Managers look at each other too oftenCorporate Social Responsibility (CSR) as another source of pressure or fad. As customers, employees and suppliers, and society at large, place increasing importance on CSR, some leaders have begun to see it as a creative way to fundamentally strengthen their businesses while contributing to the society. They view CSR as central to their overall strategy and help them creatively address key business issues.
The great challenge for leaders is to devise an approach that can truly bring these grand ambitions to life, and so far few have found the way. However, some innovative companies managed to overcome this obstacle and smart partnerships emerged as a way to create value for business and society at the same time. Smart Partnering focuses on key areas of impact between business and society, developing creative solutions that take advantage of the complementary capabilities of both to address the key challenges each partner faces. In this article, we draw on the lessons learned from smart partnerships to give leaders a practical way to assess real CSR opportunities.
Mapping of the CSR space
There is no universally accepted definition of CSR, which leads to much confusion about what constitutes a CSR activity. We can begin to develop a working definition of CSR by thinking about its two objectives (economic and social benefits) and the range of potential benefits in each case (Figure 1).
Many companies carry out CSR activities that can best be described as pet projects, since they reflect the personal interests of individual executives. Even if these activities are presented with much fanfare and fanfare, they usually provide minimal benefits to business or society. In between are efforts that can make both parties feel good, but yield limited and often one-sided benefits. In philanthropy, for example, corporate donations bring the lion's share of benefits to society (with potential but often questionable reputational benefits for the company). Also, in what is best described as propaganda, CSR activities are mainly focused on building a company's reputation without bringing any real benefit to society. Some cynics claim that this form of CSR is hype at best and potentially dangerous if it reveals a gap between the company's words and actions.
Neither approach realizes the significant shared value opportunities that have been achieved through smart partnerships. In these endeavors, the company's focus shifts beyond avoiding risk or enhancing its reputation to enhancing its ability to create core value by addressing key strategic issues or challenges. For society, the focus is shifting from maintaining minimum standards or seeking financing to improving employment, general quality of life and living standards. The key is for each party to take advantage of the other party's resources and expertise to find creative solutions to critical business and societal challenges.
Addressing the challenges of rural distribution in India
More than 70 percent of India's population lives in rural villages spread over large geographic areas with very low per capita consumption rates. For multinational companies, the cost of reaching and serving these rural markets is significant because typical urban sales approaches don't work. Hindustan Unilever Limited's Shakti project has overcome these challenges by actively understanding the critical needs of society and the organization. HUL worked with three self-help groups whose members were identified as Shakti entrepreneurs in selected villages. These entrepreneurs were women, as the association's main goal was to help rural women develop independence and self-esteem. The entrepreneurs received extensive training and borrowed money from their support groups to buy HUL products, which they then sold in their villages. In 2008, Shakti employed 42,000 women entrepreneurs in nearly 130,000 villages and 3 million households each month. That same year, HUL's sales of the project approached $100 million. Dalip Sehgal, then CEO of New Ventures at HUL, noted: “Shakti is a key win-win initiative and has faced challenges on many fronts. It is a sales and distribution initiative that generates growth, a communication initiative that builds brands, a microenterprise initiative that creates livelihoods, a social initiative that improves living standards and promotes prosperity in rural India. What makes Shakti exceptionally scalable and sustainable is the fact that it not only contributes to HUL, but also to the community of which it is a part.”1
How does this work? The examples in the two sidebars (see 'Addressing the challenges of rural distribution in India' and 'Ensuring sustainable supply of critical raw materials') illustrate smart partnership initiatives at Unilever. Both address the long-term strategic challenges facing the company and help build creative partnerships that significantly benefit both parties.
The first questions for every leader should be: "What have you focused your CSR activities on in the past?" and, most importantly, "What should you focus on for the future?" All organizations need to balance limited resources and efforts, so the challenge is how to best use your resources to maximize the benefits for your company (and its shareholders and stakeholders) and society. Start by mapping your current portfolio of CSR initiatives on the framework shown in Figure 1 and ask: What are the objectives of our current initiatives? What benefits are created and who realizes them? Which of these initiatives are helping us address our key strategic challenges and opportunities?
