Corporate social responsibility

Understanding anddeveloping strategic

corporate socialresponsibility

PETER A HESLIN1 JENNA D OCHOA

C reation of shareholder wealth onceconsidered the ultimate corporate

objective and yardstick of organizationalvalue is slowly becoming overshadowedby a broader conception of organizationalsuccess In 2006 about one in every tendollars of assets under management in theUS ndash an estimated $23 trillion out of $24trillion ndash was invested in companies that ratehigh on some measure of social responsibil-ity In 2007 64 of the Fortune Global 100published a Corporate Social Responsibility(CSR) report outlining their economic envir-onmental and social performance Manylarge companies such as General MotorsProcter amp Gamble and Vodafone now havea senior level corporate officer who ischarged with directing the organizationrsquoscorporate social initiatives

In contrast to debates over the last dec-ade about whether organizations have asocial responsibility and whether CSR per-formance predicts corporate financial per-formance business leaders are increasinglyconcerned with how their organization canprosper from addressing social and environ-mental challenges One widely acceptedguideline advanced by Michael Porter and

Mark Kramer is to undertake CSR in a stra-tegic manner by making social and environ-mental contributions only in ways that alsoenable tangible business benefits Howeverimitating other organizationsrsquo strategic CSRlsquolsquobest practicesrsquorsquo would be imprudent for thesame reason that benchmarking often leadsto disappointing results Organizational lea-ders tend to inadequately appreciate thesubtle differences in organizational compe-tencies and contexts whereby a given prac-tice enables one organization to fly but leadsothers to flounder Thus we argue that effec-tive CSR initiatives are those derived fromcareful analysis of each organizationrsquosunique culture competencies and strategicopportunities Fortunately organizationalleaders do not have to reinvent the wheelWhile the particular CSR practices that someorganizations adopt might not necessarily beuseful for others many of the principlesunderlying them are applicable to a widerange of organizations After briefly review-ing the history and nature of strategic CSRas well as why many organizations are striv-ing for CSR we outline a range of examplesof strategic CSR undertakings The 21exemplary CSR practices we discuss are

Organizational Dynamics Vol 37 No 2 pp 125ndash144 2008 ISSN 0090-2616$ ndash see frontmatter 2008 Elsevier Inc All rights reserved doi101016jorgdyn200802002wwworganizational-dynamicscom

Acknowledgments We thank Peter Cappelli Carolyn Jennings John Slocum and Theo Vermeulenfor valuable input on an earlier draft of this manuscript This paper is dedicated to the lifetime ofinspiring social contributions made by the Australian Distinguished Professor Dexter Dunphy

1 The authors contributed equally and so are listed alphabetically

125

clustered into seven principles for enactingstrategic CSR These principles could serveas a guiding stimulus for other organizationsintent on discovering and capitalizing ontheir unique opportunities to do well bydoing good

THE ROOTS AND NATURE OFCORPORATE SOCIALRESPONSIBILITY

CSR has roots in a pivotal 1953 decision bythe New Jersey State Supreme Court whichremoved legal restrictions on corporate phi-lanthropy A shareholder who objected toStandard Oil donating money to PrincetonUniversity brought a lawsuit against Stan-dard The court ruled in Standardrsquos favoraccepting the argument that its donations toPrincetonrsquos Engineering Department wereintended to benefit Standard Oil by helpingto educate future potential employees Thisdecision paved the way for other companiesin the United States to engage in corporategiving CSR initiatives increasingly involvestrategically directed donations of equip-ment or core employee skills

There are various definitions of CSR butmost share the theme of engaging in econom-ically sustainable business activities that gobeyond legal requirements to protect thewell-being of employees communities andthe environment Strategic CSR seeks to dothis in ways that simultaneously create tan-gible business benefits thereby being finan-cially self-sustaining and less prone toeliciting outcries about squandering share-holder wealth Granted that CSR includesboth environmental and human sustainabil-ity components we follow CSR scholars whouse the terms corporate sustainability andCSR synonymously

Environmental sustainability involvesusing scientific insights to reduce the envir-onmental footprint of an organizationrsquosoperations and products Doing so can helpto address issues including the earthrsquos dimin-ishing supply of nonrenewable resourcesand capacity to absorb the waste from our

production and consumption Human sus-tainability involves creating an equitabledevelopmental and healthy workplace foremployees as well as adding value to stake-holders including suppliers customers andother community members Such value-added initiatives can be delivered to externalstakeholders through avenues including theprovision of educational health careerenergy-saving pollution-reducing or envir-onmental beautification opportunities

According to Chad Holliday (2001 p134) chairman and CEO of DuPont

Sustainable growth should be viewed notas a program for stepped-up environ-mental performance but as a compre-hensive way of doing business one thatdelivers tremendous economic value andopens up a vast array of new opportu-nities Capitalizing on these benefits mayrequire relentless determination andtenacity but ultimately companies willfind that they can generate substantialbusiness value through sustainabilitywhile both enhancing the quality of lifethroughout the world and protecting theenvironment

By virtue of being self-sustainable stra-tegic CSR can become an integral and invalu-able part of business strategy and operationsrather than merely off-the-shelf or sponta-neous lsquolsquogood deedsrsquorsquo Developing prudentCSR is thus much less a matter of organiza-tional imitation than real-time customiza-tion

Complicating Factors

Many organizations appear to be strong insome areas of CSR performance yet weak inothers Should Wal-Mart Stores be deemedsocially responsible for providing low-pricedgoods for impoverished and budget consciouscustomers or irresponsible for paying itsemployees low wages providing minimalhealth care benefits and for adversely affect-ing independent merchants Does BP exhibitCSR by recognizing and striving to address

126 ORGANIZATIONAL DYNAMICS

global climate change or is it irresponsible forcontinuing to produce fossil fuels Is Hewlett-Packard socially responsible because of itscommunity development initiatives or lack-ing CSR for abandoning its long-standingpolicy of guaranteeing job security Giventhe complexity of such issues our intentionin this paper is to offer principles to guide theidentification of strategic CSR initiativesrather than to imply judgments regardingthe overall CSR of particular organizations

Enron undertook admirable social initia-tives such as making substantial charitabledonations while simultaneously defraudingits investors Ford Motor publicized a strongcommitment to reducing its environmentalimpact while also lobbying against increasesin federal fuel economy standards Besidesapparent hypocrisy these examples illustratethat to optimize progress in addressing socialand environmental challenges organiza-tional initiatives public policies and corpo-rate regulators must work in concert TheHuman Rights Watch 2006 annual reportrevealed that firms such as Google have con-cluded that CSR can place them at a compe-titive disadvantage by shutting them out ofcertain markets If Google did not complywith the Chinese governmentrsquos censorshippolicies they could not operate in Chinakeeping them from doing business in thelargest emerging market for e-commerceand Internet use As a result large organiza-tionsrsquo CSR initiatives increasingly includelobbying for legally enforceable corporatestandards that apply to all firms Starbucksprovides healthcare benefits to all employeeswho work at least twenty hours a week andspends more on healthcare than on coffeebeans Not surprisingly Starbucks activelyadvocates for national healthcare legislationWal-Mart General Electric DuPont and agrowing number of other organizations simi-larly all back some form of carbon regulation

DRIVERS OF CSR

Powerful social and political forces encou-rage organizations to act more responsibly

These include growing consumer demandfor responsibly made products challengesto organizationsrsquo reputations by nongovern-mental organizations (NGOs) industrycodes of conduct assessments and rankingsof CSR performance pressure from sociallyresponsible investors through public interestproxy resolutions as well as the sociallyconscious values of organizational managersand employees Issues such as disparities inaccess to quality education employmentand healthcare are gaining increasing mediaattention as is the need for technological andother innovations that address pressingenvironmental challenges These challengesinclude air and water pollution unsustain-able fishing and harvesting as well asincreasing greenhouse gas emissions thataccording to the 2007 IntergovernmentalPanel on Climate Change almost certainlylead to global warming

Catastrophic consequences likely toresult from global warming include increas-ing Category 4 and 5 hurricanes rising sealevels devastating coastal areas worldwideand the spread of harmful insects such asmalaria-carrying mosquitoes There is anemerging consensus that such critical envir-onmental and social issues must beaddressed without delay and that in addi-tion to public policy changes organizationshave a responsibility and key role to play inidentifying and implementing remedialactions This responsibility is underscoredby the increasing realization that both gov-ernments and individuals can also lsquolsquovotersquorsquotheir social preferences through what theypurchase where and how hard they chooseto work and where they invest

