Who’s right, the Nobel prize-winning economist or the world renowned strategist? We would contend thay they both are. Business should pursue profits foremost, but in today’s economic environment, particularly with respect to the workforce, their strategy must include efforts to improve society.
In his landmark 2006 paper, Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, Michael Porter, and co-author Mark Kramer, argue that corporate philanthropy and Corporate Social Responsibility (CSR) confer competitive advantage when aligned with business strategy and the pursuit of profit.
Strategic corporate activity to improve society should not be described as a “responsibility” as that ignores its other purpose, which is to drive competitive advantage and higher profits. Porter suggests the term “Corporate Social Integration;” we prefer “Corporate Social Investment” (CSI) because it incorporates the dual mindsets an organization should possess as it pursues these initiatives. Regardless of the term, research demonstrates that companies gain when they support the improvement of society in general.
However, companies gain much more when they direct philanthropy and CSI toward causes that are aligned with their strategy and are intended to drive profits. Even the most liberal-minded seem to agree. “CSR is appropriate as long as it’s in line with your business focus, and you’re not off saving rain forests when rain forests have nothing to do with ice cream,” says the former U.S. Labor secretary, Robert Reich. In terms of human capital, it is becoming evident that a firm’s reputation for CSI impacts its ability to recruit, retain and engage talent. Reich believes that knowledge workers seek companies that are known for their commitment to improving society.
| CSI Advantages |
| Societies are becoming more aware and sensitive to global social issues. As a result, CSI practices will begin evaluating and mitigating risks by strategically buying from firms committed to ameliorating the existing wealth and opportunity inequalities in their own countries |
| By investing in skills training of “unemployed but educated youth” in the rural communities, BPOs will gain talented employees at lower costs than offered in the Tier-1 and Tier-2 cities |
| Investments in education at the bottom of the pyramid will provide answers to future shortages and cost of talent issues. |
In Towers Perrin’s 2007 Global Workforce Study of almost 100,000 workers in 19 countries, “CSR” ranked an unprecedented third overall in drivers of engagement, ahead of other important factors including “career-advancement opportunities,” “challenging work” and “relationship with supervisor.”
In a May 2007 survey of 1.6 million employees, Sirota Survey Intelligence also found that 86 percent of employees who are satisfied with their firm’s CSR commitment have high levels of engagement. When employees are negative about their employer’s CSR activities, only 37 percent are highly engaged.”
As compelling as these studies are, they only capture the tip of the iceberg. An organization hoping to get the most benefit will look for CSI opportunities that position it for reputational gain as well as immediate and future human-capital advantage. Sandy Cohen, Founder and Executive Director, CommunitiWorks, a non-profit investment organization, offers this advice to Indian MNCs, particularly BPOs, that they should look to CSI to gain advantages to serve society while gaining competitive advantages. (See Box.)
There is no question that knowledge workers prefer to work for socially responsible companies. They would also seem to work harder in those companies and stay longer. Strategic CSI has become a tool in the competition for talent worldwide and, for those that do it best, a competitive advantage.
Lori Blackman is Founder and President, DNL Global, a talent-management solutions provider. Allan Schweyer is President and Executive Director, Human Capital Institute.
