OPINION – Creating Competitive Advantage through CSR

Mak Ka Yee, Carry

Member, Macau Institute for Corporate Social Responsibility in Greater China (MICSRGC)


How to pick and design Corporate Social Responsibility (CSR) programs that benefit the firm and to create win-win situations for the firm, its stakeholders and society? Based on researchers Burke and Logsdon’s work, there are five ways CSR programs can create strategic benefits for the firm. This can be done so by incorporating the following five strategic dimensions: centrality, specificity, proactivity, voluntarism and visibility into the CSR activities of a company.

Centrality

First, pick CSR policies or programs that have a close-fit with the mission, values and core activities of the company. Such CSR programs should be prioritized as they could ultimately yield future benefits for the firm in the long-run.

One example is Cemex, a cement manufacturer in Mexico, which initiated a program called ‘Patrimonio Hoy’. The manufacturer assisted needy local families to buy Cemex products and aided in building affordable housing. In doing so, the firm accumulated resources and capabilities to solve social problems whilst the program is central to its core business activity.

Another example that demonstrates the centrality of CSR programs to firm value is Alibaba. As two of the six core values of Alibaba.com are teamwork and passion. According to Jack Ma, he mentioned that by engaging Alibaba’s workers in all the hard work of sourcing and distributing medical supplies like protective masks during COVID-19, it enabled Alibaba to cultivate its workers regarding teamwork and benevolence.

Specificity

Second, specificity refers to choosing CSR activities that link to financial benefits of the firm.

One example is the energy saving program of TE Connectivity which provides both financial benefits in terms of cost saving as well as achievement of social objectives regarding environmental protection.

Another example is initiating concern for employee programs like health and wellness, flexible work time so that in return, worker productivity, morale and loyalty can be enhanced. This could benefit the company financially due to lowered turnover, increased productivity and reduced absenteeism.

Conducting social cause-related marketing activities could offer benefits to both sponsoring firms as well as to the receiving nonprofit organizations. For example, a dollar of every McDonald’s happy meal sold on a specific day will be donated to children with cancer which simultaneously pushes up sales for the company.

Proactivity

Third, managers should plan and anticipate CSR practices, and adapt to emerging societal expectations. This proposes that firms should constantly scan the environment, anticipate social, economic, technological, or political trends which are likely to impact the firm.

One example is when the firm Cemex in Mexico learned of the construction needs of poverty-stricken people in Bangladesh: Cemex cooperated with banks in Bangladesh to initiate micro-financing in their innovative housing project. This allowed Cemex to become a first mover to reach an underserved market segment. Thus, the firm has proactively grasped new opportunities and preempted competitors.

Voluntarism

Fourth, voluntarism indicates that firms shall strive to conduct CSR in a discretionary manner, which goes beyond simply obeying the law.

CSR practices such as philanthropy by donating money and goods to charitable organizations; sponsoring local artists and painters to hold exhibitions, as well as engaging in other local community activities are common. Further activities include voluntary environmental management practices; exceeding the minimum standards for product safety; building positive relations with regulators; and creating favorable impressions among various stakeholders, like journalists, newspaper presses, and academic institutions.

Apart from external stakeholders, firms can also contribute by providing employees with training and activities. For instance, gaming companies in Macau provide language training, computer courses and yoga classes, hold social activities for employees and their families, 365 day- 24 hour-staff social clubs; free movie nights for mothers.

Visibility

Lastly, managers can benefit their companies by making their corporate social activities observable to gain recognition from both internal and external stakeholders.

Danone Mexico adopted a “let’s build their dreams” program to donate to needy children based on the quantity of product bought by customers, which greatly helped the firm change from having a cold and an unfriendly public image, to being seen as warm and community involved. Later, when its major competitor offered substantial 40% discounts, Danone avoided having to drop their prices dramatically due to the customer loyalty already accumulated.

Finally, Jack Ma also mentioned that Alibaba will maintain a high profile when engaging in public service. He stresses that this must be open, efficient and transparent to the public with the aim to gain respect and to create more empathy within Alibaba employees and the general public.

By embracing the above mentioned five strategic dimensions – centrality, specificity, proactivity, voluntarism and visibility into the CSR programs, we hope this can help managers to better design and prioritize CSR activities that can benefit both the firm and its stakeholders.