Case studies in CSR
How to move from gloss to strategy
Abstract
Purpose – Looks at the CSR efforts of a variety of organizations in order to illustrate which approaches are the most effective for both the business and wider society.
Design/methodology/approach – This briefing is prepared by an independent writer who adds their own impartial comments.
Findings – Whether you like it or not, if you run a company of considerable size there is little chance that you have managed to avoid the issue of corporate social responsibility (CSR). Executives are increasingly aware that they are expected to offer some sort of benefit to the wider world: newspaper articles, academic papers, the activities of their peers and the public all tell them so. Many now worry that if their company is not seen to be making environmentally and morally aware social contributions as part of their day to day operations then they will lose their customers and risk their reputations. But recognising the demand and fulfilling it are two different things.
Practical implications – Research into a wider variety of industries and a future reassessment of how current CSR initiatives have performed would further increase knowledge and guideless for success in this area.
Originality/value – Offers advice and illustrative examples on CSR policy that will be useful to any company considering its own approach.
Article Type:
Viewpoint
Keyword(s):
Environmental management; Social responsibility; Corporate strategy; Society; Business performance.
Journal:
Strategic Direction
Volume:
24
Number:
1
Year:
2008
pp:
12-14
Copyright ©
Emerald Group Publishing Limited
ISSN:
0258-0543
Whether you like it or not, if you run a company of considerable size there is little chance that you have managed to avoid the issue of corporate social responsibility (CSR). Executives are increasingly aware that they are expected to offer some sort of benefit to the wider world: newspaper articles, academic papers, the activities of their peers and the public all tell them so. Many now worry that if their company is not seen to be making environmentally and morally aware social contributions as part of their day to day operations then they will lose their customers and risk their reputations. But recognising the demand and fulfilling it are two different things.
For many companies, core business and CSR are an awkward pairing. If their product base or services do not overlap with any pressing environmental or societal concerns, they feel that CSR is entirely an “extra-curricular” activity that has to be taken part in merely to appease public relations. CSR thus becomes costly and distracting, and furthermore offers little real benefit to the company.
Indeed, the majority of organizations perceive a very close relationship between CSR and PR but fail to see the potential links between CSR and strategic and organizational benefits. Even less often do executives envisage an immediate link between fulfilling the public's demands and a positive impact on the bottom line.
Despite this, business writers are increasingly trying to explain and find acceptance for the point that for CSR to be worthwhile it must become a central and not a peripheral activity, whatever the business. CSR is about much more than PR and to fail to grasp that is to waste resources and miss out on real business opportunities. Only, we are told, when CSR and business strategy develop together can the corporate and social spheres both enjoy the benefits.
So what would you do? If your shareholders demanded that you had to become more involved with CSR, how would you do it? Would you know which moves would be really valuable and which would in effect be little more than gloss? Think about the following case studies.
Taxis and GE
Radio Taxis Group is the London cab firm that first gained CarbonNeutral accreditation. The company won the CSR category in last year's CIMA Financial Management Awards and has been granted ISO 14001 accreditation. These rewards are the result of MD Andrew Herbert's 2004 decision to commit seriously to societal and environmental issues. Since then, every driver has been trained in using equipment for the disabled and knowing when help should and should not be offered to avoid causing offence. Offices use green energy and have slashed paper consumption. Given the fact that black cabs are have not yet been redesigned to cut carbon emissions, there was little that could be done about the taxis themselves. Therefore, to offset their impact on the environment, Radio Taxis Group invests in projects in India, Sri Lanka, New Zealand and Jamaica to deliver solar powered lighting, wind turbines, energy-efficient light bulbs and so on. As a result of these decisions, the firm is CarbonNeutral and has enjoyed much good publicity as a result. It is, however, a strategy that costs Herbert's company £120,000 a year.
Now consider GE. The power giant has a scheme that contributes greatly to underperforming US high schools. Specific schools are “adopted,” and each of them receives up to $1million in contributions over a five year period. In addition to this, the schools receive in-kind donations and the time of GE staff, who help teachers assess needs and then get involved with mentoring and teaching students. As a result of this program, schools have shown significant improvements and graduation rates have doubled. Further, the program has improved relations between GE and local governments and employees are proud of their involvement.
While the positive CSR contributions of both organizations are both indisputable and highly commendable, neither firm illustrates what could be labelled a mastery of CSR. In Radio Taxis' case, the firm is spending a large amount of money to try and fulfil social and moral imperatives. Though Herbert is very aware about delivering profits to shareholders, he admits that “There are always complications with green issues … Certainties don't exist in this field yet, so we have to make judgements as best we can.” Though these judgements have attracted good PR, it is always difficult to prove that contributions in Sri Lanka have had much impact on how the average person in London makes transport decisions. Similarly, taxi pollution in London remains the same and is ironically, due to this good PR, further encouraged. Herbert might be making up for the environmental damage of his company but he isn't changing his basic business premise to avoid it in the first place.
