ESG Strategy Implementation
Ford is among the top locomotive companies in the world. The company attributes its success to its effective ESG strategy. Ford Motor Company considers environmental, social, and governance (ESG) approaches to be a priority and dedicates its resources to various ESG investments. The company maintains that having an ESG is the right move to make especially when aiming to increase upside value and lower downside risks. According to the 2020 Environmental, Social, and Governance Review, Ford intends to integrate ESG opportunities and risks into its core operations through efforts such as upholding an inclusive and diverse work culture. Some of the ESG goals include achieving worldwide carbon neutrality by 2050, reinforce gender equality, and endorse the United National (UN) Women’s Empowerment Principles. Thus, Ford Motor Company recognises and comprehends the need for adequate ESG principles in contemporary business society.
Stakeholder Management
The role of stakeholders has morphed over the years shifting from the conventional perspective to a more proactive view. Stakeholders in the contemporary corporate realm understand that businesses have a crucial responsibility to the environment, society, and government. Thus, various stakeholders partake in different ESG decisions to ensure that the organisation fulfils its roles. Ford Motor Company is no exception as its stakeholders partake in implementing and making the ESG program successful. One of the scenarios portraying stakeholder involvement is when the company’s employees commit to establishing a work environment that promotes inclusivity and diversity (Environmental, social, and governance review, 2020). Ford also plans to raise the number of persons with disabilities in the company’s task force. The Environmental, social, and governance review (2020) indicates that the locomotive giant received recognition for its “perfect score of 100 in the 2019 Disability Equality Index” (p. 6). Additionally, Ford Motors’ investors have dedicated resources to reduce the company’s ecological footprint by utilizing the award winning EcoBoost technology in about 8 million Ford engines globally. Accordingly, the company’s absolute emissions decreased by 14.6% which is equivalent to 0.64 million tons. Aside from employees and investors, consumers are also drivers of ESG decisions. Consumers advocate for the production of fully electric vehicles and hybrid models that produce less CO2 emissions. Thus, the company’s stakeholders have adopted an all-hands-on-board approach when dealing with ESG practices.
Internal Structures and Systems for Measuring, Optimizing, and Monitoring ESG goals
Ford Motors has developed different methods of measuring, optimizing, and monitoring the progress of the ESG decisions and plans. For example the company has the Sustainability and Innovation Committee whose responsibility is to assess the organization’s innovative practices and technologies and advise on the way forward. The main purpose of the Sustainability and Innovation Committee is to oversee the enhancement of environmental and social sustainability (Sustainability Report, 2020). Moreover, the committee is responsible for reviewing trends in mobility infrastructure and sustainability and provide insight on potentially beneficial ventures for the company. According to the Charter of the Sustainability and Innovation Committee of the Board of Directors (n.d.), the committee also monitors and reviews “the competitiveness of the Company’s existing, new and emerging technologies, and other innovations and trends that will permit the Company to strengthen its brands, enhance customer experiences, and achieve profitable growth for all and to build a better world” (p. 2). Ford Motor Companies also relies on the Ceres Stakeholder Committee for guidance and recommendations regarding ESG practices. The committee consists of academic experts, investors, and suppliers who offer relevant data on how to achieve social and environmental sustainability.
ESG Performance Trends
The implementation of ESG goals in Ford Motor Companies has led to different performance trends. Since the company’s affected its inclusivity and diversity policies, the rate of employee satisfaction has increased substantially. The Environmental, Social, and Governance Review (2019) reveals that the employee satisfaction rate increased to 83%, exceeding the benchmark index previously set in 2018. Additionally, the firm’s “Our Truth” initiative, launched to augment cultural evolution raised the level of employee engagement. Consequently, the workers are more involved in ESG decision making and are more motivated to work. Ford Motor Company also benefits significantly from gaining global recognition as an innovation leader following its famous EcoBoost technology. The company has secured a top position in the worldwide environmental non-profit group of organization’s ‘A List’ for its commendable sustainability technique. Ford Motor has portrayed resilience in reducing its carbon emission substantially. Hence, the automaker’s corporate image has improved placing, attracting potential investors. The company has also gained more consumers in the past few years due to its mindfulness of the environment and society. Accordingly, the progress and success of the ESG goals may be attributed to Ford’s governance policies. The company operates under coherent government practices aimed at creating long-term value. For instance, the organization is mandated to maintain high standards of transparency and credibility.
Obstacles and Challenges in Implementation
The ESG program has yielded significant benefits for Ford Motor Company. Nonetheless, the implementation of ESG decisions in the company has faced major challenges. Firstly, Ford Motor’s decision to produce fully electric vehicles and hybrids to lower the firm’s carbon emission is expensive. The innovation requires an investment of over $11.5 billion to produce the new 2022 hybrid models. Additionally, the company needs $ 4 billion to create self-driving vehicles by 2023 (Environmental, Social, and Governance Review, 2019). Hence, the company’s aggressive sustainability goals led to financial disagreement among investors. However, the company dealt with the issue by encouraging shareholders to speak-up about all concerns. Ford also established respective committees to monitor, regulate, and manage the ESG goals, overseeing all financial decisions. Thus, the reports enhance accountability and transparency which encourage investors to support the organization’s environmental and social sustainable goals, increasing shareholder value.
The cost of labor is also a significant limitation impacting the company. Ford’s resolution to increase diversity and inclusion in its workforce mandates an increase in labor costs. Thus, there were uncertainties among shareholders relating to the issue. Nevertheless, Ford’s governance managed to unite all stakeholders toward the common objective of putting people first. Other barriers affecting the success of the ESG goals are inadequate technology and competition. Technology is the backbone of all innovation. Thus, the absence of effective technology limits the organization’s capacity to implement the ESG decisions. Furthermore, the high cost of technology also deters the company from attaining its sustainability goals. Finally, competitors such as Toyota, Mercedes, and Mazda also pose significant challenges for the company. The previously mentioned locomotive leaders are recognized for their innovative vehicles such as the Mazda CX5 which has surpassed ecological requirements. Therefore, such competitive models reduce the market for Ford Motor’s new inventions, lowering its profitability. Environmental and social sustainability is an expensive venture that requires the support of all shareholders to succeed.