CORPORATE SOCIAL RESPONSIBILITY (CSR) chapter 5

Chapter Five Outline Introduction The CSR threshold •Variation among companies •Variation among industries •Variation among cultures CSR- an integral aspect of the firm?. • The sooner

RESPONSIBILITY (CSR)

Dr Nguyễn Thị Vân Hà

Faculty of Business Administration

• [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 Five Outline

 Introduction

The CSR threshold

•Variation among companies

•Variation among industries

•Variation among cultures

CSR- an integral aspect of the firm?

Implementation- short to medium term

Implementation- building CSR into the organizational culture

•From a strategic perspective: planning

•From a firm perspective: action

to integrate strategic CSR into the organization’s culture and actions.

• That is, when when and how how does a company become more

socially responsible?

• We address the when when by focusing on the CSR threshold,

a tipping point that triggers firms to move toward strategicCSR

• Then we turn to the how how by outlining the design, timing,

and implementation of strategic CSR, introducing thenecessary corporate infrastructure and key policy ideas

• The decision of when to implement a CSR policy iscompunded by whywhy, wherewhere, howhow, and by whomwhom it should beimplemented.

• The industry context complicates things further because of

the varied stages of acceptance of CSR by different

competitors.

• Although the value of an effective CSR policy within specificindustries and companies is becoming increasingly accepted,the point at which such a policy becomes ripe for

implementation varies

• It varies with many factors, including:

• the industry,

• the current business environment,

• the CEO’s attitude toward CSR, and

• other factors

• Companies can pursue an effective CSR policy for either

offensive

offensive or defensive defensive reasons.

• On the offensive offensive side, the innovative, proactive CEO who is

convinced of the intrinsic value of CSR sees it as anopportunity that can maximize company capabilities andidentify new competitive advantages

• On the defensivedefensive side, CSR still has value for a company,primarily by avoiding criticism and other attacks on the firm orits offerings.

• In this instance, CSR acts like a brandbrand insuranceinsurance policypolicy,minimizing or offsetting stakeholder disillusionment inresponse to perceived lapses in CSR

Either approach assumes an up-front investment in creatingCSR policies; however, whenwhen to introduce CSR into thestrategic process depends on the driving force behind itsimplementation

• For those managers convinced of the potential benefits ofstrategic CSR, there is no time like the present Innovativeideas and policies that maximize market opportunities,minimize costs, and increase productivity can produceimmediate benefits.

• For managers yet to be persuaded of the argument for CSRand reluctant to invest up front for potential future gains,however, the temptation exists to look around at industrycompetitors and delay as long as possible

• Worse, cynical cynical managers might see CSR as merely a public

relations exercise or, worse still, postpone hard CSR choices

by assuming they can avoid outlays for health insurance – arisky, if not foolhardy, approach

• Neverthless, a crises point can arise Once reached, and

stakeholder backlash backlash becomes sufficient to warrant the

introduction of a reactionary CSR policy, it may be too late

Summary

Summary::

• Firms introduce CSR for different reasons

• Implementing CSR proactivelyproactively throughout the firm generatesthe business benefits listed above and may yield additionalbenefits associated with first-mover status

• The genuine implementation of CSR, whether for offensiveoffensive ordefensive

defensive reasons, generates the insurance-like benefits,which render CSR lapses less damaging if committed due tofactors outside the firm’s control

• Whatever the motivation, however, there is a CSR threshold

in every industry that acts as a last-resort, CSR point of noreturn

• The sooner the CSR is introduced, the less likely a firm is tocross this “tipping point,” which varies for each company(depending on whether it is the market leader or a smallplayer) and within each industry (some industries are moresuspectical to stakeholder backlash than others)

• The variablevariable naturenature ofof thisthis CSRCSR thresholdthreshold suggests why somecompanies perceive CSR to be of greater or lesserimportance to their particular organization