Enhancing organizational reputationwas once the prime motivator for CSR It isrelatively easy to contribute money to a causeor place it in a corporate foundation withouta mandate for how the funds are to be spentor what outcomes are expected With grow-ing recognition of looming human and envir-onmental crises there is a groundswell ofpublic and private sector organizations striv-ing to make measurable contributions tosustainability issues Over 4000 organiza-

127

tions from more than 100 countries are nowmembers of the United Nations Global Com-pact (UNCG) established in 1999 by UNSecretary General Kofi Annan UNGC is aninternational initiative that brings togethercompanies UN agencies labor organizationsand civil society in support of 10 principlescovering human rights labor the environ-ment and corruption UNGC member orga-nizations pledge to abide by and integrateinto their business practices the 10 principlesoutlined in Table 1

Besides value-driven small to medium-size companies large corporations that areactive members of the UNGC include BHPBilliton and Fosterrsquos Group (Australia) Ara-cruz Celulose and Petrobras (Brazil) Toshibaand Nissan (Japan) Cemex and CorporacionDurango (Mexico) BP and Royal Bank ofScotland (United Kingdom) as well as CiscoSystems and Coca-Cola (United States)Thousands of other organizations strive forCSR in concert with institutions that includethe 1 for the Planet Alliance AmericarsquosPromise Ashoka the Aspen Institute theClinton Global Initiative Net Impact theSocial Venture Network the Organizationfor Economic Cooperation and Develop-ment and the World Business Council forSustainable Development Each of theseinstitutions provides helpful guidelines foreffective CSR initiatives that are reflected inthe following discussion

Organizational myopia regarding short-term profitability can be addressed byexploring how five key drivers of businessprosperity can be positively affected by CSR

initiatives These include the need for growthin market share organizational learningcommitted and engaged employees suppor-tive external stakeholders and positiveinvestor relations

Growth in Market Share

Positive consumer responses to an orga-nizationrsquos CSR efforts have resulted inincreased sales of premium priced productsand services These include Fair Trade pro-ducts whereby producers are paid an above-world-market price for their produce InGreat Britain sales of Fair Trade productsndash including coffee bananas chocolate andflowers ndash increased by 51 between 2003 and2004

CSR initiatives can also open up newmarkets especially in developing economiesCompanies who find a way to engage withthe worldrsquos poorest citizens have been help-ing to alleviate poverty and improve theeconomies of these countries while also prof-iting from their efforts and creating newcustomers and markets for their goods Ara-vind Eye Hospitals in India perform 200000cataract surgeries per year for roughly US$50 per patient In 2001ndash2002 the hospitalsposted a profit of US $465 million By crea-tively using economies of scale high produc-tivity and top quality medical equipmentthese hospitals restored the sight of hun-dreds of thousands of people This in turnstimulates the Indian economy by freeing upboth the blind as well as those who cared forthem to enter the labor force and potentially


TABLE 1 THE 10 PRINCIPLES OF THE UNITED NATIONS GLOBAL COMPACTBusinesses shouldPrinciple 1 Support and respect the protection of internationally proclaimed human rightsPrinciple 2 Ensure that they are not complicit in human rights abusesPrinciple 3 Uphold the freedom of association and the effective recognition of the right to collective bargainingPrinciple 4 Eliminate all forms of forced and compulsory laborPrinciple 5 Abolish child laborPrinciple 6 Eliminate discrimination in respect of employment and occupationPrinciple 7 Support a precautionary approach to environmental challengesPrinciple 8 Undertake initiatives to promote greater environmental responsibilityPrinciple 9 Encourage the development and diffusion of environmentally friendly technologiesPrinciple 10 Work against corruption in all its forms including extortion and bribery

earn an income that ultimately helps toincrease consumer spending In concert withpublic policy makers healthcare organiza-tions can explore viable business modelsfor broadening the base of essential health-care consumers within a range of otherdeveloping and developed economies

Organizational Learning

Cutting edge CSR is more than corporatephilanthropy Strategic CSR programs pro-vide opportunities for organizations to learnfrom the projects they invest in and use thatknowledge to build the organizationrsquos corecompetencies while simultaneously improv-ing social or environmental conditions CSRinitiatives can be used as learning labora-tories to study different ideas methodsand processes without the time pressureand other typical constraints on the deliveryof commercially contracted products andservices Knowledge gained through CSRendeavors can flow back into the organiza-tion and drive new innovations throughoutthe company When Bell Atlantic undertookProject Explore in Union City New Jersey inthe early 1990s it strived to improve innercity childrenrsquos learning with technologyDuring the process Bell Atlantic developednew insights about networking technologiesthat more than justified the cost of the projectThese insights led to a patented and profit-able technology that became Bell AtlanticInfospeed DSL Strategic CSR undertakingsprovide fertile ground for organizationallearning and innovation while also benefit-ing humanity and our deteriorating bio-sphere

Committed and EngagedEmployees

A company attitude of fairness and com-passion often influences how employees feelabout the organizations as well as how theyact while performing their work Researchhas shown that potential employees are moreattracted to socially responsible organiza-tions and some are willing to receive less

pay to work for a socially responsible firmPeter Drucker once argued that CSR maybecome increasingly necessary to attractthe best available workers A 2006 surveyof 2100 MBA students by Net Impactrevealed that 59 of respondents plannedto seek socially responsible work immedi-ately upon graduation and 79 indicatedthat they would seek out socially responsiblework at some point in their careers Theseresults signal the growing importance ofsocial and environmental engagement tothe generation now entering the workforce

Besides enabling organizations to attractemployees who are driven by socially con-scious values CSR can also keep themengaged and eager to become increasinglyvaluable to the organization Anne Mulcahychairman and CEO of Xerox chose to work atXerox because of the reputation of the salesdepartment as a meritocracy rather than anold boyrsquos club But she has stayed for morethan 30 years and counting because of aculture that broadly defined citizenship toinclude how you treat your people yourcustomers your suppliers and the commu-nities where we work and live Because of itscommitment to corporate citizenship Xeroxdid not just get a talented salesperson inMulcahy Instead they attracted and retainedthe future acclaimed CEO of the company

Highlighting to employees an organiza-tionrsquos positive social contributions can be apowerful route for motivating and retainingcommitted and productive employees Themedical technology company Medtronicconducts annual parties at which employeesmeet patients whose lives have beenimproved by their products According tothe companyrsquos founder and Director Emer-itus Earl E Bakken lsquolsquoAll Medtronic employ-ees have a lsquodefining momentrsquo in which theycome face to face with a patient whose storydeeply touches themrsquorsquo Research by AdamGrant and colleagues has shown that whenorganizations provide employees withopportunities for appreciative contact withthe beneficiaries of their work employeesexhibit greater effort persistence and jobperformance compared with those who have

129

less opportunity to see how their work makesa positive difference

External Stakeholders

Acknowledging the need for CSR shows acompanyrsquos recognition that business andsociety need each other if both are to thriveExternal stakeholders can powerfully affectorganizational survival and prosperityHealthy societies expand demand for busi-ness as more human needs are met andaspirations grow Successful businesses con-tribute to robust economies and livable com-munities without which there would befewer consumers of goods and servicesresulting in less need for many businessesto exist

External stakeholders often view CSR pro-grams as a measure of the trustworthiness ofan organization Thus a favorable opinion ofa companyrsquos CSR practices can solidify apositive relationship between an organiza-tion and its stakeholders Engaging stake-holders proactively can thereby help insurethe success of a project In 2007 when twoprivate equity firms sought advice for theirbid on the large utility company TXU Gold-man Sachs advised that the buyout plan bemodified to accommodate more environ-mentally sound practices Specifically Gold-man Sachs urged their clients to insist thatthe number of new coal-powered energyplants TXU planned to build be drasticallyreduced from 11 to 3 and that the dollarssaved be invested in an alternative energysource such as wind power Acceptance ofthis advice pleased the environmental advo-cacy group Environmental Defense andpaved the way for TXU board members toaccept the buyout offer

The potential peril of ignoring externalstakeholders is illustrated by the notoriouslyhuge costs of CSR activist protests and boy-cotts against firms such as Dow ChemicalLevi Strauss Nike and Shell Oil In 2007 BPagreed to pay over $60 million in fines forviolations of the US Clean Air Act in Texasand Alaska In addition to collecting thelargest fine ever assessed for clean air viola-

tions the US Environmental ProtectionAgency successfully prosecuted BP undernew laws requiring chemical plants and refi-ners to proactively identify where potentialaccidental spills or toxic releases could occurand design preventative safeguards BP com-mitted to investing an additional $400 mil-lion in safety upgrades geared towardsfuture accident prevention

