CSR – A Strategic Business Tool

The globalization of markets as strongly depicted in the recent credit crunch, clearly suggests that businesses with the objective to think differently are likely to sustain in the long run. Jack Trout purports brands will die if not differentiated and thus businesses should ensure that people notice that they are different – which ultimately makes them more profitable. It is now strongly believed across the business world that strategies are successful when they have the intent to practice the blue ocean strategy as elaborately detailed out by W. Chan Kim and Renee Mauborgne, and as such are likely to protract in the long run and the rest will have a tough time to survive in an already red ocean. C K Prahalad in his classic “the fortune at the bottom of the pyramid: eradicating poverty through profits”, is an eye opener for large corporate suggesting how the poverty can be transformed into an opportunity. The United Nations Secretary General, Kofi Anan propounded the concept of global compact stating that the world should focus on four basic pillars for survival – human rights, labor rights, environment protection, and anti corruption measures.

The perspective quite clearly puts light on one of the most prospective weapon suitable for business strategies. This weapon is Corporate Social Responsibility (CSR). Before venturing into the strategy let us visit in brief this gold mine. Large number of definitions has been outlined for CSR, however, before looking at the definition or the strategic positioning of CSR let us visit the etymological definition of the term ‘company.’ Like many contemporary English words, the word company has Latin roots. It is derived from two Latin words, cum and panis, which as Arndt put it, means “breaking bread together”. Therefore, the original idea of a company has communal or social connotation.

Tracing the etymology of the term ‘company’ is relevant here because as the words ‘corporate,’ ‘social,’ and ‘responsibility’ rightly suggest, CSR covers the responsibilities that companies or corporations have to the societies within which they are based and operate. From a practical perspective, CSR involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day to- day decision-making process. It not only reflects the ‘passage of time’ in its impact and transformation, but its meaning and understanding has been affected by the growth of society, nations and changes in their appreciation of cultural heritage and background. Mahbub ul Huq explains the principle of CSR stating that the basic purpose of development through business venture is largely to enhance consumer choice while that of development is to foster an enabling environment for people to enjoy long, healthy, and creative lives; CSR combines the two. Saxena & Gupta have placed another interesting dimension to CSR by placing a three dimensional view of society, government, and corporate working together for growth of healthy, meaningful, and sustainable business.

Practitioners commonly equate CSR with philanthropy, while others equate it with promotion strategy of businesses, the fact is, it is neither in its truest sense. One must undertake the practice with a long term plan. One must be clear that the most profitable businesses always have a plan. They know where they want their business to be one, three and five years from now. They know how many clients they will have, how many employees and what kinds of goods and services they will offer. They have a plan and a strategy for achieving it. CSR is a plan that ensures that you do your planning and create a roadmap for your success.

The objective of any business is to make a profit, by definition. This is, in itself, neither good nor bad – it is a fact. A fully integrated CSR strategy is a long term plan and can add greater value to any companies’ efforts and go a long way towards brand equity enhancement, corporate reputation building and greater financial returns on the CSR investment. In addition, CSR can be a strategic tool to facilitate the private sector’s active involvement in development activities. It is through this process of development that per capita expenditure of a society may increase resulting in greater consumption, thus it creates new business opportunities, synergies and private-public partnerships, and connects customers, suppliers, stakeholders and communities with a single string called value chain.

Based on the above theoretical discussion, the following definition may be considered appropriate. ‘It is set of proactive business practices directed by ethical norms that contribute to the sustainable development of stakeholders in the value chain with the best interest of society, business and environment.’

There should not be any doubt in our mind that corporate identity is the first and defining step in creating a company’s personality. One must bear in mind that success of CSR is not new to the world; however, its practice as a business strategy is perhaps misunderstood by many since its practice was not directed towards business goals or they were undertaken as unplanned activities. In ensuring that corporate can achieve this end, the following business discipline may be integrated within the organization culture and systems.

Managers should demonstrating leadership by practicing the role of responsible corporate citizenship. This implies that managers should maintain discipline within the organization with an approach to ensure maximum care of the employees and market goods and services that is socially responsible.

Organizations having good leaders have been invariably involved with activities that are citizen friendly with a view to offer products and services that are socially conducive. This is possible if the leader has the vision and mission of the organization tuned towards such an approach. Steve jobs perhaps can be regarded as the most successful corporate leader of recent times and is considered to be a leading figure in computer and entertainment industry and listed as the most powerful businessman of 2007. One of his traits was to maintain high satisfaction level among both employees and customers through ensuring top of the line product and service.

The solutions to problems should be practical, contemporary, and related to globalization of cultures with an aim to achieve sustainable development and corporate responsibility in a multi-stakeholder context. This calls for a strategy that is comprehensive and directed to serve not only the stake holders but the nation as a whole under global setting.

Multinational and transnational companies have already realized that developing strategies directed towards mere growth of the company without addressing the country specific issues will cause concerns not only for the company but for the country and for all linked to the business at large. The impact of lack of global appreciation is vivid as an aftermath of the credit crunch in the United States. On the other hand, the fact that the global village is indeed a reality is pictured in global recruitments, culture sharing, and incorporating successful indigenous practices within the framework of global practices. ‘There is a bigger opportunity in localizing and adding social, economical, and cultural ethos in your offerings and the smarter companies are realizing that,’ this statement has been made in forums representing international companies; the basic essence is to globalize a local problem which will ultimately aid in developing a global solution package, Theodore Levitt coined it “Marketing Myopia”.

