BUSINESS STRATEGY

The link between Competitive Advantage and

Corporate Social Responsibility
BY
Michael E. Porter and Mark R. Kramer
By
Jamilatou Saidy: 13291884
&
Prateik Kelkar: 13317382

What is Corporate Social Responsibility

Concept whereby companies integrate social

and environmental concerns in their business
operations and in their interactions with their
stakeholders on voluntary basis
(European commission)

IMAGERY OF

(Fleming & Jones, 2013: Preface)

Diverging Views on CSR

Milton
Friedman

Peter
Drucker

Theodore
Levitt

CSR
Michael
Porter
and
Kramer

Edward
Freeman

Keith
Davis

HOW DOES CSR TIDE WITH CORPORATE

SOCIAL RESPONSIBILITY?
Milton Friedman argue against CSR as a
destruction to shareholder value. I have
called it a fundamentally subversive
doctrine and only one responsibility of
business to increase its profit (New York
Times Magazine 1970, 13 September.)

Mintzberg:
The stock market is willing

to reward social responsibility only to a

a point where it pays to be good but not too
good.

DRUCKER:

Respond to CSR with two approaches:

Responsive CSR (USA Model):
To do good you {first} do well eg
Carneiges private philanthropy
STRATEGIC CSR(European Model)
To do well you must first do good eg
Rosenwalds uplift of Sears customer
Service.

Definition of Corporate Social Responsibility (CSR)

Strategic

CSR unlocks shared value by investing in

social aspects of context that strengthen company
competitiveness.Porter and Kramer 2003 (Harvard
Business Review 17, No.1, p.106-112)

Video of Michael Porter on Shared Value

WHAT IS STRATEGIC CSR?

Any responsible activity that allows a firm to achieve a sustainable
competitive advantage regardless of motive via a targeted focus on
business outcome. (McWilliams and Siegel 2001)

As a competitive advantage it arises from:

Distinctive capabilities
Virtuous cycle
The creation of virtuous cycle that
Extend beyond the boundaries of

the organization

Video on Strategic CRS

THREE ASPECTS OF STRATEGIC CSR

Managing Risk
Creating and enhancing opportunities
(Value creation)

Changing the game

Risk Minimization
Risk minimization (Psaros, 2009)
CSR as a governance function:
Improved credit rating
Decrease cost of funds
Avoidance of punitive legislation

Minimizing risk through Social Compliance:

Nike used CSR to alleviate reputational damage

and change the business model spotlight

BPsRecovery of brand after environmental crisis.

Proactive social responsibility or Greenwash

HOW CAN FIRMS USE CSR TO CREATE

AND ENHANCE OPPORTUNITIES?
Building opportunities: Human Resources
Is used in innovation industry to:
Attract : CRS policies influence innovation seeking to attract employees
Retention: Companies seek competitive advantage derived from their talent pool
Engagement: Give them opportunities to participate and contribute

Harnessing Strategic CSR as a dominant strategy

Toyota:

Showing opportunity to meet long term social and

environmental concern of resource scarcity in
environmental pollution whilst diversifying product
portfolio against strategic risk.

Video of Toyota on CRS

SOCIAL LEVERAGE

They can be used beyond minimum and

differentiate as a source of competitive
advantage. E.g Cadbury for Fairtrade
complaint policies

How can firms use CSR to change the game?

The clever combatant imposes his will on the
enemy but does not allow the enemy to be
imposed on (Sun TZU)
The best strategy is never reactive or received
it is a tool to shape competitive landscape and
dictate the terms of engagement. Its about
changing the rules of the game been played.

CSR TO CHANGE THE GAME CONTD:

First mover or fast follower advantage

An organization can create a first mover or fast follower
advantage by innovating business model using principle of
strategic CSR
Opportunity in marginal markets scale or regional advantage:
Market influence in policy and legislation advocacy
Influence on consumer trends

CAN CSR BE USED TO ACHIEVE COMPETITIVE ADVANTAGE?

