Swinburne University of Technology

and Victoria University

Sustainable Social Enterprise -

International Nonprofit and Social Marketing
Conference 2009 – Proceedings
Victoria University Year 2009

Bringing Corporate Social Responsibility to Life –

The Onus is on the Nonprofit Organisation

E. Lodge* W. Binney† B. Lloyd Walker†

*Scope Victoria
†Victoria University

This conference paper was originally published as Lodge, E., Binney, W. and Lloyd Walker, B., Bringing Corporate
Social Responsibility to Life – The Onus is on the Nonprofit Organisation, Sustainable Social Enterprise –
International Nonprofit and Social Marketing Conference 2009, Victoria University, 14-15 July 2009.
 Bringing Corporate Social Responsibility to Life –
Onus is on the Nonprofit Organisation

Elizabeth Lodge, Scope Victoria, Wayne Binney & Beverley Lloyd Walker, Victoria
University

Abstract

Corporate Social Responsibility (CSR) is now a strategic imperative and embedded into
companies’ core business. Strategic CSR accomplishes strategic business goals, as well as
social goals – it benefits both the business and society. With companies now linking CSR to
their aggressive business strategies to achieve a competitive market advantage, nonprofit
organisations must also extract meaningful and sustainable value from this movement. The
onus is on nonprofit organisations to mobilise the current CSR movement to build capacity
and gain a competitive advantage for their clients, their organisations, and indeed, the
nonprofit sector and community at large.

While CSR literature abounds, an absence of research into the specific CSR desired outcomes
of nonprofit organisations has been identified. This conceptual paper firstly provides evidence
that this void requires investigation, and secondly, presents if further investigation, a three
step sequential path for nonprofit organisations to proactively embark upon, if the optimum
shared value of CSR is to be realised for these organisations and the corporations they are
involved with.

Introduction

While global economic conditions have reduced the capacity of business to pursue their CSR
goals, the demands on nonprofit organisations have been pushed to an all-time high because
of the recent natural disasters such as the floods and fires in Australia. It is reasonable to
expect that this has created an environment in which CSR has become increasingly
challenging for nonprofit organisations. To continue delivering on the overall goals and social
outcomes of the nonprofit organisation whilst providing the strongest return to the corporation
involved in CSR, ‘doing more with less’ is today’s challenge to ensure the CSR objectives of
both the nonprofit organisations and the corporations are met. A recent survey of 440
nonprofit professionals in USA (ProBono Australia, 2009) has reported that 81% of
corporations in the USA will be far less generous in their giving in 2009, including carefully
aligning their giving with the company’s strategic goals. Prior to addressing the challenge of
demonstrating greater CSR with limited budgets, defining and articulating both the nonprofits
and businesses’ CSR objectives, then proactively securing them for shared value, is appearing
as a greater challenge. This highlights the timely importance of this research.

Literature Review

The term ‘nonprofit’ is used interchangeably with ‘not for profit’, ‘non government’, ‘civil
society’, ‘community’ and ‘third sector’ in existing Australian and international literature.
The Australian Bureau of Statistics (ABS) use of the term 'nonprofit institutions' is aligned
with the United Nations definition for this sector. Specifically, the United Nations (2003 p.16)
defines the nonprofit sector as consisting of “(a) organisations; that (b) are not-for-profit and,
by law or custom, do not distribute any surplus they may generate to those who own or
control them; (c) are institutionally separate from government; (d) are self-governing; and (e)
are non-compulsory.” The most recent statistics by the ABS (2007) indicate that there were
40,976 registered nonprofit organisations in Australia. Further, registered nonprofit
organisations employed nearly 890,000 people (more than half in social services, education
and research organisations), with over 2.4 million volunteers also contributing to the nonprofit
sector during 2006-07. The sector is a vital component of the Australian economy. This paper
will concentrate on those nonprofit organisations that are formed to achieve a common goal,
are public serving, based on voluntary membership, and do not distribute profits. Public
serving nonprofit organisations exist primarily to provide a public service and are mainly
represented in the fields of health, education, community and other social services.

