E-135: Corporate Sustainability Strategy

BMW and SMS

(Case for Week 10, Oct. 31 - Nov. 6, 2016)
BMW - Bayerische Motoren Werke Ag, or Bavarian Motor Company Ltd. -- was
established in 1916 as a company manufacturing aircraft engines. It was briefly called
BFW, for Bayerische Flugzeug-Werke, before converting to the more general BMW in
1917. Its classic logo, incorporating the colors of Bavaria and the graphic of an airplane
propeller, has endured virtually unchanged since that time. Figure 1 shows the subtle
changes over the years (BMW, n.d.)

Figure 1: The BMW Logo (BMW, n.d.)

Today, BMW Group boasts three brands: BMW, MINI, and Rolls-Royce. It is
headquartered in Munich, Germany, and employs over 120,000 people worldwide –
in 30 production and assembly plants in 13 countries, including the US, UK, China and
India. Its revenues in 2015 were roughly 92 billion Euros ($100 billion), up from 80 billion
Euros in 2014, and with 2015 net profits of 6.4 billion Euros (BMW, 2015a; BMW, 2015b).

Besides their reputation for excellence in quality and innovation, BMW has become
widely respected for their commitments to sustainability. They are the only automobile
manufacturer to have been listed in the Dow Jones Sustainability Index since its
inception, and are currently listed as the leader in their industry for the DJSI. The Carbon
Disclosure Project gave them a score of 100/100 for transparency the third year in a row
last year and also rated them with an A for their measures in climate protection. This
makes BMW one of only three companies around the world who have been given that
rating for six years consecutively (BMW, 2015a).

BMW Group has also benefitted from its concentration on efficient use of resources.
Though they are known for high performance vehicles, efficiency has more and more
become a focus. They have introduced carbon fiber parts into their automobiles,
reducing weight, increasing safety, and improving gas mileage. They have publicly
declared a goal to halve their CO2 emissions from their vehicles by 2020 – from 1995
levels (BMW, 2015a).

BMW’s highly efficient diesel powered 118d model received the World Green Car of the
Year award in 2008. This, along with several other environmental awards, supported
BMW’s current position at the top of the industry for premium automobiles with excellent
environmental performance (Automotoportal.com, 2008).

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 E-135: Corporate Sustainability Strategy

In 2013, BMW introduced its first all electric vehicle, the BMW i3. With a range of 80-100
miles and using its “Efficient Dynamics” engineering, the i3 is seen as a pilot project for
BMW. They intend to use the design and manufacture of this model to benchmark their
resource use and recycling for their entire product line (BMW, 2013).

As many sustainability professionals argue, sustainability efforts can help promote

resilience in a company. Indeed, BMW maintained its profitability throughout the recent
recession, unlike many of its competitors (Nica, 2013). BMW Group is rated 51st in the
Fortune Global 500 list and is in the top 20 of Fortune’s “Most Admired” companies of
2016. The selection is made through surveying top executives of industry leaders, and
the criteria for rating the companies includes many items included in sustainability (Korn
Ferry, 2016):

1. Ability to attract and retain talented people

2. Quality of management
3. Social responsibility to the community and the environment
4. Innovativeness
5. Quality of products or services
6. Wise use of corporate assets
7. Financial soundness
8. Long-term investment value
9. Effectiveness in doing business globally

BMW has made sustainability a key strategic goal since 2009. In 2003, they were the
subject of two articles published in the International Journal of Corporate Sustainability,
describing their transition from a former emphasis on environmental management
systems (ISO 14001) to a full sustainability management system (SMS). The papers have
been provided for you in the extra case readings for this week, and you will find them to
be interesting reading as you investigate how BMW has continued its journey toward
sustainability.

For BMW today, every major project must have measurable sustainability objectives. This
means measuring both financial and non-financial performance. Managers are
compensated by their achievement of sustainability performance objectives, making
sustainability personal to key members of BMW leadership (BMW, 2015a)

BMW’s history of environmental responsibility covers decades, including appointment of

their first environmental officer in 1970. In 1999 they implemented ISO 14001 certification
(environmental certification) throughout their plants. In 2001 they embarked on a
company wide strategy to implement a full SMS. This included key performance
indicators of social, environmental and economic measurements. The SMS was
developed around the framework of the ISO 14001 standard, but it included broader
targets to include all three aspects of sustainability (Toffel, Hill, & McElhaney, 2003).

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 E-135: Corporate Sustainability Strategy

This week you will have an opportunity to study the journey of BMW on its path toward
overall sustainability. They represent the week’s topic of a sustainability management
system well. They excel in many of the areas you have studied so far this semester: a
solid business case for sustainability, good governance and ethics, serious engagement
of stakeholders across their supply chain, and attention to KPIs in environmental, social
and economic aspects. Their sustainability report is easy to navigate and includes links
to GRI reporting information.

It is also interesting to contemplate the progress of BMW in comparison to the scandal

that erupted at rival German automaker Volkswagen in 2015 regarding their diesel
emissions. BMW has not been implicated in any breach of reporting or tinkering with
their emission test results. A story briefly surfaced regarding an error In BMW testing, but it
appears to have been either a hoax or a mistake. The magazine reporting the test
result later retracted the story, but not before BMW stock fell almost 10%. BMW sells lots
of diesel cars, and they make up 38% of their total sales, although in the US they make
up only 6% of autos sold (Nica, 2015).