Financing and InvestorRelat ions

An organizationrsquos CSR performanceattracts attention from financial analysts andinvestors Ceres a coalition of over 80 inves-tor environmental and public interest orga-nizations periodically ranks 100 globalcorporations on their strategies for curbinggreenhouse gases There is a growing trendfor investors to direct their money towardsexplicitly socially responsible organizationsThe amount invested in lsquolsquogreenrsquorsquo mutualfunds in the US rose 695 in the last sixyears During the last three years the amountof money invested in clean energy has reachedUS $709 billion globally Firms such as Citi-bank and Goldman Sachs carefully assess theforeseeable environmental impact of theirlending decisions in developing countriesBanks such as Wainwright Bank and Trustin Boston as well as the New Resource Bank ofSan Francisco offer discounted financing forprojects that will be built using lsquolsquogreenrsquorsquo con-struction standards ShoreBank Corp of Chi-cago employs a triple bottom line managerwho assesses implications for people planetand profits of loans for green building pro-jects These trends highlight the increasingawareness of the need for environmentalstewardship and financiersrsquo desire to sponsorcompanies that adopt CSR business practices

Poor CSR performance can converselyhave significant negative financial implica-tions In May 2006 the California PublicEmployeesrsquo Retirement System (CalPERS) ndashthe largest public pension fund in the US ndashbanned investments in nine companies thatdo business in Sudan until the governmentof Sudan halts the genocide that has resulted


in egregious human rights violations For thesame reason major universities includingHarvard Yale and Stanford also sold theirshares in firms with substantial investmentsin Sudan In 2002 even before the start of theDarfur conflict Talisman Energy of Canadawithdrew from the Sudan after CSR-drivendivestments by investors in the US andCanada led to a 35 decline in its share priceWall Street and investors worldwide arepaying attention to CSR Their opinion of aparticular businessrsquo CSR is likely to increas-ingly impact its access to capital and theresulting fortune of companies who excelfail or fall in-between with regard to CSRperformance

STRATEGIC CSR PRINCIPLES

Seven strategic CSR principles and 21 exam-ples of CSR initiatives that illustrate theseprinciples are presented in Table 2 Theseprinciples should not be interpreted as achecklist of best practices but as a spring-

board for organizational initiatives aimed atcreatively identifying and developing viablevalue-adding and self-sustaining strategicsustainability opportunities In additionthe organizations mentioned are not beingendorsed for necessarily having high overallCSR As mentioned many organizations arestrong in some areas of CSR performance andweak in others Instead the following exam-ples are offered merely to illustrate our sevenstrategic sustainability principles

Principle 1 Cult ivate NeededTalent

Like Standard Oil Marriott Internationaland Microsoft both undertake targeted CSRinitiatives that cultivate suitable futureemployees for their businesses In 1999 Mar-riott initiated a program called lsquolsquoPathways toIndependencersquorsquo that taught chronic welfarerecipients life and job skills In return Mar-riott offered each program graduate a jobfrom its employment openings Topics cov-ered during the program include managing

131

TABLE 2 STRATEGIC CSR PRINCIPLES AND EXEMPLARY PRACTICES

STRATEGIC CSR PRINCIPLES CORPORATION EXEMPLARY STRATEGIC CSR PRACTICES

1 Cultivate needed talent Marriott Provide extraordinary career opportunitiesMicrosoft Nurture required IT talentGlaxoSmithKline Expand access to medications

2 Develop new markets Philips Electronics Produce resource-efficient productsGlobe Telecom Create first-time consumersWhole Foods Specialize in organic products

3 Protect labor welfare Levi Strauss Replace exploitation with educationOdegard amp Rugmark Certify ethical productionStarbucks Enhance farmersrsquo productivity and welfare

4 Reduce yourenvironmental footprint

DuPont Create more value and less lsquolsquostuffrsquorsquoEthel M Produce abundant life from wastewaterNorsk Hydro Renew raw materials

5 Profit from by-products Fuji Xerox Redesign products for learning and profitsShaw Industries Adopt cradle-to-cradle manufacturingManildra Convert grain and starch waste to fuels and food

6 Involve customers Target Enable customers to improve educationHewlett-Packard Reduce the environmental cost of IT usePatagonia Educate and engage customers

7 Green your supply chain Nestle Optimize transportationWal-Mart Reduce packaging across the supply chainSC Johnson Identify publicize and reward greener alternatives

finances and a household budget how tosearch for a job and improve onersquos interview-ing skills workplace etiquette and standardsof professional conduct

Marriott benefited from a wide pool ofmore diverse and eager employees who havefilled positions in a broad number of areasincluding reservations housekeeping res-taurant serving and cooking groundskeeping luggage service reception andmaintenance Pathways to Independencealso opened up career development oppor-tunities for participants by allowing them tobegin obtaining the experience needed toenter the ranks of Marriott managementThe program substantially decreased turn-over at Marriott Seventy percent of programparticipants were still working for Marriottafter one year of employment This retentionrate is almost 50 better than the hotel indus-try average for hourly employees Pathwaysto Independence also helped revitalize innercity economies by providing stable well-compensated employment opportunities tothe chronically unemployed Marriott in turnobtained the reciprocal benefit of growingfuture employees and managers who arefully immersed and largely committed toMarriottrsquos lsquolsquoSpirit to Serversquorsquo corporate cul-ture Marriott has also benefited from a rangeof other community outreach partnershipsaimed at helping individuals (eg racialminorities and those with a disability) whoface barriers to employment as well as byaddressing environmental issues that affectthe communities in which it operates

Microsoft has long experienced the needfor a robust supply of skilled informationtechnology (IT) workers In 1997 Microsoftpursued a collaborative opportunity to bol-ster the IT education infrastructure and makeit possible for more college students toreceive the training necessary to preparethem for an IT career In light of antiquatedtechnology IT curricula and faculty skillswithin community colleges across the USMicrosoft contributed software volunteeredexpertise and provided $47 million to helpthe American Association of CommunityColleges address these issues In 2003 Micro-

soft made a $15 million software grant to theAfrican-American collegiate communityThe resulting better-educated communitycollege graduates help Microsoft addressits significant shortage of IT workers whilesimultaneously providing celebrated educa-tional and career opportunities to tradition-ally underrepresented populations withinthe software industry

Attracting and retaining top scientifictalent is also a major challenge in the com-petitive pharmaceutical industry especiallyin light of consumer backlash against thehigh cost of medicine GlaxoSmithKline(GSK) has taken steps to improve access toneeded medications and vaccines around theworld This sustainability commitment hasresulted in drawing leading scientific talentto work for GSK Initiatives include licensinglocal companies in Africa to produce genericversions of GSKrsquos patented AIDS medica-tions selling vaccines at volume nonprofitdiscounts to developing countries and ded-icating a team of researchers to develop amalaria vaccine

It is rather unusual to find a pharmaceu-tical company directing RampD resources todiseases such as malaria or avian influenzaas the bulk of the people who can benefitfrom the vaccine cannot pay cost much lessthe established retail price for inoculationMany companies claim that drugs are soexpensive because of the high cost of RampDTherefore they do not look into developingcompounds unless they can be sold at a pricethat at least recoups the companyrsquos cost ofcapital GSK is somewhat unique in lookingbeyond immediate profits to provide itsemployees with an opportunity to worktowards eradicating menacing diseasesEmployees claim to value working for GSKbecause their work is making a positive dif-ference to the lives of millions

A hallmark of our knowledge economy isorganizations engaging in a war for talentThree broad strategies for building an orga-nizationrsquos capacity to attract and retain amotivated skilled workforce are to offerextraordinary career opportunities makecommunity-based collaborative investments


to cultivate required talent pools and pro-vide employees with opportunities to usetheir professional or occupational skills inways that directly help people in most needof assistance

