Tesla's CSR strategy and Environmental Sustainability
1.0 Introduction
In this new era, the world is facing many environmental challenges. According to the statistics published by the U.S Energy Information Administration, transportation accounts for nearly 33% of the worlds energy consumption. Even worse, traditional non-renewable fuels such as fossil fuels are still widely used in the modern transportation systems. Standard-gas powered vehicles, for instance, will generate toxic air pollutants and Greenhouse Gases (GHGs) which are extremely harmful to the environment. On one hand, traditional fossil fuels are depleting very fast. The consumption of these traditional energy types is highly unsustainable. On the other hand, the incomplete combustion of fossil fuels will produce air pollutants which are bad for human beings health. Besides, the release of carbon dioxide, a dominant factor which leads to global warming, will further threaten human beings living areas and cause extreme weather condition. Thus, the overriding issue is to reduce the reliance on fossil fuels in the traffic system. In recent years, due to the rapid technological development, electric vehicle (EV) industry is growing very fast. Electricity-powered vehicles potentially reduce the consumption of fossil fuels(Axsen&Kurani, 2013, p532). Department of Environment (DOE) of the U.S reports that the electrical vehicle industry will reduce over one million tones of air pollutants in America alone(2019)pk. Besides, the release of GHGs will lead to global warming. It results in the rise of sea level in the world. Countless coastal cities are under the threat of being overwhelmed by sea water. Under such context, the UNDP has proposed 17 Sustainable Development Goals in 2015. One of the SDGs is to reduce the release of Greenhouse Gases(Biermann, F., Kanie&Kim, 2017, p26). Most countries in the world agree to reduce the carbon dioxide emission and prevent the global warming through joint efforts(Florides&Christodoulides, 2009). In this report, Key challenges in regards to corporate social responsibility and sustainability will be first identified. Moreover, best practice within the electric vehicle industry sector will also be proposed accordingly. Last, recommendations will be made in order to make EV companies more responsible by taking the global considerations into account.
2.0 Key challenges relating to corporate responsibility and sustainability
In fact, business activities and operations should not just be responsible for shareholders, business owners and other key stakeholders. They should also be responsible for the whole society as a whole. Corporate social responsibility or CSR is concerned with how to manage and operate business processes in order to create positive social benefits and images(Lantos, 2001). Generally speaking, CSR contributes toward a sustainable economic development. It aims to address environmental issues and meanwhile sustain an economic profit for the company. Then it will make desirable social changes. It carries on business with moral and ethical standards. In the electronic vehicle industry, as the aforementioned, the major goal is to bring down air pollution and GHGs(Greene, Baker&Plotkin, 010). Through practicing CSR strategies, automotive companies can promote electricity-powered cars to replace traditional cars. it will reduce the consumption of fossil fuels to a very large extent. However, it is also worth pointing out that the whole industry does face many challenges with respect to CSR.
2.1 Lack of Infrastructure
First, one potential challenge is that there is lack of essential EV infrastructures. Charging stations and stands, particularly, are not sufficient for EV drivers(Deaton, 2019). In the U.S, for instance, the ratio of gas stations against charge stations is about seven to one. In other words, it is still very convenient for gas-powered car drivers to get an access to gasoline instead of electricity. They will be very reluctant to switch to EV products as charging stands are not readily available. In 2017, Indias government is planning to sell at least 6 million electric vehicles in the local market. At a national level, it is recommendable for the government to promote EV products as it will reduce the problem of air pollution and greenhouse gases(Zhang et al., 2016, p390). However, many experts in the industry point out that it is not realistic to implement this policy largely because there is lack of infrastructure, especially charging stations in India. Indias government really tries to promote the usage of EVs in its eco-system. Some researchers also point out that Indian consumers are less motivated to purchase electric vehicles due to a range anxiety. It is referring to a kind of anxiety that consumers may not find charging station very easily. In case of India, there is almost no infrastructure to support EVs for every 540 Km. However, the maximum range of Teslas model S is about 320 Km(Logan, 2019). In other words, it is not possible for Tesla drivers to charge their cars for such a distant journey. Electric charging station is a very critical element in an infrastructure that provides electricity to electrical vehicles such as plug-in cars. Superchargers deliver high voltage and direct current (DC) electricity directly to the EVs battery, by passing the on-board rectifier which coverts AC to DC. It allows superchargers to push electricity into cars battery with much faster rate. Tesla, for instance, is trying to create a network of superchargers in major cities of China(Heiskanen and Zhang, 2019). With the strong subsidies and financial supports from China’s local government, Tesla manages to construct superchargers in almost 14 cities of China for its drivers.
However, in most of other countries, lack of infrastructure potentially discourages consumers from purchasing EV products. Even though many automotive companies are ambitious in producing and selling electric vehicles, it is difficult and costly for them to build sufficient charging stations or superchargers without governments support. The EV products may be made in very high quality. But if customers are not able to charge their cars, they will have incentives to purchase them.