The CSR Threshold

The CSR Threshold – – Variations Between Variations Between

Companies

• Analyzing a company’s business-level strategy

reveals how it distinguishes itself in the marketplace

• Its value proposition is captured in its strategy and attracts stakeholder groups, particularly customers

• In turn, strategy has a direct impact on the CSR

threshold for that company within its industry

value proposition: (in marketing) an innovation, service , or

feature intended to make a company or product attractive to

Niche Focused Cost Leadership

Niche Focused Differentiation

Cost Differentiation

Cost Differentiation Competitive Advantage

• WalMart’s cost strategy probably raises the company’s CSR

threshold; that is it has more CSR leeway and can “get away with” more because its value proposition is based on low cost

So, paying low wages to its workers is not surprising for a

Walmart customer.

• For Body Shop (which built its reputation and customer base on social justice – e.g no animal testing), the CSR threshold at

which customers, media, and society in general react may have

a much lower tipping point.

• Thus, The Body Shop’s stakeholders are more likely to have a lower threshold of tolerance for perceived CSR violations.

• As Figure 5.1 shows, business-level strategies can be divided into those pursuing low costs low costs and those

pursuing differentiationdifferentiation

• The low-cost approach suggests an ability to deliver products or services at a price below that of

competitors

• For example, Walmart gains its competitive

advantage from its “everyday low prices.”

• Differentiation strategies, however, seek to offer the customer something unique, such as a luxury car

from Rolls Royce

as either broad broad (e.g., wide product range) or narrowly focused narrowly focused (e.g., pursuing only high-end cars, but not SUVs, station

vagons, or pickup trucks).

• As a result, Walmart has a scope of business that can be labeled broad

broad, while Rolls Royce’s offerings are focused focused.

• Overall, therefore, Rolls Royce’s business strategy offers a

differentiated

differentiated products, focused on the niche niche market of high-end cars, whereas Walmart’s strategy pursues cost leadership cost leadership (low costs) accross a broad broad base of customers.

• McDonald’s however seeks a focused strategy focused strategy of low cost (cheap food) and differentiation differentiation (fast service).

strategy shapes the firm’s CSR threshold (the point at which

CSR becomes obviously critical to strategic success).

• The most vulnerable strategy will be focused differentiation,

particularly for those products dependent on lifestyle

segmentation, such as products targeted at specific customers based on their approach to life.

Example

Example: :

• Nike tries to associate its products with people who have a

positive and pysically active lifestyle.

• If Nike is seen as socially irresponsible by its target customers, they are less likely to want to associate their lifestyle with these products.

• Market segments, or niches, such as lifestyle brands, are especially valuable to a company because they often rest more heavily on subjective impressions

(fashion) as opposed to objective price and quality comparisons

• Moreover, customers who associate the brand’s

appeal with their lifestyle are often willing to pay a greater premium for the product

• Yet, paradoxically, those able to pay this premium

are precisely those with the widest range of

alternatives, backed by the resources to make

different choices

• Thus, a CSR-related failure that might inflict limited harm on a firm relying on a broad, cost-based

strategy could prove significantly damaging to one reliant on a strategy of focused differentiation

• The petrolium industry offers another example The nature of this industry allows ExxonMobil to adopt a lower CSR profile than either BP or Shell without

penalty

• This implies a higher CSR threshold for ExxonMobil because it has both lower visibility among

environmentalists and its products are hardly

differentiated from etiher BP’s or Shell’s

• As different companies range accross the Figure 5.1 (in the direction of the shaded arrow) from cost- to differentiation-based strategies, the CSR threshold that they face is likely to fall, making those firms

more susceptible to stakeholder backlash

• This, therefore, increases the importance of an

effective and well-implemented CSR policy within the firm

• A similar tendency is visible when analyzing the

industries within which these firms operate

• Different industries also evoke different stakeholder emotions.

Example:

• A company operating within the apparel (clothing) industry

(with its reputation for sweatshop labor in developing countries) may face a higher CSR threshold if it sells unbranded clothing based on low cost.

