Corporate Social Responsibility:

Linkage theoretical framework and

Toyota performance

Assignment Cover Sheet

Course/Unit Assignment Assignment due Course/Unit name
code number date

Managing International Business

BUSM 4692 2 21/12/2018
Responsibility

Student Name Student ID

Luong Vien Tai S3651323

Lecturer/Teacher’s name Word Count

Thanapat Kijbumrung 3037

Introduction...................................................................................................................1
Toyota overview............................................................................................................1
Toyota CSR activities...................................................................................................2
 Society................................................................................................................2
o Improve Traffic Safety.....................................................................................2
o Employees.......................................................................................................2
 Environment........................................................................................................4
o Zero CO2 Emissions.......................................................................................4
 Corporate Governance.......................................................................................5
Literature review...........................................................................................................6
 Background of CSR............................................................................................6
 CSR in Japan......................................................................................................6
Core Characteristics.....................................................................................................6
 Voluntary.............................................................................................................6
 Internalizing or managing externalities...............................................................7
 Multiple stakeholder orientation..........................................................................7
Legitimacy Theory........................................................................................................7
Stakeholder Theory......................................................................................................8
Recommendations........................................................................................................8
Conclusion....................................................................................................................9
References....................................................................................................................9
Introduction

Nowadays, businesses are embedded in society always; both business and society are
discussed in the context of Corporate Social Responsibility (CSR). This has become an
indispensable component in Toyota Motor Corporation. As the leader in global automobile
industry, Toyota has applied in diversify CSR activities in order to reduce the environmental
concern and maintain a sustainable growth. There is different theoretical framework
approached cited in this paper to show the ethical performance of Toyota in regarding to
society, environment and stakeholders. The purpose of this research is to identify main CSR
activities of Toyota in application with different philosophical approaches to evaluate on how
Toyota is act responsibly to the society. Although Toyota CSR policy is seemed to be
perfect, flaw is still available. Hence, recommendations are provided to build a better
concept of CSR within the organization.

Toyota overview

Toyota Motor Corporation (TMC) is a global leader in the automotive industry which is
currently the largest Japanese company and ranked 9th in the most valuable brands in the
world (Forbes 2018). Toyota has a production line of producing over 10 million cars per year
with the combination of designs and assembles. The company sells vehicles to over 170
countries under four different brands which are Toyota, Lexus, Hino and Daihatsu. In 2001,
Toyota established the Toyota Way guiding principles to clarify the company values and
remain sustainable growth in the global market. Following the two pillars of ‘Continuous
improvement’ and ‘Respect for people’, Toyota has continuously updating it system in
production and human resources development to all the employees to embrace (Toyota
2018). In 2008, TMC created a Corporate Social Responsibility (CSR) policy to contribute
towards Sustainable Development by focusing on society, environment and interaction with
stakeholders (Toyota 2018). With the forward-looking approach in innovations and research
and development (R&D) activities, Toyota able to input IT into their whole system in order to
improve traffic safety and become more environmentally friendly with the aim of reducing
CO2 emissions.

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Toyota CSR activities

 Society

o Improve Traffic Safety

Based on World Health Organization (WHO) report, there are 1.25 million died because of
traffic accidents. This has urged Toyota to achieve their goal of Zero Casualties from Traffic
Accidents, although the development of safety vehicles is necessary, education is more
important. Toyota is promoting it Integrated Safety Management Concept in order to
eliminate of traffic casualties by learning from actual accidents to develop technologies.
Major traffic fatalities are caused by drivers mistook the accelerator as brake when driving;
this is why Toyota is paying more attention to develop safety technologies. Currently, Toyota
is working on improving the Toyota Safety Sense system including automatic braking to
avoid collisions with cars ahead, alert when car is leaving the lane and ITS Connect system
to alert drivers of the blind spot area. Besides, Toyota also working on automated driving
technology to prevent accidents as well as create convenience for people (Toyota 2018).