Managing risks by taking a proactive stance on critical issues. This ensures a long term strategic plan that is neither risk averse nor reactive, the plan must incorporate long term strategic gain through ensuring that the whole rather than the part gains.

CSR is like a hot air balloon, takes a long time to prepare before the actual launch. A tree grows stronger with a well-established root. And this can only occur with good soil, careful fertilizing, watering, and time. Companies having long term vision are likely to take into consideration not just a profit motive having a skimming policy; rather, they intend to stay in the market with a vision of capturing the heart share. This precise approach therefore directs the policy to be all-encompassing.

The management should strengthen partnership with governments, business, civil society and other stakeholders. A relationship approach is prescribed, which will ensure not only social interaction but also a win-win strategy designed to serve the external partners.

The business world is highly dynamic and receptive to fast changes while civil society and the government in particular reside in the slow track. It is therefore important that they work together to ensure mutual gain. The question is who should take the lead? Answer is simple; one who is faster should pull rather than push someone who is indispensable. Participating in activities that are directed towards training of the public sector people is likely to not only change the mental framework of the bureaucracy, but will also help in enhancing public-private partnership.

The employees must share good practices and learning. Quality enhancement should be the focus tagged with transmission of knowledge across the organization and with an aim to educate the society regarding good practices, this will result in improving of national standards.

Clear, complete, & concise customer education is the ultimate weapon to guarantee that the good triumph and the mind set of people move towards growth. Here is where most advertisers fall down, and you can stand head & shoulders above the crowd. Tell your full story. Don’t make people try to figure out on their own why they should be doing business with organizations that are ethical, spell it out for them. Common sense always prevails over forced change of mind and thus common sense suggests that people in general can differentiate between right and wrong. Thus being transparent and helping consumers make a choice between good and bad will definitely succeed. Of course, this will require the company to be at a higher plain than others.

Focus on broader framework of development issues. The ultimate success of an organization depends on its contribution towards the development of the country, which ensures better economy and thus greater opportunity for business.

Any developmental effort will lead to reduction in poverty or enhancement in purchasing power of those who are at the lower end of the pyramid. This implies, that a slight increase in their purchasing power will immensely increase the sales of items targeted at them. The word ‘micro’ is the creator of the global brand ‘GRAMEEN’, which is linked to development. Today, this concept has opened up a vista of opportunity for businesses across the globe.

Ensure corporate gain through adding value to corporate/brand management, employee morale and productivity, and operational efficiencies. This suggests that if the clientele are happy and the nation prospers, the corporate that is part of this development process is likely to gain at all ends and this can only be achieved through adding value at all possible touch points.

Value is the customer’s perception of a product/service or companies worth, excellence, usefulness, or importance with respect to them or their business. Value addresses the customer’s question: What can this product, this person, or this company offer? In today’s cold impersonal business world, we should be the one that treats them like family. This implies that value is automatically built in the company, the value principle suggests that the basic code of ethics ‘do unto others as would like others do unto you’ is maintained. Education plan for the workers family, long term pension schemes, health schemes for channel partners, etc. are becoming popular as successful strategies.

Protection of the global environment must be the number one long-term priority of all human endeavors, the sine qua non of our future. The new importance of “green” issues in boardroom discussions, public relations strategies and production processes cannot be denied.

One of the strengths of the environmental movement, like all social movements, is its diversity. Thus, more the diversity greater will be the scope for initiating a differentiated strategy. Automobile industry in Japan and in Europe initiated the focus on environment before others had actually initiated a plan on building environmental friendly vehicles; this gave them an edge over the others across the world.

Strike across boarders through international business to ensure better living rather. The idea is to ensure growth in trade not through confrontation but through mutual strategic comparative advantage assessment. A symbiotic rather than a parasitic approach is proposed.

The concept of know-like-trust can be easily achieved through CSR. Anti war sentiments are building throughout the world and war for economic or business gain has been proven to be too costly for nations. This is where the concept of interdependence and chain management comes into force. The new global paradigm should revisit profiting through diversification of military industry or dumping of excess goods, or politics of food, etc. and put more emphasis on more socially protective industry such as cyber space technology, health, environmental protection, per capita consumption enhancement, per capita nutrition increase, etc. History has though proven that military industry has contributed immensely towards advancement of science, however, the fact that it took longer to get to the larger cause cannot be ignored. In addition, the paradigm of comparative is age old and should be visited with a strategic business mind.

The underprivileged markets are perhaps the future growth market off the global economy. The focus should be developing products catering to the needs of this group of consumers with the right business mix.

The phenomenal growth rates in China and India in particular in the recent past and even at present under the global down turn is a vivid example. The focus of businesses has been on the lower end of the pyramid which has resulted in this phenomenal growth.

It is very important for Bangladesh corporate to understand that if we decide to stay behind in the race and in addition continue to see the distance between us and our regional compatriots increase, we may be left with corollary of nothingness. On the other hand, the country may decide to move up the ladder and take up a leading position like those who have proven this to be possible, the choice has to be made. At the global level, the developed world will have to decide how they may partner with lesser developed countries with an aim to develop a strategy beneficial for global economy and environment rather than being self centered and thus myopic. The answer lies in the expanding the horizon through CSR.