Abstract
Examining the connection between the company’s sustainable practices and financial performance is essential in the context of the current trends in business practices. This paper analyses the corporate sustainability disclosure and practices of Boeing as a large and successful company that overcomes industrial downturns and retains its leading position in the aerospace sector. Financial management is closely linked to sustainable development activities, and incorporating innovative and proactive measures can benefit both elements and the company as a whole. The role of corporate sustainability reporting in company value and creating shared value is discussed, and the concept of corporate social responsibility (CSR) is studied. CSR of Boeing is discussed in the context of four critical elements of social responsibility.
Finally, corporate sustainability risks and opportunities are explained from the financial perspective. An overview of Boeing’s measures aiming to mitigate risks is provided, and a few recommendations are made that could benefit the company by enhancing its reporting practices.
Summary
The importance of sustainable development practices to companies has significantly grown over the recent decades. According to Schoenmaker and Schramade (2018), this concept considers long-term profitability and effects of the decisions made within an enterprise and strives for environmental, economic, and social practicability. The interrelation between corporate social responsibility (CSR) practices and creating shared value (CSV) needs to be studied to understand and improve the efficiency of businesses as well as address societal needs and challenges. The purpose of this paper is to discuss the connection between sustainable practices and financial performance, examine the corporate sustainability disclosure practices of Boeing, and evaluate how they contribute to shared value creation and the firm’s value.
Boeing is known as the largest aerospace company in the world, providing a wide range of global services, commercial airplanes, and security systems. The company’s role on the global scene is remarkable since it serves customers across 150 countries, including both commercial and government clients (Boeing, 2020c). Boeing is considered a leader in aerospace, innovation, and technology as it aims to deliver value for its customers and ensure sustainable future growth.
In the context of the 2020 coronavirus crisis, the company, as part of the aviation industry, faced severe challenges that affected customer demand, operations, and financing. However, Boeing took decisive measures to secure its financial state and withstand the pandemic’s effects and protect shareholders. As per the financial overview presented by Boeing (2020c) in its annual report, steady growth in revenues can be observed between 2016 and 2018, until a rapid decline occurred in 2019 caused by the 737-8 MAX and 737-9 MAX grounding, followed by another profit decrease in 2020 resulting from the COVID-19 outbreak.
On the other hand, the cumulative total shareholder returns have experienced stable growth since 2016 despite all the challenges, until a tremendous decline in 2020 occurred (Boeing, 2020c). As can be seen, the firm’s financial performance has been compromised by a number of external factors; however, the company shows promising tendencies of overcoming the obstacles due to its finance and operational management practices.
Corporate Sustainability Reporting and Disclosure
First, the concept of corporate sustainability disclosure needs to be examined. As reported by Phan et al. (2020), the term corporate sustainability refers to the application of business procedures and strategies aiming to meet the company’s and its stakeholders’ needs in the present while caring for resources in the long run. Continuing value is achieved by the implementation of relevant social, environmental, ethical, and economic processes in businesses. In this regard, a systematic approach is essential, as well as the integration of information technology which allows for modeling developmental scenarios with high accuracy to predict the effects of the company’s actions and choose the most optimal options.
As the business environment changes at a fast pace and the competition grows, firms need to focus not only on short-term achievements but also on long-term efficiency. Furthermore, stakeholders begin to show more interest in sustainable development practice (SDP) and corporate social responsibility (CSR), which contribute to profitability in the long run (Schoenmaker & Schramade, 2018). Under such circumstances, sustainability begins to be viewed as a strategic direction critical to the company’s success. As a result, corporate sustainability disclosure becomes an important form of reporting practice, similar to financial reporting.
According to Kumar and Prakash (2019), sustainability reporting revolves around three critical areas, such as practices of environmental consideration, practices of social development, and internal socio-environmental responsibility. The extent of disclosures can vary across companies; for instance, policy statements regarding ecological protection can be used as an environmental consideration practice. Alternatively, quantitative data can be presented to showcase the company’s objectives and accomplishments in this direction.
