CorporateSocialResponsibility

&Strategy
ByHarrisonHancock,DurhamUniversityBusinessSchool

UndergraduateWinner
IBEStudentEssayCompetition2015

 CorporateSocialResponsibilityandStrategy
Introduction
If,asGalbreath(2006)writes,Corporatesocialresponsibility(CSR)isultimatelyastrategicissue
(p.176),andfirmsthatignoretheirsocialresponsibilitiescannegativelyimpacttheirshareholder
wealth(Frooman,1997),thenfirmsmustaddressboththechallengesthatimplementingCSR
strategypresentsandthepracticalmeansbywhichtodoso.
ThefirststatementwillbeaddressedinPartOne,followedbyadiscussionofthechallengesan
integratedCSRstrategypresentsinPartTwo;finallythepracticalmeansbywhichtodothisare
consideredinPartThree.
1:TowhatextentisCSRnowastrategicissue?
OperationalisingHustedandAllens(2000)definitionofstrategyastheplansandactionstakento
createuniqueresourcesandcapabilitiesandtoleverageorganisationalroutinesthatarethesource
ofsustainablecompetitiveadvantageandsuperiorperformance,wefindthatcompaniesuse
strategiestoprovideacompetitiveadvantageoravoidacompetitivedisadvantage.Inthepast,
prominentauthorssuchasFriedmanopposedCSR,sayingthatitimposedanunfairandcostly
burdenonshareholdershearguedthatcorporateexecutiveshavenoresponsibilitiesotherthan
maximisingshareholderprofits(McClaughry,1972)andthereforethatCSRoffersnocompetitive
advantage.However,overtimeCSRhasbeenincreasinglycoupledwithcorporatefinancial
performance(CFP)inresearch,totheextentthatempiricalstudieshavearguedthatCSRpositively
affectsCFP(Orlitzkyetal,2003)althoughsomeauthorscontendthatempiricalevidencefor
marketoutcomeofCSRisstillinconclusive(MargolisandWalsh,2003).Thisincreasingtheoretical
trendinCSRthinkingissummarisedinTable1.1,takenfromLee(2008),inwhichdominantthemes,
motivationsandcouplingofCSRandCFParecomparedalongsidepivotalpublications.

Table1.1:ChangingTheoreticalthemesinCSRliterature(takenfromLee,2008)

Orlitzky(2008)suggeststheideaofreversecausationstrongCFPmayprovideresourceswhichin
turncanbeinvestedinCSRwhichmayleadagaintoCFPCSRandCFParemutuallyreinforcing.
Academiccriticismofthisideahasstemmedfrommethodologicalissuessuchascontrolsforfirm
size,reliabilityandvalidityofCSRandCFPmeasuresandsampling.
Globalisationhasmadetheeffectsofunsustainableactionsmorevisible,andenvironmentalissues
havesteadilyencroachedonbusinessesabilityforvaluecreation(LubinandEsty,2010).Notonly
hasCSRbeenlinkedwithCFP,butalsowithreducedriskassociatedwithregulatoryandlegalactions
(CoalitionforEnvironmentallyResponsibleEconomies(CERES);readinLee,2008),increased
competitiveadvantage(McWilliamsandSiegel,2001),humanresourcesandtalentmanagement

