Final ugbs 207 innovative csr

LECTURE 5: INNOVATIVE CSR

Introduction

• CSR and Competitive advantage

• CSR and Value Creation

• CSR Communication

CSR and Competitive Advantage

CSR should not be seen from a short sighted viewpoint of philanthropy or charity.

Companies can remain sustainable if CSR is used as a strategic tool by absorbing it in the business philosophy and integrating it to the core of the business.

Progressive organizations have learnt that what is good for community and environment is also good for business.

CSR and Competitive Advantage

The key components of CSR should include workplace and labor relations, supply chain, customers, environment and community.

The concept of CSR as a competitive advantage will be a differentiating factor for future business leaders.

To get the benefit of the concept ‘CSR as competitive advantage’, companies need to be inward looking.

They must analyze their business processes and identify the right opportunity for creation of competitive advantage.

Strategic CSR and Competitive Advantage

Michael Porter and Mark Kramer's argue that ‘while CSR depends on being a good corporate citizen and addressing every social harm the business creates, strategic CSR is far more selective’.

They give three areas where they think competitive advantage may lie in strategic CSR;


First, identify points of intersection between company and society.

Second, select specific social issues to address social needs in ways that create shared value - a meaningful benefit for society that also adds to your company's bottom line.

Third, mount a small number of initiatives that generate large and distinctive benefits for society and your company.


Husted and Allen (2007)

CSR and Value Creation

Value is created when consumers are willing to pay a premium for the firm’s products and services based on its involvement in and position with respect to specific social issues (Husted and Allen , 2007)

Value creation occurs when firm resources are combined in new ways so as to increase the potential productivity of those resources.


Value can be created through an organization’s business model, which takes inputs from the capitals and transforms them through business activities and interactions to produce outputs and outcomes that, over the short, medium and long term, create or destroy value for the organization, its stakeholders, society and the environment.

Corporate social responsibility is a new approach that helps companies to consider the interests of all stakeholders within both the organization and society.


There are some approaches that show how CSR plays out as modern approach for value creation.

The first approach is community-based development (Maskrey, 1989). This approach focuses on local communities that companies can better work with eg. creation of education facilities for HIV /AIDS education programs in Africa.


Integration of the CSR strategy for contribution into the business strategy of a company is another approach (Baron, 2001; Galbreath, 2006).

This approach creates a fair trade for players of the business field such as buyers and suppliers.


Another approach is creating share value (CSV) (Nohria and Ghoshal, 1994). The basis of this approach is an idea that company success and social welfare are interdependent.

According to this approach, some factors such as healthy, educated workforce, sustainable tangible and intangible resources and adept government are needed to compete effectively.

Value Chain and Issues related to CSR

Ways to reap value from CSR Initiatives

According to Husted and Allan (2007) there are 3 main ways that organizations can reap value from CSR Initiatives;1.Differentiate products through innovative CSR products and processes e.g the company creates a new market for such products with consumers who are willing to pay a price premium for products with CSR features.

2.Build customer and stakeholder awareness of responsible products:- visible CSR activities enhance the firm’s reputation.

Ways to reap value from CSR Initiatives

3. Innovate new ways to meet social and environmental legal requirements, industry practice and fiscal incentives.

CSR Communication

Firms normally communicate corporate social responsibility (CSR) issues to their stakeholders in order to influence opinion leaders’ behaviours regarding their entity (APCO, 2004).

According to Branco and Rodrigues (2006) areas covered under social responsibility disclosures can be categorised into two broad categories:

Internal Disclosures External Disclosures

These have been further divided into four parts:

External Disclosures

1. Environmental disclosure.

These include :

company’s concern for the environment

lending and investment policies

conservation of energy in business.

External Disclosures Cont.

2. Community Involvement disclosure

These include;

Charitable donations and activities

support for education

sport sponsorship or recreational projects

Internal Disclosures Cont.

3. Human resource disclosure

This considers:

employee health and safety

employee training

employee remuneration.

Internal Disclosures

4. Product and Customer disclosures-

These include;

Product quality

Customer complaints/satisfaction

Provision for disabled customers.

What to communicate: Content

There are many factors that a business can emphasise in its CSR communication, such as its commitment to a cause, the impact it has on the cause, why it engages in a particular social initiative (i.e. CSR motives), and the congruity between the cause and the company’s business (i.e. CSR fit).

Most CSR communication typically focuses on a company’s involvement in various social causes, rather than on the social causes themselves.

Challenges with CSR Communication

How to minimize stakeholder scepticism and to convey intrinsic motives in a company’s CSR activities is a main challenge .

Although CEOs and government leaders insist on the fact that CSR projects create value for the firm, privately they admit that they do not know if CSR pays off.

Business

Final ugbs 207 innovative csr