Ensuring a sustainable supply of critical raw materials
Unilever's Lipton unit is the world's biggest buyer of tea. In 1999, Unilever Tea Kenya launched a pilot program in Kericho, southwestern Kenya, to apply the company's sustainability principles to tea production. The initiative focused on improving productivity, sustainability and environmental stewardship, as well as energy and habitat protection. For Unilever, increasing pressure on natural resources means that securing a high-quality, long-term supply of key raw materials is of paramount strategic importance.
Kericho's initiative has had a direct impact on the company's ability to control the supply of tea not only today, but also in the future, while enhancing Unilever's reputation with both consumers and employees. Management believed that the higher short-term costs were far outweighed by the long-term strategic advantage Unilever gained from its brands and raw material supplies. As a sign of its commitment, Unilever expanded the scope of its sustainable agriculture program in 2008, with the goal of having all Lipton tea estates Rainforest Alliance certified by 2015.
For the society, the initiative increased farmers' income through a premium of 10 to 15%, paid above market prices. In addition, it focused on issues of great concern to governments and farmers, including improving farmers' skills, protecting the environment and sustainable production methods (such as developing a self-sustaining ecosystem), and improving related local jobs. All of these factors have contributed to strengthening rural incomes, skills and living standards.
Focusing CSR Decisions: Guiding Principles
Companies may have activities all over the map, but that's not where they need to be, or how to maximize the benefits of CSR. Many businesses start with pet, philanthropic, or advertising projects because these activities are quick and easy to decide on and implement. The topic is how to approach CSR strategies that focus on adding real value to the company and to society. The attached examples suggest three principles for achieving this goal.
- Focus your CSR efforts.Management time and resources are limited, so the greatest opportunities arise in areas where the company has significant interactions and therefore the greatest impact on society. These are areas where the business can not only gain a deeper understanding of interdependencies, but also where there is the greatest potential for mutual benefit.
- Develop a deep understanding of the benefits.Even after ranking the opportunity areas you've chosen, it's not always easy to find the potential to create shared value. The key is to find symmetry between the two sides and be open enough to understand the issues from a business and social perspective.
- Find the right partners.These are the ones who will benefit from your core business activities and capabilities, and from whom you, in turn, can benefit. Forming partnerships is difficult, but when both parties see the potential for a win-win, there is greater motivation to achieve significant benefits. Relationships, especially long-term ones built on a realistic understanding of the true strengths of both sides, have a better chance of being successful and sustainable.
Applying these principles to selecting suitable CSR opportunities raises additional questions, namely: what are one or two critical areas in our business where we interact with and influence society, and where significant opportunities are mutual? if we can adapt this creatively? Relationship? What are the long-term basic needs for us and society that can be met in this way? What resources or skills do we need and what must we provide to take advantage of the opportunities?
Business case structure
In a smart partnership, mutual benefit is not only a reasonable goal, but also a prerequisite for long-term success. But this commitment, like any other strategic initiative, must be based on the potential for value creation. Every investment is an investment that must be evaluated with equal rigor in terms of prioritization, planning, fundraising, and monitoring.
Now you must define the range of potential benefits to both business and society. This won't always be easy, but a clear story and business case are important if you want to engage the company, its shareholders and stakeholders.
You can assess benefits based on the following three dimensions:
- Window of opportunity.Be clear about immediate short-term goals and long-term benefits. When it comes to smart partnership, timing is important as initiatives can be complex and take time to reach their full potential.
- kind of benefits.Some benefits will be tangible, such as: B. Income from accessing a new market. Others are equally important but intangible, like developing a new skill or improving employee morale.
- profit sharingMake clear how the benefits will be shared between companies and society. If they are one-sided, be careful not to enter the arena of philanthropy or propaganda. Remember that if the goal is to create more value through partnerships than you could alone, the benefits must be shared appropriately.
Figure 2 shows two contrasting areas of performance for the Unilever samples discussed in the sidebars. At Projeto Shakti, the short-term tangible benefits are extremely clear and strong, while in Kericho's case, the long-term intangible benefits are strategic for both the company and the communities in which it operates. Keep in mind that having advantages in all sections of the matrix is not strictly necessary. However, if you struggle with any of the dimensions, for example, there are no tangible or long-term benefits, or if most of the benefits are one-sided, go back and ask if this is a real opportunity for a partnership with significant value. . creation possible mutual value.
