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CSR as the Competitive Advantage of Business Finding shared value

CSR What does it means?

CSR is about how companies manage the business processes to produce an overall positive impact on society

CSR can benefits to business and society

But CRS first of all can be a source of opportunity, innovation, and competitive advantage of a company If company understand the relationship between business and society in any properly task CSR can become a source of tremendous social progress, as the business applies its considerable resources, expertise, and insights to activities that benefit society

The Emergence of CSR


From the beginning of CSR development it hasnt been entirely voluntary practice that is why many companies was surprised when they faced unexpected problems
Nike: boycott of consumers as a response to the issue of Indonesian supplier who applied abusive practices to its labors Shell Oils: Green peace protested against it decision to sink obsolete oil rig in the north sea Pharmaceutical companies: it was discovered that they were expected to respond to the AIDS pandemic in Africa. Even it was far removed from their primary product lines and markets.

Four components of CSR

Moral obligation- emphasizes that companies have a duty to be good citizens and to do the right thing. Companies can fully archive commercial success only in ways that respect ethical values, people, communities, and the natural environment (Any weakness?) Sustainability-emphasizes environmental and community stewardship Meeting the needs of the present without compromising the ability of future generations to meet their own needs(Norwegian Prime Minister Gro Harlem
Brundtland, 1980) (Any weakness?)

License to operate emphasizes that every company needs implicit or explicit permission from governments, communities, and other stakeholders to do business (Any weakness?) Reputation- justifies CSR initiatives on the grounds and will improve a companys image, strengthen its brand, liven up it morale, and even can raise the value of its stock (Any weakness?)

Successful companies=Healthy society

To advance CSR practices of each company, anchoring them in strategies and activities, its needed to understand the interrelationships between a corporation and society The mutual dependence of corporations and society implies that both business decisions and social policies must follow the principle of shared value That is why a company must integrate a social perspective into the core frameworks in order to understand competition and guide its business strategy

Approach to advance CSR

Identify the points of intersection Choose which social issues to address Create a corporate social agenda Integrate inside-out and outside-in practices Create a social dimension to the value proposition

Identify the points of intersection

The interdependence between a company and society takes two forms: 1. inside-out linkages: a company imposes upon society through its business operations and creates either positive or negative social consequences.
Without a careful process for identifying evolving social effects of tomorrow, firms may risk their survival 2. outside-in linkages: an external social conditions also influence corporations, but either for better or for worse. Ensuring the health of the competitive context benefits both the company and the community

Competitive context areas

1. the quantity and quality of available business inputs (exp. human resources, or transportation infrastructure) 2. the rules and incentives that rule competition (exp. policies that protect intellectual property, ensure transparency, safeguard against corruption, and encourage investment) 3. the size and sophistication of local demand
(exp. standards for product quality and safety, consumer rights, and fairness in government purchasing)

4. the local availability of supporting industries (exp. service providers and machinery producers)

Any and all of these aspects of context can be opportunities for CSR initiatives

Social conditions
Social conditions form a key part of competitive context that has great strategic importance for both companies and societies, and give to companies the ability to carry out its strategy especially in the long run

Influence of social factors

The ability to recruit appropriate human resources may depend on a number of social factors that companies can influence, such as the local educational system, the availability of housing, the existence of discrimination (which limits the pool of workers), and the adequacy of the public health infrastructure.

Choose which social issues to address

A company must select issues that intersect with its particular business, other social issues are better to leave to those who are better positioned to address them Generic issue is important for society but doesnt affected by the company Value chain social impacts are significantly affected by the companys activities Social dimensions of competitive context are factors in the external environment that significantly affect competitiveness of the companys operations Some issues can be applied widely, some can be applicable and appropriate only for the specific industry The more closely social issue tied to the companys business, the greater the opportunity to leverage the firms resources and capabilities, and benefit society

Social Issues Challenges

Health care benefits make fewer challenges for software development or biotechnology firms, where workforces tend to be small and well compensated, Health care benefits make more challenges for retailing, which is heavily dependent on large numbers of lower-wage workers.


Volvo has chosen to make safety as a central element of it competitive positioning Toyota has built it competitive advantage from the environmental benefits of its hybrid technologies

Effective corporate citizenship initiatives

GEs program contributes between $250,000 and $1 million over a five-year period to each underperforming public high schools, it managers take an active role by supporting and encouraging students . In the result is significant improvement within 10 years in all schools and in addition graduation rate has increased from 30% to 60%. Society benefit , the company creates goodwill and improve relations with local governments

Shared value opportunities arising from investment

Microsoft with American Association of Community Colleges (AACC) cooperation: Microsoft contributed products and $50 million within five years and sent employees voluntary in order to help to the community colleges to improve their programs and education of the students. In the result: many communities benefited from Microsoft actions, in the same time the company obtained many new high educated workers

Integrate inside-out and outside-in in practice

When value chain practices and investments in competitive context are stick together these create powerful tool for creating economic and social value

Integrating Companys Practice

Nestle: the company invested in local infrastructure of northern district of India, and transferred its support, knowledge and technologies directly to small farmers. In result Nestle produced enormous social benefits, such as improved health care, education, and entirely life of Indian farmers, while getting direct access to the commodities it needs to maintain a profitable global business In this case Nestl's distinctive strategy is inseparable from its social impact

CSR is important to competitive success

Strategy is always about making choices, and success in CSR is no different From the information obtained from the case we can conclude that creation of shared value should be viewed like research and development, as a long-term investment in a companys future competitiveness Moreover corporate philanthropy would generate many benefits to both business and society if consistently invested using the principles have outlined

Efforts to find shared value in operating practices and in the social dimensions of competitive context have the potential not only to foster economic and social development but to change the way companies and society think about each other Perceiving social responsibility as building shared value rather than as damage control will require dramatically different thinking in business, however, CSR will become increasingly important to competitive success Corporations are not responsible for all the worlds problems, nor do they have the resources to solve them all But each company can identify the particular set of social problems, solve them and gain the greatest competitive benefit for both society and company

Contribute to both Business Society!

Try to propose a CSR initiative for any company that you are familiar with based on our lecture material today