6 CORPORATE STRATEGIES TO IMPLEMENT CSR
A number of variables affect the strategy that a given company chooses to implement its CSR, including its structure, size, culture and business strategy. CSR strategies might also be affected by how close they are to the core business or the proximity that it demands from the community that has been affected.
Defining the appropriate strategy for CSR is one of the roles that can be played by the designer since he/she can have the necessary creativity and strategic skills required to the task. Unfortunately there is no generalized strategy or framework for adopting CSR but all the know strategies entail a learning process. Thus, more complex CSR activities might demand careful consideration on the need of promoting a slow but systematic learning process on the organization in order to increase the chances of success. Next sections present the main strategies based on a gradual evolution regarding the need for community involvement and proximity to the core business.
6.2 Passive Philanthropy
Passive philanthropy does not necessarily demand an involvement of the company with the beneficiary and might be translated simply on a donation of funds to a charity organization.
WBCSD (1998) argues that the motivation behind philanthropy is twofold: ethical and enlightened self-interest. Many religions also support the notion of the rich helping the poor. Society expected – and still does – that the wealthy companies would give philanthropically to help the disadvantaged (WBCSD, 1998). However, Porter & Kramer (2002) argues that philanthropy in order to provide a greater social impact on the long term need to be linked to the business strategy since the resulting economical benefit could provide further opportunities for social responsiveness.
Philanthropy activities of a corporation could greatly supplement government efforts to provide social services. Positive interactions between an organization and stakeholders improve how an organization is perceived, and ultimately affect the esteem and self-actualization of society (HUTCHINS & SUTHERLAND, 2008).
6.3 Active Philanthropy
Philanthropy can also be translated into active involvement of the company by conceding staff and infrastructure to a given community project. One type of example of philanthropy that fits within this category is volunteering induced within companies. CSR using this approach can induced the volunteer towards activities related or not to the core business, but usually it involves the existing skill of the company staff. Tilly and Tilly (1994) apud Wilson & Musick (1997) define volunteer work as “unpaid work provided to parties to whom the worker owes no contractual, familial or friendship obligations” (p. 291). In their studies Wilson & Musick (1997) found out that just as people exploit their cultural capital to obtain volunteer opportunities, so organizations offer purposive incentives in the form of symbolic and expressive “goods” that articulate the organization’s values.
Some of the themes for this “active philanthropy” here include provision of vocational training, assisting environmental charities, provision of child-care facilities for employees, sponsorship of local sports and cultural events (CEC, 2001). On an “active philanthropy” the company does not have a direct competitive benefit, apart from strengthen the links with the local community.
6.4 Non-Philanthropical Community Based Projects
Community-based projects can be both “active philanthropy” as well as oriented towards straightforward business benefits. Indeed, entire business processes of a company can be run using “community based projects”. Such projects demand a closer level of relationship between the company and the community. They can bring direct benefits to the local community in terms of employability, income generation, social stability, reduction of violence, among other benefits.
Community-based projects do contribute to improve the business “competitive context”, the quality of the business environment in the location or locations where it operates. After all, companies depend on the health, stability and prosperity of the communities in which they operate. Porter & Kramer (2002) argues that enhance such contexts brings social and economical goals into alignment and improves the company´s long term business prospects, leveraging its capabilities and expanding its business relationships. In the case of SME´s this is particularly relevant since most of their clients are found in the surrounding area and, thus, the reputation of the company, its image as an employer and producer but, foremost, as an actor in the local scene, have strong influence on its competitiveness (CEC, 2001).
6.5 Use of CSR Criteria on Human Resources Management and Procurement Practices
According to Rudge (2008), in order to guarantee a good relationship with its stakeholders, a company need to be sure that it is not implicated in third party harm to human rights through its relationships with such parties. This possibility can arise from any business process, such as procurement and human resource management, to non-business activities, such as lending equipment or vehicles. Therefore, a company needs to evaluate continuously the track records of its own processes and those entities with which it deals in order to assess whether it might contribute to or be associated with harm caused by such entities (RUDGE, 2008).
By choosing carefully its suppliers using CSR criteria the company can provide an amplified effect on social responsibility. Life cycle assessment and extended producer responsibility have contributed to extend the view of corporate responsibility over several echelons’ upstream and downstream in the supply chain, including the point of (recycling and/or) disposal. This imputability of the responsibility of a company for its products and processes demands an active response to its juridical obligation, pushing companies to voluntary assume wider environmental as well as social responsibility (KOVÁCS, 2008).
