Corporate Social Responsibility as Competitive Advantage.

The recommendations on corporate governance contained in King III, the new Integrated Reporting guidelines in the Global Reporting Initiative, and the ISO 26000 Standard for Social Responsibility, all work from a similar premise; the idea that organizations have an obligation to operate in a way that takes cognizance of more than just their shareholders.

Michael Porter and Mark Kramer (2006) proposed a new way to look at business that does not “treat corporate success and social welfare as a zero sum game” (p.1).  In this thought provoking article, they describe four prevailing justifications for corporate social responsibility (a) moral obligation, (b) sustainability, (c) license to operate, and (d) reputation.

• “Moral Obligation” proposes that businesses “do the right thing” and acknowledge that stakeholders may have either a legal or moral stake in the activities of the organization.
• “Sustainability”, as defined by the World Business Council for Sustainable development is “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”
• “The License to Operate” approach is based around questions of legitimacy every organization needs to secure the permission of all stakeholders to conduct bsuness.
• The notion of “Reputation” (A relatively stable, issue specific aggregate perceptual representation of a company’s past actions and future prospects compared against some standard- Fombrun,1996) is used to suggest that CSR will improve a company’s image and ultimate build the brand equity. According to the Reputation Institution's trademark methodology, RepTrak, "40% of a company's reputation with the public can be explained by institutional performance indicators - a good workplace, citizenship and sound governance.

Porter and Kramer make the point that all four schools of thought focus on the tension between business and society rather than on interdependence.

If the recommendations made in the areas of corporate social responsibility are to be truly integrated into business strategy rather than simply being seen as a “tick the box’ compliance exercise, then the true benefits of being socially responsible must be acknowledged. 

From a marketing perspective, the interdependence of a company and society can be demonstrated when one maps the value chain and assesses the “points of intersection” as positive and negative social impact of any or all of the company’s activities. (Porter and Kramer,2006,p. 5). When these impacts have been mapped, then one also needs to consider the “outside-in” linkages as far as, (a) the rules that govern competition, (b) local demand conditions, (c) related and supporting industries, and (d) the availability of high-quality inputs. Just as corporate activity affects society so society affects corporations.

If companies are to engage in corporate social responsibility from a strategic perspective, they will need to identify and assess these potential linkages and understand more fully the relationship between the organization and society. This is more than corporate citizenship; this is about building shared value. 

When organizations begin to engage with stakeholders from the basis of building shared value then they will no longer see stakeholder management as simply protecting corporate reputation or “green washing”.

Porter and Kramer (2002, p.66) demonstrated that, “when corporations support the right causes in the right ways-when they get the where and how right-they set in motion a virtuous cycle”. In order to achieve this strategic approach to corporate social responsibility, they proposed a five-step approach:

• Examine the competitive context
• Review the existing philanthropic portfolio
• Assess corporate giving initiatives against the value creation principles
• Seek opportunities for collective action within a cluster
• Rigorously track and evaluate results

More research is needs to asses the extent to which organizational leaders will embrace these principles unlock leverage and discover the competitive advantage the can be derived from operating in a more responsible fashion.

TABLE 1-The AC3ID Test of Corporate Brand Management (Balmer, Stuart & Greyser, 2008)

CRITICAL CONCERN	IDENTITY TYPE	CONCEPT	TIME FRAME
What we really are	Actual	Corporate Identity	Present
What we say we are	Communicated	Corporate communications	Past/Present
What we are seen to be	Conceived	Corporate image	Past/Present
What the brand stands for	Covenanted	Corporate brand	Past/Present
What we ought to be	Ideal	Corporate strategy	Future
What we wish to be	Desired	CEO vision	Future

When companies start to get this right then the AC3ID test  of the integrity of the relationship between corporate identity, corporate communication, corporate image, corporate brand, corporate strategy and CEO vision can be truly assessed (Balmer, Stuart, and Greyer 2008).

References

John M. T. Balmer, J.M.T., Stuart, H., & Greyser, G. (2008). Corporate Identity and Corporate Brand Alignment: The Strategic Positioning of British Airways in the 20th Century. Retrieved September 10, 2010 from http://www.anzmac2008.org/_Proceedings/PDF/S02/Balmer%20Stuart%20&%20Gre...

Porter, M. E., & Kramer, M. R. (2002). The competitive advantage of corporate philanthropy. . Harvard Business Review, December, 57-68.

Porter, M. E., & Kramer, M. R. (2006). Strategy and society. The link between competitive advantage and corporate social responsibility. Harvard Business Review, December, 1-15.

Fombrun, C. J.( 1996 ). Reputation: Realizing value from the corporate image. Boston: Harvard Business School Press.