GE can be judged in a similar way. Again, though the company's impact on specific lives has been huge, these social efforts do not relate directly to customer activity or to GE's core product. GE can therefore only claim that its CSR activities have a modest impact on its recruiting and retention and little impact on its day to day business.
Tensions between business and society
The reason both these examples fail to illustrate simultaneous significant benefit for the business and society is that they have not overcome the inherent tensions between the two. Porter and Kramer advise strongly that the most effective CSR models start by only considering social issues that are directly relevant to the firm's business. Further, they seek not to mitigate harm but to find ways to reinforce corporate strategy by advancing social conditions. But what is essential to a real strategic approach is finding a link between business activities and the society in which it operates.
Take Standard Chartered, just one of a huge number of financial institutions who have moved into sustainable banking. Though based in London, the company's income comes primarily from Asia, Africa and the Middle East, all markets that suffer from poverty, disease and environmental issues. The bank recognised that there was a direct relationship between social issues and its profits. In 1999, 10 percent of employees in Kenya missed work because of HIV and AIDS, with accompanying costs to the business. In response, Standard Chartered began a global community campaign, which seeks to raise awareness about HIV and thus prevent its further spread. Its skills and resources have enabled the bank to officially pledge to educate 1m people about the disease by 2009. The company has a similar campaign that targets the restoration of sight.
These programs, as well as offering huge benefits to the communities in which they operate, do far more than create a good reputation for Standard Chartered. Both programs are a core part of the bank's sustainability strategy to promote economic growth. As finance director Richard Meddings explains, “The cost of treatment is often small but the impact on the person and their ability to contribute to the community is huge.” The community, of course, includes branches of Standard Chartered, whose profits rely on and healthy and efficient workforce.
Standard Chartered is joined by companies such as Nestlé and Microsoft in its practice of the most effective CSR. Both these latter firms have similarly recognised that their profits depend on their communities, and thus both have put considerable resource into targeting social problems in the areas in which the operate. When distinctive strategy is inseparable from social impact in this way, then a company has achieved real CSR goals.
Comment
This is a review of “Capital gains” by Ruth Prickett, “Strategy and society: the link between competitive advantage and corporate social responsibility” by Michael E. Porter and Mark R. Kramer, and “Sustainable banking” by John Willman, Mike Scott, Eoin Callan, Kimberly Wilson, Fiona Harvey, Ed Crooks, Richard Lapper, Jane Croft, Kate Burgess and Leo Johnson.
“Capital gains” describes the award-winning corporate social responsibility initiatives undertaken by London cab firm Radio Taxis Group. The company became carbon neutral in 2005 thanks to its commitment to the environment. Prickett points out that this status comes at an annual cost of £120,000 a year, though in return the company has gained good publicity, an ISO 140041 accreditation and a financial management reward.
Porter and Kramer show that thanks to a change in the public's expectations of company policy, many organizations have had to rethink their attitudes towards corporate social responsibility. They identify four prevailing justifications for CSR, commenting that each of them focus on the tension between business and society rather than on the strategy and operations of any specific organization. After advising on how companies might best find useful points of intersection between themselves and society, thee authors conclude that it is possible to create a sustainable competitive advantage that also makes a real difference to the wider world.
“Sustainable banking” considers the social and environmental sustainable agendas being adopted at financial institutions. It presents the shortlist for the Financial Times Sustainable Banking Awards, which reflects an increasing interest in these agendas across the banking sector thanks to the realisation that environmental policy can lead to profit and growth. The paper explains how these awards are administered and judged and offers last year's winner HSBC as an example. Additionally, it presents further short articles around the same topic.
References
Prickett, R. (2007), "Capital gains", Financial Management (UK), ISSN 1471-9185, Vol. May pp.21-2.
Porter, M.E., Kramer, M.R. (79), "Strategy and society: the link between competitive advantage and corporate social responsibility", Harvard Business Review, ISSN 0017-8012, Vol. 84 No.12, December, pp.78-9.
Willman, J., Scott, M., Callan, E., Wilson, K., Harvey, F., Crooks, E., Lapper, R., Croft, J., Burgess, K., Johnson, L. (2007), "Sustainable banking", Financial Times, ISSN 0307-1766, Vol. 7 June pp.1-6.