At the same time, it has come to light since the VW scandal that virtually all diesel
automobiles emit more nitrogen oxide (NOx) emissions on the road versus in controlled
testing environments. Some BMW automobiles have been found to have NOx emissions
greater than allowed under these actual road tests, and four BMW diesel models for
2017 have been delayed due to new stricter EPA testing in the US. Although these diesel
cars emit less CO2 than regular gasoline engines, NOx is still a powerful greenhouse gas,
and it is a health hazard especially for those people suffering from asthma. Many
European cities have strict NOx regulations, and this will be a challenge for diesel car
manufacturers going forward. (Caparella, 2016; Carrington, Topper & Walker, 2016).

This will be an interesting story to watch, and it begs the question whether a robust SMS
at Volkswagen might have prevented the fraudulent testing engineering. How will
BMW’s sustainability systems management and strategies help this company provide a
pathway for their diesel engines? Will they prove more resilient in the face of these
challenges?

It is hard to say where the future will take BMW. Their venture into the EV world is
certainly appropriate, but will their customers still demand the roar and feel of a fossil
fuel powered engine? Consumer tastes have certainly changed over the past decade,
and Toyota’s success with its Prius model is a prime example.

Most of us won’t have a chance to own a BMW i3 (pictured below in Figure 2), but you
can enjoy this week getting to know about this company aiming to be the premium
provider of personal mobility. One can only hope that they might expand their dream
to public transportation!

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 E-135: Corporate Sustainability Strategy

Figure 2: BMW i3 Electric Vehicle (BMW, 2015a)

References:
Automotoportal.com. (2008). BMW 118d wins world green car of the year. Retrieved
from: http://www.automotoportal.com/article/bmw-118d-wins-world-green-car-
of-the-year
BMW. (2013). Working together; Sustainable value report 2013. BMW Group. Retrieved
from:
http://www.bmwgroup.com/com/en/_common/_pdf/BMW_Group_SVR2013_EN.
pdf
BMW. (2015a). Sustainable Value Report 2015. BMW Group.
https://www.bmwgroup.com/content/dam/bmw-group-
websites/bmwgroup_com/responsibility/downloads/en/2015/BMW_SVR_2015_RZ
_EN.pdf
BMW. (2015b). Annual Report 2015. BMW Group. Retrieved from: http://annual-
report2015.bmwgroup.com/reports/bmwgroup/annual/2015/gb/English/3080/co
mpany-key-figures.html
BMW. (n.d). Milestones. BMW Group. Retrieved from:
https://www.bmwgroup.com/content/bmw-group-
websites/bmwgroup_com/en/company/history.html
Caparella, J. (2016). 2017 BMW diesels delayed due to additional EPA emissions testing. Car
and Driver. Retrieved from: http://blog.caranddriver.com/2017-bmw-diesels-
delayed-due-to-additional-epa-emissions-testing/
Carrington, D., Topham, G, & Walker, P. (2016). Revealed: nearly all new diesel cars exceed
official pollution limits. The Guardian. Retrieved from:
https://www.theguardian.com/business/2016/apr/23/diesel-cars-pollution-limits-nox-
emissions
Korn Ferry. (2016). Fortune world’s most admired companies. Korn Ferry Institute.
Retrieved from: http://www.kornferry.com/institute/fortune-worlds-most-admired-
companies

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 E-135: Corporate Sustainability Strategy

Nica, G. (2013). BMW voted most admired car manufacturer by Fortune Magazine.
Autoevolution. Retrieved from: http://www.autoevolution.com/news/bmw-
voted-most-admired-car-manufacturer-by-fortune-magazine-56608.html
Nica, G. (2015). BMW releases full statement regarding malicious rumors about its diesel
engines. Autorevolution Retrieved from:
http://www.autoevolution.com/news/bmw-releases-full-statement-regarding-
malicious-rumors-about-its-diesel-engines-100325.html
Toffel, M.!., Hill, N., & McElhaney, K.A. (2003). Developing a management systems
approach to sustainability at BMW Group (Part 1 of 2 parts). International Journal
of Corporate Sustainability 10(2), 2-29 – 2-39.

Questions:

Note: once again, remember this is a virtual exercise! No contact should be made with
BMW regarding the completion of the questions for this week.

1. Strategy and Planning Thread: What can you find about the planning stage of
the SMS for BMW? How did they involve the entire corporate system in this
planning process? Last week’s materials focused upon strategy – how did their
strategy affect their planning process? What challenges did they face, and how
did they overcome those challenges? What challenges do they continue to
wrestle with?
2. Translating 14001 to an SMS: What types of problems did BMW find when it tried
to translate its ISO 14001 language into the overall SMS for the company? How
did they address those problems? How can a company like BMW use its existing
management system language to apply to sustainability goals?
3. Aspects and Impacts Thread: How has BMW translated the ISO “aspects and
impacts” into real language for their management team? What particular
aspects and impacts have they focused upon, and how are they
communicated to the various divisions and supply chain? What are the most
difficult challenges in the environmental, social and economic areas?
4. BMW SMS Thread: How has the SMS been a driver of success for BMW? What is
the most obvious business case for the SMS for BMW? How might having a robust
SMS prevent fraudulent activity at BMW, such as was recently found at
Volkswagen in their diesel emission engineering? For graduate students, how
does this compare with your case company? Or, how does it compare with
other companies we have focused upon so far this semester?

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