Principle 2 Develop NewMarkets

Philips Electronics is a leading producer ofenergy efficient appliances lighting andmedical equipment Philips is also becominga leader at expanding the market for its goodsand services by tailoring its offerings to thelocal infrastructure and economy of develop-ing countries One project involves the devel-opment of traveling medical vans that bringprimary healthcare to isolated villages in ruralIndia Using satellite technology the vans linkup with doctors in an urban center allowingthem to diagnose and treat patients remotelyAdditionally Philips has introduced a low-cost water purification system and a wood-burning stove that is smokeless which helpsto decrease deaths related to pulmonary dis-ease from exposure to cooking smoke Theseare desperately needed items that many com-panies have not invested in because the bot-tom line does not appear to justify the costHowever as seen with the Aravind Eye Hos-pitals in India substantial volume can driveprofit Meeting the needs of the developingworld is a natural fit for the intersection of CSRand volume-based revenues

Globe Telecomrsquos lsquolsquoG-Bankrsquorsquo program isanother example of this principle This busi-ness capitalizes on the fact that the infrastruc-ture for mobile telecommunications hasexpanded exponentially across the globeduring the past decade The same cannotbe said for bank branches or traditional land-line telephone infrastructure in remote sec-ond- and third-world villages Located in thePhilippines Globe Telecom enables custo-mers to use text messaging and prepaidphone cards to send and receive cash viatheir cell phones They can also pay bills orpurchase goods at stores This innovativeprogram makes money for Globe whichcharges 20 cents for transactions below $20

and 1 of transactions $20 and above Theprogram allows over 13 million people whocannot afford to have a bank account or donot live near a bank or landline telephone tonow engage in banking and other consumertransactions

Beyond land-line infrastructure accessibil-ity issues a large percentage of the worldrsquospopulation is functionally illiterate makingthe complexities of banking as practiced indeveloped economies a significant challengeEven illiterate individuals however oftenbecome competent and comfortable at bank-ing by cell phone Savvy companies such asGlobe Telecom as well as Vodacom in SouthAfrica have discovered that there is an enor-mous untapped market for providing pro-ducts and services to often overlooked andunderserved populations

New markets can also be found in nicheareas that attract the business of consumersseeking a more socially and environmentallyresponsible lifestyle A leader in one of theseniches is Whole Foods Marketmdashan AustinTexas-based retailer of natural and organicfoods that was founded in 1980 and is now aFortune 500 company Whole Foods operatesclose to 200 stores in locations throughout theUS and the UK making it the worldrsquoslargest natural and organic food supermar-ket chain Whole Foodsrsquo dramatic growthprovides compelling evidence that a seriouscommitment to CSR can be financially viable

Whole Foods is selective about the pro-ducts it sells and is dedicated to maintainingthe highest quality standards while requir-ing fair labor standards and sustainable agri-culture Central to the Whole Foodsphilosophy is the belief that lsquolsquocompanies likeindividuals must assume their share ofresponsibility as tenants of Planet EarthrsquorsquoThis is a primary reason for the companyrsquosactive support of organic farming which iswidely seen as the best method for the pro-motion of sustainable agriculture Organicagricultural practices provide tangible bene-fits to the health and safety of farm workerswho are no longer exposed to dangerouschemicals and pesticides that are often usedby large industrial agricultural companies

133

Whole Foodsrsquo social and environmentalcredentials are increased by habitual engage-ment in community initiatives such as sup-porting local area food banks sponsoringneighborhood events and contributing aminimum of 5 of total net profits to not-for-profit organizations Whole Foods addi-tionally provides employees paid time off forcommunity service work Whole Foods wasrated by Fortune magazine as one of the lsquolsquo100Best Companies to Work Forrsquorsquo for the tenthconsecutive year in 2007 The employeeenthusiasm and commitment reflected bythis achievement probably fueled WholeFoodsrsquo growth and retention of its sociallyconscious customer base

Growth is often essential to organizationalprosperity Anticipating and catering to theemerging markets for eco-friendly productsand services as well as adapting offeringsand business models to tap previouslyneglected markets are opportunities forbusiness growth that also sustain humanityand our biosphere

Principle 3 Protect LaborWelfare

Ensuring that products are made withoutchild labor is a concern for many companiesespecially those that have been caught in thecrosshairs for doing so in their overseas fac-tories One classic case of how this predica-ment can be addressed involves Levi Straussa company that tackled this legal and publicrelations problem with a creative CSR solu-tion To address the substantial backlashagainst employing children younger than15 years of age Levi Strauss considered sim-ply firing all the child laborers Howeveranalysis of the labor market in Bangladeshmade clear that in a significant number offamilies these children were the sole bread-winners Losing the factory work wouldhave had dire consequences for the childrenand the family members who depended onthe childrensrsquo wages

Realizing the devastation this wouldcause Levi Strauss developed an innovativesolution All children under age 15 went back

to school while the company continued topay their wages Upon completion of theirschooling a job awaited them at the factoryprovided that the applicant could providetheir school completion certificate Becausemany Bangladeshi people appear youngerthan their chronological age the companyprovides dental exams to help screen appli-cants who do not have a school certificatebut are old enough to be employed Thishelps prevent the unnecessary rejection ofage-qualified potential employees Encour-aged by Levi Straussrsquos example the Bangla-desh Garment Manufacturers and ExportersAssociation and other trade groups havegiven $1 million to support underage work-ersrsquo education

Odegard addresses child labor exploita-tion issues in the luxury rug industry Ste-phanie Odegard started a design companythat promotes rugs that are certified as beingmade under fair labor conditions Manydeveloping countries in the Middle Eastand South Asia count fine rugs as one ofthe backbones of their economies Childrenare valued as laborers for several reasonstheir small fingers and sharp eyesight makethem gifted at the detailed work of craftingrugs and they have greater stamina thanadults to work hard for long hours in hotdusty and cramped factories Odegarddecided to take her mission a step furtherand so helped to found a nonprofit organiza-tion Rugmark which certifies that rugs aremade without child labor The certificationprovides interior designers and consumerswith assurance that the rugs they purchaseare not the product of child exploitation Thegrowth of Rugmark certified products as afashionable choice in the design industryhelps to promote the reduction of child laborin rug manufacturing The initiative hashelped take 10 of an estimated 300000child rug laborers away from the loom andput them back in school It also potentiallyhelps raise awareness and concern with elim-inating exploitative labor practices in otherindustries

Starbucks takes a holistic approach in theirefforts to enhance labor welfare The com-


pany has a range of programs designed tohelp coffee farmers build profitable and sus-tainable businesses The Farmer SupportCenter in Costa Rica offers training and tech-nical support on farming practices that resultin the growth of high quality coffee Star-bucksrsquo policy is to pay premium prices forcoffee beans in order to provide farmers witha living wage that allows them to supporttheir families and grow their business Thecompany also has programs that providefarmers with affordable loans increasingtheir ability to invest in their farms and builda sustainable business To reward farmerswho practice socially and environmentallyresponsible farming practices Starbuckshas established guidelines that allow suppli-ers to qualify for preferred seller status

One of Starbucksrsquo overarching businessphilosophies is that the health of their busi-ness is only as robust as that of the manyfarmers from whom they purchase coffeeThus money invested in fostering thelong-term welfare viability and prosperityof their suppliers is considered as an essentialbusiness investment The rapid growth indemand for the premium-priced coffee pro-ducts sold by Starbucks illustrates the poten-tial viability of this business policy

During the closing decades of the 20thcentury minimizing labor costs was widelyseen as imperative for organizational pros-perity and even survival Levi Strauss Ode-gard amp Rugmark as well as Starbuckshighlight that organizations can indeed dowell while striving to safeguard the liveli-hood and well-being of their labor force

Principle 4 Reduce YourEnvironmental Footprint

DuPont seeks to increase its financial pros-perity through strategies that simultaneouslyproduce demonstrable reductions in theorganizationrsquos environmental footprint Stra-tegies for sustainable development includeintegrated science and knowledge intensityDuPont integrates the scientific fields ofchemistry and bioengineering to produce anew line of polymers called Sorona that

have most of the desirable characteristics ofolder materials such as nylon Dacron andLycra However unlike its predecessorsSonora is produced using fermented cornsugar a renewable resource rather thanthe petrochemical-derived materials itreplaces Knowledge intensity is increasedby initiatives including the creation of Sim-plyengineering which generates revenuefrom selling copyrighted engineering guide-lines calculations and models as well asSafeReturns a DuPont consultancy thathelped Texas Instruments reduce its work-place injuries by 65

The environmental sustainability attainedby DuPontrsquos integrated science and knowl-edge intensity strategies is assessed with acustomized metric called the lsquolsquoshareholdervalue added per pound of productionrsquorsquo(SVBlb) According to DuPont chairmanand CEO Chad Holliday this metric helpsDuPont focus on shareholder value creationthrough increased productivity wastereduction and the development of new ser-vices and other sources of revenue genera-tion while helping meet this chemicalcompanyrsquos stretch goals for decreasingenergy consumption and toxic emissionsmdashall essentially by producing lsquolsquomore value andless stuffrsquorsquo

