Moving Rightly Along - Corporate Social Responsibility in Perspective

Let's just say it straight: the 'business case' for Corporate Social Responsibility (CSR) has now been made and it is time to move on. More than 200 studies over 30 years show that there is no trade-off between social and financial performance. If we agree on this, then other pertinent and equally important questions can be dealt with… such as what exactly is the responsibility of companies towards their social counterparts and how can socially responsible behaviours and attitudes can be explained and, eventually, fostered?

by Maurizio Zollo, Jane Banham
Last Updated: 23 Jul 2013

The debate has been ongoing for decades; both within Corporate Social Responsibility (CSR) circles and without, on whether companies should or should not concern themselves with social good and, if so, how.

The two schools of thought are clearly defined: one assigning primacy to the maximisation of shareholder value as a "raison d'être" and primary guideline for the management of the corporation, and the second preferring the optimisation of "stakeholder" value - the notion that a company exists to satisfy the interests and aspirations of all audiences that contribute to its success, especially those that are strongly impacted by its activities, be it investors, employees, suppliers, consumers, or local communities.

Management, in this second view, has a wider responsibility than simply making money. It is expected to create value and distribute it in such a way that satisfies the interests and expectations of all the key contributors to the value creation process.

<b>Why CSR?</b>

The motivations driving companies' investments in CSR are diverse. By and large, one can distinguish three broad categories. First, a company may adopt CSR activities through a philanthropic approach and donate funds to a social cause directly or by forming a foundation. Second, CSR may be considered from a public relations perspective, building reputation by riding a public wave of interest or sympathy on a certain social subject.

Last, is the fundamental belief that by embedding social responsibility in day-to-day managerial decisions and actions the company will develop a competitive edge through enhanced cost efficiency, revenue enhancement or new product innovation.

To understand this third and crucial point, consider the case of Shell, a leading company in one of the least socially and environmentally responsible industries. Shell is a forerunner in CSR, first publishing its 'Business Principles' for responsible business practices in 1976.

Today, CSR is factored into all aspects of their business, from investment approval and resource allocation processes to supplier relationships; from a constant (some might say obsessive) use of stakeholder engagement techniques in major decisions, to the attraction, motivation and retention of new talent. Check out 'Environment and Society' on their website for an idea of just how deep the integration of CSR in business practice can be. <em>(see link on right hand menu)</em>

Although Shell had its share of backlash due to the inaccurate reporting of its oil reserves, the company withstood the scandal relatively well thanks in large part to the recognized integration of responsibility principles in its activities. Enron too had plenty of awards for the quality of its organizational practice (codes of ethics, philanthropy, etc.), but when scandal hit, it became clear to everyone that this reputation was built on PR skills rather than actual change in its business practices.

<b>A CSR RESPONSE</b>

Described above are one company's CSR efforts to move beyond the "why" CSR should be done, towards "what" exactly that means for day-to-day business conduct and "how" this subtle but significant change in one's operations should be realised. It is the 'what and how' of CSR that poses the real question, not so much the motivation behind it.

Regarding the "what" question, we are all clear on the general list of issues on the table. It is about the impact on the natural environment, the quality of life in the communities where the company operates, the fairness of dealings with customers and suppliers, and so on. The devil, of course, is in the detail of characterizing the expectations of the involved parties, and the nature of the interactions necessary in order to meet them. That is a lot more complex, and constantly changing over time and contexts.

Managers in the same company might have different understandings of what, say, local communities expect from the company, and will therefore decide and act differently based on this understanding... and what of the gaps in perception and expectations between corporate managers and their company's stakeholders? And how is it that one company understands its responsibilities so much better than another… is it purely based on motivation and the fostering of a 'caring' attitude?

The INSEAD-led RESPONSE project is exploring these questions and many more. Under the auspices of the European Academy of Business in Society (EABIS), a group of leading multinationals and business schools have undertaken a three-year research programme into the way managers and their stakeholders understand and practice corporate responsibility across a large group of diverse multinational companies. Within each company separately, and then comparatively across all the companies, CSR will be examined with four main objectives in mind.

They are: to study the discrepancies between firm and societal interpretations of CSR; the factors impacting a firm's social risk; whether and how knowledge processes in business organisation facilitate the interpretation of, and response to, societal demands; and finally, to test the effectiveness of training programs on the development of socially responsible behaviour in managers.

The first three objectives will be addressed through internal and external company analysis, 10 individual senior executive interviews and a web-based survey to 100 randomly selected managers. Using tailored versions of an extensive suite of psychological tests; corporate, sector and individual culture, values, mindset and expectations will be identified, assessed and compared.

The last objective, on the effectiveness of training programs will take a practical, experimental approach within each given company. In this ground breaking experimental phase, company managers will be offered training from a number of different approaches.

Either a standard CSR classroom learning experience, a behavioural approach where participants are directly exposed to poverty, pollution or similar social maladies, or an introspective approach designed to foster inner development of a range of psychological traits that are expected to positively influence socially responsible behaviour. Managers will be assessed both before and after the course, using a set of established psychological measures, to gauge the impact of the training on individual emotional intelligence and values.

The results from the RESPONSE project will provide the first truly global and scientifically-measured view on what CSR means to companies, executives, managers and stakeholders across countries, industries and individual firms. How CSR is perceived and practiced at the societal, corporate and individual levels, and how within the hearts and minds of corporate managers, social responsibility is reflected and can be best fostered.

RESPONSE is unique - in its aims and objectives and in the breadth and diversity of participants, business, institutional and academic members. But even more than this, RESPONSE is unique in what it promises -- a new wave of innovative and empirically-based Corporate Social Responsibility development and practice… and it will not take another 30 years!

<em>Through the RESPONSE research programme, INSEAD (France & Singapore) is partnering with the Copenhagen Business School, the Bocconi University, the Leon Kozminski Academy, and the CommonSense and IMPACT companies, along with its INSEAD/Wharton Alliance. Sponsored by EABIS, RESPONSE welcomes IBM, Microsoft, Johnson & Johnson, Royal Dutch Shell and Unilever to the Business Advisory Board, and leading Academia to the Academic Advisory Board. Click on the RESPONSE link on the right hand menu for more information.</em>

INSEAD 2005

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