Corporate social responsibility: An examination of the performance of LM Ericsson

There has been no shortage of the heated discussion on the company’s social responsibility issue in the modern business world. Consumers are now becoming more sensitive and demanding to the social performance of these organizations. This social performance not only includes good mankind, but also the whole economic and environmental aspects. Since those companies operate their businesses, they must fully consider the three aspects and their code of conduct and mission statement should firmly conform to the ten principles of the UN Global Compact (see UN Global Compact 2011).

Just like many multinational organizations, Ericsson has been recognized as a leading provider of telecommunications facilities and services to mobile and fixed network operators internationally. There are more than 1,000 networks allocated in 180 countries and it takes up 40 percent market share globally (Company Facts 2011). However, although Ericsson has made the great contribution to the environmental aspect such as enabling a low-carbon economy, reducing environmental impact and facilitate people to communicate around the world (Ericsson: Sustainability and Corporate Responsibility 2011), the company still has been criticized on social human right and any other issues.

This paper mainly examines how the Ericsson has performed socially responsible and sustainable in relation to the Environmental aspect; and also analyzes the failure in social aspect-child labor scandal and its negative impact on the society.

It examines their misconduct on Child labor case thereby causing negative social performance

Case for Ericsson
Ericsson fully utilizes its life cycle method and Design for Environment (DfE) techniques to point out and reduce negative environmental impact. The company’s LCA (Life cycle assessment) approach has illustrated what environmental impacts of their products have from raw material extraction, manufacture, transports and end-of-life treatment (Reducing our environmental impact 2011).

It has been indicated in its Company’s Sustainability Report that the CO2 emission with the products has reduced from 19 to 18 Mtonnes in one year (2009-2010); in the meantime, the direct CO2 emission from in-house activities reduced 0.64 Mtonnes. Ericsson aims at the two categories (delivered products’ life-time operation and in-house activities) to minimize the carbon intensity by 10 percent yearly (Reducing our environment impact 2011)

In 2009, Ericsson built up the carbon footprint reduction objective for these two categories. After one year later, Ericsson has achieved its target of 10 percent CO2 reduction for in-house activities annually and 14 percent reduction for delivered products. The Company has acknowledged that the direct emissions from in-house activities cause an increase because of the component shortages and increased employees, thus, it fails to reach the target reduction of direct emissions but will take more concern in this area in 2011 (Reducing our environment impact 2011)

Moreover, Ericsson has concentrated on the green innovation in the researches and design for its products and services. Its 3E concept (enhance performance, energy management and end-user value) combines with Design for Environment working practices have reduced and will continue to expect to reduce the carbon footprint of its products for 40 percent by the end of 2013. Ericsson’ DFE (design for environment) strategy has mitigated the negative impact of environment from the products’ life cycles, and efficient Ericsson’s DC-DC converters also can decrease the energy consumptions and environmental impact (Ericsson recognized for environmental excellence with second E-legacy award 2010).

Furthermore, it can be said that there is few industries that can take the transition to a new low-carbon economy like Ericsson-the ICT industry, which could reduce almost 100 percent of carbon emissions from other industries and sectors, for example, energy production, transport or construction (Enabling the low-carbon economy 2011)

Ericsson has attempted to discover the new opportunities to apply energy-smart transport solutions, which include Carbon-smart Commuting, connected car, eCall and electric vehicle charging. For some reason, according to apply ICT-based innovation to transport modes (air, water, road and rail), this innovative transport systems can facilitate people in the working time and make transport more efficient as well as reduce the CO2 emissions (Enabling the low-carbon economy 2011)

Needless to say, Ericsson is doing the right thing and has performed its business socially responsible and sustainable on Environmental aspect; it is indeed in line with UN Global Compact with environmental principles. This achievement not only brings the huge long-term profitability and brand equity for Ericsson itself, but also values all the stakeholders in many aspects, in particular, the product-users. Ericsson provides a healthy, green and sustainable environment to the stakeholders and let them enjoy and recognize the successful performance that Ericsson achieves. For instance, Ericsson’s smart-energy transport solutions can lower CO2 emission and time-consuming on the road for people; reducing CO2 emission, to some extent, is equal to mitigate the global warming risk (Reducing our environment impact 2011)

Case against Ericsson
No matter how Ericsson has performed well on Environmental aspect and how it has benefited their stakeholders, the company still cannot escape from Human and Labor Right issue like many other organizations. Child labor problem has remained in many multi-national organizations and it has been listed on the principle 5 “the effective abolition of child labor” of UN Global Compact (The ten principles of UN Global Compact 2011). Unfortunately, Ericsson still fails to follow this principle and has been challenged on this issue by the public.

