CORPORATE SOCIAL RESPONSIBILITY (CSR) updated 2015

• The problem that a firm’s decision makers face is: “Which stakeholders and what issues matter under the broad heading of corporate social responsibility as it relates to their organiza

• [1] William Werther and David

Chandler (2011) Strategic Corporate

Social Responsibility (2nd edition) California: SAGE publications, Inc

(Main book)

• [2] David Crowther & Güler Aras (2008) Corporate social responsibility Ventus Publishing ApS.

• [3] Michel Capron & Françoise Quairel-Lanoizelée (2009) Trách nhiệm xã hội của doanh nghiệp Nhà xuất bản Tri thức (Dịch giả: Lê Minh Tiến, Phạm Như Hồ)

• [4] Phillip Kotler & Nancy Lee (2008),

Corporate Social Responsibility (2nd

edition), Wiley India Pvt Ltd

Chapter 3: How Much Does CSR Matter?

Chapter 4: The Strategic Context of CSR?

Chapter 5: Implementation: The integration of CSR

Into Strategy and Culture

PART II: CSR ISSUES AND CASE STUDIES

Chapter 6: Organizational Issues and Case Studes

Chapter 7: Economic Issues and Case Studies

RESPONSIBILITY

Chapter Four Outline

Introduction

CSR through a strategic lens

Firm strategy and the CSR filter

•Competencies

•Strategy

•Structure

•The CSR filter

A firm’s environment context

The five driving forces of CSR

The market for social responsibility

Strategic CSR

Questions for Discussion and Review

• There are 3 kinds of organizations: nonprofit, governmental, and for-profit.

• Each exists to meet needs in society

• Nonprofit: altruistic (unselfish) needs (e.g Feeding the poor)

• Governmental: civic (society) needs (e.g Safety and Security of public)

• For-Profit: economic needs (e.g Make profit for shareholders)

• In a free society, organizations that do not meet needs go away.

• Non of these organizations initially sets out to do harm.

• However, organizations can create undesired consequences

organizations but from the methods or strategies deployed

in the pursuit of organizational goals.

• In pursuing societal needs, all organizations face constraints

on their methods and results.

Example:

• Organizations should produce the results that generate

profits, tax, donations, etc needed to operate

• At the same time, these results must be attained by

methods that are deemed acceptable to the larger society.

• So, results and methods should be balanced by the

organizations’ leaders.

• When these issues involve for-profits, CSR helps businesses balance the means they use and the ends they seek.

• It does this by ensuring that profit-seeking businesses plan

and operate from the perspective of multiple stakeholders.

• The problem that a firm’s decision makers face is: “Which

stakeholders and what issues matter under the broad heading of corporate social responsibility as it relates to their organizations?”

Answer: Depends on the for-profit organization’s strategy

• Because these strategies vary widely, the right mix will

differ from firm to firm and will evolve over time as firms

adapt both their strategy and execution to increasingly turbulent operational enironments.

The Result:

• It is impossible to prescribe the exact issues that any firm is likely to face at any given time.

• Instead, it is argued that a strategic lens offers the best

viewpoint through which to study CSR.

• The vision answers why the organization exists It

identifies the needs the firm aspires to solve for

reasons.

• The mission states what the organization is going

to do to achieve its vision It addresses the types of activities performed for others.

• The strategy determines how the organization is

going to undertake its mission It sets forth the

ways it will negotiate its competitive environment.

• The tactics determine when and where the

stategy will be implemented and by whom They

• Effective strategy results in providing businesses with a

source of sustainable and competitive advantages.

• For any competitive advantage to be sustainable, however,

the tactics must be executed in ways that are at least

minimally acceptable to the societies in which they are

deployed.

• Otherwise, social, legal, and other forces may conspire

against the firm, as when lawsuits punish a manufacturer

for polluting the air and water.

• Both CSR and strategy are primarily concerned with the

firm’s relationship to the environments within which it operates.

• Whereas strategy addresses how the firm competes in the marketplace (operational context), CSR considers the

strategy’s impact on relevant stakeholders (societal

context).

