If, instead, corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed — it can be a source of opportunity, innovation, and competitive advantage. — Michael Porter & Mark Kramer, Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility
If you were questioning the value of corporate social responsibility and charitable giving, one read of Michael E. Porter and Mark R. Kramer’s “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” will eliminate any doubt. The article first appeared in the December 2006 issue of the Harvard Business Review (HBR) magazine and went on to become a HBR best-seller.
The authors, Michael E. Porter and Mark R. Kramer, are CSR stars in their own right. Porter is a leading authority on competitive strategy and head of the Institute for Strategy and Competitiveness at Harvard Business School. Kennedy, a senior fellow at Harvard’s Kennedy School of Government, cofounded FSG, a global social impact consulting firm.
In Strategy and Society, Porter and Kramer propose a 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 provide a framework that organizations can use to identify the social consequences of their actions and discover opportunities to benefit society and themselves by strengthening the competitive context in which they operate. This data can be used to determine which CSR initiatives to address and the most effective ways of doing so.
At its core, the article makes a case for creating shared value (CSV). CSV requires firms to identify areas where business needs and societal needs interact and create programming that is beneficial to both. For example, Marriott provided paid classroom and on-the-job training to chronically unemployed job candidates in partnership with local community organizations. Their efforts resulted in a reduction in the cost of recruiting entry level employees and a substantially higher retention rate, a win for the organization.
You can read the article in its entirety here.
This article is a tremendous place to start for sports professionals tasked with managing their outreach initiatives and/or formulating their outreach strategy. Beyond providing a framework for creating a winning outreach strategy, the article also provides a historical overview of CSR and examples of corporations effectively using outreach to improve the bottom line.
- Responsive vs. Strategic CSR
The authors make a clear distinction between what they call responsive philanthropy and strategic philanthropy. “Responsive philanthrophy comprises two elements,” they state. “Acting as a good corporate citizen, attuned to the evolving social concerns of stakeholders, and mitigating existing or anticipated adverse effects from business activities.” Strategic philanthropy, “Is about choosing a unique position — doing things differently from competitors in a way that lowers costs or better serves a particular set of customer needs,” Porter and Kramer define.
Responsive philanthropy is akin to playing catch-up — volunteering without a strategy, amping up efforts after a scandal or issue arises and relying solely on the feedback of stakeholders or community members to drive your involvement decisions. It’s a quick fix after realizing you should be involved in the community. Strategic philanthropy, however, is getting out ahead. It’s defining your strategy and driving your involvement based on your business constraints and opportunities, independent of issues or the whims of community members or shareholders.
2. The most common arguments in support of CSR are inadequate
The authors assert that proponents of CSR have used four arguments to make their case: moral obligation, sustainability, license to operate, and reputation.
These arguments, however, focus on the tension between business and society rather than on their interdependence. They are rationales that are not tied to the strategy and operation of the organization as a whole. They also fail to take into effect the social issues that matter most or the ones that align most with the brand. “The result,” Porter and Kramer assert, “Is oftentimes 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…. Externally, the company’s social impact becomes diffused among numerous unrelated efforts, each responding to a different stakeholder group or corporate pressure point.”
3. Three categories of social issues affecting a company
Kramer and Porter divide social issues into three categories to help guide organizations towards causes that are both important and strategic for business:
Tier 1. Generic social issues: Generic social issues are causes that are not impacted directly by the company’s operations nor affect the company’s ability to operate
Value chain social impacts: Value chain social impacts are significantly affected by the normal business operations of an organization.
Social dimensions of competitive context: Factors that significantly affect the underlying drivers of competitiveness in those places where the company operates (taken directly from article).
The authors use these categories as a guide to distinguish between responsive CSR and strategic CSR. A firm engaging in responsive CSR may involve themselves with generic social issues or simply try to limit an organization’s value chain social impacts. Firms engaging in strategic CSR, however, would transform value chain activities to benefit society or concentrate its efforts in leveraging the social dimensions that can influence its competitive context.
Unfortunately, the full article is only accessible to HBR Magazine subscribers. It is well worth the $8.95 purchase fee, however, if you don’t subscribe the to the magazine. You can also get 20% of the purchase price and access to fifteen free HBR articles per month if you sign up for an HBR account (best value on the internet if you ask me!).