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 (PorterandKramer,2002)andareputationalboost(UKGovernment,2010).Infactafirmssurvival
inmodernsocietyseemstorequireanawarenessofsocialresponsibilityasanindispensablepartof
strategy(Galbreath,2006).
Although,itcanbearguedthatCSRisusedbysometohideirresponsiblebehaviour(Flemingand
Jones,2013),andsimplycomplywiththebareminimumofgovernmentlegislation(Lee,2008)a
formofgreenwashingusedtomakeunsustainabilitymorepalatable.However,theevidenceforthe
benefitsofCSRbeyondthisisundeniable.AsBurkeandLogsden(1996)putit,theultimatemeasure
ofstrategicbenefitsfromCSRactivitiesisthevaluetheycreate(p.499).Asmentioned,CSRhas
beenlinkedwithmanyadvantagestothefirm;Table1.2showshowspecificCSRbehaviourscanbe
linkedwithspecificstrategicoutcomes.IntermsoftheoreticalapproachesHuntandMorgans(1995
resourceadvantagetheoryisapplicabletotheabovepoints,inthatafirmwhichincorporates
sustainabilityintoitsstrategycouldhaveadifferentialcompetitiveadvantagebasedonattributes
suchascoreideologyanddynamiccapabilitiesrelatedtosustainability.
Table1.2:ExamplesofvaluecreationfromCSRbehaviour:adaptedfromBurkeandLogsden(1996).

CSRBEHAVIOUR STRATEGICEXAMPLES STRATEGICOUTCOME

PHILANTHROPICCONTRIBUTIONS Communitysupport,monetary Customerloyalty

donationsperunitsold. Futurepurchasers
EMPLOYEEBENEFITS Daycare,flexiblehours,health/wellness. Customerloyaltyandmorale
Productivitygains

ENVIRONMENTMANAGEMENT Processinnovationregardingpollution, Publicrelationsand/ormarketing

reducedcarbonfootprint. advantage
Newproductsormarkets
POLITICALACTIVITY Politicaldonations,politicalmarketing. Favourablechangeinregulations
Newmarketopportunities

PRODUCTORSERVICERELATED Productreformulations:e.gimproved Newproductsandmarket

CHARACTERISTICS,INNOVATIONS greendesign,fuelefficiency. Firsttomarketandaheadof
ORPROCESSES governmentalregulations.

However,becauseoftheincreasingsocialpressureoncompaniestoincreasetheirCSRactivities,
thousandsofcompaniesareplacingstrategicbetsoninnovationsaffectingCSRrelatedissuessuch
asenergyefficiencyandrenewablepower(LubinandEsty,2010).ThereforeitcouldbesaidthatCSR
maynolongerbeastrategicdifferentiator,butarequirementintheeyesofthestakeholder
companiesmaynowbeatacompetitivedisadvantageiftheydonotintegrateCSRintocorporate
strategy.InasurveybyIBMof250businessleadersworldwide,68%saidtheywerefocusingonCSR
activitiesfornewrevenuestreams,andoverhalfbelievedtheirCSRactivitiesweregivingtheman
advantageovercompetition(McElhaney,2009)companieswithoutCSRactivitiesareinthe
minority.
TorelatethisbacktotheoperationaliseddefinitionofstrategybyHustedandAllen(2000),
companiesusestrategytogainacompetitiveadvantageoravoidcompetitivedisadvantage.With
theabovediscussionCSRhasbeendirectlylinkedtobothofthesepointshoweverCSRhasan
ethicalandmoralfoundation;CSRusedbyacompanyasabusinessstrategyforexampleas