o Employees

The Toyota Way in Human Resources Management is respect for people, for employees, it
can be seen as a land of opportunities that provides to all of them to receive recognition and
achieve social contribution. This is Toyota’s philosophy for its employees which applied
globally. In addition, Toyota also focuses on ensuring safety and health of employees in
order to have a better performance. In 2017, Toyota has announced the Declaration of
Health Commitment: Aiming at Health First Company, this supports employees to prevent
illnesses and health promotion. On the other hand, Toyota is working to develop an
occupational safety and health management system (OSHMS) to measure health of
employees in each region that the company operated in. Not all, the firm also arrange a
safety meeting annually to share ideas among managers to raise the level of safety and
health activities (Figure 1). To ensure sustainable growth, Toyota is non-stop working on
human resources development by providing training through global to build the connection
with other employees in different regions. Toyota has a total of 461 transferees from 49
affiliates in 28 countries. Furthermore, Toyota aims to create an attractive workplace with a
diversified culture where skills and values are shared. The promotion of diversity and
inclusion has 6 main factors which are gender, nationality, childcare or nursing care, elderly,
disabled and LGBT. Due to understand the imbalance between childcare or nursing care
and work of employees, the company has launched the Free Time & Location Program to
help their workers to have better time management and perform more efficiently in

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workplace, the main purpose is to help employees to have more time to spend with their
family. For people with disabilities, Toyota has employed 2.25% of disabled people in their
total workforce which is higher than the legal requirement of 2.2%. Toyota not only care
about disabled people, they also want to prohibit on discrimination of LGBT, hence filling sex
type in employment application sheet is no longer available. Besides, Toyota also aiming at
reducing the gender equality gap which support women who are under pregnancy or whose
has children. Since 2002, the firm has established programs to create opportunities for
women such as reduced working hours, early return from maternity leave and created onsite
daycare centers with capacity over 460 children. Until now, there are more 186 female
managers instead of 7 in 2002 (Figure 2).

Figure 1: Structure for sharing global information and collaboration

Figure 2: Promotion for women participation in the workplace

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  Environment

o Zero CO2 Emissions

The extreme weather phenomena like global warming has created concerns about the
environment in different aspects, Toyota sees this as both risks and opportunities, hence,
they have formulated the environmental initiatives policies in 1992. TMC’s environmental
philosophy is to minimize the environmental concerns with the aim of reduce CO2
emissions, therefore, Toyota launched a long-term vision for environmental initiatives that
has six action plans to be achieved by 2050 (Toyota 2018). This plan is divided into three
areas include low carbon, recycling and harmony with nature which has total of six
challenges. The first three challenges are aiming at reducing global CO2 emissions in
vehicles and during the manufacturing process. Expanding the production of electrified
vehicles including hybrid electric vehicles (HEV), battery electric vehicles (BEV) and fuel cell
electric vehicles (FCEV) is the main goal of Toyota in order to slash 90% of CO2 emissions
by 2050 (Figure 3). Back in 1997, Toyota launches first hybrid car that has the combination
of gasoline and electricity to reduce carbon emissions. This has become the objective of
Toyota, therefore, the firm has set to achieve of nearly zero emissions by 2050 (Toyota
2008) (Cortez and Penacerrada 2010). In the area of manufacturing, Toyota is seeking to
reduce emissions in the entire vehicle life cycle include the process of assembly, disposal
and maintenance by trying to use recycled and low CO2 emitting materials in order to reduce
emissions in the disposal and easier to dismantle vehicles. Besides, Toyota also working on
large scales renewable energy and utilizing renewable energies in manufacturing.

Figure 3: New vehicles with zero CO2 emissions

For the fourth and fifth challenges, Toyota aims to minimize water usage and establish
recycling-based society. To reduce water usage, innovative technologies is indispensable. It
is estimated that 40% of the world’s population would be suffered from water shortages by
2050. This has raised Toyota concern as they used most water in painting and
manufacturing, therefore, they have come up with two main strategies included minimize the

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use of water and purify water before return to the environment. Using rainwater is the best
way to reduce the amount of water used but it requires treatment and purification, hence,
Karakuri system has developed to eliminate contamination. For the wastewater, Membrane
Bioreactor system also developed to separate sludge and become higher quality water. On
the recycling side, Toyota launched the Toyota Global 100 Dismantlers Project to focus on
four areas included use eco-friendly materials, use auto parts longer, develop recycling
technologies and manufacture vehicles from End-of-life vehicles. In the last challenge,
Toyota established three projects which are Toyota green wave project, Toyota today for
tomorrow project and Toyota ESD project in order to create a future where people and
nature live in harmony (Toyota 2018).