YES OR NO
Business can address the use of social and environmental
concerns and increase their bottom line through

Cost reduction
Increase in profit for products and
services
Ability to engage the market without
major competition

Challenges
Challenge to CSR - 1
Does corporate social responsibility exist?
Three critical perspectives of CSR
CSR is a kind of panacea that one day cures the ills of corporate
capitalism, if applied ardently.
CSR as an instance of propaganda
CSR as a kind of parasitical foray into the community which
pushes corporate interests in the non-corporate social world of
NGOs and voluntary groups (Fleming & Jones 2013: 81)

Critical Approaches
The end of CSR?

The-License-to operate approach

Identifies social issues, foster dialogue
with stakeholders

Triple bottom line

it is very difficult to talk about CSR without looking at triple
bottom line thinking (that is interactive thinking taking into
consideration social, environmental and economic factors).
These three indicators of CSR are shown in fig 1 below.
Economic
Environment
Social

Figure 1: Triple bottom line

Source: Indstate.edu (2010)

Global trends

The Three SRI Strategies:

Screening
Shareholder advocacy
Community investing
www.sc.com.my

Exporting to CSR-aware markets

Sony PlayStation 3 (Cadmium crisis)
In 2001, The Dutch Government was blocking Sonys
entire European shipment of PlayStation game.

Four lessons from Sonys experience:A) even the best companies can be surprised by environmental issues
B) it can cost businesses real money
C) real benefits can come from seeing things in a new light
D) Smart companies seize competitive advantage through strategic
management of environmental challenges
Source: Green To Gold by Daniel C. Esty and Andrew S. Winston
.

Exporting to CSR-aware markets Contd.

The Star 5 September 2007

Mattel recalls 800,000 toys worldwide because of lead

paint.
This was the third major recall of Chinese-made toys
because of excessive amounts of lead paint.

Mattels last recall announced on Aug 14 covered about

19 million toys worldwide

Exporting to CSR-aware markets Contd.

Bloomberg Aug 13
Chinese toothpaste distributed to hotels worldwide by a US
company has been recalled because it may contain a
chemical used in antifreeze.
USATODAY.com
Natural Balance pet food recalled
The industrial chemical melamine has been found in pet
food.

WHY DO YOU THINK CRS MATTERS?

LIST 10 environmental issues facing humanity

Climate change
Energy
Water
Biodiversity and Land use
Chemicals, Toxics and Heavy Metals
Air pollution
Waste management
Ozone layer depletion
Oceans and Fisheries
Deforestation

Source: From Green to Gold

CONCLUSION
CSR can make our business more
competitive.

Companies should be encouraged to

assimilate CSR values into their
business strategies and goals.

References and Resources

European Commission (2011). Responsible industry. Enterprise and Industry on-line magazine, 3
Michael Porter and Mark Kramer. In: Business Ethics Journal Review 17, No. 1, 106-112, p.
109 http://businessethicsjournalreview.com/2013/09/08/beschorner-on-porter-kramer-on-creating-sharedvalue/
Fleming, P., & Jones, M. (2013). The End of Corporate Social Responsibility. London: Sage.
Friedman. M. (1970). The Social Responsibility of Business is to Increase its Profits. New York Times Magazine, 13
September.
http://www.academia.edu/419290/The_Business_Case_for_Corporate_Social_Responsibility_A_Review_of_Concepts
_Research_and_Practice. It is a snapshot of the page as it appeared on 23 Oct 2014 02:00:06 GM
Check Dimitras, M. T. (2014). Mattel takes aim at Lego with $460 million Mega brand deal. Bloomberg Business week.
Retrieved from http://www.bloomberg.com/news/2014-02-28/mattel-bids-460-million-to-buy-blockmaker-megabrands.html

CSr and competitive advantage

Give examples of companie and ask class how they should direct their CSR efforts to create shared calue or competitive
advantage

REFERENCES