Ethel M operates a uniquely designedwastewater treatment system at its chocolatefactory in Las Vegas Nevada Adjacent to thefactory is the lsquolsquoLiving Machinersquorsquo an ecosys-tem containing plants snails bacteria fishand other organisms Distributed throughoutan acre of tanks marshes and reed beds thefactoryrsquos wastewater enters the LivingMachine and is lsquolsquotreatedrsquorsquo by being processedthrough and by the living inhabitants insideThe water is then reused for industrial pur-poses Visitors to the factory can take a self-guided tour view the chocolate manufactur-ing process sample the companyrsquos productsand then explore the Living Machine andview examples of lsquolsquobeforersquorsquo and lsquolsquoafterrsquorsquo trea-ted water Treated water is reused within thefactory where appropriate as well as to washthe companyrsquos vehicle fleet and provide irri-gation for the botanical cactus garden located

135

on the property The company makes a posi-tive environmental difference while also cul-tivating its reputation and sales byreclaiming a natural resource and educatingits visitors on environmental sustainability

Norsk Hydro strives to become moreenergy efficient while meeting the worldrsquosincreasing demand for aluminum When thecompany did a life cycle assessment it dis-covered that recycling aluminum used just5 of the energy needed to produce primaryaluminum It is well known that aluminumhas a key advantage of outstanding recycl-ability whereby its composition and qualityis not changed or altered in the recyclingprocess It can be remade into usable materialover and over again without any loss of itsintegrity Aluminum is used for airplanebodies and propellers door and windowframes furniture beverage containerspower lines and in components of televi-sions radios refrigerators and air condi-tioners Granted the widespread use ofaluminum and the small fraction of energyused to recycle versus produce it the poten-tial positive environmental impact of recy-cling aluminum is enormous Of the 39million tons of aluminum Norsk Hydrodelivered to customers in 2005 approxi-mately 18 million tons or 46 had beenrecycled In doing so companies such asNorsk Hydro have both flourished and pro-tected the earth from some of the unneces-sary toxic by-products of superfluousaluminum production and landfill

Whether through new business strategiesreduced energy consumption (not illustratedbecause examples and opportunities aboundin this area) reuse or recycling of productsand materials there are countless ways fororganizations to benefit from initiatives thatserve to reduce their environmental foot-prints

Principle 5 Profit fromBy-products

Fuji Xerox Australia exemplifies how newbusiness models that are good for the envir-onment can also help a company improve its

technology and bottom line After changingtheir corporate strategy from selling to onlyleasing office equipment Fuji Xerox beganservicing rather than disposing of rentedphotocopying machines that no longer oper-ated properly Careful study and redesign ofa few key components ndash which cost as little as$140 ndash resulted in reconditioned equipmentbeing restored to better-than-original work-ing order This initiative saved the company$14 million in its first year Studying thekinds of malfunctions and defects thatoccurred and incorporating this knowledgeinto new product and parts design led toRampD advantages that resulted in even morereliable generations of office equipment thatcost the company less to maintain Organiza-tional learning is also heightened as employ-ees discover what works and what does notwhen manufacturing maintaining andrepairing products The program has putmachines back into use that would otherwisehave been destined for landfill The Austra-lian division of Fuji Xerox is thus considereda model of strategic CSR for other Fuji Xeroxdivisions worldwide

Shaw Industriesrsquo $150 million commercialcarpet and tile business has adopted a lsquolsquocra-dle to cradlersquorsquo model When carpet needsreplacing Shaw takes it back from the con-sumer breaks down the materials and thenuses those materials to make new carpetOften only heavily trafficked areas requirecarpet replacement by servicing just thosespots Shaw saves its customers money andperfectly good carpet is not removed anddiscarded By changing the incentive struc-ture for keeping carpet for the full duration ofits useable life the human and naturalresources consumed in providing qualitycarpeting is substantially reduced This inno-vative approach saves Shaw a great deal ofmoney as the price of raw materials nowexceeds the cost of recycling old carpet intonew Interface the worldrsquos leading commer-cial and industrial carpet manufacturer alsorecycles through their ReEntry1 CarpetReclamation Project To date Interface hasrecycled 84 million pounds of carpet thatwould otherwise have gone to landfills


where it takes an average of 50 years todecompose

Manildra developed a range of innovativereuse processes that allow the company tobenefit by putting its by-products to produc-tive use Started as a single flour mill in theShoalhaven region of Australia in 1952 Man-ildra has grown into an international proces-sor of grains and starches as well as a globalleader in using wheat for industrial pur-poses Manildra uses lsquolsquowastersquorsquo products fromgrain processing to make other useful sub-stances profiting from what would other-wise be discarded and helping to protectthe environment by creating less waste Man-ildrarsquos ability to make comprehensive use oftheir raw materials comes from over 50 yearsof increasing vertical integration Startingwith grain and lsquolsquowaste starchrsquorsquo Manildramanufactures ethanol and agricultural feedEffluent wastewater from the mill used toirrigate a farm located next to one of theprocessing plants contains organic nutrientsand replaces harmful chemical fertilizerstypically used in agriculture The farmannually produces over 10000 tons oforganic rye grass that is used for feed bythe local cattle and dairy industries By thetime the wheat and all by-products have beenprocessed little waste is left over achieving aminimal environmental footprint

Adoption of Manildrarsquos practices by othergrain processors could help increase theavailability of ethanol for alternative fuelas well as reducing unnecessary and harmfulCO2 emissions The sustainability initiativesof Fuji Xerox Shaw Industries and Manildraillustrate how useful lessons and valuableresources can be derived by the prudentanalysis and utilization of an organizationrsquosby-products

Principle 6 Involve Customers

Since 1997 Target has contributed 1 ofall purchases at Target stores and 12 percentof all other purchases charged to a Targetcredit card to benefit the elementary juniorhigh or high school of the cardholderrsquoschoice In March and September each year

checks are mailed directly to school princi-pals This CSR program puts money intocommunity schools across the United StatesOver $200 million has been contributed sincethe programrsquos inception More than 25 mil-lion customers have enrolled in the programThis initiative allows an individual with noother connection to Target aside from being aconsumer of Targetrsquos products to participatein a corporate wide CSR program and tochoose the educational beneficiary of theirpurchases

Hewlett-Packard (HP) involves its custo-mers in recycling and energy reductioninitiatives by offering educational contenton their Web site In lsquolsquo5 Steps to GreenerComputingrsquorsquo tips are offered for reducingthe environmental impact of both businessand personal computer usage ranging frommajor initiatives to small changes in every-day practices Advice is offered regardingorganizational policies and checklists recy-cling policies methods for disposal of usedequipment (eg batteries) and applicablegovernment guidelines HP provides a lsquolsquotakebackrsquorsquo recycling program for all of its pro-ducts and advocates recycling all used ITequipment Small actions such as buyingrecycled paper using both sides of paperbefore recycling and utilizing the low powerstates on electronic devices can together sub-stantially reduce energy consumption HPalso strives to raise awareness of sustainableissues and practices among all its employeesas well as throughout the IT industryBeyond its educational initiatives HP hasrecycled more than 1 billion pounds of elec-tronic equipment Its goal is to double thatnumber by 2010

Patagonia a leading manufacturer ofenvironmentally protective outdoor clothingand recreation equipment involves its cus-tomers in its CSR by using a mail ordercatalog and Web site as forums for educationabout social and environmental issues In1972 the company published a catalog withan essay by founder and owner Yvon Choui-nard entitled lsquolsquoClean Climbingrsquorsquo Chouinardadvocated the use of climbing equipmentthat does not scar or destroy rock in the

137

climbing process He counseled his readersto heed the words of 19th century environ-mentalist John Muir lsquolsquoLeave no mark exceptyour shadowrsquorsquo The response was so positivethat Patagonia has continued to use the cat-alog as well as more recently their Web siteas an avenue for dialogue with their custo-mers Chouinard is deeply committed toprotection of the environment and Patago-niarsquos catalog and Web site have served as keymedia for advocating and guiding environ-mental involvement and preservation Eachissue of the catalog contains a balance ofroughly 55 products and 45 lsquolsquomessagersquorsquondash the articles and original thought piecesrelated to social and environmental topicsoften written by Patagonia customers Inter-estingly Patagonia documented that chan-ging this balance in favor of devoting morespace to products resulted in a decrease insales Patagonia thus identified a way toactively engage their customers with envir-onmental issues and opportunities of mutualconcern while involving them in the com-panyrsquos growth and CSR efforts

