CSR and Competitive Advantage

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CSR AND COMPETITIVE ADVANTAGE

Corporate social responsibility (hereinafter CSR) has become one of the central issues on the agenda of organizations today, but is still a long way from being a centre stage on corporate strategy (Smith, 2003; Stewart, 2006). One of the key problems is the lack of understanding about the impact CSR has on competitiveness (Porter and Kramer, 2006). There are many studies trying to analyze the relationship between CSR and financial performance (Chand and Fraser, 2006; McWilliams and Siegel, 2001), proposing a business case for CSR (Cramer et al., 2006; Smith, 2003) or providing case studies on CSR practices (Gueterbok, 2004; Robertson and Nicholson, 1996). However, financial performance or smart practices don’t automatically imply long term competitiveness (Porter and Kramer, 2006; Porter and Van der Linde, 1995; Smith, 2003). The bottom line is that there seems to be a connection between CSR and competitiveness, but the nature of the relationship is unclear (Mackey et al., 2007; Van De Ven and Jeurissen, 2005).

Today, corporate social responsibility (CSR), a firm’s commitment to maximize long-term economic, societal, and environmental well-being through business practices, policies, and resources, is a strategic imperative. Spurred by the thinking of leading strategy, management, and marketing scholars (e.g., Kotler and Lee 2005, Raghubir et al. 2010, Mahoney et al. 2009, Margolis and Walsh 2003, Porter and Kramer 2006), most forward-thinking firms across the globe are approaching CSR as not merely their ethical responsibility to society and the environment, but instead as a way to achieve their strategic objectives while at the same time bettering the world (i.e., creating joint value for the firm and society). In line with this emerging perspective, more and more companies are engaging in initiatives that try to improve public health, safety, the environment or community well-being through the active participation of key stakeholder groups such as consumers. Kotler and Lee (2005) call such initiatives corporate social marketing initiatives, labeling them “best of breed” among alternative corporate social initiatives in terms of their ability to improve consumer well-being while at the same time helping achieve strategic goals such as market development and increased sales. For example, the personal care brand Dove, in partnership with the Girl Scouts, has an initiative aimed at a critical social issue facing its consumers and their families: pervasive low self-esteem among adolescent and preadolescent girls, with accompanying risky behaviors such as smoking, eating disorders, and suicidal tendencies (Unilever 2010, Girl Scouts 2010). This program, which comprises age-appropriate curricula and workshops that inspire girls (also Dove consumers) to embrace a wider definition of beauty, build a strong sense of self, and take care of their bodies and minds, has greatly boosted the popularity and sales of Dove products (Cone and Darigan 2010)

An important strategic objective for many firms/ brands 1 is to gain a competitive advantage over their often formidable rivals. Thus, it is not surprising that a recent large-scale study of chief financial officers, investment professionals, and CSR managers (McKinsey Quarterly 2009) revealed that “strengthening competitive position” is a key impetus for firms to engage in strategic CSR. Yet, even as the debate on CSR has shifted decisively from “whether” to “how” (Smith 2003), there exists little conceptual clarity regarding when, how, and why firms might be able to achieve their strategic goals, such as gaining a competitive advantage, through their CSR actions. This is due in part to the disparate perspectives the different disciplines have brought to their examination of strategic CSR. Researchers in management (encompassing strategy and organizational behavior) have typically focused on macro- and mesolevel issues such as the link between...
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