As identified by Carroll (1999) when he traced the evolution of CSR, there are a myriad of
definitions of CSR. From this work an accepted definition describes CSR as “…the
continuing commitment by business to behave ethically and contribute to economic
development while improving the quality of life of the workforce and their families as well as
the local community and society at large”. Therefore, CSR does not negate making a profit,
but requires businesses to be accountable and balance the benefits gained against the social
cost of achieving these benefits (Wulfson, 2001).

In recent years, dramatic changes in the attitudes and expectations brought to bear on
corporations by their stakeholder groups have occurred (Dawkins and Lewis, 2003).
Corporations are now concerned with more than just profit; they are showing a responsibility
to their customers, their employees, their shareholders, the environment, and the community
in which they operate, including nonprofit organisations. According to Dawkins and Lewis
(2003, p.188), this broader view of corporate responsibility “puts it at the heart of everything
a business does, firmly within its core business practices.”

Porter and Kramer (2006, p.9) take the definition of CSR one step further by creating a
corporate social agenda which “.. looks beyond community expectations to opportunities to
achieve social and economic benefits simultaneously”. It moves from acting as good
corporate citizens and mitigating harm from current business practices (responsive CSR), to
finding ways to reinforce corporate strategy by advancing social conditions (strategic CSR).
Strategic CSR, which aligns a company’s values, business plan and core competencies with a
social agenda to benefit both the business and society, will be the focus of this paper.

If the immediate challenge in delivering mutual and sustainable benefits for corporations as
well as nonprofit organisations, is for each sector to firstly define and articulate their own
CSR objectives, then to secondly secure these objectives for shared value, all within a
challenging economic climate, CSR must not be thought of in generic ways, but instead, in
the way most appropriate to each firm’s strategy (Porter and Kramer, 2006). However, the
literature overwhelmingly discusses strategic CSR in terms of the motivations and a
measurable outcome for the corporation, with very little reference to the nonprofit’s motives
and desired outcomes.

Many corporations have claimed to have had a long involvement with CSR in Australia. In
1992, 24 of the top 100 companies listed on the Australian stock exchange responded to a
survey on CSR. Of these 24 companies, 18 indicated some form of CSR, including specifying
a social role in their objectives, appointing staff and allocating funds to enact social
responsibility, and incorporating social responsibility into their internal culture and external
relations. Moon (1995) views the advent of this CSR within large Australian businesses as a
citizenship model, which recognises the unavoidable connection between society and business
and the market-related opportunities to enhance reputation. His paper, on CSR in Australia,
considers the implications of CSR for the corporation, and doesn’t take into account the
implications for nonprofit organisations, or the shared value that is potentially available for
both.

In terms of the effect of CSR on economic performance, Friedman (1995) clearly states that
companies have no social responsibility at all, just a responsibility to increase their profits;
solving social problems is the role of nonprofits and governments, not businesses. In short,
Friedman views a company’s stakeholders solely as its shareholders. In contrast, Novak
(1996) in his seven responsibilities outside business, makes reference to the nonprofit sector
as one of the stakeholders a business should consider, but again, it is in reference to the
corporate’s perspective and not the nonprofit’s perspective. Corporate volunteering, for
example, enables businesses to demonstrate good corporate citizenship, but is it of value to
the nonprofit and what is at stake for both parties, especially if the financial return from
investment is not significant to the corporate?

Mitchell, Agle and Wood (1997) take another viewpoint, suggesting there is little
disagreement on who stakeholders are – employees, customers, suppliers, competitors,
shareholders, investors, governments, local communities, society at large – but the existence
and the nature of what is at stake itself presents an area of argument. Which stakeholders’
interests are most important, and how can these be balanced? According to Freeman (2001),
stakeholders include any groups or individuals affected by the company’s actions, policies
and decisions, plus any groups or individuals vital to the survival and success of the company.
Both papers stop short of highlighting nonprofit organisations as significant stakeholders.

Friedman (1996) may have viewed shareholders as the sole stakeholders, but stakeholder
theory explains, “...there is more than just a relationship between an agent who has fiduciary
responsibility to a principal - there are also third parties to whom the corporation owes
morally significant non-fiduciary obligations” (Lantos, 2001, p.604). Strategic CSR enables
both the company and one or more stakeholder groups to benefit; ‘giving back’ to their
stakeholders is believed to be in the company’s best financial interests. Having stated that,
Lantos (2001) also questions whether the evidence of CSR’s effectiveness is merely
anecdotal. It is unclear if socially responsible businesses outperformed or underperformed
their competitors, as the factors contributing to profits in this arena, such as employee morale
and corporate image, are qualitative and hence difficult to assess objectively.

