What’s Your “CSR” Specialty?

When it comes to corporate strategy, the definition of the problem shapes the definition of the answer.  Increasingly companies are recognizing that when it comes to how they deal with what are commonly known as CSR issues, they are actually dealing with a range of different problems. 

The result, as you can imagine, is that companies are developing increasingly sophisticated and specialized tool sets and job descriptions to deal with these challenges.  Broadly speaking, they can be split into four different specialties: (1) applied philanthropy, (2) CSR operations, (3) stakeholder relationship management, and (4) social innovation.

Applied philanthropy addresses the question: “how can my company contribute to addressing social, community or environmental causes that are too big for any single organization to handle?”  These are often issues like K-12 education, local community challenges, and humanitarian crises that employees and senior managers care about, that offer results such as higher employee morale and better community relations but where the connection to core business operations isn’t direct.  

Companies have developed tools like corporate philanthropy, volunteerism, and donations management to address them. They have become skilled at identifying and prioritizing issues that matter to them, and identifying ways that they can make unique contributions.  Some may scoff, but these are specialized skills, and you can easily discern the difference between companies that are good at applied philanthropy and those that aren’t.  Companies are deriving strategic business value from these skill-sets, and this should not be ignored.

Experts in this field usually become corporate foundation presidents or community affairs vice presidents.  They are supported by volunteer coordinators and donations managers, among others. 

A second group of practitioners, those who manage CSR operations, have grown up around a second set of problems: “how should companies address the externalities caused by their businesses?”

Properly understood, this is the core of the “corporate social responsibility” world. These experts go by various labels: vice presidents for environment, health and safety, chief ethics and compliance officers, and chief sustainability officers are some of the most popular.

The tools of art in this sub-field include the code of conduct, the supplier code of ethics, the training program, the hotline, and the operations check list. This sub-field tends to be operationally oriented and focused on clear targets and conditions, such as factory and supply chain realities. 

The third specialization is less about reacting to externalities, and more about building up trust and social capital so that the external environment aids and abets the competitive position of the company.  Stakeholder relationship management is important because companies are increasingly transitioning from seeing themselves as autonomous management units to interconnected hubs located within their eco-systems.

Before Professor Michael Porter started to discuss shared value he was very famous for his work on competitiveness. He divided corporate management responsibilities into two spheres: those things which a company could control directly -- its internal systems – and those things which affected it but which it could not control – its external environment.

For most of business history, companies have tended to focus on their internal systems, their plant, property, and equipment, their people, their marketing and communications. They have worked to maximize their strengths, and minimize their weaknesses. They have focused on their core business.

But over the last generation, with the massive information and communications revolution that has taken place, companies increasingly realize that their external environments can and do profoundly affect their businesses. Their opportunities, challenges, and threats and demands from outside have increased exponentially.

Because of learnings and expertise built from philanthropy and CSR, companies have built up a body of knowledge about how to react to these externalities, and many of these same professionals are now starting to help companies engage with them proactively. In other words, instead of just coping with incoming issues, companies increasingly are trying to figure out how to lean forward and engage.

This kind of engagement is being driven by heads of external affairs, public affairs, vice presidents for communications and marketing. They are working with their colleagues in philanthropy and operations and coming up with new formulas for engagement.

The tools of the trade include public-private partnerships, social impact initiatives, pro bono and technical assistance programs, joint ventures, networks, alliances, and coalitions, “pre-competitive” investments, and the like.

The fourth segment that is rapidly growing is the social innovator segment – i.e. the business leaders who are trying to develop business products and services that address specific social and environmental concerns.  Social innovators are the synthesis of the profit motive with social and environmental benefit. This is the area where we expect to see the most rampant growth in the years to come because it is coming from both the non-profit sector and from the business sector.

The key to the growth of the social innovation sector is the growing acceptance that the most sustainable way for a desirable social or environmental good to be produced is to make sure that people want it.  In other words, in the minds of a growing number of people, profit has become linked to sustainability, and sustainability has come to be seen as profitable.

From the social side, non-profits are developing fee-for-service models. They are entering into businesses in order to generate revenues that subsidize their social purpose. B-corporation laws (for benefit companies) have been established in a number of states that explicitly protect managers who do not engage in profit maximization behavior.

From the business side, companies are scrutinizing social and environmental challenges and discovering opportunities to make money. Last year, I was fascinated to hear about the story from Dow, about developing a paint that sucks pollutants out of the air, and how the start-up Ecovative has developed a new kind of packaging material out of mushrooms that is much more biodegradable than previous packaging material standards.   

One person’s obstacle is another person’s opportunity. For the business people who can figure out the solutions, there is money to be made in addressing societal challenges like intractable traffic conditions, holes in the ozone layer, aging populations, desalination, clean energy, and neighborhood renewal. Social innovation could be very profitable in years to come.

I think it was an unfortunate accident of history that “corporate social responsibility” stuck as the label to describe the interaction of business with environmental, social and ethical issues.  Basically, CSR became short-hand for dealing with the interdisciplinary skill-sets of navigating business and social, environmental, and ethical interests. 

Properly speaking, the whole field should be considered “socio-economic management.”  Practitioners deal with very different problem sets and offer very different value propositions, and they should be respected for their particular technical skill-sets.  Perhaps the increasing segmentation and specialization of the field -- a by-product of the fact that companies are getting more sophisticated and diversifying how they manage business-society relations – will bring clarity from the confusion.