It is becoming undeniable that at least incertain markets customers care about theenvironmental and human consequences oftheir buying and consumption habits Provid-ing customers with viable concrete actionsthey can take that will make a positive differ-ence as well as insights and information thatilluminate the helpful consequences of theircollective action is a relatively inexpensivethough socially and environmentally usefulway to foster customer loyalty

Principle 7 Develop a GreenSupply Chain

Nestle the largest food and beverage com-pany in the world and a prominent memberof the UN Global Compact uses a variety ofpractices throughout their supply chainaimed at environmental protection Begin-ning with raw materials and ingredientspurchased for use in Nestle products strictquality controls include limiting potentialenvironmental contaminants Nestlersquos fac-tories employ processing technologies that

focus on reducing waste and consumptionof resources Since 1991 Nestle has reducedits use of packaging materials by 315000tons To minimize impact after finishedgoods leave the manufacturing facility Nes-tle strives to optimize shipments and part-ners with other producers to share availablespace on trucks and rail cars to maximize theamount of goods that can be moved per tripAnother transportation efficiency tool is theuse of software that optimizes pallet place-ment which maximizes usable space andreduces the amount of travel needed to shipgoods to their final destination Each of theseinitiatives not only saves transportationcosts it also reduces the adverse environ-mental effects of transportation whichinvariably include energy use and pollution

Wal-Mart often criticized for its practicestowards employees and the environment isattempting to use its power in the market-place to proactively require more humanelabor conditions such as a living wage aswell as sustainable harvesting and produc-tion practices by Wal-Martrsquos suppliers In2008 Wal-Mart plans to begin measuringits 60000 worldwide suppliers on how wellthey reduce packaging and conserve naturalresources Wal-Mart expects a 5 reductionin overall packaging to keep millions ofpounds of trash from entering landfillsthereby keeping 667000 metric tons of car-bon dioxide from entering the atmosphereThis is the CO2 equivalent of taking 213000trucks off the road using 323800 less tons ofcoal and 667 million gallons less diesel fuelWal-Mart CEO Lee Scott elaborates on thispoint lsquolsquoEven small changes to packaginghave a significant ripple effect Improvedpackaging means less waste fewer materialsused and savings on transportation manu-facturing shipping and storagersquorsquo

SC Johnson amp Son has a long history ofenvironmentally friendly practices but theirpinnacle achievement occurred in 2001 withthe development of a unique and highlyinfluential environmental reference docu-ment the GreenlistTM It classifies raw mate-rials based on their environmental impactsand is designed to improve the development


process of SC Johnson products The formatof the Greenlist allows users to comparesubstances listed with one another in termsof their environmental and human healthimplications The system rates ingredientson a scale of 0ndash3 A substance with a ratingof 0 is classified as a restricted material andsenior management must directly approveits use in a product The culture at SC John-son strongly discourages the request forapproval of a lsquolsquo0rsquorsquo rated ingredient becausethe company is so dedicated to reducing itsenvironmental impact Substances that rate alsquolsquo1rsquorsquo are deemed acceptable lsquolsquo2rsquorsquo is better anda rating of lsquolsquo3rsquorsquo indicates this is the best choicefor people and the environment The Green-list is available on line to all SC Johnsonscientists allowing them instant access to thebest-rated ingredients for the product or pro-cess under development Employees receiveincentives in the form of annual meritincreases and bonuses for using the best-rated materials and the company creates agreener supply chain by encouraging suppli-ers to offer products that rate highly on theGreenlist Since the program started SCJohnson has reduced the amount of volatileorganic compounds (VOCs) in the environ-ment by over 10 million pounds Use of theGreenlist criteria reduces the amount ofVOCs used by 26 million pounds annually

Like Wal-Mart Starbucks and WholeFoods SC Johnson is sharing its innovationswith its suppliers so as to green the companyrsquosentire supply chain SC Johnson has furtherleveraged the positive impact of its Greenlistby sharing it with the US EnvironmentalProtection Agency Environment Canadathe Chinese EPA the UKrsquos Forum for theFuture the World Business Council on Sus-tainable Development industry associationsuniversities corporations and others We pre-dict that these examples of CSR undertakingsby Nestle Wal-Mart and SC Johnson merelyforeshadow the types of logistical incentiverole-modeling standard setting and informa-tion-sharing initiatives that innovative orga-nizations will develop and apply to have alucrative and substantial positive human andenvironmental impact

MAKING STRATEGIC CSRHAPPEN

The organizational benefits of strategic CSRcan be substantial but so too are the potentialchallenges encountered in making the orga-nizational changes needed to implementstrategic CSR Five guidelines for puttingstrategic CSR into action are as follows

Focus your CSR Init iat ives

Based on careful analysis of your organi-zationrsquos strategic challenges and opportu-nities initially focus on just a few CSRinitiatives with the most promise to yieldboth business value and socialenvironmen-tal contribution Prioritizing in this way canprovide the focus needed to attain substan-tial positive CSR and business outcomesrather than diluting organizational resourceswith an overly ambitious range of CSR initia-tives

Focus is facilitated by establishing a com-pelling CSR vision together with clear state-ments about what that vision does and doesnot encompass BPrsquos vision of lsquolsquoBeyond Pet-roleumrsquorsquo is elaborated with the explicit state-ment that it does not mean that BP isabandoning oil and gas getting out of hydro-carbons or focusing only on alternatives(eg renewable energy sources) Ratherwhat Beyond Petroleum does entail includesdeveloping new ways to produce and supplyoil and gas ndash through clean fuels throughgreater efficiency and through substitution ndashas well as developing new fuels that can overthe long term begin to provide new energychoices

Identify and Engage RelevantStakeholders

Stakeholders encompass employees man-agers suppliers subcontractors customersshareholders local communities govern-ment regulators and interest groupsAlthough interest groups do not necessarilyhave a contractual connection to an organi-zation their power to influence public opi-

139

nion and organizational outcomes can besubstantial A Greenpeace campaign againstShell UK exemplifies the impact interestgroups can have on organizational opera-tions Shell wanted to dispose of the BrentSpar an off-shore oil storage tank by sinkingit into the deep waters of the North Sea off thecoast of Scotland After research identifyingthe deep-sea disposal method as the mostenvironmentally sound option Shellobtained the British governmentrsquos supportfor this course of action However Shellfailed to include environmental advocacygroups in the decision-making process andGreenpeace mounted a costly campaign tostop Shellrsquos proposed disposal of the tank

After three months of falling share pricesand public boycotts Shell announced theywould no longer pursue the deep-sea dispo-sal of the Brent Spar The storage tank waseventually moved intact to a Norwegianfjord a process that probably led to moreenvironmental harm than Shellrsquos originalplan Both sides incurred battle scars in theprocess Shell lost money customers andshareholders Greenpeace lost credibilitywhen investigations revealed it had grosslyover-estimated the amount of oil left in thestorage tank thus misrepresenting theamount of potential environmental damagethat could have occurred Proactive engage-ment with environmental stakeholders earlyin the process ndash which is increasingly thenorm especially for potentially environmen-tally sensitive projects ndash would have savedShell the substantial financial and other costsincurred by striving to merely meet environ-mental regulatory requirements

Grapple with Inevitable EthicalDilemmas

Implementing strategic CSR routinelyposes ethical challenges for organizationsConducting business directly in Chinaenabled Google to dramatically increase itsmarket share and ostensibly expand thepotential access to information of over abillion people Doing so in accordance withthe Chinese governmentrsquos strict censorship

guidelines however raised cynicism aboutGooglersquos corporate philosophies thatlsquolsquoDemocracy on the web worksrsquorsquo and thatlsquolsquoYou can make money without doing evilrsquorsquo

Reducing costs by moving productionoverseas can trigger thorny ethical dilem-mas These include decimating the viabilityof small communities that are highly depen-dent on a particular manufacturing facilityas well as the challenge of ensuring thatcheap production costs are not the result ofhuman exploitation Maintaining quality andsafety standards is also more difficult whenproduction is outsourced exemplified byproblems encountered with toys toothpasteand pet food produced in China

