CSR & Competitive Advantage PDF

# BRANDING & COMMUNICATION TEAM #2 ## COLLECTIVE READING 08.10.2024 ### STRATEGY & SOCIETY **The Link Between Competitive Advantage and Corporate Social Responsibility.** by Michael E. Porter and Mark R. Kramer Students: Giulia Bisanti - Benedetta Luciano - Stefania Mariani - Marco Zagaria ##...

# BRANDING & COMMUNICATION TEAM #2 ## COLLECTIVE READING 08.10.2024 ### STRATEGY & SOCIETY **The Link Between Competitive Advantage and Corporate Social Responsibility.** by Michael E. Porter and Mark R. Kramer Students: Giulia Bisanti - Benedetta Luciano - Stefania Mariani - Marco Zagaria ### overview Published in 2006 on Business Harvard Review, 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. ### agenda #### PART 1 what CSR is and what is not + PLENARY DISCUSSION #### PART 2 framework: interdependences for shared value + TEAM DISCUSSION ### definition CSR refers to a company's **responsibility** to address the **social, environmental**, and **economic impact** of its operations. Proponents of CSR have used **four justifications** to make their case. **Moral obligation** companies have a **duty** to be good citizens and to **do the right thing**. “achieve commercial success in ways that honor ethical values and respect people, communities,and the natural environment.” - *CSR Business Association US* **LIMITATIONS** Corporate social choices involve **balancing** competing values, interests, and costs. They cannot follow an "**absolute mandate**" logic. **Sustainability** companies must exhibit **environmental** and **community stewardship**. “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” - *World Business Council for Sustainable Development* **LIMITATIONS** The notion of **sustainability** can become so vague as to be meaningless. Little basis for balancing long-term objectives against the short-term costs they incur. **License to operate** companies need **tacit or explicit permission** from governments, communities, and numerous other stakeholders to do business. **LIMITATIONS** By ceding **primary control** of their CSR agendas to outsiders, a firm devolves into a series of short-term defensive reactions-a never-ending public relations palliative with minimal value to society and no strategic benefit for the business. **Reputation** justifying CSR initiatives on the grounds that they will improve a company's **image**, strengthen its brand, enliven morale, and raise the value of its stock. **LIMITATIONS** Focus on **satisfying external audiences** often leads to high profile cause-related marketing campaigns. Risk to confuse public relations with social and business results. **At the time of the writing,** “... the most common corporate response [to public pressure] has been neither strategic nor operational but **cosmetic**: public relations and media campaigns; the centerpieces of which are often **glossy CSR reports** that showcase companies' social and environmental good deeds. [...] What these reports leave out is often as telling as what they include." ... **how is it possible?** Mentioning isolated anecdotes over coherent goals, using incomplete information and referring to meaningless measurement units is enough to **circumvent the granular and not-standardized criteria** used in rankings, which often rely on self-reported company information. ### EXAMPLE: THE RATING GAME **DOW JONES SUSTAINABILITY INDEX** *economic performance included* *customer service > corporate citizenship* **FTSE4GOOD INDEX** *no measures of economic performance or customer service included* ### implication When companies approach CSR primarily as a way to improve their image or to score well on publicized ratings, they shift focus from the deeper, strategic integration of CSR into their operations. This **dilutes the true impact of CSR on both society and the business itself**. ### PLENARY DISCUSSION #### What about now? Social pressure and activism are stronger than ever, and consumers seem more aware and conscious than before. Yet, this hasn't stopped the proliferation of **cosmetic CSR practices**. Do you know of any recent cases of this phenomenon? How do you think this is possible despite growing public awareness? ### framework The inclusion of CSR into a broader strategic view requires a **shift in mindset**. Companies must move away from the **ingrained us-versus-them mindset** and start focus on **interdependences over tensions**. ### INTEGRATING BUSINESS AND SOCIETY FRAMEWORK #### 1/4 Identifying the points of intersection “The mutual dependence between businesses and society implies that both business decisions and social policies should follow the principle of **shared value**." That is, choices that benefit both parties-because fostering these linkages can lead to sustainable growth, increased innovation, and improved social outcomes. #### Inside-out linkages refer to the impact a company has on society through its everyday business operations. Activities like hiring practices, emissions, and waste disposal can have both positive and negative effects on the surrounding community, and these impacts can vary depending on the location. #### Outside-in linkages describe how external social conditions affect a company's success. Factors such as infrastructure quality, workforce availability, and regulations