UNIVERSITI UTARA MALAYSIA

BKAL 3063
INTEGRATED CASE STUDY
GROUP A
A201 2020/2021

CASE 2
SOGO DEPARTMENT STORE, HONG KONG:
INTEGRATING ENVIRONMENTAL SUSTAINABILITY INTO A RETAIL
STORE’S OPERATION

LECTURER: PROF. MADYA DR. NOOR AFZA BINTI AMRAN

GROUP 4

Group Members Matric No.

SITI SARAH BINTI AHMAD SUKI 252681

HANISAH BINTI AHAMAT 255729

LOO SEE SEE 258976

CHENG SING HIENG 259502

YEAK QIAN HAN 264472

SUBMISSION DATE: 9 NOVEMBER 2020

 Contents
1.0 Executive Summary ........................................................................................................... 1

2.0 Statement Of The Problem ............................................................................................... 2

2.1 Stakeholder Are Lack Actively Participating In ESG Matter .......................................... 2

2.2 How To Balance The Business Profitability And Sustainability. .................................... 2

3.0 Causes Of The Problem ..................................................................................................... 3

3.1 Gap Between Consumers' Awareness Of Sustainable Consumption And Behavioral

Awareness ........................................................................................................................ 3

3.2 Business Partners Widely Differing Levels Of Attention To Sustainability Issues ......... 4

3.3 Profitability Is The Main Performance Measurement For Business ................................ 6

4.0 Decision Criteria and Alternative Solution ..................................................................... 8

4.1 Decision Criteria .............................................................................................................. 8

4.2 Alternative Solution For Stakeholder Are Lack Actively Participating In ESG Matter . 8

4.2.1 Organizing Campaign ............................................................................................... 8

4.2.2 Consumer Behavior .................................................................................................. 9

4.2.3 Cooperate With Local Suppliers ............................................................................... 9

4.2.4 Disclose ESG Information ...................................................................................... 10

4.2.5 Special Customization KPI Measurement For Business Partners .......................... 10

4.2.6 Two-Way Communication Channel ....................................................................... 10

4.3 Alternative Solution For Balance The Business Profitability And Sustainability ......... 11

4.3.1 Research On Relationship Between ESG And Profitability ................................... 11

5.0 Recommended Solution ................................................................................................... 12

REFERENCES ............................................................................................................................ 14
1.0 Executive Summary

Corporate social responsibility is a concept whereby companies integrate social and environmental

concerns in their business operations and in their interaction with stakeholders on a voluntary basis

(European Commission, 2001). Environmental, social and governance (ESG) requirements are a

set of principles for business operations that are used by socially responsible investors to track

future investments. Michelle Tsang, Deputy Store Manager of SOGO Department Stores, needs to

find ways to incorporate environmental sustainability into its primary areas of responsibility for

in-store operations and product sales, considering the new realities that corporations in Hong Kong

have faced in balancing their pursuit of ever greater profitability with their corporate commitments

in terms of environmental sustainability. There are also issues for stakeholders such as clients,

shareholders, society and business partners who are not yet fully engaged in ESG matters. In the

opinion of the shareholders, the risk and benefits will be weighed up, and the shareholder will

consider all possible risks in SOGO. Their business partners did not pay attention to how SOGO

integrated ESG and sustainability into its business strategies.

Michelle Tsang and the ESG Committee must concentrate on consumption and

sustainability. Reasonable KPI measurements should be given to all industry business partners for

selected business partners and a connection should be formed between SOGO and its business

partners to share the ESG policy applied by the companies. They can also use local distributors

and suppliers as a very green business practice as it can reduce the effect of carbon emissions on

the atmosphere by local distribution of goods and supplies. Make sure your customers know that

not only do you help your local economy, but your company also minimizes gas consumption and

carbon emissions by using local vendors.

