sec c strategy and society (1)
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STRATEGY AND SOCIETY
The link between competitive advantage and Corporate Social Responsibility
Section C – Group 2 Avishek Dasgupta - 13P
Ashir Madaan - 13P Kanika Virmani - 13P146
Rahul Aggarwal - 13P Siddharth Gautam - 13P Tarun Gupta - 13P177
Introduction
This article presents a new way to look at the
interdependence of business and society and
shows that corporate success and social welfare
are not a zero sum game.
• Governments, activists and the media hold companies responsible for social consequence of their activities
•Growing Publicity given to company rankings on performance of their CSR despite their questionable methodologies
• Led to fragmented approaches to CSR which are disconnected from business and strategy
•CSR can be much more than a cost, a constraint and can be a source of opportunity, innovation and competitive advantage
Emergence of CSR•Public Responses:
• For Nike, NY Times reported abusive labor practices at its Indonesian suppliers in 1990s
• Shell Oil’s decision to sink the Brent Spar, an obsolete oil rig in the North Sea led to Greenpeace protests
• Pharmaceutical companies expected to respond to the AIDS pandemic in Africa even though it was far removed from heir primary product lines and markets
• Fast food and packaged food companies held Responsible to obesity and poor nutrition
Emergence of CSR• Activists targeting big corporations
• Activists tend to target the most visible or successful corporations to bring attention to an issue, irrespective of impact
• Nestle, world’s largest purveyor of bottled water became a major target in the global debate about access to fresh water
• Governmental regulations• In UK, companies have to disclose ethical, social and
environmental risk in its annual report
Corporate attitude towards CSR• Currently, most CSR activities are done only for public
relations and media• Led to glossy CSR reports that showcase companies’
social and environmental good deeds• Non coherent framework for CSR activities• Philanthropic initiatives are expressed in terms of dollars
or volunteer hours spent but almost never in terms of impact
Prevailing justification for CSR
Moral Obligation• Achieving commercial success in a way that honors ethical
values and respect cultures, communities and natural environment
• It doesn’t tell how to balance one social benefit against another or against its financial cost
Sustainability• Meeting needs of present without compromising on future• Companies should operate in ways that secure long term
economic performance and avoid social detrimental short term behavior
• It doesn’t say anything as to how the tradeoff is to be made
Prevailing justification for CSR
License to operate• Tacit or explicit permission from govt., communities and other
stakeholders• Offers a concrete way of identifying social issues that matter to its
stakeholders• Though it fosters a constructive dialogue, companies often transfer
their CSR agendas to outsiders
Reputation • Used to justify CSR initiatives on the grounds that it will improve
company’s image, strengthen brand and raise the value of stock• Studies on companies social reputation on consumer purchases
and stock market performance have been inconclusive
Prevailing justification for CSR
All the four school of thought focus on the tension between business and society rather than their interdependence
They are not tied to the strategy and operations of the company and thus are not sufficient to help the company identify, prioritize and address social issues that matter it the most/ where it can create a biggest impact
Result: Thus they neither create a meaningful social impact nor strengthen firms long term competitiveness
Integrating Business and Society(Porter and Kramer’s theory)
Large level of Interdependence between Business and Society
Both business decisions and social policies must follow the principle of shared value
creationValue Chain impact on CSR Activities
• Every aspect of a company’s value chain comes in contact with the society either in a positive or negative manner.
• A company can strategise its CSR through mapping its value chain touch points on society
Inside Out Linkages Outside In Linkages
Impact of a value chain activity of a company on the society
Influence of external social conditions on organization
Successful Companies
Healthy Society
Mapping Company Value Chain To CSR: Looking Inside
Inbound Logistics
Operations
Outbound Logistics
Marketing and sales
After Sales Service
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Sup
port
A
ctiv
ities
Prim
ary
Act
iviti
es
Transportation Impact - Emissions,
Congestion, Accident
Biodiversity impact,
Energy & Water Waste
Transport Impacts, Improper packaging
Pricing , False
Advertisements
Disposal of Obsolete Products, Customer Privacy
Mapping the Diamond to CSR: Looking outside
Rules and Incentives that
govern competition
Local Demand Conditions
Local availability of Supporting
Industries
Quality of Business Inputs
• Availability of Human Resources
• Access to research Institutions and universities
• Efficient Physical Infrastructure
• Fair Competition (absence of trade barriers)
• IP Protection• Transparency (Financial
Reporting)• Rule of law
• Sophistication of Local Demand
• Regulatory Standards• Unusual Local needs
that can be served nationally
• Availability of Ancillary Industries
• Presence of Clusters• Presence of Related
Firms
Choosing which social issues to address
Generic Social Issues
• Social Issues that are not significantly affected by a company’s operations
• Has no material effect on long term competitiveness
Value Chain Social Impacts
• Social issues that are significantly affected by a company’s activities
• Touch points between society and value chain
Social Dimensions of Competitive
Context
• Social issues in the external environment that significantly affect drivers of competitiveness
• Effects are generally long term
Creating a Corporate social agendaAn affirmative Corporate Social Agenda moves from mitigating harm to
reinforcing corporate strategy through social progress
Responsive CSR• Good corporate citizenship• Mitigating harm arising from firm’s value chain
activities
Strategic CSR• Transform value-chain activities to benefit society
while reinforcing strategy• Strategic Philanthropy that leverages capabilities to
improve salient areas of competitive context• Closer the social issue – greater the leverage
Creating a social dimension to the value proposition
Unique Value Proposition
Lies at the heart of every strategy. A set of needs that only the company can meet
The Most Strategic CSR occurs when a company adds a social dimension
to its value propositionWhole Foods Market
Unique Value Proposition
Social Dimension
• Critical analysis of procured ingredients to weed out unhealthy or environmentally damaged ones
• Use of Unbleached and Unbromated Flour• Use of Environment Friendly energy• Turning Bio-Degradable waste into Biofuels
Sell, Organic, natural and healthy food products to customers who are passionate about food and the environment
Strategic CSR • Adding a social dimension to value proposition and
making social impact integral to its overall strategy resulting in competitive advantage
• Why social value proposition is important?• Increasing Government Regulations• Exposure to criticism• Consumer’s attention to social issues
Organizing for CSR
Create shared value which should be viewed like R&D, a long term investment in company’s future competitiveness
Shift focus from an emphasis on substance rather than image
Measure social impact rather than stakeholder satisfaction
CSR needs to be incorporated in the job profiles
Choose which issues to focus upon
Moral Purpose of BusinessWhat CSR is not
•Making philanthropic contributions
•Undoing business wrongs
What CSR is•Choosing a set of societal problems that we are best equipped to resolve
•Finding a fit between strategy and social responsibility
•Creating shared value to lead to self sustaining solution.
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