Role of Corporate Sustainability Reporting in Company Value and Creating Shared Value
The company value and sustainability initiatives become more closely related in the context of the current business environment. The question of the positive effect of sustainability measures on the firm’s value has been studied by many researchers. In particular, as stated by Romero et al. (2014), corporate sustainability was found to have an association with company value since high-quality reports resulted in a positive market reaction.
In turn, the CSV framework suggests that while addressing society’s needs, companies both contribute to economic value and improve profitability (Schoenmaker & Schramade, 2018). Thus, it is a win-win situation that helps businesses implement self-sustaining solutions while making a profit. Further, CSV benefits and enhances the relationships among companies, philanthropists, and governments. While sustainability disclosure can differ across regions and businesses, research findings emphasize the positive effect of such practices on financial performance.
Sustainable Practices and Disclosure of Boeing
This paper looks at the sustainable development practices of Boeing as a leading company in the aerospace industry that implements innovation to create value for its customers. The company is known as environmentally progressive and willing to innovate its operations to improve performance. According to Boeing’s global environment report (2020b), it designs high-performing products that aim to reduce carbon emissions and improve the efficiency of each new aircraft generation by 15% to 25%. Furthermore, carbon-neutral growth constitutes one of the company’s objectives that is expected to be accomplished by 2050 (Boeing, 2020b).
Another sustainability goal involves saving fuel use and, consequently, emissions, as well as operating costs. Boeing is also recognized for its recycling of a million pounds of carbon fiber on a yearly basis and supporting environmental practices. As can be seen, the highly competitive business environment where Boeing operates encourages the company to optimize its processes and disclose the implemented practices and accomplishments to enhance stakeholder trust.
In this regard, it is crucial to discuss the sustainable practices and reporting of Boeing in detail to understand their relation to financial performance better. The company monitors the current environmental risks and challenges and attempts to implement appropriate measures to address the issue. As reported by Boeing (2020b), steady progress is made in achieving the objective of eliminating greenhouse gas emissions, reducing energy and water use, and decreasing waste. To accomplish this goal, environmental initiatives are incorporated into all functions and organizations within Boeing, ensuring a systematic approach, as mentioned above. The enterprise-wide strategy encompasses all services, products, staff, and operations allowing the company to ensure safety and enhanced environmental performance.
As a result, the service quality is improved, and costs are reduced due to the comprehensive approach. Moreover, shared value plays an essential role in Boeing’s activities, and employees are involved in the use of corporate reporting tools to share their insights regarding sustainability and safety (Boeing, 2020b). In so doing, the corporation is proactive regarding its development initiatives and programs that aim to optimize the use of human, natural, and capital resources.
Corporate Social Responsibility Practices of Boeing
Boeing’s CSR policies aim to assist the company in being socially accountable to the stakeholders and broader public. According to Ahmed (2020), CSR is ensured through four major factors: economic, legal, ethical, and philanthropic. In this regard, Boeing’s practices comply with the first element, namely, being profitable.
Operating profitability is the critical success factor for the company, which retains the leading position in the aerospace industry, plays an important role in the United States’ export, and generates jobs and revenue across 70 countries in the world (Boeing, 2020b). Boeing is involved in various sectors, such as advanced communication, defense, and launch systems, commercial and military aircraft, as well as logistics and training. As a result, the diversified activities allow for maintaining financial performance even in the context of the decline in demand for air travel due to the coronavirus pandemic. Boeing meets its social responsibility goal of generating revenue and delivering value to stakeholders, as well as aims to maximize profits in the context of the ongoing downturn of demand in the aviation industry.
Another CSR factor implies obeying the law and operating within the legal frameworks. Boeing complies with U.S. legal and regulatory matters and prioritizes fair trade and reasonable taxation (Boeing, 2020c). The company’s offices cooperate with governmental bodies of state, federal, and local level and interact with numerous third-party organizations, including international organizations, consulting agencies, and associations (Boeing, 2020b). Boeing bears legal responsibility, as can be seen from the example of 737 MAX proceedings.
