Sustainability Management at Philips


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Case Details:

Case Code : BECG051
Case Length : 25 Pages
Period : 1995-2005
Pub. Date : 2005
Teaching Note :Not Available
Organization : Philips
Industry : Consumer Electronics
Countries : Netherlands

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Reading through our annual sustainability report, you see that these programs save us money, produce more attractive products, and products that use less energy, both in their production and in their useful life. In extending our reporting to the social and cultural aspects of sustainability, we assume that contributing to the well-being of society is part of our cost and in the end will translate to shareholder value." 1

- Gerard Kleisterlee, President and CEO, Royal Philips Electronics.

"Some people think that sustainability is just the latest trend, or even a PR thing. We don't think so. It's serious business; it's challenging and inspiring, but above all, it's business. It affects the entire company: from product creation and business development to production processes and the treatment of waste." 2

- Arthur Van der Poel, ex-Executive Vice-president of Royal Philips Electronics and Member, Board of Management.

Introduction

In September 2004, the Dow Jones Sustainability Index (DJSI)3 ranked Netherlands based Royal Philips Electronics (Philips) #1 in corporate sustainability in the cyclical goods and services sector. This was the second year in a row that Philips had received this ranking.

The company was assessed on its social, environmental, and economic performance and it emerged as the leader among companies from consumer electronics, leisure goods, apparel, and airline industries. Philips' sustainability initiative was evaluated based on ten economic, six environmental, and ten social parameters. Commenting on the process followed for selecting the leader, John Prestbo, editor of Dow Jones Indexes, explained, "To be identified as the leader in its sector, a company has to demonstrate high-caliber governance, knowledge management, environmental performance, human rights policies, and other factors. All of these criteria are carefully assessed in selecting companies for the index, and in our view all contribute to the long-term success of a company."4

Philips considered sustainability a business imperative and it undertook sustainability initiatives across many of its operations. Sustainability was made an integral part of the company's corporate strategy as Philips believed that it could not be addressed successfully in isolation or as an 'add-on' to the company's daily business.

It involved all its functions, businesses, and regions in managing sustainability issues. Philips' sustainability initiatives focused on its environmental and social responsibilities and tried to integrate these with the company's economic goals. The company believed that environmentally and socially responsible behavior would lead to sustained revenue growth and designed more competitive and user-friendly products through its environmental initiatives, which could translate into revenues in the long term.

These products consumed less energy and were more environment-friendly. Social projects allowed the company to explore new business initiatives that benefited the people while contributing to the company's growth.

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1] "The Future of Sustained Growth," www.weyerhaeuser.com.

2] "Launching the Sustainability Report," Philips Newscenter Archives, 2003.

3] The DJSI was launched in 1999 to track the financial performance of companies that focus on sustainability, demonstrating environmental and social commitment.

4] "Dow Jones Names Philips Market Leader in Sustainability," www.greenbiz.com, October 15, 2003.

 

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