International Management Governance and Sustainability Development 1

International Management Governance and Sustainability

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International Management Governance and Sustainability Development 2

International Management Governance and Sustainability

Introduction

Corporate governance refers to the set rules that must be complied with to ensure

control over the corporations' business activities. The governance practices help companies

positively impact the environment, social and economic development, termed corporate

sustainability. Corporate governance directly affects corporate sustainability. International

management practices indicate a company's governance and sustainability. Sustainable

development is a key factor in dominating markets. Francois Henri Pinault once stated that

sustainable development is a critical break that can reshuffle the entire deck. Companies are

going to dominate the market simply because they understand this. The paper evaluates the

Tesco company and benchmarks its practices against UN Global Compact while considering

the Rana D case study on Tesco social responsibility (Rana 2007) to scrutinize the company

to demonstrate the role of international management and governance for more responsible

business.

Tesco is a British multinational that deals with grocery and general merchandise retail

with its headquarters in Welwyn Garden, England. The company has been ranked as the third-

largest retailer globally concerning gross revenue. On considering Tesco’s governance

system, from February 28th, 2009, the board was composed of eight executive directors.

Seven of the non-executive directors are independent, then David Reid who is the non-

executive chairman. According to the company's article of association, new directors are

submitted to an election in the first year of their appointment by stakeholders. The company

has a senior independent director who, when normal channels fail, helps shareholders resolve

their concerns and assess the chairman's effectiveness. According to Nigam et al., 2018 pp.

571-585, the board links the managers who do the company's day-to-day running with

shareholders.
International Management Governance and Sustainability Development 3

There is a balance between the executives and non-executives in the Tesco company.

The company satisfies the combined code, which ensures that executives are working

according to the best interests of stakeholders. The code states that the board should ensure at

least half of it is composed of non-executive directors, and Tesco meets the combined code

(Shrives and Brennan 2017 pp.31-56). According to the recommendations of Cadbury, a

single person should not be the chief executive officer and chairman at the same time. It

causes a lack of dissolution in power between the chairman and chief executive officer, which

is a source of many failures in the financial world globally. In Tesco, the chairman and chief

executive officer are two different people where the chairman is in charge of the board. In

contrast, the chief executive handles the operations of the group.

The combined code further ensures good governance practices by providing principles

on how the board should direct companies. Companies listed in the UK are required by

Financial Service Authority to disclose their governance structure regarding section 1 of the

combined code. Two Tesco non-executives resigned due to a conflict of interest, giving an

imbalance in the number of executives and non-executives. The company had to handle this

as fast as possible to comply with the UK combined code. The company’s nomination

committee oversees the board appointments.

Directors have to attend board meetings unless prior commitments prevent them.

When conflicts in their schedule prevent them, they provide their comments in advance.

According to the IR magazine, Tesco has been rated as the company with the poorest

corporate governance. In the paper, the Tesco management practices will be evaluated and

benchmarked against a third-party standard while illustrating the role of international

management, governance, and sustainability. The diagram below illustrates Tesco’s

governance structure (Dudovskiy 2017).

International Management Governance and Sustainability Development 4

The UN Global Compact is the third-party standard considered for the evaluation. The UN

Global Compact is a non-binding party responsible for encouraging businesses globally to

ensure sustainable and socially responsible policies and reporting on their implementation.

The UN global compact helps create a culture of integrity in strategies and operations. For an

organization to participate in the UN global compact, the organization requires full

commitment from the chief executives. The organization is also based on accountability, so

organizations should submit reports or communicate annually, showing their efforts to

operate responsibly and support society (Fussler and Van, 2017). The UN global compact

activities are based on 10 key principles.

The 10 principles are based on four subjects: human rights, labor, environment, and

anti-corruption (Xie et al., 2019). Under human rights, there are two principles. The first

states that businesses should respect and hold up to the internationally proclaimed human

rights, and the second states that the businesses should not be involved in activity concerning

the violation of human rights. Under labor, there are four principles. They include businesses

holding up to the freedom of association and recognizing the right to collective bargain,

eliminating forced labor, child labor abolition, and eliminating discrimination in employment

and occupation. Under environment, there are three principles. Upholding cautionary

approach to environmental challenges, Taking actions that promote greater environmental

International Management Governance and Sustainability Development 5

responsibility, and encouraging friendliness are ensured when developing technologies. The

last principle states that businesses should work against anti-corruption of any form, be it

bribery or extortion.

Consumers and investors are more informed than before in the current age, and they

need companies to be responsible for the increasing pressure on the planet and its population

(Lusardi and Mitchell 2017 p.1750008). People are growing to know that being careful with

short-lived gains is not enough for businesses and more efforts are needed. Natural disasters

like floods, social unrest, and economic disparity can destroy the long-lived results.

Businesses that have a clear understanding of this and are acting will be more privileged and

several steps ahead of those not understanding. The 17 UN sustainable development goals of

2030 sustainable development agenda came into force on January 1 st, 2016. The image below

is an image from Dreamstime indicating the goals of sustainable development (Goerge et al,

2021). George tries to illustrate digital sustainability and entrepreneurship.

International Management Governance and Sustainability Development 6

According to the UN global compact website, the sustainable development agenda

opens new markets and opportunities for companies worldwide. Success to come to the

global goals have to be turned into businesses. According to the UN, global compact

companies have to play a role in preventing global financial crises like the one in 2008

through investors ensuring transparency with their financial practices, social and

environmental challenges to ensure substantial finance. The UN global compact website has

led to investors evaluating companies' performance on environmental, social, and corporate

governance issues.