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strategicphilanthropy1,anexampleofsharedvaluetheory(PorterandKramer,2011)which
enhancesthecompetitivenessofacompanywhileadvancingsocialandeconomicconditionsinthe
environmentsinwhichitoperates,cannotbemorallypraiseworthyinaKantian(1964)sense.
InconclusionalthoughinaKantiansenseCSRusedasastrategymaynotbemorallypraiseworthy,
companieshavecertainlybeguntorealisethepotentialbenefitsthatintegratingCSRinto
strategycanbring(andpitfallswithnotdoingso).Wherethereexistspossibilityforcompetitive
advantagebusinesswillcreatestrategiestotakeit,andthereforebusinessnowmustseeCSRasa
strategicissue.
2:ThechallengesofintegratingCSRstrategy:thesuitabilityofpresentedroadmaps.
IfweassumeasdiscussedinPart1thatbusinessseesCSRasastrategicissue,thenthisnew
imperativemustbringwithitchallenges.LubinandEsty(2010)attemptedtopresentmanyofthese
challengesbylookingathistoricalmegatrendssuchastheITrevolutionandanalysingthe
behaviourofsuccessfuladaptors.Theywritethatfirmsseekingadvantageinthesustainability
megatrendhavetosolvetwoproblemssimultaneously:firstlyformulatingavisionforvaluecreation
andsecondlyexecutingit.
Followingpreviousmegatrends,specificallyinIT,LubinandEsty(2010)putforwardaclassification
ofhowcompanieswilladapttosustainability,shownandexplainedinFigure2.1.Theyalsodevelop
fivekeyareasinwhichcompaniesmustchangeinordertoreachthewinnerstateoftheeco
premiumofintegratedanintegratedCSRstrategy:elevatingleadership,systematisingmethodsand
modes;aligningstrategyanddeployment;integratingmanagement;andsystematisingreportingand
communication.ThechangesthatthepaperrequiresarehighlightedinTable2.1.Theseproblems,
theyhighlight,arefurthercompoundedbythelackofasuitablepracticalortheoreticalroadmap
aviewsharedbyHusted(2001).Theirpaper,however,ismorefocusedontheoreticalbusiness
processchangestowardssustainabilitythanexamplesthereforemakingitdifficultforpractitioners
tojudgehowtheprocesschangeswouldoccurinthecontextofafirm.

1
Targetingareasofcompetitivecontextwherethecompanyandsocietybothbenefit(PorterandKramer,
2002)withastrategicmotiveofbrandimageordifferentiation.

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Table2.1:Keyareacompaniesfacechallengesinforthesustainabilitymegatrend(Adaptedfrom
LubinandEsty,2010).

Keyarea Previousmethods/procedures Newmethods/procedures

ElevateLeadership Individualdepartmental CLevelleadershipthatlinkssustainabilitystrategywith

leadership initiativesandoutcomes,anddevelopssharedgoalsin
partnershipwithsuppliers,customers,andother
stakeholders

SystematizeMethodsand Imprecise,inconsistentlyused Professionalizedgreenbusinessanalysisthroughsystematic

Models toolsthattrackdiscrete useofspecializedtools(e.g.,scenarioplanning,risk
projects modeling)andnewcertificationsandstandards

AlignStrategyand Unconnectedtacticalprograms Megatrendbasedinitiativesalignedwithcorebusiness

Deployment andinitiatives strategiesandembeddedinoperatingplans

IntegrateManagement SiloedResponsibility Sharedaccountabilitythroughintegratedobjectivesand

performanceevaluation

SystematizeReportingand Adhocreportingusingnon Sustainabilityscorecardsthatenablebenchmarking,best

Communication standardizedtools practicecomparisons,andconsistentinternalandexternal
communication

ThatiswhereHustedandAllens(2011)sevenstepmodelisdesignedtocomein.Itisclearlybased
instrategicanalysisliteratureinthatthefirstthreestepsencompassexternalenvironment
breakdownandanalysis,resourcebasedinternalconsiderationsandfirmidentitysocialneedsand
opportunities.AllsevenstepsarediagrammaticallyshowninFigure2.2.

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Figure2.2:HustedandAllen's(2011)sevenstepCSRmodel.

