Corporate Social Responsibility (CSR) or corporate responsibility, sustainable development, global citizenship, corporate citizenship, values-driven business or whatever moniker is used is a contemporary business reality that is here to stay. The rise in global digital connectivity has increased stakeholders’ ability to scrutinize and punish companies who fail to meet expectations of corporate responsibility.
Beyond the intrinsic benefits it provides, CSR should be harnessed as a strategic business element like marketing, production, talent management and operations in order to generate business value.
CSR refers to the obligations of the firm to society or, more specifically, the firms’ stakeholders- those affected by corporate policies and practice. It is about enterprises deciding to go beyond the minimum legal requirements and obligations stemming from collective agreements in order to address societal needs. Some benefits of CSR include increased employee engagement and customer loyalty from being affiliated with a socially responsible company. There are also evidences that some CSR practices such as responsible sourcing and energy conservation can reduce costs and improve a company’s bottom line.
In most emerging markets, a fundamental problem with CSR practice is that organizations don’t usually have a CSR strategy but rather a collection of disparate CSR programs and activities. Most businesses operate what Michael Porter and Mark Kramer describe as “a hodgepodge of uncoordinated CSR and philanthropic activities disconnected from the company’s strategy that neither make any meaningful social impact nor strengthen the firm’s long-term competitiveness.” According to consulting firm – Mckinsey, CSR should move beyond strategically disconnected philanthropic giveaways to an integrated business strategy. They advocate that firms need an Integrated External Engagement strategy with components including defining a company’s unique contribution, knowing stakeholders, radical engagement, applying world-class management and measuring outcomes.
There are three typologies within which one could classify a company’s CSR activities. First is corporate philanthropy, which stems from intrinsic motivations of employees or business leaders who seek broader organizational support for their interests.
Second is creating shared value, i.e. finding opportunities within a company’s core competencies and business processes to generate some social or environmental benefit while improving the bottom line in the process. An example of such a strategy could include measuring and reducing corporate carbon footprints.
Third is seeking to improve the business environment by creating broader external environmental changes in how an industry addresses sustainability issues e.g. by helping to create industry wide sustainability standards.
Regardless of whether company adopts one or a mix of any of these broad theatres of CSR, a good strategy should build active participation and engagement in their initiatives and should move from a top- down strategy determined by the board to a richer process of bottom-up co-creation with stakeholders. Centralized CSR teams can lose touch with reality- they tend to take a narrow view of the relevant external stakeholders. Managers on the ground have a much better understanding of the local context. By engaging with a broad range of stakeholders from the board to local management and other strategic business units, an organization can involve itself in those CSR schemes that are really important to its stakeholders. Also, through a process of engagement, all stakeholders can own the strategy and begin to see how their functions help achieve the corporate CSR strategy. Moreover, any CSR strategy must be connected to a company’s purpose and should have outcomes that can be measured in terms of value added to the business.
In sum, CSR shouldn’t be limited to a particular programme or project. It should be a deliberate corporate strategy on how the business can maximize positive impact while minimizing negative externalities in a way that is connected to the company’s mission and integrated into the company’s operations.