 Corporate Governance

Build relationship with stakeholders is one of the Toyota priority, hence, Toyota has created
corporate governance organizational diagram to show how their firm is structured. The
structure divided into board of directors and operating officers (Figure 4), this was formed for
stakeholders follow the system in order to make a better decision making that is close to
customers demand and close to their objectives. Shareholders meeting is arranged regularly
to make sure the process is run smoothly as well as maintain a sustainable growth (Toyota
2018).

Figure 4: Shareholder’s meeting

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Literature review

 Background of CSR

Howard Bowen who refers as the “Father of Corporate social responsibility”, he defines CSR
as “the obligations of businessmen to pursue those policies, to make those decisions, or to
follow those lines of action which are desirable in terms of the objectives and values of our
society” (Moura-Leite & Padgett 2011). CSR was begun in the 1950s and expected
corporations to be concerned with society and communities who are related to the business
activities. The concept of business responsibilities consists of business ethics (37%),
governance (25%), environment (19%) and CSR (18%) (Hackert et al. 2014). In addition, the
social responsibilities also focus at fulfilling stakeholder expectations and must not
detrimental to stakeholders. Stakeholders can be directly and indirectly involved in the
performance of the business that have different concept of CSR through their expectation
like consumers, suppliers, employees and governments (Balqiah et al. 2017). Moreover,
CSR activities that company can choose include promotion, corporate philanthropy,
sustainability and environmental responsibility (Hamidu et al. 2015). There are total of six
core characteristics that show how firms are contributed to the society (Bondy et al. 2012).

 CSR in Japan

In Japan, businesses are committed to the development of the country by following the word
of business, Keiei, this means they are seen themselves as a part of the society, hence,
have responsibility bringing the well-being of the communities (Park et al. 2017). Since 1956,
the Japan Association of Corporate Executives has created CSR resolution to deal with
using forced labor from developing countries, law of Kawamura created for firms to comply.
Due to the historical context of labor pressure, Japanese firms tend to pay more attention to
the local and regional communities in order to enhance their brand reputation. According to
the Japan’s METI, it shown that about 86% of managers think that companies should be
responsible to deal with social problems as the interaction between Japanese firms and the
world is increasing as well as customer is becoming more aware to the business activities.

Core Characteristics

 Voluntary

CSR is considered as voluntary activities that goes beyond the legal minimum, this
characteristic is mostly emphasize by governments and stakeholders in different countries.
The self-regulatory CSR initiative of Toyota is seen as a way of compliance with society,
they have employed disabled people into their workplace which is accounted for 2.25%. This

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data is higher than law minimum requirement as they believe disabilities deserve the chance
to become self-reliant. In 2018, Toyota spent more than 24 billion yen on CSR activities
(Toyota 2018) and they have over 20,000 workers are donating their time to contribute to the
society (Park et al. 2017).

 Internalizing or managing externalities

Environmental degradation is regarded as externality in CSR and firms can be forced to

internalize the cost of the externalities. Pollution is a common one as it raises most concern
in the public, hence, Toyota has come up with different approaches in managing externalities
like expanding electrified vehicles, use recycled materials, generate renewable energies and
return clean water to the environment (Hamidu et al. 2015). In addition, externalities also
involve in workers’ rights, hence, Toyota has kept on updating their HRM system to bring
better working condition and satisfy their workers. Besides, they also conduct a study on
their workers lifestyle and their tribulation, hence, many preferential treatments is provided to
support such as women with small children. According to Chikudate (2009), taking good care
from employee’s demand is considered as prevailing interpretations of CSR. Moreover,
maintaining good relationship with stakeholders also Toyota priority, the firm always engage
in stakeholder-oriented management with open and fair communications as well as to show
their philosophy.

 Multiple stakeholder orientation

The engagement of Toyota in stakeholders-oriented help them to have a better

understanding stakeholders’ prioritization. Stakeholder plays a vital role in organization as
they are considering the survival of the company. Toyota is mainly focusing on five different
stakeholders who are customers, employees, business partners, shareholders and local
communities. Toyota always engaged with these five stakeholders to discuss different
factors such as communication, operation, financial, marketing, human resources,
environment or public relations in order to understand stakeholder expectations in relation
with organization performance.

