With the intensification of globalization and improvement of information technology, Corporate Social Responsibility (CSR) has increasingly become a popular management issue for contemporary organizations. CSR has evolved from the PR sphere into the strategic one, contributing to create and sustain corporate competitiveness. The essay aims to analyze the shift from the PR approach to strategic approach in CSR efforts done by companies. Firstly, it presents the general definitions on CSR and its significance. Secondly, it discusses the PR approach with its implications. Thirdly, it argues for the popularity of strategic CSR and its significance in enhancing corporate reputation and brand, and ultimately create source of competitive advantages for the corporations. Lastly, it concludes that the shift to strategic approach to CSR will be an increasingly popular trend in corporate management.
1.0 CSR in general
1.1 Definitions on CSR
The concepts and definitions around Corporate Social Responsibility (CSR) are diverse. According to the World Business Council on Sustainable Development (WBCSD), CSR is defined as the voluntary integration of social and environmental concerns and values into the business operations and the engagement with stakeholders by organizations (WBSCD, 2002). CSR to some extent is oriented to the interaction with all the stakeholders of a given organization to achieve the triple bottom lines of economic, social and environmental values. Stakeholders has a wide range far beyond the stockholders of an organization. Freeman (1984, p.52) suggests that stakeholders are groups or individuals who can affect or are affected by the organization’s business activities. In this sense, the stakeholders of an organization include employees, customers, suppliers, competitors, local communities, governments and environments. Marc Vilanova (2007, p.57) proposes five dimensions of CSR, as the figure 1 shows. Apart from the stakeholders in relation to community, workplace and marketplace, it has incorporated vision and accountability into CSR. Vision means the CSR conceptual development within an organization and the values and reputation while accountability deals with the corporate transparency, reporting and communication. The relevant debates around CSR derive from a broader debate about the role of business in society (O’Riordan and Fairbrass, 2008, p.747). Friedman (1962) argues that “the only social responsibility of firms is to make profit”, while Porter and Kramer (2006) suggests the possibility of win-win situation with strategic CSR, which will be discussed later.
Figure 1: The five dimensions of CSR. (Source: Marc Vilanova, 2007, p. 57.)
1.2 Reasons and significance
Various factors contribute to the popularity of CSR in corporate management and the significance of CSR could never be more exaggerated in today’s competitive market. The intensification of globalization makes the interdependence of nations and companies more close than ever before, which means one activity could have a wider impact on another in a larger geographical scope. Moreover, the advance development of information technology enables the breaking news to spread as quickly as possible. Therefore, a PR disaster in a village could spread worldwide instantly, which usually might generate devastating result for the organization concerned. Another driver behind the popularity of CSR is the increase demands of the general public with the looming threats of global warming and environmental pollution. Customers’ expectations have improved with the improvement of living standards. They desire more than safe and superior products and services, and they also need a clear environment and harmonious relationship with nation as well as sustainable resources for future generations. As to the implications of CSR for contemporary organizations, it is no longer in a PR sphere, but expend its role into the corporate strategy and serves as a source of competitive advantage, which will be discussed in detail later.
2.0 PR: responsive CSR
2.1 Definitions and analysis
From the perspective of PR, CSR is responsive in a defensive and fragmented manner rather than strategic in a proactive and integrated way. PR focuses on the relationship between the organization and the various stakeholders with the purpose of preserving or enhancing corporate image and reputation (Goi and Yong, 2009, p.47). Argenti (2007) includes CSR as a part of PR function or corporate communication, with which CSR reporting is used to legitimate the business activities. With PR efforts, the glossy CSR reports are cosmetic as a means of disaster control or showcasing the good deeds of companies without sincere intentions for the common good. With the PR perspective, their role is to ease the tension between companies and society, fulfilling the best interests of stockholders or profits. For instance, in the case of PR’s reaction to the unrest and turmoil in Nigeria caused by Shell’s presence in the country, the PR professionals in Shell spent substantial efforts in whitewashing the innocence of the company by using the term “armed” demonstrators while the truth is that the demonstration is peaceful and the Shell Police suppressed them ruthlessly (Frynas 2000, p.159). It indicates the function of disaster control by PR as well as the wrong approach in local community management by Shell. In short, it fails to incorporate the social and environmental concerns into its corporate strategies and only perceives the PR or CSR efforts as a cost or constraints on the bottom line of the company.
With responsive approach to CSR, PR efforts probably tend to cause customer skepticism with counterproductive effects, let alone the high publicity costs in disaster control. Some CSR efforts done by PR aim to temper criticism faced with the organization. For instance, in the case of Shell above, PR forces attribute the actions of oil sabotage by local residents, which is trivial in fact, to the oil spillage (Frynas 2000, p.160). Although it could placate the outrage of the outsiders temporarily, it is short-sighted and will incur dissatisfaction in the wider scope beyond the local communities. When the CSR reporting is full of fancy statistics and sum of money without mentioning the real effects of the CSR initiatives, customers tend to believe the CSR efforts are window-dressing and fails to address the real social or environmental concerns. If this is the case, then it is hard to establish positive customer perception about the brand or reputation of the organization involved, thus failing to improve corporate competitiveness. Therefore, it is necessary and vital to shift from responsive approach to strategic approach towards CSR.