• But the CSR threshold may drop dramatically for a company

using a focused diferentiation strategy that offers a “lifestyle

brand” aimed at well-to-do customers who have choices and

include more than just cost in their value calculations.

• If a well-known fashion brand is seen as violating

CSR expectations, customers can quickly abandon

the brand and products by shopping elsewhere

• But a large nonbranded producer, particularly one

offering just low-cost styles, may have a much higher threshold, simply because the connection between

product, brand, and customer aspirations is weaker

• By comparison, in the financal or banking industry

(with strategy of broad differentiation), the CSR

threshold may be relatively higher than for apparel

• Here, it may be harder for consumers to identify a victim or

accurately quantify the degree of harm caused by any CSR

violation

• The issues that determine the CSR threshold for an industry

seem more complicated than those for individual compaies, with specific industries being more vulnerable than others

• Indeed, a number of industries have already passed their CSR threshold, which has forced companies operating within those industries to take significant corrective action

Examples:

• fast-food industry talking about benefits of health foods.

• Tobacco companies warning against dangers of smoking in it

The CSR Threshold

The CSR Threshold – – Variations Between Cultures Variations Between Cultures

• CRS threshold driven by different cultural

expectations among different societies complicate the picture

• In much of the developing world, however, the

perception of CSR revolves around issues of

corporate philanthropy

• Given these differences, however, globalization and the free flow of information help drive down CSR

thresholds accross the board and across cultures

(reducing stakeholder tolerance and increasing the chance of

backlash) as the news media expose corporate CSR

lapses

• This greater availability of information helps forge,

for better or worse, a more recognizable link between stakeholders and the company or product

• Furthermore, as levels of affluence and living

standards rise generally, the CSR threshold is likely

to become lower

• The combination of globalization, rising living

standards, and media applications of first-world

standards to developing world operations suggest

that an effective CSR policy, which prevents CSR

lapses and insulates against stakeholder backlash, is increasingly advisable for all firms and will grow in importance as these trends continue into the future

• To provide business benefit to the firm and avoid or

at least minimize negative publicity and societal

backlash, the best practice is to implement a

proactive CSR policy

proactive CSR policy

CSR Business Plan of Action-Short Term

• The urgency with which CSR policies are

implemented depends on the perceived CSR perceived CSR

threshold

threshold and the priority the issuespriority the issues holds with the

firm’s leaders

• Implementation is integrating a stakeholder

perspective into all aspects of operations, thus

protecting the investments corporations make in their their public image, investor confidence

public image, investor confidence, and brandsbrands

• The eventual goal should be for CSR to form an

inherent component of a business’s culture, as

reflected in its day-to-day operations

The following steps offer an overview of how any corporation can further the integration of CSR into its operational culture.

From the Top Down With Sincere Commitment

• The CEO must establish the necessary components of an

effective CSR policy and ensure that CSR is institutionalized within the firm as a core component of day-to-day operating practice

• Ideally, the CEO will consider him/herself the chief CSR officer

• At a minimum, the CEO must remain in touch with the

effectiveness of the company’s CSR policy by receiving regular updates, while granting a clear line of access to the top for the CSR officer This commitment from senior management is

•• The CSR officer defines, implements, and audits the company’s CSR policies

CSR policies This includes assisting with legal and regulatory compliance, as well as compliance with discretionary

configurations (e.g., ISO standards – 9000 and 14000) It also includes input to strategy formulation

• All these policies need an organizationwide perspective

to ensure effective implementation and dissemination of benefits and goals.

• Ideally, the CSR officer must create awareness with a blend of rewards and, where necessary, penalties to

organizational members who act in contrary ways.

• The CSR officer will need to develop contingency plans for the unexpected emergence of CSR crises.

CSR Position Statement

• All stakeholders (internal and external) need to

understand the firm’s CSR position and how that stance affects them.

• The value of a statement outlining the vision and

mission for the organization is part of the awareness

process.

Equally important for the company’s CSR direction is a

CSR position statement The develoment of an effective CSR position statement: