The theaters of CSR

Corporate Social Responsibility CSR can be better understood through the innovative model developed by Harvard Business School Professor Kash Rangan, who talks about a platform of three theatres of CSR for evaluating and classifying CSR practices. These three theaters include the wide range of activities that can be described as CSR, and they constitute a comprehensive CSR strategy.

The core competencies, institutional capacity, and ability to excel in either philanthropic, value chain, or transformative ecosystem CSR efforts determine the type of CSR program a company might adopt.

Why trends of business

The first CSR theater focuses on philanthropy, either in the form of direct funding to nonprofits, community service organizations, and employee community service projects on the one hand, or in-kind donations of products and services to nonprofits and underserved populations on the other. Corporate philanthropy may be characterized as the “soul” of a company, expressing the social and environmental priorities of its founders, executive management, and employees, exclusive of any profit or direct benefit to the company. Coca-Cola sets a perfect example of this theater through its $88.1 million annual contribution to a variety of environmental, educational, and humanitarian organizations through The Coca-Cola Company and The Coca-Cola Foundation.

Other examples of inkind giving include IBM’s computer donations through its global KidSmart Early Learning Program 16, and Microsoft’s donation of almost $300 million in software products to nongovernmental organizations (NGOs) across the globe. Similar to corporate cash funding, in-kind donations provide important, and often critical, goods and services to nonprofit organizations and needy populations.

As corporate philanthropy evolves, it may become more strategic and more closely correlated with a company’s business priorities. In strategic corporate philanthropy initiatives, funding for social or environmental programs reflects a corporation’s philanthropic priorities as an extension of its business interests. Examples include PNC’s Bank “Grow Up Great” early childhood education program and Goldman Sachs’“10,000 Women” initiative to train and support women entrepreneurs in developing countries. Both CSR efforts are a direct expression of both companies’ respective business strategies. With $100 million in funding over a five-year period, “Grow Up Great” provides critical school readiness resources to underserved populations where PNC operates, in turn creating stronger communities, potential future employees, and PNC brand loyalty.

The “10,000 Women” initiative was a culmination of Goldman Sachs’ senior management’s effort to consolidate its diverse “philanthropic efforts behind a big idea.”

The company devotes significant CSR resources to its“10,000 Women” program to provide business and management skills to underserved women entrepreneurs throughout the world.

Under the second CSR theater, initiatives aim at increasing business opportunities and profitability, while also creating social and environmental benefits by improving operational effectiveness throughout the value chain, be it upstream in the supply chain or downstream in the distribution chain.

Nike has established a Code of Conduct governing its entire production supply chain, including the factories with which it contracts to manufacture its products. Gap Inc. launched a comprehensive “stakeholder engagement” campaign in 1999 to address the highly publicized exploitative labor practices in its manufacturing facilities, some of which also produced goods for Nike. Like the Nike program, Gap’s aggressive supply chain initiative was a response to intense negative publicity and protests.

If a company can promote the enhanced social or environmental value of its products through its CSR initiatives, it can increase its profits. Examples include ethically or socially responsibly-sourced products such as fair trade coffee, conflict-free precious stones, and sustainable farming and fishing.

The third CSR theater,(i.e. transforming the ecosystem),according to Harvard Business School’s study, represents a wide scale and disruptive change to a corporation’s business model that shifts the priority first to crafting a solution to a societal problem, which would then lead to financial returns in the longer run.

In this third theater, the company attempts to create societal value by significantly addressing a critical social or environmental need that is within its business reach, but that may not return immediate business profits. The initiative might not emerge from the company’s core competencies but may require the corporation to fundamentally change its business model and develop new skills and strategies.

Within this third domain, the corporation creates a radically new ecosystem solution that may be outside its core business interests, and that is fundamentally disruptive to the existing value chain. CSR efforts in this domain are not incremental or cautious, but require strategic risk-taking and a focus on long-term rather than short-term economic gains.

General Electric (GE) is leading a comprehensive initiative to address global warming and climate change by transforming the United States’ automobile transportation system to reduce CO2 emissions and petroleum-based fuel consumption from passenger automobiles. The GE transportation solution includes electric vehicle (EV) charging stations, electrical grid improvements, investments in component technologies, and a robust EV production system.

GE’s endeavor, if successful, has the potential to reduce CO2 emissions and petroleum-based fuel consumption by fundamentally changing the U.S. automobile transportation ecosystem. It will potentially also increase GE’s long-term profitability, given its engagement in many aspects of renewable energy production, energy delivery, EV production, and EV charging supply chains. As yet, the company has not profited from its EV solution, demonstrating that in this third CSR domain, corporations need to be willing to defer short-term profits to produce environmental and social benefits.

