Evolving Management Paradigms: Building CSR strategy to uncover shared value

Social responsibility is an old idea, which has been of concern to mankind for many years. However, in the past few years, it has become of increasing concern to the business world. This has resulted in growing interaction and correlation between the working of the government, businesses and society as a whole. Traditionally, businesses primarily concerned themselves with the economic results of their decisions but today they must also reflect on the legal, ethical, moral and social responsibilities. Social corporate responsibility and the maintenance of high ethical standards is not an option, but an obligation for all business.

Corporate social responsibility for a company is no longer defined by how much money a company contributes to charity, but by the overall involvement of the firm in activities that improve the quality of people’s lives. Even though CSR is largely unregulated, corporations around the world acknowledge the positive impact on their brand image, upon involving and carrying out CSR activities reflects. In case of financial reporting, companies are required to follow strict standardized requirements. However, in the case of CSR, there are no strict regulations that make CSR mandatory. Despite the lack of regulations, the government has always been encouraging companies to engage in CSR, allowing firms to claim tax benefits on the expenses incurred. In the race to outrun their competitors, corporations conduct bigger and bigger CSR activities to earn higher goodwill among consumers. Corporations benefit from CSR as well because consumer prefer carrying out business with companies, which have a positive image in the market. The topic of corporate responsibility has been captioned under many names, including strategic philanthropy, corporate citizenship, social responsibility and other monikers. Regardless of the label, the dominant paradigm underlying corporate social responsibility revolves on the idea of creating “shared value.” Hence, the business is chartered to create value for its shareholder but in such a way that it also creates value for society, manifesting itself as a win-win proposition.

Many businesses pursue CSR activities that can best be termed pet projects, as they reflect the personal interests of individual senior executives. While these activities may be presented with much noise and fanfare, they usually offer minimal benefits to either business or society. In the middle are efforts that can make both sides feel good but that generate limited and often one-sided benefits. Hence, in what can be referred to as propaganda, CSR activities are focused primarily on building a company’s reputation with little real benefit to society. Some cynics suggest that this form of CSR is at best a form of advertising—and potentially dangerous if it exposes a gap between the company’s words and actions.

Exhibit 1 shows various initiatives that could be classified as CSR activities.

Key parameters while defining a CSR Strategy:

In order to define an effective CSR strategy, it is important for a company to consider the below factors in detail:

Develop a Vision: It is essential for every firm to be aware of its core beliefs, business strategy and model of success. Socially responsible behavior in business starts with an awareness of who they are and what they believe as an organization. Once these questions are answered, the company can begin searching for programs and initiatives that fit well with its mission statement.

Link to Company’s Core Purpose: Top management must be focused on creating business value for the organization, and not NGO management or cause marketing. A firm has to carefully analyze how their CSR program can help save or make money for its business, meet the challenge of a specific societal need, and create shared value by acting in its own best interests. The guiding principle is that a good corporate responsibility strategy is about how to make money, not give it away. This is possible if the firm aligns its core beliefs and competencies with its CSR strategy to develop initiative that can create or help build an eco-system, which the company could also leverage for its own business.

Understand Customers: Companies need to understand the diversity among customers and not let their biases paint a picture of their customers, which might not be accurate. Once the company has identified the various needs of its clients, it would be in a stronger position to discover activities that could lead to better value creation for the society, with the customer needs and requirements in mind. The potential correlations between the customer demands and corporate responsibility will help strengthen the existing socioeconomic system and client loyalty.

It can be concluded that corporate social responsibility is a self-regulated addition to the business model of corporations and can be considered to be extended marketing. Although, it does not generate revenue for the company, it helps the corporations strengthen their brand image and stabilize their consumer base in the market.

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