CSR includes looking at situations where the company might be seen as complicit in abuse caused by others. Complicity occurs when a company knowingly assists a State in violating human rights (e.g.: forced relocation of people in circumstances related to business activity). A company benefits directly from human rights abuses through complicity with someone else, for example, when it suppresses a peaceful protest against business activities. In order to avoid such situations a company need to raise reflect on the possibility of implementing a continuous and systematic process to avoid human rights violations both inside as well as on its partners (e.g.: recruitment process that avoid discrimination in employment of particular groups on the grounds of ethnicity or gender) (RUDGE, 2008b).
6.6 Integrating Social Inclusion as a Criteria to Market Selection
A company can include on its portfolio of products/services solutions directed to markets that are not necessarily the most profitable or that do not receive appropriate attention from the industry. In many instances companies do chose to set their core business on these markets, having the motto of social inclusion as a key competitive differentiation.
Fragile markets that fit within the scope of this strategy include people with disability, people in social disadvantage (ex: former inmates) or ethnical and religious minorities. Within this scope one might include poor people, which often do not have fully considered their particular needs. Nearly two thirds of the planet´s population is poor and, paradoxically, most companies focus their business on richer one third and are fiercely competing over saturated markets (WSCD, 2007). That is the case of Brazil, for instance, where 46% of the population earns less than U$ 325,00/month, living in rural areas, or urban shantytowns. For a long time Brazilian companies have understood this 300 Billion U$ market as economically unviable. Conventional business might not see this as a viable market. However, it fails to take into account the growing importance of the informal economy among the poorest families. For instance, recent national survey in Brazil has shown that 36% of this population intends to buy an electrical appliance or furniture. Around 19% percent has expressed intention of expending on travelling and/or entertainment (CETELEM, 2007; DATAPOPULAR, 2007; PRAHALAD & HART, 2002).
Directing part (or total) of the business portfolio for these markets implies wide design and technological innovations. Among the many possibilities for innovation, there is the opportunity of developing products that don’t repeat the environmental mistakes of developed countries over the last 50 years (PRAHALAD & HART, 2002). Yet the products and services currently offered to poor people still require fundamentally different approaches from those observed in richer markets.
6.7 Base-of-Pyramid (BOP)
Worldwide there is a growing number of companies are now implementing innovative ways of doing business and producing solutions that match the expectations of this population and, at the same time, respect the environmental limits of the planet and the social needs of the local communities. This is in tune with Kofi Annan´s vision that “…there are many positive ways for business to make a difference in the lives of the poor not through philanthropy, though that is also very important, but through initiatives that, over time, will help to build new markets”. One of the approaches to implement this vision is called “Base-of-Pyramid”. It is also known as business pro-poor since it put the poor at the heart of the business process and focuses on detecting unmet needs (WSCD, 2007).
Prahalad & Hart (2002) argue that investing at “the bottom of the pyramid” can contribute to averting the social decay, political chaos, terrorism, and environmental meltdown that is certain to continue if the gap between rich and poor countries continues to widen. This investment received some further motivation nowadays by some global trends that created a favourable environment for companies to start engaging with the poor and that includes the need to break out from mature markets; framework conditions on developing countries; communications are faster and cheaper; public expectations of corporations are changing; new and better partners are available and, finally, aid and investment are beginning to reinforce each other (WSCD, 2007).
The base-of-pyramid is a solution to the dilemma between the need for profits and the concern with environmental degradation, labor exploitation, cultural hegemony and local autonomy. With this approach companies can generate growth and satisfy social and environmental stakeholders, helping on the process 4 billion people that aspire to join the market economy for the first time (HART & CHRISTENSEN, 2002).
Grayson et al. (2007) call attention to the fact that engaging with base of the pyramid markets does not automatically make a company’s activities sustainable. It is necessary to pay the attention to the fact that shareholder value and economic development must also explicitly balance the societal and environmental impacts. It has to value the long term needs of the communities in preserving their social fabric and natural environment (GRAYSON et al., 2007).
Based on the BOP successful cases, it is now well accepted that sustainable poverty alleviation must recognize the poor as central agents in that process. Instead of seeing the poor as helpless dependants waiting on international aid this strategy sees them as highly resourceful entrepreneurs who possess valuable knowledge, resources and capabilities. Thus, within BOP a company move to a position of an “enterprise facilitator”, who assists the poor in acting on their self-defined aspirations (SIMANIS & HART, 2006).
All companies regardless of their industry can stimulate local markets and enable the poor to become active on these local markets, both as customers and entrepreneurs (WSCD, 2007). However, doing business with the low-income people requires profound changes in the way companies do business. According to Prahalad & Hart (2002) within BOP companies need to transform their understanding of scale, from a “bigger is better” ideal to an ideal of highly distributed small-scale operations married to world-scale capabilities. When addressed properly, a focus on the base of the pyramid brings/demands new expertise and technologies to deal with the local problems. Although it could be seen as a threat it is in fact an opportunity for business searching for new competitive advantages.