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2.0 Statement Of The Problem

2.1 Stakeholder Are Lack Actively Participating In ESG Matter

SOGO store has started its ESG reporting journey in the past few years, and it has taken several

measures. The first is to establish an ESG committee and conduct an online survey of its employees

to determine the priority of its sustainability work and initiate a number of possible initiatives for

sustainable development projects. These projects just involve employees and other major

stakeholders who lack actively participating in ESG matter with SOGO store. As we can see, the

stakeholders such as customers, shareholders, community and business partners who are not yet

actively engaged with the ESG matters. For successful the ESG program, the corporation of all the

stakeholder is most important. Michelle as a Deputy Store Manager, she was very familiar with

customers and business partner. In this study, we will focus on the customers and business partners.

2.2 How To Balance The Business Profitability And Sustainability.

In this case, Michelle, as a Deputy Store Manager and ESG committee, she needs to focus on

consumption and sustainability. Because of the main purpose for business is to earn the profit to

its shareholder. While implementing ESG, the company’s profitability must also be considered.

From here, SOGO store need to improve the sustainability of the businesses without negatively

impacting the profitability. Michelle needs to make sure SOGO store can get monetary and non-

monetary benefits from ESG activities. Therefore, how Michelle balances ESG and profitability is

also a major test for her.

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3.0 Causes Of The Problem

3.1 Gap Between Consumers' Awareness Of Sustainable Consumption And Behavioral

Awareness

The customers of SOGO store are mostly the consumers of Hong Kong as the department stores

had only been set up in that region which is the SOGO Tsim Sha Tsui and SOGO Causeway Bay.

In order to gain the information on consumer’s sustainable consumption (SC), the Hong Kong

Consumer Councils had conducted a survey on that matter of which the result is ironically showing

a high awareness on the importance of SC among the consumers while at the same time their

behavior does not represent the awareness in their actions. Thus, created a gap between their

intellectual agreement with SC and practically followed the SC. Based on the result of this survey,

it can be seen that the consumer's high awareness on the issue of sustainability surely shows the

connection between human and nature as proposed in the theory of Biophilia of where they have

the tendency to be affiliated with the effort in sustaining the future through nature conservation.

While this is true to a certain extent, the fact that the consumer’s reluctance in following the

environmentally friendly practice is still of a concerning issue as shown in the survey result. In

response to this, the theory had suggested that the current modern society that is prone to making

more harm than good towards nature as merely the result of an unnatural estrangement with nature.

In addition, according to Elijah of Journal of Environmental Science and Public Health,

this concern is also known as the environmentally responsible behavior (ERB) concept of which

consists of three primitive models on the theories correlating between behaviors and actions of a

person. These theories refer to the Behavioral Change Model, Theory of Environmentally

Responsible Behavior and The Reasoned Action Theory. He further adds that these theories had

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led towards The Environmental Citizenship Model, human interaction model with the environment

and the value-belief-standard environmental theory which further extends the relationship between

consumer behavior and the environment. Based on the latter theory, we can take the current

situation of SOGO store interpreted as where the belief refers to their awareness of benefits of

waste separation while the pro-environmental personal norms refer to their sense of obligation to

separate the waste themselves. We can also include the concept of habit due to the modern daily

lives that revolve around conveniences that have resulted in the hesitance of changes in consumer

behavior. In short, the root issue on consumer behavior towards the environment needs to take into

consideration human psychology itself to extend our understanding in order to produce a

countermeasure on this issue and preserve nature.

3.2 Business Partners Widely Differing Levels Of Attention To Sustainability Issues

On the aspect of being one of the well-known department stores with a good reputation, SOGO

store had a strong structure of business partners who had offered a wide variety of goods from

daily necessities to luxury products. As reported by Michelle, their business partner is most likely

conscious of the issue of sustainability and shows conscientiousness on the matter. However, the

level of promoting the effort for a sustainable environment differs among them such that cosmetics

vendors are highly conscientious to environmental factors compared to home appliance vendors.