Children have been forced to work in the dangerous workplace without any securities in Bangladesh. A 22-year-old worker, who had been drowned in a galvanizing tub, was only paid $ 3,600 (David, Landes 2008). The Journalists have found that there were younger employees less than 18 years old who worked in the factory that was full of dangerous equipment near zinc bath kept at nearly 500 degrees Celsius. The report also indicates that workers only have helmets and masks when they tended to acid baths (Ericsson in Child labor scandal 2008).

The company has also claimed that it has cut off the relationships with the suppliers who get involved in this child labor case; it has acknowledged the misconducts and tried to make up for the loss and improve the working conditions (Ericsson in Child labor scandal 2008). However, it is interesting to note that in the NBIM children’s Rights Disclosure Rating table with top score of 10 points, there are nine out of 527 companies that have been reported on the risks of child labor and children’s rights violations in the operations and supply chains, Ericsson is one of them on the list (Walt Disney, Ericsson Among Companies with top marks for Child Labor Risk Disclosure 2011)

Also, in Ericsson’s social performance and labor practices LA4 and LA6, there is no information about the child labor and children’s right protection whereas the statements represent the Occupational Health and Safety committees have been well-established in many countries (Social Performance 2011)

From this child labor case, it can be reminded of other companies such as Nike, Gap also committed the labor rights problems in developing countries. According to these similar cases and Ericsson’s child labor case, it can be demonstrated that company has still considered the profitability as the main purpose. The maximum profit and minimum cost consumption are their pursuit even if they made the big contribution on the environment.

Although Ericsson has a positive attitude to face their misconduct and promised that they would deal with the problem, it still fails to escape from the public eyes. The evidence has been proved that Ericsson is on the list of 9 companies with 10 scores for Child Labor and Children rights. This misconduct has not only gone against the ten Principles of UN Global Compact, but also infringed on the stakeholders’ basic rights (Walt Disney, Ericsson Among Companies with top marks for Child Labor Risk Disclosure 2011)

In addition, now that Ericsson has known the lesson learnt from other companies like Nike, why should not it put more focus on this area? It cannot abuse that the reasons of companies seek for the profits because of the business nature. Nevertheless, maybe company is impossible to change this nature but it can reduce the occurrence if the company focuses on the long-term benefits (Ericsson in Child labor scandal 2008)

Ericsson, as the world leading company, should take more account on social performance on Labor rights and protection and establish a good example for other organizations in that the good conduct that Ericsson performs socially responsible can have a positive impact on the society and benefit the stakeholders (Company Fact 2011)

On-balanced Conclusion
Taken together, the given paper has successfully examined Ericsson’s business performance on Environmental and social aspects. It can be concluded that Ericsson’s social performance has a negative impact on the society and itself, it affects both company’s reputation and stakeholders’ values. With respect to the child labor and children rights, Ericsson has failed to conform to the code of conduct and mission statement as well as the ten principles of UN Global compact.

On the other hand, Ericsson has made the unimaginable effort on the Environmental aspect and facilitates most of the products users, the transportation system could be the best example to prove. Ericsson has also fulfilled its sustainability and responsibility by reducing CO2 emission and design many effective solutions. As to this aspect, Ericsson is doing the right and good thing for the human, society and environmental ecosystem. Therefore, Ericsson should take the actions to rectify its mistakes and keep the improvement on its successful achievement.

Reference
Ericsson Company Facts. 2011 http://www.ericsson.com/ (accessed August 9 2011)

Ericsson in Child Labor Scandal. 2008 http://www.thelocal.se/11762/20080514/ (accessed August 9 2011)

Ericsson recognized for environmental excellence with the second E-legacy award http://www.bsigroup.com/en/About-BSI/News-Room/BSI-News-Content/Disciplines/Environmental-Management/Ericsson-achieves-global-environmental-registration/ (accessed August 9 2011)

Enabling a low-carbon economy. 2011. http://www.ericsson.com/thecompany/sustainability_corporateresponsibility/enabling_a_low-carbon_economy (accessed August 9 2011)

Reducing our environmental impact. 2011. http://www.ericsson.com/thecompany/sustainability_corporateresponsibility/reducing_our_environmental_impact (accessed August 9 2011)

Landes, David. 2008. Ericsson in Child Labor Scandal. http://knowmore.org/wiki/index.php?title=Ericsson_in_child_labour_scandal(accessed August 9 2011)

Social performance: Performance indicators, Labor Practices LA1 - LA14. 2011. http://www.ericsson.com/article/social-performance-labor-practices_216734306_c (accessed August 9 2011)

The ten principles of UN Global Compact. 2011. http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html (accessed August 9 2011)

Walt Disney, Ericsson among Companies with Top Marks for Child Labor Risk Disclosure.2011.http://www.nbim.no/en/press-and-publications/News-List/736/walt-disney-ericsson-among-companies-with-top-marks-for-child-labour-risk-disclosure/ (accessed August 9 2011)