IMPLEMENTATION the Integration of CSR Into Strategy and Culture

CHAPTER 5 IMPLEMENTATION The Integration of CSR Into Strategy and Culture The first four chapters of this book set out the case for CSR, addressed the anti-CSR argument, and analyzed CSR’s strategic importance within the global economy. This chapter provides insights as to what a firm must do to integrate strategic CSR into its culture, strategy, and everyday operations. That is, when and how does a company become more socially responsible? When should a company begin adopting CSR as a strategic driving factor, for example? Is there a standard point of organizational evolution at which this should occur, or does it differ from company to company and among industries? How should management construct CSR policies that can then filter down throughout the organization? How will stakeholders distinguish between a genuine CSR strategy and a cynical attempt to create positive public relations or, worse, misleading greenwash ? We address the when by focusing on the CSR threshold , a tipping point that triggers firms to move toward strategic CSR. Then , we turn to the how by outlining the design, timing, and implementation of strategic CSR, introducing the necessary corporate infrastructure and key policy ideas in the form of a comprehensive plan of action for a firm seeking to implement CSR throughout operations . THE CSR THRESHOLD The decision of when to implement a CSR policy is compounded by why, where , and how it should be implemented, not to mention who should oversee the process. The industry context complicates things further because of the varied stages of acceptance of CSR by different competitors. Another level of complexity, differences among countries and cultures, ensures different firms will approach CSR in vastly different ways. Although the value of an effective CSR policy within spe - cific industries and firms is becoming increasingly accepted, the point at which such a policy becomes ripe for implementation (or unavoidable to those unconvinced of the benefits) varies. Thus, when depends on many factors, which include the CEO’s attitude toward CSR, the firm’s industry and actions of competitors, and the cultural environment in which the firm is operating. 119 120 — STRATEGIC CORPORATE SOCIAL RESPONSIBILITY Companies can pursue an effective CSR policy of either offense (“corporate social opportunity”) 1 or defense (CSR as “brand insurance”) .2 The innovative, proactive CEO who is convinced of the intrinsic value of CSR sees it as an opportunity to maximize company capabilities and identify new competitive advantages. 3 Examples abound : From Nike’s sustainable Air Jordan XX3 athletic shoe, which is made with “the near absence of chemical- based glues and an outsole made of recycled material ,” 4 to the wide range of products licensed under Bono’s Product (RED) brand, 5 to Anheuser-Busch’s efficient recycling policies ,6 firms seeking CSR innovations find lots of good ideas with which to work and plenty of good reasons to put them into practice. Companies with a progressive and innovative mind-set see benefits that range from being an attractive employer (helping retention and recruitment) , to greater acceptance among government agencies (such as needed zoning and tax relief), to better relations with social activists (such as Greenpeace). In short, an effective and innovative CSR program improves a firm’s relations with both its external and internal stakeholders. Timberland, for example, believes that its Path of Service program, which grants “40 hours of annual paid time off to work on service projects in [employees’] communities,” 7 raises morale and increases retention, therefore lowering training costs while inducing new skills and stoking corporate pride. 8 In terms of defense, CSR still has value by avoiding criticism and other attacks on the firm or its offerings. In this instance, CSR is a rational choice that acts like a brand insurance pol - icy, minimizing or offsetting stakeholder disillusionment in response to perceived lapses in CSR. 9 A good example of this approach is the USCAP (United States Climate Action Partnership, http://www.us-cap.org/), formed by a group of energy and manufacturing firms, which “supports the introduction of carbon limits and trading” as a means of mitigating fed - eral legislation designed to control carbon emissions. 