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 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 .