O’Brien (2001) also sees a serious problem occurring when there is a misalignment between
the company’s core business and the company’s CSR strategies and functions, especially if
financial gains are not delivered as part of a company’s investment into CSR initiatives. Quite
simply, strategic CSR must focus on a theme or cause which has some relationship to a
company’s core business (O’Brien, 2001). On their current website, GlaxoSmithKline for
example, an international health care company that “helps people to do more, feel better and
live longer” (GSK, 2009), has a CSR charter which supports this core mission – their CSR
activity is solely targeted towards health, wellbeing and educational projects. On another
website, one of Australia’s leading banks states that their area of CSR focus is to assist
disadvantaged communities in accessing financial services and addressing financial literacy,
thereby delivering value to their business and the communities they operate in (NAB, 2009).
When companies are analysing their CSR prospects, Porter and Kramer (2006) suggest they
should be using the same business frameworks that guide their core business choices. The
challenge for business is therefore to identify those areas of social context with the greatest
strategic value to them, and which will benefit society and their own competitive advantage.
Although Porter and Kramer (2006) believe that strategic CSR unlocks this shared value,
Chahal and Sharma (2006) found the literature inconsistent in terms of the effect of CSR on
economic performance.

These discussions suggest that the onus of utilising CSR to provide benefits for the nonprofit
organisation rests with the organisation itself, as the corporation who may be involved in this
partnership has a different agenda. In adopting a strategic CSR platform, a corporation
commits to providing the strongest financial return to the business whilst providing mutual
and sustainable benefits for the various stakeholders. As one of those stakeholders, and the
stakeholder least likely to boost profits (Lantos, 2001), nonprofit organisations need to
proactively build the capacity to extract meaningful and sustainable value from CSR for their
clients and organisation, and for the nonprofit sector and society at large.

The Concept

As previously discussed, numerous models, frameworks and theories relating to CSR have
evolved from the corporate’s perspective and with the corporate’s CSR objectives guiding the
process. However, these examples have all overlooked the CSR objectives of the nonprofit
organisation. Where in the evolution of these models, frameworks and theories have the CSR
needs of the nonprofit been considered? Who, therefore, is responsible for highlighting these
needs and ensuring that they are considered when a corporation is choosing which social issue
it will address? Novak (1996) acknowledges nonprofit organisations as one of the
stakeholders whose interests must be factored into corporations’ CSR programs, yet stops
short of enquiring as to what is at stake for the nonprofit organisation. In presenting an
adjusted scale for reliably measuring CSR, Turker (2009) recommended further testing of the
scale by the nonprofit sector, but did not go as far as considering the nonprofit’s CSR
objectives. In the absence of supportive literature, we contend that the responsibility of
effectively utilising CSR for nonprofit organisations rests with these organisations
themselves.

In outlining corporate involvement in society, Porter and Kramer’s (2006) corporate social
agenda concept, which moves from responsive CSR to strategic CSR, provides an initial
framework that can be adapted and refined by the nonprofit to include its CSR objectives, and
hence proactively build shared value from CSR. In creating an explicit and affirmative
corporate social agenda which reinforces corporate strategy by advancing social conditions,
prioritising social issues is a company’s first step in this creation. “The essential test that
should guide CSR is not whether a cause is worthy but whether it presents an opportunity to
create shared value – that is, a meaningful benefit for society that is also valuable to the
business” (Porter and Kramer, 2006, p.8).

In prioritising social issues, Porter and Kramer’s (2006) framework is a continuum from
generic social issues to value chain social impacts through to social dimensions of
competitive context. These three categories along the continuum distinguish the broader
worthy social causes from the narrower group of social issues that are strategically aligned to
a business and are important to society. Further, the continuum distinguishes how
significantly a company’s activities affect social issues, and how these issues in turn affect a
company’s competitiveness. Each company needs to individually sort social issues into one of
the three categories above; owing to differences in competitive positioning, the same social
issue may be ranked differently along the continuum from one company to the next.

