BUSS4 CSR Research Bullet 2

Here are some outline notes which should held focus students who are gathering there research notes together for the second research bullet on CSR for BUSS4:

The second research bullet asks students to consider the: Importance of CSR relative to other corporate objectives

Definitions
Corporate objective: strategic objective which supports the achievement of corporative aims
Mission / aim: the long-term goal or purpose of the business
Shareholder return / value: the total return (dividends + increases in business value) enjoyed by shareholders
Business strategy: the direction, plan and activities adopted by a business to meet its corporate objectives
Competitive advantage: sources of sustainable advantage

Key Theory
Porter’s Generic Strategies (Cost leadership; Differentiation; Focus/Niche) - how does CSR fit and/or support these?
Role of social enterprise: three pillars: profit; people & planet
Profit maximisation (free market / Friedman) - the role of profit as a reward for risk & source of innovation
Sustainability - ability of a business to operate profitably in the long-term without depleting society’s resources
Hierarchy of objectives - how determined & change over time

Arguments for CSR as a Corporate Objective
Hierarchy of corporate objectives inevitably changes over time
In the long-term, firms can only succeed if they meet society’s needs
Genuine and long-term CSR activities provide significant opportunity for differentiating a business & brands
CSR has become a strategic priority for firms (particularly large ones) who want to compete in low-growth, global markets
Failure to address CSR adquately may threaten the viability of a business
Business has entered into a new era which requires a focus on sustainability = new responsibilities

Arguments Against CSR as a Corporate Objective
Corporate objectives should be consistent with the interests of shareholders, for whom management work
Maximising shareholder return should be the underlying objective of all “for profit” businesses
Most firms still manage their CSR functions narrowly, often within the marketing or investor relations dept. CSR is therefore managed tactically and tends to operate at a distance from strategic decision-making
Embracing CSR threatens the efficiency / productivity of firms that need to compete on a cost-leadership basis
Some very successful brands don’t mention CSR in their mission statement or aims

Examples / Evidence
2011: Over 50% of global CEOs are planning to change strategies in the next three years because they expect stakeholders to factor companies’ environmental and corporate responsibility practices into purchasing decisions
Major firms that have embedded CSR into corporate objectives / mission & aims
M&S: aim to be the world’s most sustainable retailer
Co-operative Group: aim to be the UK’s most sustainable business
Unilever: Sustainable Living Plan: aims to double sales and halve the environmental impact of its products by 2020; 50 “concrete, challenging targets (CEO - a “long-term model of sustainable growth)
Procter & Gamble: new sustainability vision (2010): reduce its use of petroleum derived materials by 25%, reduce its packaging by 20% and ensure 30% of the power in its operations is sourced from renewable energy by 2020
Sony: corporate vision of being a zero carbon emission firm by 2050 with staged targets along the way
CSR has moved up corporate objective hierarchy in response to problems (e.g. Primark; BP, Apple, Nike)
Firms priding themselves on featuring in CSR / ethical business rankings - the new badge of success
But others still appear less than interested? Ryanair; Dominos Pizza; others?

“Depends on” Factors
Extent of pressure from shareholders and other stakeholders (e.g. how influencial are ethical investors, customers, NGOs?)
The financial position of the business - short-term probs (e.g. losses, debt) may focus attention on profitability & efficiency
The ownership of the firm: e.g. compare & contrast objectives of a quoted plc with a social enterprise
The economic environment: CSR has grown in strategic importance during a period of uncertain / low economic growth
Attitude and culture of senior management

Possible Evaluation Arguments
Multinationals increasingly seeing CSR as a key driver of product innovation (Unilever, GE, M&S)
Growing evidence that CSR has become a strategic imperative for multinationals = CSR has priority as an objective
Are we entering a period of long-term low growth in developing economies that forces firms to reevaluate the importance of short-term profitability?