DRIVERS FOR CONVERGENCE OF SM AND CSR: IS SUSTAINABILITY

REALLYTHESTRATEGICGOAL?

Vogel presents examples in a recent book [2] to indicate there is a clear business case for CSR. He writes that ‘the emergence of ‘companies with a conscience’ is due to the current reconciliation of social values and business systems. He adds that CSR is not “a precondition for business success but a dimension of corporate strategy”. Yet to many company strategists, the word ‘sustainable’ has become closely associated with ‘competitive advantage’- and indeed ‘sustainability’ has come to be an important indictor of sound strategy-making (e.g. in references to

‘the sustainable, long-term success of the company’).

Critical is to differentiate between CSR (as a subset of the sustainability movement aimed at addressing challenges of longer-term, global, environmental stewardship, conservation and equity based on a global partnership for sustainable development) and notions of ‘corporate responsibility and sustainability’ which are primarily business management approaches aimed at maximising long-term shareholder value with some attention paid to providing value for other stakeholders. Yet there is no fundamental reason to believe that the strategic management of companies, sustainability and the use of CSR tools are irreconcilable goals.

From a sustainability perspective, it may be interesting to know what is driving the current uptake of CSR practices (i.e. a business management approach or a sustainability approach). CSR is potentially a strategic matter of great importance (and thus potential threat) in so far as it has the potential to change the frame of reference (organisational purpose or mission) of the company. Some proponents of CSR challenge the value-creation paradigms of the organisation on an equity basis (e.g. as evidenced in Bakan’s film ‘The

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Corporation²²’, by critically asking “who stands to benefit from company activity?”). An ecocentric approach may question whether value is being created or destroyed by companies (e.g. by using non-renewable resources in the production of goods of dubious added value to consumers). Yet examples abound of corporations that have publicly committed themselves to taking CSR on board as part of their sustainability strategies. Often quoted drivers for the uptake of CSR as part of a wider corporate sustainability strategy usually include (modified from Katsoulakos, [6]):

• self regulation (codes of conduct, improvements in occupational health and safety, environmental protection and social and environmental reporting)

• alignment with national sustainability strategies

• Socially Responsible Investment (SRI) and corporate sustainability indexes.

• risk management

• satisfying consumer preference

• complying with goals and principles for responsible corporate behaviour (e.g. Global Compact)

• incorporation of stakeholder concerns.

• increasing eco-efficiency (decreasing resource costs)

• improvement in supply chain processes;

• developing human capital (by means of talent attraction and retention, motivation and participation of employees)

• opening market opportunities (social innovation and green products and services)

• reputation building or maintenance

Integrating CSR into strategy-making processes may be as simple as companies dealing with CSR in the same frame of reference as they do with other issues (e.g. decreasing resource costs by increasing eco-efficiency and advertising the benefits as being CSR-driven, or opening ‘green’ market opportunities).

Yet the strong argument (from a sustainability perspective) that CSR should be considered a strategically important concept for organisations at the firm or organization level goes well beyond simple attempts to link financial performance to proxy measures (such as various indicators) of CSR [28]. In any case, many such studies have proven inconclusive - finding negative, positive and curvilinear relationships between financial performance and CSR [18].

A recent survey [29] of 111 Dutch companies attempted to measure managers’ attitudes toward and motivation for implementing CSR activities by asking for level of agreement with the following statements:

‘Our firms’ own effort with respect to CSR will have a positive influence on our financial results in the long term’ (to capture the strategic view of CSR), and…

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‘To behave in a responsible way is a moral duty of businesses towards society’ (to capture the moral view of CSR)

Results from this survey were cross-checked against actual company efforts to implement CSR practices. Results showed that a majority of respondents had a positive view of CSR in both dimensions. Interestingly, while a weak correlation was found between the strategic view and actual CSR efforts, the strategic view generated active CSR policies with respect to consumer relations and employee relations. In relations with suppliers, competitors and society, and the use of instruments to integrate CSR in the organisation, a positive strategic view made only a very small difference with respect to actual CSR efforts. However, a positive moral view of CSR was more “strongly correlated with actual efforts”

(related to CSR policies affecting relationships with employees, customers and the use of instruments to integrate CSR in the organisation). For other stakeholders the research found a small but insignificant correlation between the moral view on CSR and CSR performance. The authors conclude:

”The result that CSR implementation is more related to moral commitments than profit maximisation implies that one should be careful when emphasising the financial advantages of CSR”

This finding is echoed in work by Stratling [20 whose empirically (company survey) based paper concludes:

“A surprisingly limited number of the companies in the sample take a very explicit strategic approach to CSR by stressing long-term shareholder value maximisation. The CSR policies therefore appear not to focus solely on a strategic stakeholder approach geared towards maximising shareholder value”

A 2005 KPMG Survey of corporate responsibility²³ report also highlighted diverse motivation for corporate responsibility initiatives (a weighting of 74% economic and 53% ethical was discovered - although ‘stated preference’ type techniques are known to be problematic and often do not positively correlate to actions).