IntermsofthechallengesLubinandEsty(2010)highlight,apractitionerfollowingthemodelwould
firstlybeabletofollowthestageseasilyasitislargelyakintootherstrategicplans,andsecondly
wouldlikelyemergewithaplanencompassingopportunitiesbasedonthefirmsresourcebaseand
stakeholderneeds.However,oneofthekeyissueshighlightedinLubinandEstyspaperisthe
implementationofanintegratedstrategy;howtochangethewaymanagersandemployees
approachtheirworktobemoresustainableasliketheITandqualitymegatrends,sustainability
willtoucheveryfunction,everybusinessline,everyemployee(LubinandEsty,2010,p.49).
AlthoughfirmidentityandcultureisidentifiedbyHustedandAllen(2011),itisnotgiventhe
evaluationitrequiresthatofthemainproblemassociatedwithimplementation.
If,asHustedandAllendo,baseourrecommendationstopractitionersonpreviousmegatrendssuch
astheITrevolution,thenwecanfindsomeissueswiththesevenstepmodel.Firstly,havingawell
thoughtthroughplandoesnotequalcompetitiveadvantageorevensocialperformancewesaw
fromtheEnroncasethatcompaniescanadvertiseonethingintheircasevaluesandpeopleand
operateentirelydifferentlyintheircaseformingunethicalandillegalpracticesthroughoutthe
organisation(Gladwell,2010).Secondly,leadingonfromthefirstpoint,havingawellthought
throughplandoesnotmatterifthefirmdoesnothavethemeanstoimplementit.HustedandAllen
(2011)writethatimplementationwillbelargelythesametoimplementationofotherstrategiesif,
asLubinandEsty(2010)believe,sustainabilitystrategieswillneedtofundamentallyrepositionand
redefineacompanysstrategy,thenitwillbeacompletelydifferentchallenge.
Inthemoresimpletermsofmovingfromadhoc,siloedapproachestosustainabilityreportingtoa
moreintegratedapproachthenthesevenstepmodelwouldsufficeitsinformationgatheringand

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comparisontoresourceswouldeasilyachievethisaimhoweverthisalonewouldnotraisea
companytoLubinandEstys(2010)ecopremiumortheirvisionoftransformedcorebusinesses.
Howeverinordertomakethecompanyatruewinnerinthenewsustainabilitymegatrend,amuch
morefocusedmodelisneededinordertodealwiththeimplementationofsucharadical,core
businessshift.
3:PracticalmeansbywhichCSRmaybeincorporatedintocorporatestrategy
Althoughthepressureonfirmstoimplementsuccessfulsustainabilitystrategiesishigh,fewhave
managedtosuccessfullyembedthemintotheorganisationsDNA(A4S,2013).AswellasHustedand
Allens(2011)sevenstepmodelotherintegratedmeasureshaveemergedtoattempttoovercome
thisissuewithsomepracticalguidelinescompaniescanfollow.TheISO26000(ISO,2010)andthe
SustainabilityBalancedScorecard(SBSC)(Figgeetal,2002)bothprovidepracticesforintegrating
socialresponsibilitythroughoutanorganisationandavoidingthemoretraditionalcorporate
reactionthatfollowsClarksonsstagesofresponsiveness(1995)whichislargelyunhelpfulandan
unethicalresponse.
Moreover,ISO26000canbeusedwithothertoolsforexampleGRIandreportingoftriplebottom
lineinordertomoresuccessfullyreportCSRstrategiesandprocesses,andallowingotherwise
unethicalcorporationstooperationaliseatooltoallowCSR(Cragg,2012).Duetoinvestors
increasinglywantingtoseesystematicreportingapproachestoCSRmanagement,acompanys
worthisnowmorethanitsfinancesitmustdisplayintegratedandsustainablestrategies(Meyer
andKirby,2010),andISO26000canaidthat.However,thismaynotproveethicallysoundand
followingguidelinescoulddisguiseunethicalbehaviour:companiesoftenpublishCSRreports,
aggregatinganecdotesaboutuncoordinatedinitiatives(PorterandKramer,2006)inorderto
demonstratethecompanyssensitivesideasaclearmarketingtechnique.Reportinghasbeen
arguedtobemerelyanillusionthatcorporationsusetoupholdimage(McDonoughandBraungart,
1998).IfacompanywastrulyethicalandmoralfromaKantianperspective,itwouldnotuseits
moralityasamarketingtool.Initiativescouldbechosenonthebasisoftheirsocialvisibilityand
relevancetoimmediatestakeholdersasnotallbehaviourshaveequalpotentialprofitabilityor
marketdemand.Thebiascouldresultinincreasedcorporateattentiontocertainsocialneeds,while
othersocialmiserycouldbeconvenientlyignored(Lee,2008).
AnotherwelldocumentedissueisthatISO26000isnoncertifiable.Ascompaniesliketohave
evidenceoftheirgoodperformanceinareas,thisissomethingthatmaypreventsuccessfuluptake
ofitasatool(Henriques,2012).Clearlycompanieswouldbeabletoclaimtheyfollowedthe
guidelines,albeitinformally.
AfirmthatusesISO26000isFujitsu.TheyadvertisethatthesevencoresubjectsoftheISO26000
haveindividualdepartmentsassignedtomanagetheseissues(Fujitsu,2014).However,theydonot
usethetooltomovetowardsLubinandEstys(2010)ideaofanecopremiumtheysimplyuseitto
identifytrendsandminimiseriskforthegroup(Fujitsu,2014).ThisisawayIS026000maynotfully
addressLubinandEstys(2010)problems:asaguideline,itisnotprescriptiveandtherefore
companiescanpickandchoose.
AnotherpracticaltoolistheSBSC(Figgeetal,2002).TheSBSCwasbaseduponKaplanandNortons
(1997)balancedscorecardsaimedtobeusedtoidentifystrategicallyrelevantconcernstheyhad
observedthateffectiveuseofinvestmentcapitalwasnolongeraguaranteeofcompetitive
advantage.Figgeetals(2002)SBSCallowsfirmstolinkoperationalaspectsandnoneconomic
actionstostrategy,whilstconsideringthemasfactorsthataffecttheeconomicsuccessofthe
businessandthereforeissimilartotheISO26000inthisway,inthatitprovidesamanagement
systemtohelptackleCSRresponsibilities(Bieker,2002).

