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Corporate Social Responsibility Analysis of Boral Limited

3143 words (13 pages) Business Assignment

1st Dec 2020 Business Assignment Reference this

Tags: Business AssignmentsBusiness

1.0  Introduction

Boral Limited was established in early 1946 by David Craig and is headquartered in Australia (Boral, 2019). It is a multinational company that specializes in manufacturing and supplying materials for construction (InvestSMART, 2017). According to Boral, the company has other small establishments operating in 17 countries with more than 17,000 full-time employees and nearly 9000 contractors in 2018 (Boral Limited Annual Report, 2018). The following report will indicate information about Boral Limited in terms of its role and responsibility towards society and investigate the company’s competitive environment utilizing the PESTLE framework.

2.0  The Business’s Role in Society

2.1  Type of the Business

Based on Boral Limited 2018 annual report, it initially seems to be a Created Shared Value (CSV) type of company. However, after many research, Boral Limited may merely be considered as a Profit Maximization (PM).

Boral has been attempting to contribute positive effects on the environment by minimizing negative impacts which are caused through its production procedure (Boral Limited Annual Report, 2018). Moreover, the company is committed to supporting its employee welfare and improving their engagement, which is related to human rights (Boral Review, 2018). Therefore, the company can be mistaken as a CSV in the beginning. This means that the company that has beneficially contributed to the economic and the society but making profit simultaneously (FSG, 2011).

Nevertheless, Boral Limited should only be assumed as a PM type of company. A Profit Maximizing company is a company that primarily focuses on making its profit as high as possible (Economics Online, 2019). As there are still many other sources claiming about Boral doing illegal activities that are harmful to the environment and not promoting human rights, the company’s actions are contradicting its aim to become a CSV company.

2.2  Why Boral Limited is a Profit Maximizing company:

2.2.1        Environment’s Responsibility:

Since 2012, Boral Limited has been reducing 27% of its greenhouse gas emissions through rearranging the company’s portfolio towards lighter-weight products, less-carbon intensive business and investing in energy efficiency and alternative fuels programs (Boral Limited Annual Report, 2018). As a result, a huge extent of Boral’s low-carbon and recycled products sales, accounting for 9% of the company’s total revenue, comes from external waste products (Boral Limited Annual Report 2018).

On the other hand, in 2016, Boral was discovered illegitimately storing 110,000 tons of industrial waste without a state license at a close down quarry site after being examined by the Environment Protection Authority Victoria (EPA). Eventually, the company was fined $30,000 and forced to pay $142,000 for court costs (EPA Victoria State Government of Victoria, 2016). (EPA Victoria State Government of Victoria, 2016). Therefore, it can be seen that the company has not fulfilled its obligations in protecting the environment.

2.2.2        Human Rights’ Responsibility:

As stated in the Human Rights and Labour Policy of the company, Boral has the goal of advancing respect for internationally recognised human rights across its global operations. This comprises eliminating all types of constrained, obligatory or child labour, discriminate and bullying in the workplace. Besides, the company established a Human Rights and Modern Slavery Working Group in 2018 which aimed to develop its approach to modern slavery and human rights across the operations and supply chain of Boral. (Boral Review, 2018).

Nonetheless, Boral subsidiary De Martin and Gasparini (DMG) was reported threatening to fire over 100 employees who are working at its Sydney concrete subsidiary. This happened after a majority of its workforce voted against altering the enterprise agreement to comply with the new building rules administered by the Australian Construction and Construction Commission. (Han, 2017).

3.0  Strategy Evaluation:

3.1. PESTLE Framework:

PESTLE is a framework that is used to analyse 6 aspects for the industry containing Political, Economical, Social, Technological, Legal and Environmental to identify various external elements that might impact a business (Course Hero, 2019). The subsequent parts will discuss these factors to investigate Boral Limited strategy.

3.1.1         Political:

The Political part of the framework indicates the effect of government actions on the industry. Boral is an international building product and construction materials group operating in various countries (Boral Limited Annual Report, 2018). Hence, the company exposes materials to distinct types of political environment and political system risks.

Based on Boral Limited 2018 Review, one of the company’s risks are the changes of the US Government policies comprising tax, labour and infrastructure. Since the US is an important location where the company implement many of its projects, the policies of this country are what Boral Limited needs to be concerned about. Moreover, most of Boral operating activities in North America have government stormwater management licenses with very strict limits.  In addition, the Australia Government representatives also engage in the company’s concrete and quarry operations on the Gold Coast, Queensland. (Boral Review, 2018).

In 2017, Boral once proposed the exploitation of a quarry in the Gold Coast city but was rejected by the Queensland courts (Forbes, 2017).  In addition, in 2019, the Council of the Municipality of Kiama, Australia has refused Boral’s intention to expand its “Dunmore sand mine” in the Minnamurra River as it is considered as causing more damage to the environment (Langford, 2019).

Hence, the government regulations have a significant impact on Boral Limited operation, not only Australia but also in other countries. Therefore, the company should follow rules imported by the government to avoid any project being rejected and shut down.

