What is strategic CSR?

In a previous post, I looked at sustainability and knowledge management. In this post, I want to further my examination. I made the comment that the contemporary organisation must view itself as belonging to an ecosystem, which is populated by the local community the organisation exists and does business within; its customers; its suppliers; employees of the organisation; economic and political influences that impact on the organisation etc.

A lot is being said about corporate sustainability reporting (CSR) and I fear that it’s a term being thrown around without much understanding of what it means and the value CSR can deliver. If we look at CSR through the lens of complexity and take an ecosystem perspective, then CSR must surely be about reciprocal relationships that deliver social value throughout the ecosystem. It must be about a mutually beneficial and mutually reinforcing strategic relationship between a company and the society that it interacts with and impacts on ie the local community; or parts of the globe where the company transacts business.

Whilst organisations are demonstrating good citizenship by donating money to support local or worthy causes, this is a reactionary or defensive stance (akin to the Compliant or Opportunistic organisation I outlined in my earlier post). If companies simply produce glossy, thick CSR reports or glibly talk about how they are being environmentally responsible, then this is merely reactionary.

The organisation needs to establish its CSR footprint and understand the impact it has on the environment and society from every angle and in every step in the value chain. The intelligently sustainable organisation moves beyond offering marketing hype and works out how it can create a value proposition that includes having a social impact of benefit to itself and society.

So I was pleased to come across an article in the Harvard Business Review by Michael Porter & Mark Kramer that talks about strategic CSR. I particularly like the framework they articulate that includes “inside-out linkages” and “outside-in linkages”.

Without specifically talking about an ecosystem model, Porter & Kramer see CSR as an opportunity rather than a cost because there are points of intersection between a company and society. If these intersection points are identified, then the company can work out a value proposition that is unique for its customers.

Inside-out linkages refer to the impact a company has on society through the normal course of business. By working through each step of the value chain, the company can work out positive and negative consequences of its actions eg hiring practices; waste disposal. This includes identifying and acknowledging evolving or future social effects. Asbestos was considered safe in the early 20th century, but we now know the horrifying impact of asbestos on humans and the subsequent legal actions taken against companies. Sustainable organisations will need to know what is coming over the horizon in terms of the social impact its products may have in the future.

Outside-in linkages refer to external social conditions that may affect an organisation – availability of talent; intellectual property protection; rule of law etc. The company needs to work out what it can and can’t influence. From here, it must then choose which social issues to address. It can’t take on the full buffet but it can choose to offer a select gourmet menu. Where a social issue intersects with its business, then this is perhaps a priority social issue where shared value can be created. Toyota is probably a good example – the Prius, the increasingly popular hybrid car – is an intersection between Toyota’s business and environmental benefits (less emissions; happy customers; cleaner roads, air etc).

Similarly, Mexican construction company, Urbis, builds houses for disadvantaged buyers using different payment options such as flexible mortgages made through payroll deductions. The social impact is clearly around helping the disadvantaged afford decent homes whilst, at the same time, Urbis as a business benefits.

Adding a social dimension to the value proposition and understanding inside-out and outside-in linkages is strategic CSR, which results in the contemporary organisation being able to impact positively on society, rather than merely dishing up PR and marketing hype.