VI. DISCUSSION

If what is suggested by these limited surveys holds true in the wider environment (and there is as yet scant evidence to prove or disprove this hypothesis) and the ethical drive for implementing CSR influences behaviour at least as much as or even more than strategic concerns, obvious implications for cost-benefit approaches to implementing CSR practice are indicated (i.e. while costs of CSR-related activities to the company are already difficult to calculate in monetary terms – due to lack of clarity about motivation for such activities - benefits may prove

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monetizable only with extreme difficulty if they include ‘ethical’ – feelgood - benefits). Companies may also benefit from acknowledging, studying and learning from the implications of a possible disconnect between corporate CSR-related action-taking and decision-making, and strategic planning.

From the microeconomic theory of the firm and the resource-based view of the company it is clear how CSR may provide strategic advantages through more efficient use of scarce resources (higher eco-efficiency with non-renewable resources, for example). It is possible to contend that some of the ethical dimensions of stakeholder demands are similarly driven. When a majority of everyday resource transactions (typically purchases) of much of the richer population of the globe are brokered through multi-national companies, stakeholders (as customers) are increasingly demanding transparency regarding the ethical behaviour of companies (which is obscured due to the long nature of modern supply-chains). If transparency in ethical issues can be considered a resource that is increasingly in demand in relation to corporate transactions, the analogy is also applicable. Surveys also indicate declining trust in global companies, in part due to recent corporate scandals. CSR may thus reflect in part an increasing demand for the scarce

‘trust’ resource. Due partly to the increasing availability of information (and speed of transmission) companies which attempt to manipulate this demand purely for the purposes of strategic advantage (e.g.

through so-called ‘Greenwashing’) are liable to find the accruing benefits short-term. Yet, if a genuine supply of such hard-to-monetize resources increases, a long-term win-win result ensues.

Strategic management theory does not preclude integration of the environmental, social or economic dimensions of CSR practice, and at the business level it is clear that CSR practices are being increasingly adopted (admittedly, mainly by a small sector of larger multinational companies, at least in the formal sense).

If calls for transparent and meaningful CSR leadership and practice increase, as they continue to do, it companies will be impelled to take into account these calls or risk losing competitive advantage. One challenge is to understand how companies can be motivated and lead to understand the potential benefits to be gained by CSR, and thus transform their

‘responsive’ CSR strategies into strategically-driven, pro-active CSR opportunities. In support of this thesis, a recent cost-benefit analysis (based on a ‘standard microeconomic analysis of the level of social output that results’) Husted and De Jesus Salazar [30]

suggests that CSR when used strategically may benefit both society and firms (whereas when used

‘altruistically – i.e. without regard to bottom line – or due to ‘coerced egoism’ – when compelled by regulation - less benefits accrue). More studies are needed.

VII. CONCLUSIONS

Evidence for the fuller integration of CSR and SM is visible in the realms of both practice and theory, and looks set to continue. Mainstreaming of the concept (strategically-speaking) is likely. Fuller consilience would help slow running up against resource limitations, data on which appears alarmingly and increasingly frequently.

Additionally, understanding what calls for CSR practice really represent could assist in taking into account the rights, desires and preferences of large segments of society. Asking is ‘business’ able to escape from profit-driven business-as-usual to fully reflect the range of values inherent in society, as reflected in the emergence of CSR?’ is perhaps the wrong question to ask. The fact that many companies have already responded with their own brands of CSR shows that it is to some extent already embodied in the business model through the mechanisms of the firm and the laws of supply and demand. The demand for CSR to be integrated into company strategy is partly an expression of customer preference, and those companies that are best able to capture market preferences are likely to prosper. On a legitimacy, stakeholder (ethical) and resource basis companies will come under increasing pressure in the 21^st Century to continue actualising demands for CSR into corporate tools. Demands for a ‘restorative economy’ defined by Hawkins [31] as:

“rethinking the fundamental purpose of business and economy in order to “creat{e} a very different kind of economy, one that can restore ecosystems and protect the environment while bringing forth innovation, prosperity, meaningful work and true security”

are likely to increase. By remaining informed and open to fuller consilience of SM and CSR and working towards the resolution of what seemed previously opposing systems of economy, ecology and ethics through the medium of social and natural sciences and strategic management through such forms of dialogue such as CSR, opportunity still remains to ‘do good, by doing well’.

TABLEI.SELECTEDTHEORETICALPAPERSONCSR(FROM MCWILLIAMS,[32]

THEORY STRATEGIC ASPECT/VALUE CSR RELATION