CSR Notes

Corporate Social Responsibility (CSR)

Two Views on CSR

• Friedman's View (Free Market Economies):

  • Property Conception: A firm is a collection of assets owned by stockholders.

  • A firm's primary duty is profit maximization.

  • The firm must obey the law and avoid fraud.

• Socioeconomic Conception:

  • The firm is part of a wider society.

  • It has a duty to promote a healthy and prosperous society as a corporate citizen.

  • The interests of all stakeholders should be balanced.

Triple Bottom Line

• The triple bottom line considers three aspects:

  • Prosperity/Profit

  • People

  • Planet

Why Involve in CSR?

• Moral imperative

• Reputation

• Legitimacy (license-to-operate)

• Customers (ethical/green consumerism, differentiation)

• Advantages like lowering costs

• Motivating and attracting employees (especially young employees)

• Potential profit/revenue enhancement

CSR Strategy

• CSR Strategy: Setting up a separate CSR strategy alongside the general strategy.

• Strategic CSR: Incorporating CSR into the overall business strategy.

What is a CSR Strategy?

• Goes beyond philanthropy and merely following the law.

• Exceeds minimum legal requirements.

• Examples include:

  • Code of conduct.

  • Ethical training.

  • Avoiding excessively high goals and bonuses.

• Involves actions ensuring ethical company operations.

Responsive vs. Strategic CSR

• Responsive CSR addresses generic social impacts through best practices or philanthropy

• Strategic CSR involves:

  • Identifying areas where the company affects society.

  • Addressing those issues to achieve a social benefit and an economic/competitive benefit.

  • Aiming to lower costs and/or differentiate the company.

EU Strategy 2011-14 for CSR

• Strategic approach to CSR:

  • Integrating social, environmental, ethical, human rights, and consumer concerns into business operations and core strategy.

  • Close collaboration with stakeholders.

The NEW Framework: Creating Shared Value (CSV)

• Premise: Business and society are interdependent.

  • Successful corporations need a healthy society.

    • Educated and healthy employees lead to a productive workforce.

    • A healthy society boosts demand.

  • A healthy society needs successful companies.

    • Companies offer jobs.

    • Companies innovate.

    • Companies pay taxes.

Choosing CSR Initiatives

• The essential test: Does the cause present an opportunity to create shared value (a meaningful benefit for society that is valuable to the business)?

• Other social agendas are best left to companies in other industries, NGOs, or government institutions that are better positioned.

Intersect: Shared Value

• Two simultaneous steps:

  • Identifying all issues where the corporation affects society to determine which ones to address.

  • Determining which issues offer a simultaneous economic/competitive benefit for the corporation.

Categorizing Social Issues

• Social issues are categorized based on the relationship/intersection between the company and society:

  • Inside-out linkages: Impact of company's value chain activities on society (e.g., transport, production, waste, water). - Proactively address these ALWAYS

  • Outside-in linkages: Social dimensions of the competitive context (factors in the external environment that significantly affect the underlying drivers of competitiveness). - Actively look for opportunities.

  • No real intersection: Generic social issues (address only if you can).

Strategic Issues - Social Dimensions of Competitive Context

• Factors in the external environment that significantly affect the underlying drivers of competitiveness where the company operates (outside-in linkages).

• If the company helps with the issue, it benefits the company.

  • Lowering costs: e.g., healthy workforce, secure supply chains (e.g., Mars cacao farmers).

  • Differentiation: Adding a social dimension to the value proposition (e.g., Patagonia, Wholefoods).

• ACTIVELY LOOK FOR OPPORTUNITIES.

Examples

• Mars cacao:

  • Considerably lowering costs.

  • Differentiation.

• Patagonia:

  • Eco-friendly apparel manufacturer.

  • Capilene material made of recycled polyester.

  • Recycling program for old clothes.

  • Support for a Land Trust in South America.

• Wholefoods:

  • Distinguishes itself from competitors.

  • Buying from local farmers.

  • Green electricity.

  • Animal welfare.

  • Screening out unhealthy/environmentally damaging ingredients.

  • Composting spoiled products and biodegradable waste.

  • Leading to "premium" prices.

Categorization Varies

• The categorization of a social issue (generic, value chain impact, or competitive context) varies from:

  • Business unit to business unit.

  • Industry to industry.

  • Place to place.

Examples of Categorization

• Carbon emission:

  • Financial institution: Generic.

  • Cookies production company: Value chain social impact.

  • Car manufacturer: Value chain social impact & Competitive context.

• AIDS:

  • Financial institution: Generic.

  • Pharmaceutical company: Competitive context.

  • Mine company in Africa: Competitive context.

Take Away

• Sort social issues into generic issues, value chain impacts, and social dimensions of competitive context for YOUR company/BU.

  • Generic issues: only if you can.

  • Value chain impact: ALWAYS proactively (minimum).

  • Look at strategic CSR opportunities.

• Some value chain impacts.

• Always social dimensions of competitive context – choose wisely!

• By helping, it helps my business.

• Adding a social dimension to the value proposition.

Critiques

• Nil novum sub sole est:

  • Similar to corporate sustainability and value creation for stakeholders.

  • Ignores existing literature (intellectual piracy).

• Blind focus on individual corporate self-interest.

• Naïve as it ignores tensions between social goals and economic goals.

  • Social and economic goals are not always aligned for all stakeholders (no win-win).

  • Social and economic goals are difficult to integrate.