Another case would be the one of Philip Morris International (PMI) which decided to use technology and innovation to solve the problem of cigarette smoking, choosing to use their own new technologies to replace cigarettes altogether. Over the past three years, approximately 7.3 million adult smokers around the world have stopped smoking and switched to PMI’s heated tobacco product, which is currently available for sale in 48 markets in key cities or nationwide under the IQOS brand. PMI developed Business Transformation Metrics, on which the company reports periodically in its Sustainability Report. In 2018, smoke-free products represented more than 5 percent of PMI’s shipment volume and more than 13 percent of its net revenues, but they already represented 60 percent of its global commercial expenditure and 92 percent of its global R&D expenditure. You can read the full PMI article here .

What you need to know about Brexit: a historic moment of mourning or celebration?

Friday evening and the clock was 23:00 GMT, Britain cut ties with the EU; the British Flags were quietly lowered, folded and taken away from the many EU buildings of Brussels. This historic moment left the world with a question of whether the UK woke up today the 1st of Feb. on an uncertain future or not.

This controversial move left some people celebrating and others mourning the UK’s departure.

In his new year speech, the UK’s Prime Minister Boris Johnson said the upcoming decade would be one of “prosperity and opportunity” for the United Kingdom. This statement will be debated for years! Johnson described the Brexit moment as “a moment of real national renewal and change.”

With the UK formally leaving the EU on 31 January 2020, a lot to talk about and months of negotiation will follow. Both the EU and the UK still need to decide on the shape of their future relationship. This fate will be worked out during the transition or implementation period which is due on the 31st of December 2020. Meanwhile, the UK is destined to follow all of the EU’s rules and its trading relationship which shall remain the same.

Trade is on the top of the debatable items on the agenda, many other aspects of the future of the UK-EU relationship will also need to be decided. These aspects range from the matters of Law enforcement, data sharing and security, aviation standards and safety, access to fishing waters, supplies of electricity and gas, licensing and regulation of medicines.

This will be accompanied by some implications as the lost seats of many UK MEPs, no more EU summits, the ability of the UK to start talking to countries around the world about setting new rules for buying and selling goods and services, the change in the color of the UK’s passports, circulation of 50p Brexit coins bearing the date “31 January” and the inscription: “Peace, prosperity and friendship with all nations”,  the anticipated tightening of the UK – US relationship and shutting down the UK’s Brexit department.

These aspects are accompanied with the arguments for remaining in the EU focusing on the benefits of being part of a wider union, and the security and favourable trading relationship made possible through EU membership. While reducing red tape, gaining more sovereignty and taking control over immigration are the major arguments against.

The below chart extracted from IG gives further clarification on the controvesey of Brexit.

Key arguments for remainKey arguments for leave
Foreign affairs
As part of a community of 500 million people, Britain has greater influence over international matters as a member of the EU.
Foreign affairs
EU membership limits Britain’s international influence, ruling out an independent seat at the World Trade Organisation (WTO).
Britain has proved that it can opt out of some EU policies which it considers counterintuitive, such as adoption of the euro, the Schengen Agreement and enforced migrant quotas.
Britain would have more control of its laws and regulations, without risk of having counterintuitive policies forcefully imposed.
A union better equips Britain to tackle threats to security, including terrorism and cross-border crime.
Britain’s domestic security could benefit from full border controls, which it would gain outside the political union.
European businesses invest billions of pounds in the UK every year, both in the public sector and private sector.
Britain contributes billions of pounds in membership fees to the EU every year.
EU membership gives Britain access to the European single market, which is invaluable for trade and enables the easy movement of goods, services and people across member states.
Membership of the EU keeps Britain from fully capitalising on trade with other major economies such as Japan, India and the US.
Free trade within the EU reduces barriers and enables UK companies to grow.
The EU subjects Britain to slow and inflexible bureaucracy, making it more prohibitive for smaller companies to do business.
Millions of jobs linked to Britain’s membership would be put at risk. Some sectors such as nursing and manufacturing could experience a slump in skilled labour.
Improved global trade agreements and more selective immigration could have a positive effect on the British job market.
Consumer goods
The average person in Britain saves hundreds each year thanks to lower prices of goods and services facilitated by the EU.
Consumer goods
The average person in Britain loses hundreds of pounds each year due to EU VAT contributions and agricultural subsidies policies.