In: Operations Management
Analyze how ISO 14001 and AA1000 regulations protect stakeholders. Do these regulations and reports have an impact on how investors see the long-term viability of an organization or company in which they plan to invest? What are examples of this in the Kingdom of Saudi Arabia where this reporting occurs? In a 2-4-page paper, explain how these regulations impact future investors, local stakeholders, and the organization’s or company’s sustainability.
For most business organizations, achieving competitive advantage over its competitors has been the main influential factor to organizational success. Stakeholders and investors determination to stay in business or invest in a business is influenced by the positive indicators to healthy performance. In the recent days, however, most organizations economic indicators are not the only sources of competitive advantage (Potoski & Prakash, 2005). Environmental impacts and social responsibility concerns have played significant roles in implementing sustainable strategies and emphasizing on corporate social responsibility (Bansal & Hunter, 2003). These strategies were kept in mind while designing the regulations related to ISO 14001 and AA1000.
Regulations of ISO 14001 are used in cases of those organizations that are seeking to improve their environmental management systems (Prakash & Potoski, 2006). This in turn helps them to focus on corporate sustainability and adopting sustainable business practices. However, the implementation of the regulations depends on the organization’s environmental policy, nature of its operations, its products or services, the location and its operation conditions (Potoski & Prakash, 2005). The AA1000 regulations, on the other hand, are concerned with social standards (Gobbels & Jonker, 2003). The regulations stipulate social and ethical standards for quality auditing, accounting and reporting (AccountAbility, 2008). The standards help organizations identify stakeholders, internalize their expectations and align corporate values with these expectations.
These regulations have significant and important impacts on the stakeholders and investors on businesses. To begin with, they protect the stakeholders by minimizing and averting risks that would arise from public concerns about the organization’s practices and operations. With the world increasingly becoming environmentally conscious, the public attitudes and perceptions are influenced by organization’s adherence to sustainability standards (Potoski & Prakash, 2005). As such, observing ISO 14001 standards, for instance protects stakeholders and investors from risking public criticism, rejection and wrath that would be harmful to business. On the other hand, corporate social responsibility and ethical values are effective for competitive advantage. Consequently, the AA1000 standards are useful in projecting the long term performance of the company, which is useful in influencing investors’ decisions towards the business.
In Saudi Arabia, sustainable environmental measures are important especially since the country is involved in oil and energy production, which according to climate research, accounts for 6% of the GCC countries environmental pollution levels (Prakash & Potoski, 2006). Companies such as ISO Riyadh and Lakshy, in Saudi Arabia provide consultation and reporting services on the ISO 14001 regulations (Ali & Al-Aali, 2012). As such, the companies help companies such as Sabic to enforce effective environmental protection and conservation strategies that is important to the public. For future investors, these regulations help control or mitigate environmental pollution through their companies hence gaining quick and easy public acceptations.
Gulf Arab countries are known for their effective management strategies that are founded upon strong historical, Islamic and cultural beliefs. Under this form of management, Saudi Arabian organizations aim at achieving positive performance through observation of high ethical standards and CSR. Therefore, the AA1000 standards are important in influencing ethical responsibility that is required to build the local investors and stakeholders’ trusts on the management and workers (Gobbels & Jonker, 2003). Companies such as AccountAbility and Bureau Veritas provide consultation and reporting for these regulations in companies such as Saudi Arabian Airlines and Saudi American Bank (Ali & Al-Aali, 2012).
Conclusively, these regulations are important in providing the future direction of the company. Strategic implementation of the standards is important in improving the organizations sustainability, hence important to investment decisions and stakeholders’ trust.
Reference List
AccountAbility, A. S. (2008). AA1000 Assurance Standard 2008.
Ali, A. J., & Al?Aali, A. (2012). Corporate social responsibility in Saudi Arabia. Middle East Policy, 19(4), 40-53.
Bansal, P., & Hunter, T. (2003). Strategic explanations for the early adoption of ISO 14001. Journal of Business Ethics, 46(3), 289-299.
Göbbels, M., & Jonker, J. (2003). AA1000 and SA8000 compared: a systematic comparison of contemporary accountability standards. Managerial Auditing Journal, 18(1), 54-58.
Potoski, M., & Prakash, A. (2005). Green clubs and voluntary governance: ISO 14001 and firms' regulatory compliance. American Journal of Political Science, 49(2), 235-248.
Prakash, A., & Potoski, M. (2006). Racing to the bottom? Trade, environmental governance, and ISO 14001. American Journal of Political Science, 50(2), 350-364.