3.0 Strategic CSR
3.1 Definitions and analysis
Strategic CSR aligns the social and environmental activities of an organization with its corporate strategy. It is designed to generate win-win situation beneficial to the society as well as to the shareholders of the organization (Lantos, 2001, p. 595). It emphasizes the shared value between all its stakeholders and the shareholders and the interdependence between the society and the company (Porter and Kramer, 2006, p.83). The ultimate purpose is to create and sustain the competitiveness of the organization. Despite the short-term financial sacrifice even pain like other advertising campaigns, CSR efforts will produce goodwill among the public including its potential customers. The resulting effects of goodwill might benefit the corporate performance in the long run. Rangan, Chase and Karim (2015, p. 43) classify three types of CSR activities: the first one focusing on philanthropy such as donation of money or equipment to local communities; the second one focusing on improving operational effectiveness such as investment in employee working conditions and sustainability initiatives; the third one focusing on transforming the business model, mostly addressing the social and environmental challenges. No matter which type of CSR activity an organization assigns, it will enhance the organization’s reputation and improve its corporate image, which combined with its CSR efforts will constitute source of corporate competitiveness.
.2.1 Brand and reputation It is common practice for established companies to use strategic CSR as a means to improve the organization’s reputation and brand, thus sustaining its competitiveness. Some key determinants to the corporate competitiveness depend on such intangible assets as “brand equity, reputation or innovation capability” (Vilanova et al, 2009, p.60). Around 90% of the Fortune 500 companies have CSR initiatives in place and over 80% of them highlight CSR efforts on their Websites, clearly indicating the prevailing belief that performing CSR activities does lead to improved reputation (Lii and Lee, 2012, p.69). According to Business Week (2007), through analyzing the websites of the top 25 most innovative companies in the world, most of them claim to have a strong commitment to CSR through their CSR reporting, codes of conduct, ethics and environmental policies (Vilanova et al, 2009, p.60). There is no doubt that established companies possess huge financial advantages to conduct CSR initiatives. Indeed, their CSR efforts benefit the society at large while preserving and improving their corporate reputation as a responsible corporate citizen. Through their CSR initiatives, customers and employees will be more identified with the corporation. Their perception about the company and its relevant products and service will generate favorable behaviors, such as switching to buy its products, recommending them to others, word-of-mouth advertising, etc. In the long run, the corporate reputation and brand will become source of competitiveness for the organization, claiming a premium price on its products and service. Because customers are inclined to pay extra for the products and services whose company they believe shoulder some social responsibility for the common good. In short, CSR initiatives will enhance the corporate reputation and brand, generate goodwill and better identification among customers and employees. Consequently, the established companies usually adopt this seemingly costly CSR strategy to sustain their competitiveness at marketplace
3.2.2 Competitive advantages
For many contemporary organizations, some CSR initiatives could be used to create competitive advantages while contributing to the well-fare of the society. Competitive advantages are the strengths that differentiate an organization from its competitors (Vilanova et al, 2009, p. 59). Apart from well-established reputation and brands, an aggressive manner is to transform the business model to serve the social and environmental interests while aligning them with the corporate strategy. For instance, in the case of IKEA, its People & Planet initiative aims to make its entire supply chain to be 100% sustainable by 2020 without compromising the goal of doubling its sales by the same year. This initiative motivates IKEA to radically alter the way it design its furniture with the new model of collecting and recycling used furniture (Rangan et al, 2015, p.44). Another case in point is Hindustan Unilever’s Project Shakti in India (Rangan et al, 2015, p.43), with the initiative the company recruits village women and provides them with microfinance loans and related training in sales. More than 65,000 women participates the initiative with their household income doubling, addressing the unemployment and poverty issue in the local community. Meanwhile, the improved rural access to hygiene products contributes to public health. As of 2012 Project Shakti had generated over 100 million dollars in sales for Unilever. Therefore, it is possible to address the social and environmental challenges while increasing the financial bottom line for the organization. The CSR initiatives aligned with corporate strategies will benefit both the corporate performance and the well-fare of society.
With the intense competition at marketplace, more and more companies shift their CSR efforts from a PR approach to a strategic approach. PR approach is defensive, fragmented and responsive while strategic approach is offensive, integrated and proactive. Unlike a PR approach, strategic CSR will align the social and environmental concerns with the corporate strategies, creating a win-win situation for both the corporation and the society. Although it lacks adequate empirical research to verify the real effects the empirical evidence from some established companies proves it possible and reasonable in practice. Theoretically, CSR initiatives will generate goodwill among the customers and employees, which will increase their identification with the corporation, thus improving the reputation and brand as well as source of competitive advantages. More researches should be done to explore the verification of corporate commitment to CSR in practice in the future.
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