Ethical issues will arise for organizationsplanning strategic CSR initiatives so carefulanalysis and sound reasoning is requiredOrganizational leaders need to carefully con-sider relevant ethical principles that pertainto their business operations such as thoseproduced by the UNGC and outlined inTable 1 as well as other sources identifiedin the selected bibliography After examiningrelevant ethical guidelines one well-knownheuristic is to avoid actions that you wouldregret seeing on the front page of a news-paper Realize that in practice ethical princi-ples often conflict necessitating a reasonedassessment of the short- medium- and long-term foreseeable positive and negative con-sequences for all stakeholders of adopting aparticular major organizational initiativeEngaging with stakeholders to craft uniquesolutions ndash as illustrated earlier by how LeviStrauss dealt with its child labor issue ndash canbe challenging though prudent Finallyappointing a devilrsquos advocate can help high-light blind spots or flawed reasoning in ethi-cal analyses

Methodically working through ethicalissues helps to ensure that CSR initiatives passthe scrutiny and win the approval of relevantstakeholders Indeed proactive managementof ethics is critical not only for attractingemployees customers and investors con-cerned with CSR but also for avoiding thepotentially devastating wrath of regulatorsinterest groups and investors who are eager to


expose and dissociate themselves from orga-nizations with questionable ethics

Develop Appropriate Metrics

What gets measured in organizations iswhat gets done Organizations first embark-ing on a path to strategic CSR need to make afundamental shift in measurement systemsbeyond traditional operational and financialmetrics The triple-bottom-line perspective ofassessing the impact of organizational opera-tions on people and planet as well as profitscan be helpful in this regard

The Leadership in Energy and Environ-mental Design (LEED) Green Building Rat-ing SystemTM provides building designersdevelopers owners and operators with per-formance measures in five key areas ofhuman and environmental health sustain-able site development water savings energyefficiency materials selection and indoorenvironmental quality LEED materialsselection criteria include using buildingmaterials that have been extracted or manu-factured from within 500 miles of the projectsite thereby supporting the use of indigen-ous resources and reducing the adverseenvironmental impacts resulting from trans-portation Potential financial incentives forcomplying with such standards are illu-strated by the Embrey Engineering Buildingat Southern Methodist University whichreceived additional donations as a result ofcertification that it had been designed andconstructed to the LEED Gold StandardSimilarly Texas Instrumentsrsquo (TI) newLEED-certified manufacturing facility inRichardson Texas was built under budgetand is expected to save TI $4 million inenergy costs annually from the environmen-tally friendly innovations designed into thebuilding

Further ideas for CSR metrics may begleaned from CSR institutions including Sus-tainAbility (wwwsustainabilitycom) theUnited Nations Global Compact (wwwun-globalcompactorg) and the World Busi-ness Council for Sustainable Development(wwwwbcsdch) While such resources

can be a useful source of CSR measurementideas quality metrics tend to be crafted toprovide both financial and nonfinancial indi-cators of an organizationrsquos progress againstits unique CSR goals

Embed in Senior Leadership andwith Rewards

Valuable strategic CSR opportunities canemanate from any level within an organiza-tion or even from outside it Senior manage-ment nonetheless needs to play a crucial rolein championing guiding and nurturingpotential CSR initiatives if they are to becomea fundamental aspect of business operationsndash and thereby a strategic imperative ratherthan merely a transient ostentatious expres-sion of lsquolsquogood willrsquorsquo During the early imple-mentation of CSR initiatives at least somepeople tend to refuse to buy in It can taketime and perseverance for all organizationalmembers to appreciate the business impera-tive and benefits of truly strategic CSR initia-tives rather than dismissing them as merelykeeping up with business fashion as mani-fested through cynical expressions such aslsquolsquothis too will pass rsquorsquo

To weave strategic CSR into the fabric ofcorporate culture senior leaders need tounambiguously and consistently expresstheir commitment to whatever strategicCSR initiatives an organization chooses toadopt Involvement and commitment withCSR initiatives needs to be recognizedthrough organizational reward systemsthereby helping to integrate strategic CSRinto organizational culture This persua-sively communicates to employees the orga-nizational value of pursuing and attainingstrategic CSR objectives

CONCLUSION

There is no business to be done on a deadplanetndashDavid Brower Executive DirectorSierra Club

141

Exxon Mobil argues that other organiza-tions have more competence at tacklingenvironmental issues than it does so it isbetter for Exxon to leave that market segmentto them Viewed in light of Exxonrsquos recentfinancial triumphs this perspective high-lights that CSR is not a panacea for organiza-tional prosperity with appeal to allorganizations

Jeff Immelt the CEO who pioneered andchampions GErsquos lsquolsquoEcomaginationrsquorsquo strategywas asked recently lsquolsquoDo you recyclersquorsquo Hisresponse lsquolsquoIrsquom not sure Maybe somebody inmy house does Itrsquos not like Irsquom JohnnyAppleseed here This is purely about thescience of business I donrsquot consider myselfan environmentalist Irsquom a business leaderwho says this is an important trendrsquorsquo WhileStarbuckrsquos chairman Howard Schultz clearlysees CSR as both a moral and businessimperative Immeltrsquos comment illustrateshow CSR can make good sense even to lea-

ders who are not inherently passionate aboutaddressing environmental or social issuesAs mentioned engaging in strategic CSRcan yield growth in market share increasedorganizational learning retention of deeplyengaged employees support from externalstakeholders and favorable relationshipswith investors

A growing multitude of organizationsare finding innovative and prosperous waysto grow their business while simultaneouslyhelping people in need and sustaining ourfragile planet The principles we have offeredwill hopefully inspire and guide many otherorganizations to identify unique viable andworthwhile opportunities to nurture theirbusiness prosperity as well as the commu-nities in which we and future generationslive and work


SELECTED BIBLIOGRAPHY

The relationship between CSR and financialperformance is documented by MarcOrlitzky Frank Schmidt and Sara Rynes inlsquolsquoCorporate Social and Financial Perfor-mance A Meta-Analysisrsquorsquo Organization Stu-dies 2003 24 403ndash441 as well as in lsquolsquoMiseryLoves Companies Rethinking Social Initia-tives by Businessrsquorsquo J D Margolis amp J PWalsh Administrative Science Quarterly2003 48 268ndash305

For further useful insights about strate-gic CSR opportunities metrics and ethicalprinciples see 1 For the Planet Alliance(wwwonepercentfortheplanetorg) Ameri-carsquos Promise (wwwamericaspromiseorg)Ashoka (wwwashokaorg) the AspenInstitute (wwwaspeninstituteorg) theClinton Global Initiative (wwwclintongloba-linitiativeorg) the Global Reporting Initia-tive (httpwwwglobalreportingorg)Mayors for Climate Protection (wwwcool-mayorsorg) the Global Sullivan Principlesfor Social Responsibility and Endorsersrsquo BestPractices (wwwthegsporg) Net Impact(wwwnetimpactorg) the Organizationfor Economic Cooperation and Development(wwwoecdorg) the Social Venture Net-work (wwwsvnorg) SustainAbility(wwwsustainabilitycom) the UnitedNations Global Compact (wwwunglobal-compactorg) and the World BusinessCouncil for Sustainable Development(wwwwbcsdch)

lsquolsquoStrategy and Society The Link BetweenCompetitive Advantage and CorporateSocial Responsibilityrsquorsquo by Michael Porterand Mark Kramer (Harvard Business Review2006 December 78ndash92) outlines the conceptof strategic CSR and provides a frameworkfor evaluating how a proposed CSR initiativefits into an organizationrsquos business strategy

C K Prahaladrsquos The Fortune at the Bottom ofthe Pyramid (Upper Saddle River NJ Whar-ton School 2006) provides many examples oforganizations that are creating viable busi-ness opportunities in poor underdevelopedmarkets

Comprehensive practical guidelines forleading the implementation of CSR initia-tives are provided by Dexter DunphyAndrew Griffiths amp Suzanne Benn in Orga-nizational Change for Corporate Sustainability(New York Routledge 2007) Analysis of thepotential rewards and pitfalls of engaging inCSR are discussed by Daniel Vogel in TheMarket for Virtue The Potential and Limits ofCorporate Social Responsibility (WashingtonDC Brookings 2006) For insights on devel-oping sustainable metrics to assess CSRattainments see Chad Hollidayrsquos lsquolsquoSustain-able Growth the DuPont Wayrsquorsquo HarvardBusiness Review 2001 September 129ndash134as well as Dunphy et al (2007)