2.2 Energy Storage System
Energy storage system or battery is another major challenge for automobile companies to implement CSR strategies such as increasing the production of electric vehicles. Customers are less motivated to purchase electric vehicles because the energy storage system of electric vehicles are not able to sustain a distant journey. It is true that Tesla has invented its own power-train system which allows its EV products to cover a similar distance with traditional cars. Its Model S and Model X are capable of running nearly 400 miles with its EV batter. However, it should be noticed that electric battery has the problem of degradation over time. It is difficult and impossible for EV drivers to maximize the potential of battery or extend the battery life. After using the batteries for several years (up to 8 years), EV drivers may have to consider to replace the car batteries or even purchase a new car. As such, the problem within the energy storage system poses challenges for implementing corporate social responsibilities in the EV industry.
3.0 Best Practice
By definition, ethics is set of rules that define right or wrong conduct. Business ethics, on the other hand, can be defined as both written and unwritten business principles and values that guide the decision-making process within a company or an organization. Business ethics has several features, including code of conduct, moral and social values, giving protection to social group, providing basic framework, voluntary, requiring education and guidance, relative terms, etc. Code of conduct, for instance, is telling about what to do and what should not do for the welfare of the whole society. Traditional automotive industry, as the aforementioned, is heavily dependent on standard gas-powered cars, which leads to air pollution and the discharge of GHGs. CSR strategies aim to provide a holistic reasoning process and solution to address this ethical issue.
The Best Practice in the EV industry is to expand charging infrastructure. Many industry experts point out that charging infrastructure is the key to boost the growth of the global EV market. PEV, Hybrid and other electric vehicles requires huge investment and cooperation with major stakeholders such as government bodies and time to construct and expand in urban, sub-urban and rural areas. Public PEV charging infrastructure such as superchargers should be constructed near the metropolitan areas. It is largely because people who live in rural areas are less likely to access vehicle products. They rely more on public transport system. Home-charging is highly unlikely especially for multi-family units. It is both dangerous and ineffective for EV drivers. Home-charging stands will require AC-to-DC rectifier. As the aforementioned, the charging time cannot compare with superchargers or other charging infrastructure.Moreover, EV vehicles cannot sustain long journey as gas-powered cars. As such, it is more necessary to build a network of supercharges in order to promote EV usage.
In the U.S, the Department of Energys Alternative Fuels Data Center reports that charging stations are unevenly distributed in different states. Majority of the charging stations are concentrated in major large cities. It potentially limits the ability of electric vehicles from travelling between cities. The American Recovery and Reinvestment Act have already funded the installation of nearly 1,500 charging stations in the U.S. However, it is still far from being sufficient. In order to increase of number of charging stations and related infrastructure, several strategies should be undertaken.
3.1 Provide Incentives for Investment in building charging stations
Charging stations will undoubted require a sizeable investment to finance the construction. It is difficult for EV producers to build the charges all by themselves. EV producers have to collaborate with local government and communities to finance such projects. Very often, tax incentives and public financing will be an effective approach to attract investment in building PEV infrastructures. To be more specific, tax credits, low-interest loans, and government financial grants can allow private sectors to have sufficient fund to build the charging stations or replacing malfunctioning ones. The charging stations should be located near residential area and workplace as these are the places where EVs will be parked the most.
Currently, private construction companies can enjoy up to $75 tax credit for building a home charging stand in Arizona, U.S. In Louisiana, public charging station construction project can have 50% tax credit. In fact, not only limited to government bodies, local communities are also strongly interested in these public infrastructure projects. The New York City Private Fleet Alternative Fuel Program offers grants up to 50% of the cost of installing home charging or public charging stations. Through the collaborative efforts, it becomes possible for the EV industry to have well-established infrastructure to support electric vehicle products.
3.2 Invest in Charging Infrastructure in Public Spaces
EV drivers and potential customers have to rely on electrical charging station to provide energy for their cars. If charging stations can be readily discovered in public spaces such as street parks or publicly operated parking stations, etc, the range anxiety can be reduced significantly. To invest or build charging infrastructure is also in accordance to socially acceptable business ethics. When the potential users of EV are able to access EV infrastructure convenient, it is highly possible for them to switch to electric vehicles as they are environmental-friendly. Tesla, GW and other automobile firms should work with local communities and various financial institutions to attract monetary public investment to finance EV infrastructures. According the report of Rocky Mountain Institute, small public investors should be guided and convinced that building EV infrastructure is profitable (Hong et al, 2012, p85).
3.3 Collaborate with Private Charging Station Service Providers
In order to build more charging stations and stands, major stakeholders in the EV industry can also collaborate with charging station service providers. So far, EV project, ChargePoint America, eVgo, etc, are companies which are rolling out charging infrastructure. EV project so far is the largest private charging station demonstration in the U.S. It collects nearly $230 million from public and private investment to finance charging station construction projects. In the U.S alone, under the fund of EV Project, more than 14,000 chargers are installed in 16 cities across 8 states. Nissan, a famous Japanese automotive producer, is strategically partnered with ECotality to build approximately eight thousand chargers for Volt and Leaf drivers to charge their electric vehicles at home. In the return, the EV Project can effectively collect data with respect to EV drivers’ charging patterns in the home chargers and public charging stations. The data can be used to make the future installation of charging infrastructures more economically efficient and effective. ChargerPoint America is so far the third largest EV charging project in the U.S. Majority of the financial resources and investment are collected from ARRA and the California Energy Commission. It represents almost $37 million of public-private investment in building charging stations and related infrastructure. ChargerPoint is partnered with EV companies such as Ford, Chevy, and Tesla to build about five thousand chargers in 9 cities along the east and west coasts in the U.S. ChargerPoint America also wishes to collaborate with major EV companies to build more charging stations in the global market.