Climate change, water, human rights, and anti-corruption can affect the value of

companies. Businesses with control over the ESG issues are likely to have good long-term

financial performance. The UN global compact supports different groups towards ensuring

sustainable development (Fussler et al., 2017). The first group is the companies; it helps them

assess and deal with ESG risks by encouraging them to participate in their operations and

investments. The second group is the investors, and they are helped with decisions to ESG

risks part of their investments. The last group is the stock exchange market, which developed

sustainable stock exchange initiatives. The UN global compact has developed several

frameworks that companies can use to embed sustainability in their strategy.

According to the case study used in the paper, Tesco's CR strategy enabled Tesco to

develop international managerial practices that hold up to the UN's sustainable development

agenda. The company based its managerial practices on continuously supporting the local

community, responsibly buying and selling products, Taking care of the environment,

ensuring healthy choices to customers, and creating good jobs and careers. Though the

company based its international practices on these points, they still left loopholes in playing

their role towards ensuring sustainable development.

International Management Governance and Sustainability Development 7

To protect the environment, Tesco labeled carbon labeled 100 of their brand products

in 2009 in Ireland and the UK and devised a plan to introduce the practice in other countries.

The company implemented a 70% smaller carbon footprint in their stores and intended to

open new stores in the same format. Tesco took a step and implemented biofuel in their petrol

stations and consulted the sustainable consumption institute in Manchester to research the

issue (Ahmed 2017). The company also worked hard to reduce the plastic packaging of its

products. Though the company tried to implement schemes towards sustainable development,

it did not act on group water use (Apte and Sheth, 2018). On evaluating the practices of Tesco

company against UN global compact principles and sustainable development plan, the

company is making efforts towards sustainable development. The case study clearly outlines

Tesco’s international management practices towards the environment.

The company has also taken initiatives towards the community. It established 250

store community champions in different countries like China, Malaysia, and South Korea.

The company showed its employees how to make a difference by launching its community

promises. The company raised 6.2 million sterling pounds to support charity in the UK and

the Marie Curie cancer care. According to Rana's case study, the company has supported and

done more to the communities while building 951 Korean culture centers. The actions show

its embedding of sustainable development in its investments and operations.

Tesco is not left behind in activities involving ethical and responsible business. The

company acquired 726 vetted and skilled auditors from 11 auditing bodies to audit its global

supply chain. As stated in the case study, 90% of Tesco suppliers around the globe are

positive about how Tesco treats them with a lot of respect. From the data provided in the case

study, Tesco is meeting UN global compact principles. The company is not complying with

human rights violators. According to the case study, the company focuses on meeting its
International Management Governance and Sustainability Development 8

customers' needs. The introduction of Tesco loyalty Clubcard indicates their efforts towards

meeting customer satisfaction.

Regarding Tesco's labor activities, Tesco has had several complaints about their unfair

treatment of workers. The case studies illustrate the complaints of workers in Bangladesh and

South Africa. The workers' complaints indicate Tesco's not in compliance with the UN global

compact labor principles.

Tesco has played a major role in customer choice and health (Johnson et al., pp.179-

188). As indicated in the case study, the company helped reduce saturated fat and salt from

their products. The company continually works with the government, health organizations,

and industry bodies to develop standards for nutritional labeling. The company is playing a

major role in the UN sustainable development agenda. Has company has shown good

progress towards the sustainable development agenda. Tesco succeeded in reducing in-store

waste by a third in the space of a year. The material flow diagram below is developed from

data obtained from Tesco (Yang et al,2019).

International Management Governance and Sustainability Development 9

The data used in developing the flow diagram was obtained from Tesco illustrating Tesco’s

actions towards sustainable development. Despite the company's actions towards sustainable

development, more actions can be done towards achieving more. The company can engage in

activities of healthy eating. Tesco should improve the nutritional content of foods while
International Management Governance and Sustainability Development 10

regulating salt and sugar in foods. The action will help improve health, and it will be a step

towards sustainable development. The company should provide its customers with means of

accessing their products and services which are less carbon to bring a positive impact on

climate change. The company can reduce emissions in its supply chain by understanding the

carbon footprint of a product. The company should also ensure good working conditions for

its employees and avoid having its employees complain about payments like in Bangladesh.

The company should work on a year in year out plan for reducing carbon emission

though it has shown radical improvements in some areas about the environment. As the

company expands, it should reduce its effects on the environment. Tesco should implement

the Kyoto protocol and government initiatives towards renewable energy. The company

seems to be well-governed but still lacks transparency and weak internal control. The

company should work towards fighting these. Poor cooperate governance leads to failure to

achieve sustainability goals and ethical business practices. Tesco

Conclusion

Two factors impact the success of a business. Transparency in transactions and

behaving ethically. The case study, the benchmark, and evaluation confirm that Tesco runs a

good corporate governance framework. The business ensures transparency with its investors

and hence good performance from the company. The good corporate governance in Tesco has

contributed to sustainable development in the company. Recently Tesco has implemented

many schemes for ensuring the UN global compatibility principles are met. With Tesco

practicing the best corporate governance practices, the company has achieved more

responsible business. It has led to more achievements towards sustainability development

because good corporate governance positively impacts sustainability development. The report

presented by Tesco annually to the UN global compact clearly outlines their efforts towards

sustainable development but more can be done as the recommendations illustrate.

International Management Governance and Sustainability Development 11
International Management Governance and Sustainability Development 12

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