Strategy & Society
The Link Between Competitive Advantage and Corporate Social Responsibility
The Idea in Brief
Many firms’ corporate social responsibility (CSR) efforts are counterproductive, for two reasons: They pit business against society, when the two are actually interdependent. And they pressure companies to think of CSR in generic ways, instead of crafting social initiatives appropriate to their individual strategies. CSR can be much more than just a cost, constraint, or charitable deed. Approached strategically, it generates opportunity, innovation, and competitive advantage for corporations—while solving pressing social problems. How to practice strategic CSR? Porter and Kramer advise pioneering innovations in your offerings and operations that create distinctive value for your company and society. Take Toyota. The company’s early response to public concern about auto emissions gave rise to the hybrid-engine Prius. The Prius has not only significantly reduced pollutants; it’s given Toyota an enviable lead over rivals in hybrid technology.
The Idea in Practice
To practice strategic CSR: 1. Identify points of intersection between your company and society. • In what ways does your organization affect society? For example, do you provide safe working conditions and reasonable wages? Do your operations create environmental hazards? • How does society affect your competitiveness? For instance, do countries where you operate protect intellectual property? Supply enough talented workers? Encourage outside investors? 2. Select social issues to address. Given your company’s and society’s impact on each other, how might you address social needs in ways that create shared value—a meaningful benefit for society that also adds to your company’s bottom line? Example: By addressing the AIDS pandemic in Africa, a mining company such as Anglo American would not only improve the standard of living on that continent; it would also improve the productivity of the African labor force on which its success depends. 3. Mount a small number of initiatives that generate large and distinctive benefits for society and your company. Example: To enter the Indian market, Nestlé needed to establish local sources of milk from a large, diversified base of small farmers. It received government permission to build a dairy in the district of Moga. But in Moga, farmers were impoverished, failed crops led to a high death rate in calves, and lack of refrigeration prevented farmers from shipping milk or keeping it fresh. Nestlé built refrigerated dairies as milk collection points in each Moga town and sent its trucks to the dairies to collect the milk. page 1
With the trucks went veterinarians, nutritionists, agronomists, and quality assurance experts. Farmers learned that milk quality hinged on adequate feed crop irrigation. With financing and technical assistance from Nestlé, farmers dug deep-bore wells. The consequent improved irrigation reduced calves’ death rate 75%, increased milk production 50-fold, and allowed Nestlé to pay higher prices to farmers than those set by the government. With steady revenues, farmers could now obtain credit. Moga’s standard of living improved: More homes had electricity and telephones; more towns established primary, secondary, and high schools; and Moga had five times the number of doctors as neighboring regions. Meanwhile, Nestlé gained a stable supply of highquality commodities—without having to pay middlemen—and saw demand for its products increase in India.
COPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
Strategy & Society
The Link Between Competitive Advantage and Corporate Social Responsibility by Michael E. Porter and Mark R. Kramer
COPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
Governments, activists, and the media have become adept at holding companies to account for the social consequences...
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