Through adopting the best practice in building a well-established EV charging network, it is predictable that potential customers will feel no difficulty in charging their electric vehicle products.
4.0 Recommendations
4.1 Collaborate with local communities
Electric vehicle producers should continue to collaborate with local communities in order to promote EV products. Tesla Motor, for instance, decides to allow all communities in the world to use its patents and some technologies in developing sustainable energy solutions(Tesla, 2014). As compared with other EV producers, Tesla is a highly innovative company which has thousands of patents in many areas such as solar panels, energy storage systems, power packs, etc. Tesla allows its users and other parties to generate and store energy through its solar panels and related energy storage system. Tesla hopes that communities will reduce the reliance on fossil fuels. As such, it is highly recommendable for other EV producers to follow suit. In order to promote EV products and develop sustainable energy solutions, automobile companies should strategically partner with local communities in sharing technologies and patents. Besides, EV companies should also work with communities to construct more public and home charging stations. As the aforementioned, if the EV charging infrastructure is not ready, it is difficult to persuade potential customers to switch to EV products. So far, Tesla is taking lead in building charging stations in both domestic and global market. In China, it collaborates with local government and communities to construct a supercharger network in 14 cities. Tesla drivers find it very convenient to charge their electric vehicles. Local communities will also benefit because electric vehicle will generate much less air pollution and greenhouse gases(Tan et al., 2014, p5493).
4.2 Raise Green Awareness among Potential Customers
Moreover, it is also recommendable for EV companies to raise green awareness in regards to environment conservation among target customers. According to Tesla’s Impact Report 2018, the company gives the highest priority to customers as compared with other major stakeholders in the target market through its CSR and Sustainability approach(Tesla, 2018, p4). Tesla positions itself as a promoter for environmental conservation and sustainability. Therefore, it aims to influence environmental-sensitive customers through its CSR strategies such as increasing the production capacity of electric vehicles, construction of superchargers, developing solar panels, etc. Potential customers are convinced that it is necessary and urgent to switch to electric vehicles because the latter can discharge less carbon dioxide(Florides&Christodoulides, 2009). The UNDP has long considered global warming as a potential threat to human beings’ life and properties. It calls on all governments and private sectors to jointly reduce the carbon emission and develop sustainable energy solutions. Recently, the Australia’s fire has taken countless lives of wild animals there. Experts point out that the natural disaster is attributed to global climate change. GHGs are certainly the major cause for global warming and extreme weather condition(Hill et al., 2009, p190).
4.3 Marching into Car-sharing Market
Last, the EV sector should not only limit itself within selling electricity-powered cars. In fact, it can also collaborate with other industry sectors like car-sharing. In order to reduce energy consumption of fossil fuels, car-sharing business actually shares the common goal with electric vehicle industry. Uber, Didi and many other companies are leading in car-sharing or ride-sharing businesses. One major goal of car-sharing is about reducing vacancies of seats in a car journey(Bellos, Ferguson&Toktay, 2017, p185). Electric vehicle companies can either collaborate or compete with car-sharing companies to join the market. Tesla, for instance, decides to launch its Robotaxi project. vehicles, passengers can rent or share a car-ride with Tesla’s self-driving and electric cars.
5.0 Conclusion
In conclusion, it is highly necessary and essential for automotive industry to focus on producing and promoting electric vehicles. On one hand, fossil fuels are depleting very fast. Scientists predict that petroleum in the world will be used up by the end of this century. On the other hand, the combustion of fossil fuels will also lead to severe air pollution and global warming. Electric vehicles, as compared with standard gas-powered cars, will generate no toxic air pollutants and GHGs. Therefore, it is a potential substitute for traditional cars. In order to attain environmental sustainability and conservation goals, all countries and private sectors should collaborate and jointly promote the use of electric vehicles. However, currently the EV industry is facing two potential ethical challenges. First, the EV charging infrastructure has not been sufficiently constructed. Even in countries like the U.S, electrical charging stations have not been fully constructed. The existing charging stands are also concentrated in urban or metropolitan areas. But currently electric vehicles are criticized for poor energy storage capacity. It is difficult for EVs to sustain a distant journey. If electric charging stations are not readily available, potential customers will lose interests in EV products. In order to address these problems, EV companies should work with local government, communities, charging station providers and other financial institutions to create a network of charging infrastructure. In the future, EV companies should also focus on developing green awareness among customers and cooperate with car-sharing service providers to attain sustainable development goals together.
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