are part of the competitive context that shapes a company's ability to execute its strategy. #### 2/4 Choose which social issues to address | GENERIC SOCIAL ISSUES | VALUE CHAIN SOCIAL IMPACTS | SOCIAL DIMENSIONS OF COMPETITIVE CONTEXT | |---|---|---| | Issues not directly influenced by the company's operations | Issues directly affected by the company's activities | External factors that impact company's competitiveness | #### 3/4 Create a Corporate Social Agenda A Corporate Social Agenda is a strategic framework that outlines a **company's commitment** to proactively addressing **social issues** while aligning these initiatives with its **business objectives**, aiming to mitigate negative operational impacts and reinforce overall corporate strategy. **RESPONSIVE CSR** *Actions and initiatives taken by a company in reaction to stakeholder expectations and societal concerns.* **STRATEGIC CSR** *Intentional and proactive approach that integrates social responsibility into the core business strategy of a company.* #### 4/4 Creating a Social Dimension to the Value Proposition At the core of any strategy is a **unique value proposition**, a set of needs a company can fulfil that others cannot. The **most effective strategic CSR occurs when companies incorporate a social dimension into this value proposition**, making social impact integral to their overall strategy. ### remember **NO BUSINESS CAN TACKLE ALL OF SOCIETY'S PROBLEMS:** companies must select **social issues that align with their specific operations and strategic goals**. ### unlock the power of food to enhance quality of life for everyone *Nestlé sources milk directly from local farmers in its Milk District program, strengthening local economies.* *The program creates economic opportunities and ensures access to sustainable farming for the community.* *The program provides technologies and resources to farmers, enhancing their production and milk quality.* *The program responds to consumer preferences for locally sourced and ethically produced food products.* *Nestlé sends experts to these communities to provide guidance on animal husbandry and milk conservation.* *The program is designed to promote sustainable farming practices and resource management.* ### SHARED VALUE *Inside-out* *Outside-in* ### take-away When aligned with core business activities, CSR can become a source of **competitive advantage** while **solving societal issues**. CSR + Business = Competitive Advantage ### It's a two-way interdependence: “Successful corporations need a healthy society [...]. At the same time, a healthy society needs successful companies.” *A SUCCESSFUL COMPANY CREATES THE JOBS, WEALTH, AND INNOVATION THAT IMPROVE STANDARDS OF LIVING* *A HEALTHY SOCIETY CREATES EXPANDING DEMAND FOR BUSINESS, AS MORE HUMAN NEEDS ARE MET AND ASPIRATIONS GROW.* ### TEAM ACTIVITY #### Applying CSR to Business Which CSR initiatives would you put in place to create shared value for both the business and the social context? **The Company:** a multinational tech company operating globally, specializing in software and cloud computing services. Given its expertise, the company is well-positioned to tackle issues such as technology training, internet connectivity, and innovation in underdeveloped areas. **The Social Context:** a developing region with limited access to the internet and insufficient technological skills. The community lacks the digital competencies needed to take advantage of job opportunities in the growing global digital economy. **Final output:** * **Objectives:** Specify what community and business needs the project aims to meet. * **Main Activities:** Detail the activities to be implemented (e.g., training workshops, provision of devices, establishment of an innovation center). * **Resources Involved:** Human resources, materials, partnerships with other organizations. * **Community Benefits (Linkage Inside-Out):** How the project will improve skills and quality of life in the community. * **Benefits to the Company (Linkage Outside-In):** How does the initiative benefit the company's competitive position? ### MICROSOFT'S WORKING CONNECTIONS PROGRAM #### a case of shared value What was the challenge? In the early 00s a shortage of **IT workers** was limiting Microsoft's growth, with 450,000 unfilled positions in the U.S. Meanwhile, **community colleges** - which enroll 45% of U.S. undergraduates - faced obstacles such as outdated technology, non-standardized IT curricula, and lack of faculty development programs. #### Microsoft's Response They launched a $50 million five-year initiative. A partnership with the American Association of Community Colleges (AACC). **Key Actions included:** providing funds and products to modernize IT education. Sending employee volunteers to assess needs, develop curricula, and establish faculty training institutes. Volunteers and assigned staff were able to use their core professional skills to address a social need, going beyond traditional volunteer programs **Community Benefits:** improved IT education infrastructure, better trained faculty, and enhanced student skills. **Business Benefits:** strengthened Microsoft's talent pipeline and market presence, while enhancing its image as a socially responsible leader ### THANK YOU! Any other food for thought? :)