Thus, causing a significant variance in the ESG reports. From this situation, various analysis and

scanning may identify the causes for such differences. First of all, the motivation factors would be

the primary concern as the business is focusing on maximizing profits. Hence, this would involve

all of the cost in the company operation itself as well as their networking with other parties through

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the supply chain. Taking the example of cosmetics and electronic products, it can be said that the

difference in their priority on sustainability may relate to the fact that cosmetics products are

directly affecting the health of their customer while the electronic product focuses on providing

the technology of the most up-to-date. The correlation between these two industry and

sustainability practices is that by prioritizing the health of the customer, it works as part of their

corporate social responsibility which will benefit them on their reputation and also contribute to

sustainability since risk-free products are environmentally friendly ingredients. While for

electronic products, it’s harder to achieve sustainability due to many electronic components being

outsourced from various vendors and specifically selecting for a sustainable outsourcing vendor

would cost more.

Based on this fact, the Sufficiency Economy philosophy research framework is in line with

the issue. As stated by Kantabutra (2019), the five domain predictors will act as the determining

factors on how company actions can contribute towards corporate sustainability performance

outcome whether direct or indirect. Apart from that, the imbalance of certain industries on

sustainability practice may be related to the practice known as the ‘secret sustainability’ where

sustainable innovation exists, however, being kept in silence by a certain company from the rest

of the industry to gain the upper hand in the market. For example, innovation on waste management

provides for a more efficient and cost-effective operation. While the justification for such practice

is reasonable to avoid any unnecessary accusation of greenwashing towards a business, its

downturn is far from generally acceptable on the bigger scale referring to those other players in

the market are not on the same ground in making the business industry equally sustainable. As for

the last note, factors that contribute towards the issue of sustainability among the industry is still

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a complex matter as the business continues to strive forwards facing different challenges and

different environmental views as time goes by in line with the progression of the innovation era.

3.3 Profitability Is The Main Performance Measurement For Business

Milton Friedman proposed in the 1970s that corporations make the most of their shareholder

capital legitimately and reasonably and have benefited the company (such as paying taxes,

generating jobs, selling goods and services to consumers, and helping manufacturers to make

profits). He assumes that the one underlying obligation of a corporation is to increase earnings or

shareholder value and then return profits to shareholders in order to allow shareholders to freely

manage those returns. Milton Friedman's "Shareholder Theory" objects to the use of shareholders

' funds in additional CSR programs to support social justice or public health, and argues that this

is the responsibility of companies, governments or NGOs. He denies that management working as

representatives of owners are diverted from social security as this would create economic damages

for shareholders, consumers and workers.

However, Freeman (1984 ) argues that, alongside benefit sharing and shareholder

accountability, businesses often have to explain those interested in an organization that have to

pay attention and establish various methods to swap capital and fulfil their needs in order to allow

the long-term growth of industries, institutions or corporate groups. In other words, as well as

corporate owners, partners, creditors, staff, consumers, rivals, public bodies, culture and the

community, they all have strong relations with business organizations. A business is then a single

group of owners, and by various explicit and implicit contracts, it controls duties and commitments,

then distributes the balance of the power to fulfil its needs and to generate profit. The ideological

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rationale raised by the stakeholder hypothesis radically modified the justification for the existence

of companies and transformed business objectives, essence and governance models.

The corporate sustainability theory notes that the sustainable growth of an enterprise

assumes that the enterprise achieves its strategic targets and strengthens its market position in order

to achieve sustainable development on the one side. On the other, it aims to accomplish the

manufacturing mechanism that will satisfy not only customer demands but also the fair use of

natural resources and energy and protect the Methods and initiatives to ensure harmonious

coexistence between companies and all stakeholders by seeking the holistic benefits of economic,

social and environmental capital. Since the 1970s, the introduction of sustainable development

principles into the CSR industry has become a consensus, since businesses must take fair social

responsibility to move towards sustainable development. Many organizations employ performance

assessment or incentive mechanisms to monitor and even establish opportunities for social and

environmental performance primarily to show their contribution to sustainable growth. While in

the short term investment in sustainable development planning will raise business operation costs;

in the long term, as corporate responsibility takes hold, the company's recognition of the company

and its goods will grow and the company can be the biggest beneficiary.