When you have developed a clear set of benefits, a business case, and a story that you can share with all stakeholders, ask: Do we have a clear understanding of the full set of benefits and associated business case that we are evaluating to focus on? and manage potential CSR activities? Is the activity focused on fundamental value creation opportunities, where can we really collaborate with society to obtain benefits at the same time? Are the opportunities significant, scalable, and support our overall strategic priorities?
Implement CSR consistently and resolutely
As we all know, partnerships can be challenging. It takes planning and hard work to assess potential mutual benefits, build trust, and develop and manage activities both internally and externally. But is it worth it? The companies at the forefront of these partnerships suggest the answer is a resounding yes, but two additional principles must be followed to ensure success:
Start with a long-term commitment.Having a positive impact on social issues like living standards is not a "quick fix" project. As such, leaders seeking to form alliances must have a long-term mindset, backed by strong promises and measurable commitments and actions. Your initiative must generate value for shareholders and stakeholders over time.
Engage the entire workforce and lead by example.Your employees can be one of your greatest assets and beneficiaries when it comes to CSR activities. Employees are increasingly choosing to work for organizations whose values align with their own. Attracting and retaining talent will be an increasing challenge in the future, so activities that are based on core values and inspire employees are vital. Unilever, along with other leaders in smart partnerships, actively engages its employees in such initiatives and sees increased motivation, loyalty and the ability to attract and retain talent as a result. Employee engagement starts at the top. Leaders must be willing to make a personal commitment in order for activities to reach their full potential.
That's the hard part of the process: acting instead of talking about it and maintaining momentum even when goals are far in the future. As you plan and execute the execution of your chosen initiatives, ask yourself: can we generate the commitment we need across the organization to achieve this and, as leaders, are we ready to lead by example? Do we plan effectively to ensure implementation is successful, with resources, milestones, measurement and accountability? How can we manage the initiative and focus on the totality of the anticipated benefits, not just the short-term finances?
What is a manager to do?
When it comes to CSR, there are no easy answers on what to do or how to do it. The interactions and interdependencies of a company with society are varied and complex. However, it is clear that approaching CSR as a welfare exercise or a quick fix risks missing out on great opportunities for business and society. Taking a step-by-step approach and following the principles outlined here provides leaders with a way to recognize and drive mutual value creation. But this will require a mindset shift: Smart Partnering's vision is that CSR is about doing good business and tackling the creatively important issues facing business and society, not just feeling good. And the smart partnership is not for the faint of heart. It requires more focus, work, and long-term commitment than many standard CSR projects, philanthropic activities, and advertising campaigns, but the rewards are potentially much greater for both parties.
Conversation Continuation - Authors' Response to Readers' Comments
In January 2010, the authors reviewed our readers' comments on their original article and brought new insights and suggestions to the discussion.
Thanks a lotFor those who read and considered the insights in our Making the Most of Corporate Social Responsibility article, and especially for those who shared their thoughts and experiences on smart partnerships. As many have rightly pointed out, interest in CSR has skyrocketed and there are a growing number of compelling examples of smart partnerships. This dynamic reflects a better understanding of the potential benefits for business and the maturation of social organizations. Both see the potential to create mutual value.
Our goal was to advance the debate on how to make CSR an integral part of core strategic thinking, rather than an addition to wellbeing. Where should we have this conversation? Many of the responses came from academics or executives responsible for CSR activities in their companies. While this is obvious, it raises the question of how best to engage (or support) senior leaders who make strategic decisions and set the direction of organizations, especially the next generation of leaders, who are facing increasing challenges. pressing Challengers are facing problems than ever before.
Our work, that of others in this field, and the contribution ofTrimestral de McKinseyReaders suggest that there are three key challenges to making smart partnerships a strategic necessity and business opportunity. They also suggest ways to overcome these challenges.