Legitimacy Theory

Legitimacy theory is considered society as a whole instead of individualism where there are
regulations and community is expected organizations to operate within the norms of the
society. In this theory, there is a term called “social contract” that existed to ensure
corporations not to breach the terms set in the contract in order to have a legitimate right of
survival in this society. Firm’s needs to fulfill the society expectations, in order words,

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benefits must outweigh the drawbacks in all business activities that contributed to the
society. Expectation from stakeholders created pressure for businesses to ensure their
activities are appropriate within socially constructed system. In addition, organizations that
provides CSR report annually is considered as legitimating strategy, they tend to disclose all
of their CSR activities to the society. Activities can be included environmentally friendly,
positive behaviors and new development projects (Fernando & Lawrence 2014). Refer to
Toyota, the firm has sustainability section on their website which included annual report,
sustainability data book, security reports and corporate governance reports, these reports
are updating each year to provide information for stakeholders on how business is operated
and structured (Toyota 2018).

Stakeholder Theory

Stakeholder’s theory focuses on different stakeholders within an organization who are

affecting or is affected by business activities and it is similar to CSR as it is taken societal
interests into the organization (Freeman 2017). Stakeholder is classified into primary and
secondary groups, primary group is those directly affect to the survival of the company such
as customers, employees, suppliers and government. Secondary group includes those who
are less importance and do not have much influence on the organization. In addition, there
are three classes involved in this theory which are descriptive, normative and instrumental.
The descriptive shows the way to communicate with stakeholders while normative focuses
on way to treat them and instrumental is dealing with the relationship between firm and
stakeholders (Hamidu et al. 2015). In stakeholder theory, community has a right to know
about how business operate; hence, Toyota has published CSR report annually to disclose
information in the way of responsibility-drive instead of demand-driven (Fernando &
Lawrence 2014). Based on three classes of stakeholder theory, Toyota engages in
stakeholder-oriented management with the aim of build relationship through open and fair
communications. Moreover, Toyota aims to exceed expectations from stakeholders by
carefully listen to them and step by step to achieve the objectives in order to receive smiles
from everyone (Toyota 2018).

Recommendations

It is no wonder that as a leader in Japanese market and placed in top companies globally,
Toyota achieved almost all of the CSR activities that focuses in the areas of social
upliftment, health, welfare of women & children, infrastructure development, welfare of the
employee, protection of environment, stakeholder engagement, women empowerment and
community development. Although Toyota focuses on employees in how to improve their
working conditions, welfare, health and safety, the engagement between them is seemed to

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be not enough. Toyota has more than 369,000 employees but only around 5.5% of the
workforce donated their time for volunteer social activities (Park et al. 2017). This statistic
showed that employees are not motivated to contribute to the society, hence, it is
recommended that Toyota should engage more employees in cementing CSR strategies by
promoting or rewarding them for each contribution. There are two types of rewards that
could be implemented in order to motivate employees which are intrinsic and external
rewards. These rewards are also known as appreciated from organization for employees
whose did something valuable; therefore, it is not only motivate them for more CSR
initiatives but also increase the productivity within workplace (Khan et al. 2014).

In addition, it is recommended that Toyota should care more about its recall scandals. In
2009, Toyota has announced biggest recall with around 4 million vehicles due to accelerator
pedals problems, beside there are more recalls occurred in 2009 and in the following year
which is 2010 (Allen and Sturcke 2010). These scandals have a direct impact to Toyota CSR
activities as it has shown that what Toyota has done is opposite from what they are written in
providing customer safety. Scandal will be spread out when media take place in and media
has raised its power in the public relations over years. In other words, it is now able to
destroy a particular brand in the blink of an eye (Svensson and Wood 2008).

Conclusion

In conclusion, Toyota CSR initiative strategy is one of the factors that maintain its position as
the world leader in automotive industry. This study has made in-depth analysis to the firm
CSR activities based on numerous theoretical concepts. In other words, CSR core
characteristics have been analyzed along with legitimacy and stakeholder theories. The
results show that Toyota has implemented a wide range of CSR activities that contributed to
society, environment and corporate governance. However, despite excellent results of CSR
provided to the public, improvement is needed in the field of employee and media. Besides
making profit, avoiding scandals and build up brand reputation in the general public are
required. In order to maintain a sustainable growth in a responsible manner, it is necessary
for Toyota has to balance between firm performance and ethical practices.

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