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4.0 Decision Criteria and Alternative Solution

4.1 Decision Criteria

SOGO store should firstly consider the solution can be ease of implementation therefore no affect

the basic operation for the business. Other than, the solution must match or extend from the existing

strategy to avoid disrupt the existing strategic direction and affect the improved ESG progress. The

relationship with business partners and images to consumers also should be considered. Finally,

cost also is the element that must be considered by Michelle.

4.2 Alternative Solution For Stakeholder Are Lack Actively Participating In ESG

Matter

4.2.1 Organizing Campaign

SOGO store can plan to organize a campaign to influence the mindset of stakeholders toward ESG.

For example, “Change the Earth, Start with Us” campaign maybe can be conducted by SOGO

Store. In this campaign, foods and beverages will be provided. However, the stakeholder need to

bring their own food container and cup for the foods and beverages, at the same time SOGO store

can sell the food container and cup to those who desire to join the campaign but didn’t bring their

own. Education of environment sustainability also can be provided to the stakeholder. On the other

hand, the costs, time implementation and manpower need to be considered before organizing this

campaign. From the cost aspect, Michelle Tsang may request sponsorship from the business

partners. As evidence, SOGO store partnered with Green Monday which promoted food

consumption, the food cost will save from the budget since it will sponsor by Green Monday. By

doing these actions, SOGO store can promote eco-friendly and green products.

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4.2.2 Consumer Behavior

Consumer behavior will impose a double environmental burden on the ecosystem by polluting and

destroying non-renewable natural resources. Change customer behavior is one of the challenges

faced by SOGO store. The consumers know that waste separation is good, but they didn’t take

action to separate the waste. What the SOGO store can try to do is forcing consumer behavior. For

example, SOGO store changes all the rubbish bins into the recycle bins, it can print out the statistic

of how the earth changes with their small actions on the recycled paper and show it upside the

recycle bins. Furthermore, SOGO store encourages the consumers to reduce to use the plastics bag

by providing a 10% discount on the purchase if they bring their own reusable bags. “Thank you

for saving our earth today” cashier greet to the consumer, it also is raised up the image of SOGO

stores.

4.2.3 Cooperate With Local Suppliers

A research conducted in 2019 stated that 48% of carbon emissions in the United States came from

petroleum fuels. Cooperate with local suppliers not only will bring up the country’s economy, at

the same time, but it can also reduce the impact of carbon emissions by reducing the use of

petroleum fuel in delivering the products. Since the one product category which Sogo Stores had

direct control on procurement was food items, it may supply the food items such as vegetarian,

eggs, fruits and other from the local farmer. It is better to cooperate with the supplier who nearby

the company location. Fresh food items will be selling and promote to the consumers. It shows

several advantages when cooperating with the local suppliers.

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4.2.4 Disclose ESG Information

In order to raise up the awareness and understandability of stakeholder toward environmental

sustainability, SOGO store can try to disclose the ESG information to them. Some of the

stakeholders just know about sustainability but they didn’t realize ESG. SOGO store need to

communicate, share and explain ESG information to them. Once SOGO store disclose the ESG

information to the stakeholders, they will understand the sustainable policies and status of

sustainability implemented by SOGO store. Then, good cooperation and a strong relationship will

be built between the SOGO store and the stakeholders. By discussing the ESG information, SOGO

store also indirectly disclose their transparency and accountability.

4.2.5 Special Customization KPI Measurement For Business Partners

SOGO ESG committee can have the meeting with different sector organization (such as

Sustainable Apparel Coalition) and have a review on the related research to set a customization

KPI measurement policy to a different sector of business partners. This may help SOGO to

measure their business partners’ ESG policy is consistent with SOGO and also can guide SOGO’s

business partner to modify their ESG policy.

4.2.6 Two-Way Communication Channel

SOGO store may organize a forum and invite the related organization, business partners and

customers to join. In this forum, SOGO store can display all the ESG policy that has done and

show the sincerity of being willing to cooperate with other major stakeholders. Other than, SOGO

store can also have an online survey to the consumers to collect the opinion and promote the ESG

concept to its customers. The feedback that collects can be analyzed to improve the existing

framework.