1. Place the CSR on the strategy table
For CSR to realize its potential, it must focus on key areas of interaction between a company and its environment and place value-added activities at the center of the strategic agenda. The challenge is to bring innovative CSR ideas to the table when examining and deciding on business strategies. How can we make CSR approaches an integral part of the strategic toolkit for line of business managers?
First, the potential benefits of CSR, particularly smart partnerships, need to be demonstrated in practice for established business leaders to recognize the significant opportunities it offers. That is why it is so important to share their examples and ours. Next, key CSR leaders need to be part of key strategic processes. Ultimately, CSR must move from being a separate function to being part of every leader's skill set as an innovative way to solve critical problems.
2. Expand your strategic ambitions for CSR
Several readers spoke about positively received CSR activities in their organizations in the areas of philanthropy and partnership. As we have suggested, the starting point for any CSR strategy should be to describe the CSR activities that a company is already undertaking and to make clear their intent and position in the overall portfolio. When CSR activities are primarily philanthropic in nature, they can provide a strong foundation for building a company's reputation and engaging employees. Philanthropy has other obvious benefits, too: It's relatively easy to get started, it's often tax deductible, and it requires less effort and commitment from the entire organization.
The questions in this approach are: What benefits are left on the table, both for society and for the company? What opportunities are lost? The challenge is to scale up strategic CSR ambitions and actively move towards Smart Partnering, where the greatest opportunities lie. Stretching means going beyond the usual practice. While the growing recognition of the benefits of CSR in building employee engagement is extremely encouraging, it is just the tip of the iceberg. In the examples we have described, the benefit matrices set out much broader ambitions and a variety of benefits (short and long term, tangible and intangible) both for society and for key business strategies. How can you expand your company's ambitions in a similar way? Who do you need to engage, especially top business leaders, to gain new perspectives and challenge conventional wisdom?
3. Reinforce your core values, internally and externally
When describing corporate visions and strategies, reference is often made to the core values that shape individual behavior and expectations about how we work and interact with each other. But too often we limit value discussions to internal behavior and actions. As several readers have pointed out, shouldn't leaders also be responsible for how organizations live out their core values in their interactions with all stakeholders?
Companies affect society and vice versa, so it is necessary to recognize the mutual responsibility that it implies. Trust in business within society is low, public scrutiny of business is constant, client selection criteria include vendor reputation and values, and the next generation of leaders will choose employers whose values match their own. . One potential challenge for companies is whether the way they operate externally, and not just internally, will affect their "license to operate." Many companies that approach CSR strategically recognize this symbiosis and are based on strong values that live both internally and externally.
Of course, we don't advocate smart partnership initiatives just because they reinforce a company's core values; This falls within the realm of advertising. But when you consider the benefits of a potential initiative, think specifically about its impact on your company's assets. If you can't see a direct connection to them, think about how you can create one, for example by reinforcing values through employee ownership or building additional external relationships based on initiative.
What is your next step? First, engage with key business leaders to identify two or three critical interactions with society. Then identify for each what you have to offer in terms of skills, knowledge, resources, relationships, etc. That would make a difference to both your organization and society by addressing the challenges you identified. Consider what ideal partners you can offer to complement the things you bring to these challenges. For the Unilever-Kericho example in our original article, a critical interaction with society related to commodities (tea in particular). Mapping the potential complementary strengths of a partnership can provide something of a balance sheet.
Use the balance sheets you create as a starting point to identify issues and discuss them with key internal stakeholders and potential external partners. In a world of burgeoning technology, we may one day even see some kind of CSR "dating agency" where potential partners can share their changes. As discussions progress, an inventory can also help you and your partners build the performance roadmap and business case for your smart partnership initiative.
In this type of process, experienced CSR leaders can begin to put CSR on the strategic agenda by engaging leaders in real business challenges. That means helping these leaders identify opportunities, share concrete examples, think more broadly about solutions, and move forward.
Smart association is good business. The experiences and insights of our readers confirm that momentum is building towards a time when CSR is integrated into core strategy and business activities, rather than being treated as an orphan in need of a special label. With your help this dynamic will be built. Share your experiences, design your business portfolios, develop your balance sheets and performance matrices, and challenge the business community to change mindsets for the better.