10 Either approach (offense or defense) assumes an up-front investment in creating CSR poli - cies; when to introduce CSR into the strategic process, however, depends on the driving force behind its implementation. For those managers convinced of CSR’s strategic potential, there is no time like the present. Innovative ideas and policies that maximize market opportunities , minimize costs, and increase productivity can produce immediate benefits. For managers yet to be persuaded by the CSR argument, however, the temptation exists to delay as long as pos - sible. Worse, cynical managers might see CSR as merely a public relations exercise or, worse still, postpone hard CSR choices by assuming they can avoid the expense altogether. Perhaps this is analogous to someone who imagines that, as long as they remain healthy , they will be able to avoid outlays for health insurance . Nevertheless, a crisis point can arise. Once reached and stakeholder backlash becomes suf - ficient to warrant the introduction of a reactionary CSR policy, however, it may be too late. As mentioned in Chapter 3, Walmart announced that it would donate $35 million to the National Fish and Wildlife Foundation in April 2005. Although commendable, this action took place “barely a week after environmentalists forged a broad alliance with organized labor and com - munity groups to attack Wal-Mart and its business practices.” 11 Complicating matters further, this threshold of when to act ebbs and flows with public perceptions and media spin, which can change with the next news cycle. Even more confounding is the variability that exists among industries, cultures, and nations, as well as among companies within the same industry. In summary, firms introduce CSR for different reasons. Implementing CSR proactively throughout the firm can generate multiple business advantages and may yield additional benefits associated with first-mover status. In addition, the genuine implementation of CSR, whether for Chapter 5: Implementation — 121 offensive or defensive reasons, generates insurance-like benefits that render CSR lapses less damaging if committed due to factors outside the firm’s control. Whatever the motivation, how - ever, there is a CSR threshold in every industry that acts as a CSR point of no return. The sooner CSR is introduced, the less likely a firm is to cross this “tipping point,” 12 which varies for each company (depending on whether it is the market leader or a smaller player) and within each industry (some industries are more susceptible to stakeholder backlash than others). The variable nature of this CSR threshold suggests why some companies perceive CSR to be of greater or lesser importance to their particular organization at different points in time . Still, why is it that different companies and industries have different CSR thresholds for different reasons? An important part of the answer comes from the business-level strategy a company pursues . Variation Among Companies Analyzing a company’s business-level strategy reveals how it distinguishes its products in the marketplace. Its value proposition is captured in its strategy and attracts stakeholder groups, particularly customers. In turn, the firm’s strategy has a direct impact on the CSR threshold for that company within its industry. Consider these comparisons in light of Figure 5.1. Walmart’s strategy, for example, prob - ably raises the company’s CSR threshold; that is, it has more CSR leeway and can “get away Figure 5.1 The Business-Level CSR Threshold Competitive Advantage Cost Differentiation d e Niche-Focused s Niche-Focused u c Cost Leadership Differentiation o F e p o c of S t ac e p s v Im re i r u t e il i t a t a re F e G SR p C m o C d a o r Cost Differentiation B 122 — STRATEGIC CORPORATE SOCIAL RESPONSIBILITY with” more because its value proposition is based on a business-level strategy of low cost. Thus, a Walmart shopper is unlikely to be surprised to discover that the company favors prod - ucts manufactured overseas in low-cost environments, rather than higher cost products made by U.S. employees . For a company like The Body Shop, however, which has built its reputa - tion and customer base largely on the social justice issues it chooses to advocate (such as no animal testing and fair trade), the CSR threshold at which customers, media, and society react may have a much lower tipping point. Thus, The Body Shop’s stakeholders are more likely to have a lower threshold of tolerance for perceived CSR violations. Restated, The Body Shop consumers would expect the company to live up to the values that attracted them in the first place, which translates into a correspondingly lower CSR threshold for the firm. For example, one CSR error by The Body Shop may well be equal, in terms of stakeholder perception, to multiple CSR oversights by Walmart. As suggested by Figure 5.1, business-level strategies can be divided into those that pur - sue low costs and those that pursue differentiation (see Chapter 2). The low -cost approach suggests an ability to deliver products or services at a price below that of competitors. The products that Walmart sells, for example, are not fundamentally different from those of its competitors. As a result, the firm gains its competitive advantage from its “everyday low prices, ” which enable its customers to “Save money. Live better.” Walmart is able to gener - ate its low prices because of its laser-like focus on minimizing costs throughout the value chain. Differentiation strategies, however, offer the customer something unique, such as a luxury car from Rolls Royce, for which there is often an associated price premium .

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