• In turn, both CSR and strategy are constrained by these

environments Strategic CSR represents the intersection of

the two

• In order to implement a strategic CSR perspective => to

understand the independent relationship among a firm, its

strategy, and its stakeholders

 A firm’s vision, mission, strategy, and tactics (see Figure

4.1) are limited by three kinds of constraints.

• Firm’s resources and capabilities constraints

(Organizational constraints) - human, social, and financial capital that determine what the firm is able to do

• Firm’s internal policies constraints shape the culture of

the organization by requiring and forbidding specific actions

• Firm’s environments constraints (the

sociocultural-legal-stakeholder environments), along with markets and technology, limit the firm’s actions

VISION (Why?)

STRATEGY (How?)

CSR (Filters?)

MISSION (What?)

Figure 4.1 The Tactics, Strategy, CSR, Mission, Vision Constraints

NOTE: A sustainable effort to attain a firm’s mission and vision depends on a strategy

and tactics that are evaluated through the CSR filter within the organizational policy

• A sole focus on the linkage among vision, mission, strategy, and tactics is insufficient to achieve the firm’s goals

• Tactics and strategic actions necessary to achieve mission and vision must be evaluated by first passing through a CSR filter

• The CSR Filter assesses management’s planned

actions by considering the impact of day-to-day tactical decisions and longer term strategies on the organization’s constituents

competitive advantage assumes a marriage of the firm’s

• internal strengths (its competencies) with its

• external (environmental) opportunities.

 A strategy is limited by the firm’s vision and mission

 A strategy is also limited by both the firm’s internal

environment in wich it must operate.

 A strategy is constrained by the CSR filter, which identifies

the range of strategies that are acceptable to constituents

 In turn, strategy helps influence the organizational

structure (See Figure 4.2)

Driven Figure 4.2: Firm Strategy and the

CSR Filter

Environment Strategy Competencies Structure

success (the CSR filter) requires an understanding of the interplayamong a firm’s competencies, strategy, and structure as it facesits environment.

• To facilitate an understanding of strengths, a clear differentiation

among capabilities, competencies, and core competencies is

required:

•Capabilities are actions that a firm can do (e.g Pay its bills and

produce some value-added good and services)

•Competencies are actions a firm can do and can do very well

•Core competencies are actions a firm does very well, and it is so

superior at performing these activites that it is difficult (or at leasttime consuming) for other firms to match its performance in thisarea

Example:

•Walmart has a capability of hiring employees; it has a

competency to locate stores where they will be successful; and it

has a core competency of maintaining and distributing its

inventory throughout the supply chain (better than itscompetitors)

• Walmart’s vision of offering the best customer value in retailing gives rise to a mission of delivering groceries and other

consumer products efficiently

• That vision and mission are attained by a strategy of passing

on cost savings to customers by continually seeking to roll back

their “everyday low prices.”

• In turn, that strategy is built upon competencies and core

competencies, which are the competitive weapons with which

Walmart competes

• How Walmart folds its competencies into a strategy and then

how it deploys that strategy vis-a-vis stakeholders

determines how society views the degree to which Walmart issocially responsible

•If Walmart receives negative publicity because of low-paidworkers, it will be forced to make changes in competencies inpublic relations, advertising, and human resource management

• Walmart’s activities (e.g Advertising) + competitive advantages (efficient inventory) interact and reinforce each other.

• With these competencies supporting its strategy, it

creates a virtuous cycle – Walmart’s lower prices

attract more customers.

• More customers means:

• Greater volumes

• Increased economies of scale in operations

• Greater power in demanding price reductions form its suppliers

Result: even lower prices and more cusomers

• When environmental changes occur, leaders face a

make-or-buy decision

• Should the needed competencies be developed

internally (make) or acquired from others outside the firm (buy)?

• Historically, many large firms have had the resources

to develop the needed competencies internally

through hiring and training

• Today, due to changes in external environment, firms often buy the needed skills from others because of the need for speed of execution.

If the decision makers decide to buy the needed capabilities orcompetencies, leaders then face a second decision:

• Whether to bring the needed capabilities under the control of the organization structre or to outsource those activities via contractual relationships with suppliers.

