Harley Davidson - Sustainability

Harley-Davidson

What in the world is sustainability? The term sustainability is often misunderstood and misused, and not everyone agrees on its definition. In 1997, there were estimated 350-plus definitions of sustainability and sustainable development (Hendrix, 2008). Regardless, most understand sustainability as the capacity for continuance into the long term. With that said, it seems the term sustainability is the new buzz word in Corporate America and across the world. However, the idea of sustainability dates back hundreds of years. Its roots can be traced back to the Iroquois Indian Tribe where tribal leaders based decisions on their impact to the seventh generation. The seventh generation philosophy is best described in this quote from Oren Lyons, an Iroquois tribal leader: "In our way of life, in our government, with every decision we make, we always keep in mind the Seventh Generation to come. It's our job to see that the people coming ahead, the generations still unborn, have a world no worse than ours and hopefully better. When we walk upon Mother Earth we always plant our feet carefully because we know the faces of our future generations are looking up at us from beneath the ground. We never forget them" (Deneen, 2010). Basically, sustainability is a proactive 360 degree approach to business management. Thus, organizations must develop comprehensive sustainability strategies. Harley-Davidson, Inc. is one such company that is dedicated to sustainability efforts.

Harley-Davidson, Inc. has been in business for 107 years and has experienced both the best and bleakest of times since its inception. The company was founded in 1903 by William Harley and brothers William Davidson, Arthur Davidson, and Walter Davidson. Harley-Davidson's 1903 model was made in the Davidson family shed and had a three-horsepower engine. In 1909 Harley introduced its first two-cylinder, V-twin engine, featuring the deep, rumbling sound for which made Harley-Davidson motorcycles world-famous (Grant, 2004). In the early years of operation, Harley-Davidson had a firm grasp on the market share as its only competition came from the Indian Motorcycle which went out of business in 1953. Therefore, competition was nearly insignificant until the Japanese Motor Company Honda entered the market in 1960 as the first of many Japanese competitors to enter the U.S market in the following decade. The increased competition immediately highlighted many quality deficiencies and almost forced the company into bankruptcy in 1969. It took nearly two decades to recover, but Harley-Davidson has once again taken its rightful place as an American Icon.

Aside from improving quality and value, the company has taken multiple steps to ensure long term success. In Harley-Davison's 2009 Sustainability Report, the company unveiled its new vision: "To present the future for the brands in a way that brings social and environmental responsibility along for the ride" (Harley-Davidson, 2009). While reviewing the companies past and future social and environmental initiatives, it becomes obvious the company utilized the Corporate Sustainability Model to develop its strategy.

Corporate Sustainability Model

The corporate sustainability model describes the inputs, processes, outputs, and outcomes necessary to implement a successful sustainability strategy (Epstein, 2008). It creates a systematic approach to look at sustainability efforts from a macro perspective. In many ways the model is similar to a S.W.O.T analysis as it takes the company's strengths, weaknesses, opportunities and threats into consideration. The model takes managers through a systematic journey to review current and future issues (Inputs) in order to develop programs that promote sustainability (Processes) by creating value (Outputs) which ultimately leads to long-term financial success (Outcomes).

In regards to sustainability, external context poses the most serious threat to Harley-Davidson's future. In their 2009 Sustainability report, the company focused primarily on environmental impact and government regulations. Highlighted in the report were climate change and green house gas (GHG) emissions. Considering these inputs among others, the company implemented processes to improve sustainability. The company developed an ongoing plan to reduce energy use and greenhouse gas emissions as part of their integrated sustainability strategy, and is taking steps to prepare for the transition to a low carbon economy. Their operations have reduced energy use and related greenhouse gas emissions every year since 2004. Through implementation of control improvements at their Kansas City plant, Harley-Davidson reduced natural gas consumption by 17.6 percent and reduced GHG emissions by 1,315 metric tons per year. Additionally, they have instituted energy efficient lighting at their facilities resulting in savings of approximately 40 percent (Laur, 2010). Sustainability outputs of this nature help promote Harley-Davidson as a responsible corporate citizen, which leads to improved financial performance. However, there are additional actions required to ensure sustainability.

Risk Assessment and Capital Budgeting

Aside from using the Corporate Sustainability Model, Harley-Davidson pays particular attention to risk assessment and capital budgeting. In today's global economy, it is crucial for organizations to focus on much more than the bottom line to ensure long-term sustainable operations. Companies must conduct analysis to understand the wide array of corporate sustainability impacts and manage their inherent risks. Effective risk management includes identifying the corporate environment that might impact the risk, identifying risks, evaluating potential effects, measuring these impacts, identifying and analyzing possible solutions, adopting the most appropriate solutions for managing risks, communicating results, and monitoring risks as they continue to evolve (Epstein, 2008). The risk management process requires complex decisions that will ultimately have an impact on sustainability and profits.

Harley-Davidson's commits a tremendous amount of resources to analyzing risk. As previously stated, much of the risk posed to the company comes in the form of government regulations. However, without research and analysis, there would have been no way to foresee this risk until it was too late. It sometimes appears the really great companies have the ability to see the future. In truth, these companies simply spend the necessary time to assess risk. Managers at Harley-Davidson assess risk by analyzing competition, staying abreast of economic and political issues, and studying risks associated with other industries. For example,