It is at this initial step of a company selecting a social issue that intersects with its core
business that the nonprofit must simultaneously be positioning its cause to be of strategic
importance to the business. Having categorised and ranked social issues according to the
shared value they will create, the corporate’s social agenda has progressed along the
continuum from community expectations, that is responsive CSR, to making a significant
social impact whilst reaping economic benefits, that is strategic CSR. A corporate’s
involvement in society is now underpinned by a strategic approach.

It is in strategic CSR that the opportunities for shared value, and hence mutual and sustainable
benefits, essentially lie. “Typically, the more closely tied a social issue is to the company’s
business, the greater the opportunity to leverage the firm’s resources and capabilities, and
benefit society” (Porter and Kramer, 2006, p.10). By adapting Porter and Kramer’s concept of
corporate involvement in society to include, not only the social issues being addressed by
nonprofit organisations and the objectives the corporations are addressing, but to also include
nonprofit’s CSR objectives into this mix, meaningful value which is truly shared will begin to
materialise (Figure 1).

Figure 1: Corporate Involvement in Society - adapted from Porter and Kramer (2006)

Having aligned its cause to a company’s core business, and then distinguished itself as a
social vehicle to strengthen a company’s competitiveness, the onus is now on the nonprofit to
extract meaningful value from strategic CSR for their clients and the organisation, and for the
nonprofit sector and society at large. This will only be achieved if the individual nonprofit
organisation has clearly defined and articulated its own CSR needs, such that it can
effectively leverage the firm’s resources and capabilities to meet these objectives, thereby
utilising strategic CSR to its full potential. Building this shared value requires a cultural shift
rather than just thinking in terms of CSR as it is currently accepted.
 Discussion and Conclusion

With few exceptions (Friedman, 1996; Henderson, 2004), state that there is a consensus
throughout the literature that companies have accepted the mantle of conducting their
business in an environment where the impact of this business on all stakeholders, including
the community, is considered. Chahal and Sharma (2006, p.205) simply state, a company’s
obligation “... is to protect and improve the welfare of the society and its organisation, now as
well as in the future, through its various business and social actions, and ensure that it
generates equitable and sustainable benefits for the various stakeholders”. There is also
agreement that companies need to be profitable, and CSR should not negate this economic
return (Wulfson, 2001); to the contrary, strategic CSR is seen as the vehicle for unlocking
shared value, and providing mutual and sustainable benefits for the breadth of stakeholders
(Porter and Kramer, 2006). According to the literature, whether this actually occurs is
debatable due to the lack of reliable CSR measurement tools (Lantos, 2001). However, what
is consistent in the literature is the absence of research into the CSR needs and desired
outcomes of the nonprofit as a relevant stakeholder. Addressing this lack of research is the
first step of future investigations, including defining CSR outcomes that are tangible for the
nonprofit and can be measured.

These discussions suggest that there is a sequential path to proactively optimise the potential
of CSR for the individual nonprofit organisation and the sector at large. Having articulated its
CSR objectives, the second step for future research is to investigate how the nonprofit can
most effectively achieve these objectives. In challenging companies and nonprofit
organisations to think, not just in terms of CSR, but also in terms of corporate social
integration, Porter and Kramer (2006) suggest that there should be the opportunity for
nonprofit organisation to take responsibility for:
(i) positioning their overall mission and their specific causes to be of strategic importance
to a company to achieve both a competitive advantage for the company and the
desired social outcome for the nonprofit, then ...
(ii) integrating their CSR objectives with the company’s CSR objectives to extract shared,
meaningful value from strategic CSR.

With the onus resting with the nonprofit, research is also required to investigate how the
nonprofit can best position itself and strategically align itself with the corporation to leverage
its resources and capabilities in a way that both parties’ CSR objectives are met. In this way,
there is shared value for both the nonprofit organisation and the corporation, and a new
concept of CSR will materialise. As mentioned at the outset, in the current economic
environment, ‘doing more with less’ has never been so vital for the corporate and community
sectors. By investigating CSR from the nonprofit organisations’ perspective, it is envisaged
that the stakeholder least likely to boost corporations’ profit, will be able to market itself to a
particular corporation, relying on evidence based research, as the conduit for financial and
social return on CSR investment.

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