• When the activity is seen as a core competency (e.g Managinginventory at Walmart), most firms seek to capture that activitywithin the structure of the firm to strengthen this vitalcomponent of their strategic advantage

• If the activity is seen as peripheral, such as calculating andprinting payroll checks, the firm will often outsource the activity

if it is cheaper or faster to do so

• McDonald’s strives for a focused strategy that embraces both lowcosts and product differentiation.

Whether a firm compete on costs, differentiation, or a focusedstrategy that embraces either cost or differentiation (or both),strategy seeks away for the firm to provide customer-focusedvalue added as a means of gaining a competitive advantage

• The structure – the organizational design – exists to support

the strategy of the firm

• What architects say of a building, organization designers say of

the firm’s structure: The form follows the function.

• Expertise is often concentrated into a functional organization design, in which

• store operations, and

• other like activities

are grouped together by their common functions into specialised

• This organizational form support the functions necessary for the

firm to implement its strategy successfully and thus is called a

functional organization design.

• In the case of Walmart, different parts of the company might

pursue diferent structural designs

Example:

• Support activities like accounting or finance may be grouped by function at corporate headquarters

• The store management oversight and distribution systems may

be organized along geographical lines (e.g Overseas store

operations)

• At NIKE, CSR is such an important function that is built into thefirms’s structure in the form of a separate CSR department,headed by a vice president

• The optimal organizational design is the one that best supportsthe firm’s strategy, giving attention to key functions

• Therefore, organization structure varies from industry to industryand from company to company within an industry

• The CSR filter is a conceptual screen through which strategic

and tactical decisions are evaluated for their impact on the firm’svarious stakeholders

• The intent is to take a viable strategy and make it optimal for thestakeholder environment in which the strategy must be executed

THE CSR FILTER

• Although CSR is only one part of the strategic big picture, even

implementation is perceived as socially irresponsible.

• The application of societal based considerations screen strategiesfor their impact on the firm’s multiple constituents

• Together, these stakeholders form the larger environment, calledsociety, within which the firm operates and seeks to implementits tactics, strategy, mission, and vision

Example of Nike’s case (Page 92)

• Customers, competitors, economics, technology, government,sociocultural factors, and other forces all drive changes in thefirm’s external environment.

• Often these changes are gradual but over time their cumulativeimpact redefines the competitive environment and whatorganizational strategies and actions are deemed sociallyacceptable

• The evolution of what is socially expected of organizationstypically migrates from discretionary to ethical to mandatory(legal and economic) Example: Equal Pay Act – USA 1963

• Generally, once society recognizes a particular form ofdiscrimination, or other socially unacceptable action, the

perceived abuse can lead to a legally mandated correction

such as Equal Pay Act

• Consequently, the range of socially acceptable employmentpolicies used to facilitate competitive strategies has changedgreatly

• Similar changes can be identified with regard to environmentalpollution, product safety standards, financial record keeping, andscores of other, previously discretionary behaviors

• Once discretionary issues evolve into legal constraints, meetingsocital expectations becomes an absolute requirement, enforced

by criminal or civilian sanctions

• More difficult to identify are issues not yet subject to legalmandates.

• If leaders exercise discretionary authority to attain economic endsbut that use of their authority is deemed socially irresponsible,

the consequences may damage sales, employee recruitment

and retention, financial support from investors and markets, and

a host of other important relationships

Question: What should a company do?

• One extreme: Milton Friedman who considers the CSR-related

issues as a distruction from the firm’s profit-seeking and creating functions

wealth-Friedman has stated that as long as a company can remain in business, it should be entitled to do so because it provides jobs for society and a return on investment for shareholders.

• The other extreme: the argument that society has the right,

even the obligation, to restrain the negaive excesses of business

This position states that just as societies rely on the commerce and industry businesses create, companies unarguably rely on the resources of the societies within which they are based No organization exists in isolation, and businesses, without exception, have an obligation to contribute to the communities on which they

 Strategic CSR bridges both these arguments

• A business cannot ignore its profit-seeking and wealth-creatingfunctions if it is to remain in existence

• However, if the firm is to survive beyond the short run, it mustpursue these ends of profits and wealth creation by means of thatare deemed acceptable to the larger society

• As we argued before, stakeholders have the right and the

power to determine waht is acceptable corporate behaviour.

• Long-term business success demands at least minimumcompliance with societal expectations