Furthermore, the third factor of CSR focuses on ethical issues as an element of the social responsibility of the company. The problem of moral dilemmas is an integral part of any business, but the aerospace industry implies tremendous safety risks should a wrong decision be taken. Boeing aims to engage in ethical behavior by implementing the appropriate programs addressing the fraud, waste, and abuse issues. In particular, the Boeing Code of Conduct was established as a managerial guideline that implies severe consequences in case of violation of the rules (Boeing, n.d.). Thus, by training employees on ethical business conduct practices, the company realizes its CSR. Moral behavior is incorporated in the company’s values, vision, mission, and strategy, which increases its shareholder and employee value.
Finally, the fourth CSR factor refers to the philanthropic responsibilities of a firm. In this regard, one of Boeing’s core values is sharing with communities, and the company has invested over $240 million and 750,000 volunteer hours for charitable purposes (Boeing, 2020a). The philanthropic activity of Boeing includes responding to the coronavirus crisis by manufacturing face shields to donate to medical workers and delivering over 3.5 million PPE units in the U.S. (Boeing, 2020a).
Besides, the company participated in Food & Essentials drive and Out & Equal Workplace Summit, showing its commitment to utilizing its resources to deliver support to communities. Boeing has been participating in humanitarian supplies and sharing knowledge as part of its vision. Another essential practice attributed to the company is supporting a healthier lifestyle in its staff and engaging students in creative and scientific programs (Boeing, 2020a). Such actions help the business to be accountable and demonstrate the core values to employees, clients, and stakeholders.
Corporate Sustainability Risks and Opportunities
Both risks and opportunities are involved in corporate sustainability practices, which implies the need to evaluate them, in particular, from a financial perspective. The principles of sustainable development present the chance of improving the firm’s operational efficiency and increasing market share (Schoenmaker & Schramade, 2018). Consequently, customer attraction and retention results in revenue increases and shareholder value.
Other beneficial effects of corporate sustainability include employee attraction, improved risk management, enhanced brand recognition, and retaining skilled human capital. On the other hand, a number of risks are posed for the companies, including the increase in energy and scarce raw materials costs (Schoenmaker & Schramade, 2018). Furthermore, management challenges in regard to waste and energy and the risk of fines resulting from violations imply the potential adverse effects of sustainable practices implementation. Embedding sustainability into the company’s operations requires a comprehensive and well-developed approach.
Boeing works towards improving its environmental performance and the associated mitigating risks. It recognizes the potential issues related to sustainable development and engages employees in providing feedback to the company’s practices. Strategic and compliance risks are addressed by Boeing leadership to ensure that the company’s sustainable development plan proves to be efficient. Furthermore, Boeing monitors environmental challenges of the industry, including policy and climate change, and establishes executive meetings to discuss the company’s progress and financial performance (Boeing, 2020b).
Therefore, risk management practices such as improved measurement and reporting can be implemented to enhance Boeing’s compliance with sustainability goals and the transparency of operations for stakeholders. Moreover, increasing visibility can help the company set trends for other organizations and the public, emphasizing the role of social responsibility (Schoenmaker & Schramade, 2018). Brand and social views are critical to enhancing the company’s recognition and investment and, as a result, financial performance.
To summarize, Boeing’s sustainability efforts show the company’s dedication to improving its compliance with innovation and sustainable development principles to increase value and profitability. The relationship between an organization’s sustainable development practices and financial efficiency can be observed through the case of the Boeing company who maintains the top position in the aerospace industry and aims to optimize its practices to create more value. The role of the comprehensive approach is critical in managing risks and using opportunities involved in sustainability. Boeing can benefit from increased visibility and disclosure by improving the social view and attracting more employees, stakeholders, and clients.
References
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