I’ve often wondered if corporate social responsibility initiatives can bring actual value to a business. I recently came across an article written by Michael Porter (of Porter’s 5 forces) which really clarified what kinds of CSR strategies can contribute to a company’s success. I’ve condensed and simplified the key points of the article below:
For many successful firms, corporate social responsibility is not merely a public relations ploy. Rather it can create shared opportunity for both social welfare and corporate gain. Strategic CSR can also provide additional value to product offerings and differentiated market positioning.
When corporate social responsibility is done strategically it can provide a source of competitive advantage to corporations while creating real social change. Strategic CSR is the adoption of small-scale initiatives that pertain to a companies’ core business. The best CSR initiatives are both self-perpetuating and create meaningful impacts. For instance, Microsoft created a partnership to broaden access to community college education for individuals. This partnership resulted in both the generation of a well-trained workforce; from which Microsoft was able to address its labor shortage problem. Additionally, this program created a notably stronger community college system. Another example of a CSR program central to the core business of a company is that of Nestlé. In order to ensure the highest quality ingredients for the company’s chocolate, Nestlé works with all members of its global supply chain to spread best agricultural best practices and technology, especially in underdeveloped countries. This results in sustainable development, supplier loyalty, and high quality chocolate.
In addition to creating a competitive advantage for a company logistically or with regard to product quality, CSR can actually help companies command better prices and create stronger brands. For example, consumers are willing to pay a premium for coffees that are organic and fairly traded—it is (rather unfortunately) a strong differentiating factor in today’s marketplace. Brand equity can also be built on a good corporate image; consumers who feel they are doing something positive by purchasing a product or service will be more likely to continue to purchase it.
CSR is good for public relations, but if that were the only benefit, companies would not continue to pursue strategic initiatives in this area. Smart executives are realizing that social and environmental benefits do not have to be at odds with corporate interests. Rather, social issues can be carefully addressed in ways that create competitive advantages for firms.
To access the original article: http://www.fsg-impact.org/ideas/item/strategy_and_society.html