Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility
Reprint: R0612D
Governments, activists, and the media have become adept at holding companies to account for the social consequences of their actions. In response, corporate social responsibility has emerged as an inescapable priority for business leaders in every country.
Frequently, though, CSR efforts are counterproductive, for two reasons. First, they pit business against society, when in reality the two are interdependent. Second, they pressure companies to think of corporate social responsibility in generic ways instead of in the way most appropriate to their individual strategies.
The fact is, the prevailing approaches to CSR are so disconnected from strategy as to obscure many great opportunities for companies to benefit society. What a terrible waste. If corporations were to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices, they would discover, as Whole Foods Market, Toyota, and Volvo have done, that CSR can be much more than a cost, a constraint, or a charitable deed—it can be a potent source of innovation and competitive advantage.
In this article, Michael Porter and Mark Kramer propose a fundamentally new way to look at the relationship between business and society that does not treat corporate growth and social welfare as a zero-sum game. They introduce a framework that individual companies can use to identify the social consequences of their actions; to discover opportunities to benefit society and themselves by strengthening the competitive context in which they operate; to determine which CSR initiatives they should address; and to find the most effective ways of doing so. Perceiving social responsibility as an opportunity rather than as damage control or a PR campaign requires dramatically different thinking—a mind-set, the authors warn, that will become increasingly important to competitive success.
Many firms’ corporate social responsibility (CSR) efforts are counterproductive, for two reasons: They pit business against society, when the two are actually interdependent. And they pressure companies to think of CSR in generic ways, instead of crafting social initiatives appropriate to their individual strategies.
CSR can be much more than just a cost, constraint, or charitable deed. Approached strategically, it generates opportunity, innovation, and competitive advantage for corporations—while solving pressing social problems.
How to practice strategic CSR? Porter and Kramer advise pioneering innovations in your offerings and operations that create distinctive value for your company and society. Take Toyota. The company’s early response to public concern about auto emissions gave rise to the hybrid-engine Prius. The Prius has not only significantly reduced pollutants; it’s given Toyota an enviable lead over rivals in hybrid technology.
The Idea in Practice
To practice strategic CSR:
1. Identify points of intersection between your company and society.
2. Select social issues to address. Given your company’s and society’s impact on each other, how might you address social needs in ways that create shared value—a meaningful benefit for society that also adds to your company’s bottom line? Example:
By addressing the AIDS pandemic in Africa, a mining company such as Anglo American would not only improve the standard of living on that continent; it would also improve the productivity of the African labor force on which its success depends.
3. Mount a small number of initiatives that generate large and distinctive benefits for society and your company. Example:
To enter the Indian market, Nestle needed to establish local sources of milk from a large, diversified base of small farmers. It received government permission to build a dairy in the district of Moga. But in Moga, farmers were impoverished, failed crops led to a high death rate in calves, and lack of refrigeration prevented farmers from shipping milk or keeping it fresh.
Nestle built refrigerated dairies as milk collection points in each Moga town and sent its trucks to the dairies to collect the milk. With the trucks went veterinarians, nutritionists, agronomists, and quality assurance experts. Farmers learned that milk quality hinged on adequate feed crop irrigation. With financing and technical assistance from Nestle, farmers dug deep-bore wells. The consequent improved irrigation reduced calves’ death rate 75%, increased milk production 50-fold, and allowed Nestle to pay higher prices to farmers than those set by the government.
With steady revenues, farmers could now obtain credit. Moga’s standard of living improved: More homes had electricity and telephones; more towns established primary, secondary, and high schools; and Moga had five times the number of doctors as neighboring regions. Meanwhile, Nestle gained a stable supply of high-quality commodities—without having to pay middlemen—and saw demand for its products increase in India.
Governments, activists, and the media have become adept at holding companies to account for the social consequences of their activities. Myriad organizations rank companies on the performance of their corporate social responsibility (CSR), and, despite sometimes questionable methodologies, these rankings attract considerable publicity. As a result, CSR has emerged as an inescapable priority for business leaders in every country.
Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility
Research & References of Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility|A&C Accounting And Tax Services
Source
0 Comments
Trackbacks/Pingbacks