PART A- TÜV SÜD CSR ANALYSIS
INTRODUCTION
TUV SUD is a German multinational corporation that operates in over 60 countries. It employs more than 25000 workers at over 1000 locations; It aims to provide safe and sustainable solutions. The TÜV SÜD’s (TS) service portfolio includes consultancy, certifications, inspections, expert advice, tests, and training [1].
TS’s actions were highlighted in 2019 when the dam disaster happened in Brumadinhu, Brazil. The dam’s collapse caused the unleash of a toxic mud flow that killed over 250 people. The event caused debates regarding the integrity level of the company as well as the transparency of its CSR operations [2].
TS did not consider itself to be legally responsible even though the Brazilian subsidiary inspected the dam’s basis and certified that it was safe [3].
The first part of the essay will concern the application of TS’s CSR strategy, particularly in relation to its controversy. Additionally, a proposal regarding the improvement of the CSR operational transparency will characterise the second part of the essay.
Stakeholder analysis
TUV SUD has financially grown in recent years reporting $ 2,98 billion in operating revenue and $ 149 million of net income [4]. The company’s mission and vision statement (appendix 1) highlight’s the inclination towards ethical behaviour with respect to customers and the environment [5] (appendix 2). However, TS did not address any particular strategy towards its stakeholders.
The TUV SUD’s 2019 annual report states that the company prioritises 4 stakeholder groups, which are represented by customers, employees, media and the general public, and the TIC (testing, inspection, and certification) industry (Appendix 3). Additionally, the company asserted that it considers stakeholder’s groups' interests with respect to their operations [6]. This view would suggest that the organisation follows Freeman stakeholder vision. Applying the stakeholder salience model considering data provided by TS, the most salient stakeholder is represented by the customers as this group retains power legitimacy and urgency.
Nonetheless, TUV SUD has been recently ranked as one of the most controversial organisations in 2019, highlighting transparency and integrity issues that characterised the organisational behaviour. Taking into account the Brumadinho dam disaster, it can be argued that TUV SUD did not prioritise its customers; Indeed, it seems that the company prioritised its shareholders manufacturing fake documents that certified the dam’s stability [7]. In this way, TS would have followed Freidman stakeholder view if it had acted within the law. Considering TS actions, it can be argued that shareholders represent the company’s legitimate stakeholder. Firstly, owners retain power as they can exert influence over corporate management. Secondly, shareholders hold legitimacy as it is their strongest attribute [8]. Lastly, the stakeholder group could have retained urgency as shareholders desired their investment to pay off.
CSR analysis 394
To analyse TS’s commitment towards CSR, the Carrols pyramid model will be utilised. Firstly, TS has an economic responsibility to the society which represent a fundamental condition for its existence [9]. Data reported that TS had in 2019 operating revenues equal to $149 million. Moreover, the company reported a ROCE of 10.66% that can be considered as a sign of high profitability [10]. Secondly, TS holds legal responsibility as society created ground rules under which it is expected to operate [11]. Despite the fact that the company reports to acts within the law and following regulation, it did not fulfil legal responsibility. The Brumadinhu disaster did not represent the only company’s scandal. Ts has also been involved in the breast implant scandal in 2016 in which It failed to properly check silicone produced by a third company, damaging more than 20,000 people[12]. Thirdly, TS retains ethical responsibility as society expects that businesses would operate in an ethical fashion[13]. The company stated in its annual report that it acts in an ethical way as it aims to protect people and the environment [14]. Although facts do not comply with TS statements as in the dam accident, it killed 248 people and ruined the surrounding environment [15]. Fourthly, TS has philanthropic responsibility that complies with all forms of business giving [16]. Although, the company is not involved in activities that are not mandated, required by statute, or commonly expected of businesses in terms of ethics. Therefore, it cannot be characterised as a good corporate citizen[17].
TS appears to be managed according to their stakeholders’ interest as the organisation asserted that it implemented the general German approach in which normative and derivative stakeholders are taken into account [18]. However, the company’s actions strongly suggest that the business is driven by its shareholders’ interests. Concerning the TS’s corporate governance, the four-pillar represented by accountability, fairness, transparency and independence have to be highlighted. Firstly, due to TS’s behaviour, it can be argued that the management is accountable to the board, and the board is accountable to the shareholders. Moreover, TS declared to its stakeholder regarding the company’s business purpose [19]. Secondly, TS safeguards shareholders’ rights but it did not treat all stakeholders with fairness. Thirdly, the company do not provide accurate material regarding the role and responsibility of the company members, suggesting transparency issues. Fourthly, TS seems to be an independent company that does not employ external auditors.
Part B - TUV SUD Board Paper
**BOARD PAPER**