3.1.2         Economical:

Economic factors such as interest rate, foreign exchange rate and the inflation rate will have significant effects on the aggregate demand and aggregate investment. Therefore, it affects Boral Limited to some degree.

The decrease of the Australian dollar (AUD) in 2017 had given a great opportunity for companies who are counted as “offshore earners” in general and for Boral Limited specifically (Hindmarsh, 2017). In 2019, the Australian interest rate continues to drop, this helps the company to become more appealing to international customers (White, 2019). Ultimately, Boral Limited’s profit earned from America rose by 10% (White, 2019). 

As the interest rate is related to the exchange rate, the declining of AUD had resulted in the fact that international customers become more interested in buying the company’s products since it is cheaper. Therefore, it can be stated that any alteration in economic factors will either benefit Boral Limited or disadvantage it.

3.1.3         Social:

Elements such as customer’s demand, preference or attitude and culture are part of Social. In early 2019, Mike Kane – Boral Limited chief executive claimed that the company’s shares had declined by 20.6%, which was the lowest figure in 6 years since the company was unable to satisfy its customers’ demand (Evans, 2019). The Boral consistent delays in various infrastructure projects in Australia had led to the fact that the company failed to meet the increasing demand for concrete, asphalt and quarrying products (Evans, 2019).

If Boral’s projects keep being slow and delayed in the future, customers might change their preference which results in the company losing its sales. However, with a continuous rise in demand, if Boral Limited has the ability to manufacture and provide its products on time then the company’s profit would grow significantly overtimes. Thus, Boral Limited should try to enhance its capability to satisfy customer’s needs to obtain more achievements.

3.1.4         Technological:

Technological indicates anything related to invention, innovation and machine development. In the contemporary world, most companies attempt to advance their technology in order to be up to date and therefore improve the company’s result.

According to Boral Limited, the company has developed a new type of technology called Fly Ash. It is produced from coal burning in power generating plants which supports the formation of cement compounds to enhance the strength, water repellent capability and durability of concrete (Boral Resources, 2019). Therefore, it can be seen that the company has been able to transform wasted materials into usable resources. This helps Boral Limited to be more friendly to the environment and at the same time reduces its costs (Boral Limited Annual Report, 2018). As a result, the company’s better result primarily comes from higher revenue and earnings from the Fly Ash (Boral Limited, 2018).

Based on the benefits that Boral Limited has accomplished from developing Fly Ash, improving in technology will offer the company more advantages in the future. Hence, the Boral should try to advance its technology in manufacturing and avoid using old technology.

3.1.5         Legal:

Legal factors include laws that a country or an industry have to obey. As it was mentioned in the 2.0 section, the Boral has been doing some illegal activities which caused the company to be penalised by the government.

In 2016, the company was fined $30,000 and ordered to pay $142,000 in court costs for storing 110,000 tonnes of industrial waste illegally at a disused quarry site after the investigation of the Environment Protection Authority Victoria (EPA) (EPA Victoria State Government of Victoria, 2016). In addition, the DMG – Boral subsidiary De Martin and Gasparini had to pay $30,000 to the construction union for violating the Fair Work Act by threatening to dismiss more than 100 employees after a majority against the agreement to an enterprise that that the company endeavoured to comply with the federal building code (Hannan, 2018).

Hence, the company needs to operate legitimately since doing illegal activities cause it to be punished. This will not only affect the company’s revenue but also its reputation. Boral Limited might lose its customers since the company is not prestigious. Ultimately, if the company continues to do dishonest activities this will have serious effects on its operation in the long-term. Therefore, it can be said that Legal is a crucial factor that Boral Limited should consider when operating.

3.1.6         Environment:

Environmental is a crucial elements that every company should be concerned about when operating. Any changes to the environment would affect the working process of a business. Since Boral Limited is a large company that manufactures and supplies construction’s materials, changes in the environment have a certain impact on its constructing activities.

According to Nick Toscano, the arrival of a huge downpour across the east coast of Australia in early 2019 has greatly affected Boral's profitability in building large materials. Moreover, the company's ongoing projects in the United States have also encountered problems due to less material being produced from the impact of the rain. Based on the results in late February 2019, Booral predicted that the company's earnings would be slightly lower than the same period last year. This announcement caused a sale of stock prices with shares decreased by nearly 8%. (Toscano, 2019).

As a result, it can be seen that adverse changes in weather will cause significant impact on Boral’s operating and also the company’s revenue. Its projects, delivery and sales could be negatively affected. Hence, if unfavourable weather keeps occurring in long-term then Boral Limited will have to face many hazards in the future.

4.0  Conclusion

In conclusion, Boral Limited is aiming to become a Created Shared Value type of company but what it is doing gravitate towards a Profit Maximisation. Boral is affected by all six factors of the PESTLE framework. Throughout the evaluation of the report, it is clear that the company’s profit has been either positively or negatively impacted by some of the external elements. As a result, the Boral needs to improve more in the future in order to be able to become a CSV company.

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