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TheSBSChasanadvantageinthatratherthanasetstandard,liketheISO26000,itisanopen
conceptwhichgivesittheadvantageofbeingapplicabletoimplementationofbothconventional
andexplicitcorporatesocialstrategies.Howeverasitisopenitis,liketheISO26000,subjectto
interpretationandthereforecouldbeusedasaformofgreenwashingtopersuadeinvestorsofa
companyssustainableactions.
Neverthelessthebalancedscorecardapproachhasbeenusedtomapoutsustainablestrategiesin
multinationalcompanies:RoyalShellDutch,knownasShell,havesustainabledevelopmentasone
perspectiveintheirbalancedscorecard,andmanagersperformancebonusesisbasedontheir
performancerelativetothis.(ZingalesandHockerts,2003).ZingalesandHockerts(2003)alsofound
thattheuseofaSBSCasastrategymapiscreatingvalueforShell.Howevertheyalsonotethatthis
isanecdotalevidenceandwritethatnoscientificproofexistsshowingarelationshipbetweenSBSCs
arepositivevaluebroughttothefirm.
Conclusions
If,asLubinandEsty(2010)believe,businessneedstoreachanecopremiuminordertobe
successfulintheneweconomythenitseemstoolsmustbecreatedforbusinessestofollowinorder
fortheirstrategiestoreachthisstate.Businesshasclearlylinkedsustainabilitywithcompetitive
advantage,howevertheimplementationofsustainabilitytakesovercomingconsiderablechallenges
towhich,despiteHustedandAllens(2011)efforts,thereisnoeffectiveroadmap.Inpractice,
companiesseemtobeusingtoolssuchastheISO26000andSBSCnottoreachtheecopremium,but
insteadsolidifyandjustifytheirdefensivepositionsinLubinandEstys(2010)diagram(Figure2.1).
Certifiabletoolsthatforcefirmstofullyintegratesustainabilitythroughoutareneededandwould
beutilisedifthebusinesscaseremainsasstrongasitis.

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