CSR Strategy - more than a necessary evil
Corporate Social Responsibility (CSR) has achieved a lot of media focus in the past decade and where some firms are viewing the concept as a necessary evil to conform; other firms are literally riding the wave, by engaging the trend proactively and incorporating CSR in their strategy. Governments, clients, suppliers, NGOs and the media in general are placing more and more demands to sustainability and consequently many firms experience the need to document and attest their CSR efforts. Some have even chosen to include an ethical and/or social statement next to their financial statements. Most experts agree that this development is not just another fad, but that CSR is an aspiring mega trend, which firms must include in their strategic considerations. But how do we get from “a necessary evil” to a potential source of competitive advantage?
Michael E. Porter argues that a clear alignment between existing strategy, business operations and CSR initiatives are paramount to a successful integration and implementation. However, if this is achieved CSR can actually be a profitable add-on instead of just a “necessary cost.” Recent research conducted independently by Harvard Business School and Gallup documents the need, the scope and scale as well as the profitability of CSR initiatives among Danish SMEs. Simultaneously, both surveys convey the fact that the same company segment has concerns about engaging in actual activities as they feel they lack knowledge and information both regarding what they can do, and how they can do it.
One of the more common misconceptions seem to be that firms do not follow up on their CSR initiatives and believe that a “plug & play” solution is adequate. This line of thought can be conceptualized in to general problems: misalignment and lack of documentation.
Although CSR can be applied and engaged from many angles the concept quintessentially rests on perception and recognition. Both are highly subjective matters and this is exactly the reason why CSR is so challenging. Strategically and operationally companies differ in their ambitions; internally employees differ in their values, and externally people, communities, institutions and governments differ in their expectations to the respective businesses. These three different dimensions can be referred to as respectively Identity, Profile and Image (IPI) and illustrated as the figure below.
Figure 1: Image, Profile and Identity matching – (IPI Gap Analysis Model)
Source: Own adaptation based on Universum (Employer Branding Organization)
The individual company’s effort must be based on and aligned across all of these dimensions if the message is to be communicated effectively and with integrity, no matter whether it is directed towards employees, customers, shareholders, organizations etc.
Too many companies are sporadically deploying their CSR efforts on apparently good and reasonable initiatives like donating money to various NGOs or limiting CO2 emissions and saving on the electricity etc. This could be an effective strategy if the individual company can relate these initiatives to its profile, identity and image. Vestas is a good example of this and can actively exploit the public discourse on CO2 emissions, because its’ product actually can prevent or at least limit emissions and because its image is “No. 1 in Modern Energy”. In other words; business activities and CSR policies must be focused on a mutual goal and this enforces the individual dimensions, supports consistency throughout and builds integrity to the company both externally and internally. Essentially this increases the bargaining & sales power towards possible clients and thereby increases the foundation for economic growth & profit.
Documentation and Integration
Companies already engaging in CSR initiatives face another problem. In order for the message to bear any true weight it needs to be both continuous and consistent, no matter whether it is guided towards clients, owners, employees or other stakeholders. This is where documentation and communication comes into the picture. Even if CSR is aligned to activities and across the three dimensions it still has be documented and communicated effectively & consistently. The problem with simply donating money to a cause or a NGO is that it is getting harder to trace the actual impact of the donation. The more a company is able to follow and document its CSR effort, the easier and more trustworthy the message will be.