To learn more about how CSR can con-tribute to organizational learning see lsquolsquoFromSpare Change to Real Changersquorsquo by RosabethMoss Kanter Harvard Business Review 1999MayJune 122ndash132 as well as Dunphy et al(2007) Keeping employees engaged and com-mitted to onersquos organization is discussed inDaniel Turban and Daniel Greeningrsquos lsquolsquoCor-porate Social Performance and Organiza-tional Attractiveness to ProspectiveEmployeesrsquorsquo Academy of Management Journal1996 40 658ndash672 and Jeff Barbianrsquos lsquolsquoTheCharitable Workerrsquorsquo Training 2001 38 50ndash55 lsquolsquoImpact and the Art of Motivation Main-tenance The Effects of Contact with Benefici-aries on Persistence Behaviorrsquorsquo OrganizationalBehavior amp Human Decision Processes 2007 10353ndash67 by Adam M Grant Elizabeth MCampbell Grace Chen Keenan Cottone

143

David Lapedis and Karen Lee documentsmotivation as a function contact with thebeneficiaries of prosocial work For more onthe relationship between CSR and externalstakeholders see Porter and Kramer (2006)as well as Michael Barnettrsquos lsquolsquoStakeholderInfluence Capacity and the Variability ofFinancial Returns to Corporate Social Respon-sibilityrsquorsquo Academy of Management Review 200732 794ndash816

For information on the impact of CSR oninvestor relations see Alison Mackey TysonMackey and Jay Barneyrsquos lsquolsquoCorporate SocialResponsibility and Firm Performance Inves-tor Preferences and Corporate StrategiesrsquorsquoAcademy of Management Review 2007 32817ndash835 lsquolsquoHow To Make a Buck Greenrsquorsquo byJane Bryant Quinn Newsweek April 12 200763ndash66 and lsquolsquoThe Street Turns Greenrsquorsquo by John-nie Roberts Newsweek March 12 2007 40

To learn more about the exemplary stra-tegic CSR initiatives featured in this papersee Hewlett-Packard (httpwwwhpcomhpinfoglobalcitizenshipenvironmentindexhtml) Interface (wwwinterfaceflorcomimagesphotosReEntry_demohtmlLevi Strauss (httpwwwlevistrausscomCitizenshipCaseStudiesaspx)Manildra Group (wwwmanildracomauframeset htm) Nestle (wwwnestlecomShared ValueCSR) Norsk Hydro(wwwhydro comenglobal_commitmentenvironmentresource_management) Star-bucks (wwwstarbuckscomaboutusorigi-nsasp) Target Stores (httpwwwtargetcom) Wal-Mart (httpwalmart-storescomGlobalWMStoresWeb) andWhole Foods (httpwholefoodscomcompanyindexhtml)

Peter A Heslin is assistant professor of management at the Cox School ofBusiness Southern Methodist University Dallas TX He received hisPhD in organizational behavior and human resource management fromthe Rotman School of Management University of Toronto Heslin teachesgraduate courses in organization behavior leading organizationalchange and managing across cultures He has consulted in these areasto corporations including Citibank IBM Zurich Insurance KPMG andProcter amp Gamble Peter has authored or co-authored over a dozenarticles published in journals such as Applied Psychology An InternationalReview Journal of Applied Psychology Journal of Organizational BehaviorJournal of Occupational amp Organizational Psychology OrganizationalDynamics and Personnel Psychology (Tel +1 214 768 4170 e-mailheslincoxsmuedu wwwpeterheslincom)

Jenna D Ochoa is a corporate relief pharmacist for Tom Thumb adivision of Safeway She serves as an interim manager in a range of TomThumb pharmacies throughout the DallasFort Worth Metroplex Ochoaalso serves as a volunteer pharmacist at the Collin County Adult Clinic aswell as a subject matter expert for the Health and Sciences TelevisionNetwork After completing a BS (Pharmacy) at the University of Texas atAustin Ochoa worked as a staff pharmacist for three intensive care units atthe Presbyterian Hospital of Dallas Subsequently she worked as aconsulting pharmacist at Merck-Medco LLC Since completing herProfessional MBA at Southern Methodist University Ochoa is in theprocess of transitioning into a management and strategy consulting rolewith a focus on addressing strategic sustainability opportunities within thehealthcare industry (Tel +1 214 403 2846 e-mail jennaochoagmailcom)


Understanding and developingtradestrategic corporatetradesocial responsibility

Acknowledgments

The roots and nature of corporate social responsibility


Drivers of CSR



Committed and Engaged Employees


Financing and Investor Relations

Strategic CSR Principles

Principle 1 Cultivate Needed Talent

Principle 2 Develop New Markets

Principle 3 Protect Labor Welfare

Principle 4 Reduce Your Environmental Footprint

Principle 5 Profit from By-products


Principle 7 Develop a Green Supply Chain

Making strategic CSR happen

Focus your CSR Initiatives

Identify and Engage Relevant Stakeholders

Grapple with Inevitable Ethical Dilemmas


Embed in Senior Leadership and with Rewards

Conclusion

Selected bibliography

clustered into seven principles for enactingstrategic CSR These principles could serveas a guiding stimulus for other organizationsintent on discovering and capitalizing ontheir unique opportunities to do well bydoing good

THE ROOTS AND NATURE OFCORPORATE SOCIALRESPONSIBILITY

CSR has roots in a pivotal 1953 decision bythe New Jersey State Supreme Court whichremoved legal restrictions on corporate phi-lanthropy A shareholder who objected toStandard Oil donating money to PrincetonUniversity brought a lawsuit against Stan-dard The court ruled in Standardrsquos favoraccepting the argument that its donations toPrincetonrsquos Engineering Department wereintended to benefit Standard Oil by helpingto educate future potential employees Thisdecision paved the way for other companiesin the United States to engage in corporategiving CSR initiatives increasingly involvestrategically directed donations of equip-ment or core employee skills

There are various definitions of CSR butmost share the theme of engaging in econom-ically sustainable business activities that gobeyond legal requirements to protect thewell-being of employees communities andthe environment Strategic CSR seeks to dothis in ways that simultaneously create tan-gible business benefits thereby being finan-cially self-sustaining and less prone toeliciting outcries about squandering share-holder wealth Granted that CSR includesboth environmental and human sustainabil-ity components we follow CSR scholars whouse the terms corporate sustainability andCSR synonymously

Environmental sustainability involvesusing scientific insights to reduce the envir-onmental footprint of an organizationrsquosoperations and products Doing so can helpto address issues including the earthrsquos dimin-ishing supply of nonrenewable resourcesand capacity to absorb the waste from our

production and consumption Human sus-tainability involves creating an equitabledevelopmental and healthy workplace foremployees as well as adding value to stake-holders including suppliers customers andother community members Such value-added initiatives can be delivered to externalstakeholders through avenues including theprovision of educational health careerenergy-saving pollution-reducing or envir-onmental beautification opportunities

According to Chad Holliday (2001 p134) chairman and CEO of DuPont

Sustainable growth should be viewed notas a program for stepped-up environ-mental performance but as a compre-hensive way of doing business one thatdelivers tremendous economic value andopens up a vast array of new opportu-nities Capitalizing on these benefits mayrequire relentless determination andtenacity but ultimately companies willfind that they can generate substantialbusiness value through sustainabilitywhile both enhancing the quality of lifethroughout the world and protecting theenvironment

By virtue of being self-sustainable stra-tegic CSR can become an integral and invalu-able part of business strategy and operationsrather than merely off-the-shelf or sponta-neous lsquolsquogood deedsrsquorsquo Developing prudentCSR is thus much less a matter of organiza-tional imitation than real-time customiza-tion


Many organizations appear to be strong insome areas of CSR performance yet weak inothers Should Wal-Mart Stores be deemedsocially responsible for providing low-pricedgoods for impoverished and budget consciouscustomers or irresponsible for paying itsemployees low wages providing minimalhealth care benefits and for adversely affect-ing independent merchants Does BP exhibitCSR by recognizing and striving to address




DRIVERS OF CSR





127


















129

















131



























133


















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CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion




DRIVERS OF CSR





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CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion



















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CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion


















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CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion


















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CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion



















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CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion


















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CONCLUSION


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143








Acknowledgments



Drivers of CSR




















Conclusion



















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CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion




















CONCLUSION


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Acknowledgments



Drivers of CSR




















Conclusion














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Acknowledgments



Drivers of CSR




















Conclusion









Acknowledgments



Drivers of CSR




















Conclusion


Corporate social responsibility

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