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4.3 Alternative Solution For Balance The Business Profitability And Sustainability

4.3.1 Research On Relationship Between ESG And Profitability

SOGO store should change the old ideas in shareholders' mind that is monetary benefit is most

important for the business. Have to research on the relationship between ESG and profitability by

insourcing or outsource and explain to shareholder in annual general meeting the SOGO store can

earn what type of benefit from ESG activities. But this may take a long time and cost to implement

this solution.

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5.0 Recommended Solution

Before the decision making, Multi-criteria decision-making method will be used to analyze which

solution is most suitable to SOGO store. The analysis will base the decision criteria and rank (1~6)

the effect on these solutions.

Cooperate
Disclosure Two way
Organizing Consumer With KPI
ESG communication
Campaign Behavior Local Measurement
Information channel
Suppliers

Ease of 3 4 2 6 5 1
implementation
Match or
extend with 6 2 3 1 4 5
existing
strategy
Costless 2 1 5 6 4 3

Company 5 4 6 3 2 1
images
Total 17 11 16 16 15 10

From the result, we can see that the organizing campaign, disclosure of ESG information

and cooperate with local suppliers are with the high score. In conjunction to that, SOGO store can

have Green Day Campaign that also includes disclosure ESG information and ESG forum. The

foods and beverages will be provided and require participant should bring their own food container,

with this can attract more investors. Other than, SOGO store should take this advantage to promote

the ESG information and have an open discussion with its stakeholders. Besides that, this

campaign can also be used to promote the wishes of SOGO store's intentional and qualified local

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fresh food suppliers. SOGO store will selected that local suppliers/farm that have comply with

sustainable agricultural product certification.

Because of Covid-19 global pandemic, the campaign may increase the risk of infection.

SOGO store can have an effective communication channel with its customers and business partners

by online method. A discount coupon will be given to customers that have complete the online

survey form. ESG Committee member can have an online meeting with the business partners

though Webex, Zoom and other applications to sharing the ESG strategy. Vice versa SOGO store

also can get the sharing from their business partners. Ideally, they can cooperate with each other

to modify or improve their companies’ ESG practice.

However, KPI measurement for SOGO store’s business partners has a lower score, but by

no means does this resolution is not suitable to SOGO store. Because the image of business

partners also will affect SOGO store’s image. With the KPI measurement not only help SOGO

store improve ESG practice and also the business partners. But it may take a long time to collect

the information to have a specified measurement to related sector business partners. The solution

must listed as a future plan by SOGO store.

The best solution to dispel shareholders’ worries is proved to them that even if ESG

increases costs, the benefits will surely outweigh the cost. SOGO store can organize a competition

and provide rewards to attract public or students to have this research study. The participant should

list the benefit that SOGO store can earn from ESG program and provide the reference and

evidence to support their research. The research will be present in next annual general meeting

with shareholders.

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REFERENCES

Coburn, C. (2019). Why the Industry is Going Green on the Quiet. The Observer Science.
Retrieved from https://www.theguardian.com/science/2019/sep/08/producers-keep-
sustainable-practices-secret

Daryl, R. J. M. (2000). Love, The Environment and Bioethics. Turkish Journal of Medical
Ethics, 8, 1-8. Retrieved from https://www.eubios.info/Papers/LOVEENV.htm

Elijah, A. A. (2017). Theories and Concept for Human Behaviour in Environmental

Preservation. Journal of Environmental Science and Public Health, 1(2), 120-133.
Retrieved from http://www.fortunejournals.com/articles/theories-and-concepts-for-
human-behavior-in-environmental-preservation.pdf

Kantabutra, S. (2019). Achieving Corporate Sustainability: Towards a Practical Theory.

Sustainability, 11, 4155. Retrieved from
https://www.researchgate.net/publication/334861686_Achieving_Corporate_Sustainabilit
y_Toward_a_Practical_Theory

Yildiz, Ayselin & OZERIM, Mehmet. (2014). Corporate Social Responsibility in European
Context.

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