CSR - Short-term gimmick or sustainable strategy

Chris Hart, UK Partner, McKinney Rogers

by Anthony Hilton
Milton Freedman once argued that corporations accepting societal responsibilities
other than making money for their stakeholders were undermining the very
foundations of a free society. While some believe this view directly contradicts the
argument for corporate social responsibility (CSR), research suggests that CSR
can, in fact, benefit an organization if implemented correctly. Simply paying lip
service to CSR however, will provide few long-term advantages to companies and could result in heavy
backlash from a skeptic public. Corporations keen to employ a sustainable CSR program must therefore
approach it with the same frameworks that guide their other business decisions and develop a CSR
program that compliments, and adds to, their long-term goals.

CSR has been one of the most talked about topics over the last couple of years; its significance is
undeniable despite the fact that it means different things to different people. This said, there are recurrent
themes and if pushed to try and describe it in one sentence, it would be: 'a concept whereby organizations
consider the interests of society by taking responsibility for the impact of their activities on customers,
suppliers, employees, shareholders, communities, and other stakeholders, as well as the environment'.

When first considering CSR participation, business leaders should familiarize themselves with the
disadvantages of social contributions disconnected from corporate strategy. Some philanthropic practices
may result in managers partaking in socially positive activities that concurrently hurt their organization.

Too often CSR programs only consist of a manager having a fixed budget to allocate funds to numerous
community-based charities. While this may seem like an easy approach to CSR, it generally yields little or
no meaningful social impact, nor does it strengthen businesses in the long-term. A better approach to CSR
is to analyze what can benefit both the company and society. Unproductive CSR approaches typically pit
society versus corporation, not recognizing the interdependence between the two. Tying CSR in with
business activities is the first step to successfully integrate CSR into business strategy.

Organizational leaders understand current and developing issues within their sector and can make
contributions that genuinely impact society; start by recognizing core company competencies that could be
used in CSR initiatives. By analyzing how these competencies impact a business' stakeholders,
organizational boardrooms identify if stakeholders are negatively affected by their company's actions and
also how they use their organization's core competencies in innovative ways that benefit stakeholders,
society and business.
But how does this directly affect business? For companies that fail to integrate CSR into their business
strategy - and do not treat it as a long-term investment - it will most likely provide very few advantages and
result in little more than an added cost and constraint. However, companies involved in strategic CSR can
achieve a considerable competitive advantage. For example, corporations need a healthy society in order to
succeed. Whether it is healthy workers, clean natural resources or strong consumer spending, societal
strength increases demand for business. CSR can also create a positive corporate reputation, thus
improving an organization's financial performance and competitive standing. In the United Kingdom it has
now become mandatory for public companies to report on their social and environmental performance. The
Companies Act 2006 requires organizations to report any activity that affects the welfare of stakeholder
groups such as employees, the community and suppliers in addition to the environment and the company
itself.

Once the direction and focus of a CSR program is decided, business leaders may conclude that more than
just their company's core competencies are needed to execute a successful CSR program. If that is the
case, one possible solution involves entering into a joint venture with partners who possess the skills or
resources the business may lack. Potential partners include governments, NGOs or special interest groups.
These partnerships give businesses added credibility, showing that they have the resources and expertise to
carry-out meaningful and genuine socially responsible activities. For example, one popular strategic alliance
is to award grants to not-for-profit organizations for the implementation of social projects. Another prevalent
CSR activity is supplying tangible objects to chosen partners. In the National Football League (NFL) the
Denver Broncos have formed a strategic alliance with U.S. Bank and The Charmel Hill
Foundation/Accelerated Reader Summer Reading Program to improve reading abilities for local children.
While the Broncos may not have the expertise on the issue of literacy, it can provide the incentives and
rewards to encourage youths to become involved and dedicated to reading.

The Denver Broncos is one of many professional sport clubs in the United States that use its business
competencies - often in partnership with charities or corporations - to positively impact society. For many of
the professional sport franchises, the primary target of their CSR programs is the youth community. Issues
such as youth sport involvement, education promotion and endorsing healthy lifestyles are all areas covered.

From a business perspective, it is at this age level when children begin to become lifelong fans. By creating
a relationship between team and child through, for example, free tickets or merchandise, one-on-one
interaction with athletes or sponsorship of youth teams, a sport organization is simultaneously creating their
future fan base. Additionally, CSR programs focused on player development could potentially help a team on
the pitch by developing and identifying future talent. Finally, CSR interlinks a team with its local community
thus maintaining sustainable support and loyalty.
Two of the main core competencies for sport clubs are brand image and athletes, both of which heavily
appeal to youths. Using such assets to promote socially responsible community programs increase
participation, attract widespread attention and motivate children to become involved.

As with other business programs, integrating CSR into corporate strategy must be supported from the top
down. Strong leadership is vital in making decisions as to which social issues represent real opportunities to
make a difference in society and provide a competitive advantage to the business. Leaders must believe,
and communicate to their team, that CSR is not a short-term gimmick separate from 'real' business, rather it
is a sustainable initiative that should be woven into core corporate strategies.

One organization that demonstrates dedication to CSR from the board level is international housing and
development group Taylor Wimpey plc. In addition to creating their inaugural CSR report in 2007, Taylor
Wimpey has set up a board-level Corporate Responsibility Committee made up of independent non
executive and executive directors, responsible for recommending and reporting corporate responsibility
strategy, policies, reporting and performance to the Taylor Wimpey board. The committee is tasked with
ensuring CSR strategy and activity are sufficiently resourced, have appropriate standing within the
organization and are aligned to the company's business needs. The committee is also responsible for
recognizing important social, environmental and ethical opportunities and risks of interest to Taylor Wimpey's
board. It is this level of devotion that is needed for an organization to successfully execute a fully sustainable
CSR program.

An organization's primary social responsibility is creating jobs, wealth and innovations to enable societal
prosperity. CSR, when integrated with business strategy, provides corporations with an additional means of
being socially responsible. It should not only be about fixing what a company has done wrong, nor should it
solely be about donating philanthropic contributions to charity. Rather it should be treated as a long-term
investment that brings in sustained profitability as a company does not need to forfeit profits to do the right
thing. With a strategic CSR plan in place, organizations can address societal issues whilst gaining a
competitive advantage, thus strengthening the bond between society and business.

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