Group Assignment

Strategy & Society (Summary)

Areeba Amjad

Arfa Waseem

Haider Kamran

Muhammad Saad

Muhammad Subhan

Business Policy

MBA 2

Lahore School of Economics

In the article, Michael E. Porter and Mark R. Kramer discuss Corporate Social Responsibility
(CSR). Corporate Social Responsibility is the corporation’s initiatives to assess and take
responsibility for the company’s effects on environmental and social wellbeing. Governments,
activists, and the media have become experts at holding companies accountable for the social
consequences of their activities. Moreover, CSR can be much more than just a cost, constraint, or
charitable deed. It generates opportunity, innovation and competitive advantage for the companies
by solving the social problems. Companies are putting business against society and they think
corporate social responsibility in the general terms. Many companies have become aware of the
corporate social responsibility movement from public responses to various issues. Like, Nike
faced extensive consumer boycott due to abusive labor practices.

There have been four general arguments for corporate social responsibility. In the moral appeal
argument, companies have a duty to do the right thing and be good citizens. Moreover, moral
considerations are easy to understand and apply in some areas, which include filing financial
statements. In the sustainability argument, it appeals to enlightened self-interest by meeting the
present needs without compromising the ability of future generations to meet their needs.
Moreover, choices related to sustainability are fairly clear in areas where short-term behavior can
be socially detrimental or environmentally wasteful. In the license to operate argument,
companies need permission from governments, communities and other stakeholders to do
business. Using the license to operate approach to social responsibility is a practical way to
identify issues that matter to stakeholders and make the decisions about them. In the reputation
argument, like the license to operate approach, it focuses on external audiences, rarely produces
a strategic benefit, and tends to confuse public relations with social and business results. In
consumer oriented companies, it leads to high profile cause related marketing campaigns. All
four arguments for corporate social responsibility share the same weakness in that they focus on
the potential conflicts between businesses and society, rather than their interdependences.

Corporations need a healthy society, and a healthy society needs successful corporations. Neither
can exist without the other. This mutual dependence means that the underlying basis for business
decisions and social policies should be shared value. Corporations must integrate a social
perspective into their corporate strategy to put this realization into practice,
Companies must prioritize and select social issues that intersect with their particular business.
The essential test is whether the cause represents an opportunity to create shared value. Generic
issues can be important for society but they are not affected by company’s operations. Therefore,
more close a social issue is to company’s business, the greater the opportunity to leverage the
firm’s resources. Every company operates within a competitive context, which significantly
affect its ability to carry out the strategy. The purpose of categorizing and ranking social issues is
to facilitate the development of an explicit and affirmative corporate agenda where social and
economic benefits can be achieved simultaneously. This agenda must include both responsive
and strategic CSR. Responsive CSR includes acts of good corporate citizenship as well as
actions that mitigate adverse affects on society from the firm's business activities. Strategic CSR
involves identifying a small number of initiatives with large and distinctive potential social and
business benefits.. Toyota's initiative towards limiting automobile emissions is an example. The
Prius hybrid vehicle produced a competitive advantage and environmental benefits
simultaneously. Microsoft's Working Connections partnership with the American Association of
Community Colleges is another example that produced shared value.

A key element of a company's strategy is a value proposition. We can say that the utility that the
company can provide to satisfy the needs of customers less the price they pay for it. Initiatives to
find shared value between society and businesses have the potential to enhance economic and
social development, and to change the way companies and society think about each other, i.e.,
where the thinking about business and social issues changes from corporate social responsibility
to corporate social integration.