Strategic Corporate Social

Responsibility Stakeholders
Globalization and Sustainable Value
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Strategic Corporate Social Responsibility 3e
David Chandler and William B. Werther, Jr.

CHAPTER 5
IMPLEMENTING CSR
FACULTY NOTES AND DISCUSSION

This final chapter of Part I provides insight as to what a firm must do to integrate
strategic CSR into its culture, strategy, and everyday operations. That is, when and how does a
company become more socially responsible? When should a company begin adopting CSR as a
driver of its business, for example? Is there a standard point of organizational evolution at which
this should occur, or does it differ from company-to-company and among industries? How
should management construct CSR policies that can then trickle down throughout the firm? How
will stakeholders distinguish between a genuine CSR strategy and a cynical attempt to create
positive public relations or, worse, misleading greenwash?
We address the when by focusing on the CSR Threshold, a tipping point that triggers
firms to move toward strategic CSR. Then, we turn to the how by outlining the design, timing,
and implementation of strategic CSR, introducing the necessary corporate infrastructure and key
policy ideas in the form of a comprehensive plan of action for a firm seeking to implement CSR
throughout operations. Finally, we provide an outline of what the ideal result—a values-based
business operating within a framework of conscious capitalism—might look like.

THE CSR THRESHOLD

The decision of when to implement a CSR policy is compounded by why, where, and how
it should be implemented, not to mention who should oversee the process. The industry context
complicates things further because of the varied stages of acceptance of CSR by different
competitors. Another level of complexity, differences among countries and cultures, ensures
different firms will approach CSR in vastly different ways. Although the value of CSR within
specific industries and firms is becoming increasingly accepted, the point at which such a policy

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David Chandler and William B. Werther, Jr.

becomes ripe for implementation (or unavoidable to those unconvinced of the benefits) varies.
Thus, when depends on many factors that include the CEO’s attitude toward CSR, the firm’s
industry and actions of competitors, and the cultural environment in which the firm is operating.
Companies can pursue an effective CSR policy of either offense (“corporate social
opportunity”)1 or defense (CSR as “brand insurance”).2 The innovative, proactive CEO who is
convinced of the intrinsic value of CSR sees it as an opportunity to maximize company
capabilities and identify new competitive advantages. Companies with a progressive and
innovative mind-set see benefits that range from being an attractive employer (helping retention
and recruitment), to greater acceptance among government agencies (such as needed zoning and
tax relief), to better relations with social activists (such as Greenpeace). In short, an effective and
innovative CSR program improves a firm’s relations with both its external and internal
stakeholders.
In terms of defense, CSR still has value by avoiding criticism and other attacks on the
firm or its offerings. In this instance, CSR is a rational choice that acts like a brand insurance
policy, minimizing or offsetting stakeholder disillusionment in response to perceived lapses in
CSR.8
Either approach (offense or defense) assumes an up-front investment in creating CSR
policies; when to introduce CSR into the strategic process, however, depends on the driving force
behind its implementation.
In summary, firms introduce CSR for different reasons. Implementing CSR proactively
throughout the firm can generate multiple business advantages and may yield additional benefits
associated with first-mover status. In addition, the genuine implementation of CSR, whether for
offensive or defensive reasons, generates insurance-like benefits that render CSR lapses less
damaging if committed due to factors outside the firm’s control. Whatever the motivation,
however, there is a CSR Threshold in every industry that acts as a CSR point of no return. The
sooner CSR is introduced, the less likely a firm is to cross this “tipping point,”12 which varies for
each company (depending on whether it is the market leader or a smaller player) and within each
industry (some industries are more susceptible to stakeholder backlash than others). The variable
nature of this CSR threshold suggests why some companies perceive CSR to be of greater or
lesser importance to their particular organization at different points in time. Still, why is it that

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David Chandler and William B. Werther, Jr.

different companies and industries have different CSR thresholds for different reasons? An
important part of the answer comes from the business level strategy a company pursues.
Variation among Companies
Analyzing a company’s business level strategy reveals how it distinguishes its products in
the marketplace. Its value proposition is captured in its strategy and attracts stakeholder groups,
particularly customers. In turn, the firm’s strategy has a direct impact on the CSR threshold for
that company within its industry.
These low-cost and differentiation strategies can be further categorized as either broad
(targeting a large market segment, such as the automobile market) or narrowly focused (e.g.,
targeting only consumers seeking to purchase luxury cars, but not SUVs, station wagons, or
pickup trucks). As a result, Walmart has a scope of business that can be labeled broad, while
Rolls Royce’s products are focused. Overall, therefore, Rolls Royce’s business strategy offers a
differentiated product, focused on the niche market of luxury cars, whereas Walmart’s strategy
pursues cost leadership (low costs) across a broad base of customers.13 An alternative strategy is
pursued by a firm like McDonald’s, which seeks a focused strategy of low cost (cheap food) and
differentiation (fast service).14
Whether a company pursues a cost- or differentiation-based strategy shapes the firm’s
CSR threshold—the point at which CSR becomes obviously critical to strategic success. The
most vulnerable strategy will be focused differentiation, particularly for those products
dependent on lifestyle segmentation—products that are targeted at specific customers based on
aspirational values.
Variation among Industries
Different industries also evoke different stakeholder emotions. Although there are likely
to be differences within the apparel industry, for example, between a firm that sells unbranded
clothing based on low costs (a higher threshold) and a firm using a focused differentiation
strategy that offers a “lifestyle brand” (a lower threshold), the industry as a whole (with its
reputation for sweatshop labor in developing countries) may have a lower threshold than
industries where the connection between product, brand, and customer aspirations is weaker.
Variation among Cultures
CSR thresholds driven by different cultural expectations further complicate the

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David Chandler and William B. Werther, Jr.

environmental context for firms. Even among developed economies, there are stark differences.
For example, it was legal action in the United States that determined the CSR thresholds for the
tobacco, fast-food, and asbestos industries. In Europe, instead of litigation-driven activism, NGO
and nonprofit activism has largely driven the CSR agenda. Again, examples abound and include
Greenpeace’s campaigns against Shell’s operations in Nigeria,20 Friends of the Earth’s
campaigns against Monsanto and genetically modified foods,21 and Oxfam’s work (both with
and against) Starbucks and its fair trade coffee program.22
In much of the developing world, however, the perception of CSR has traditionally
revolved around issues of corporate philanthropy, an issue that consumes only a fraction of the
CSR debate in developed economies.23 Although these historical differences among cultures are
real and have consequences for firms, globalization and the free flow of information help drive
down CSR thresholds across the board (reducing stakeholder tolerance and increasing the chance
of backlash).

CSR: INTEGRAL TO THE FIRM?

A research sample of 515 firms, studied by the Center for Corporate Citizenship at
Boston College, emphasizes the value of CSR to small, medium, and large corporations:

“Like financial controls and human resource management, corporate citizenship is

integral to keeping a business healthy. Most accept the notion that businesses
have responsibilities that go beyond the traditional making money, providing jobs,
and paying taxes. Most respondents report that their commitment is rooted in
tradition and values; eight of ten say corporate citizenship helps the bottom line;
and more than half indicate it is important to their customers. The attitude about
and commitment to corporate citizenship by small- and medium-sized business
leaders are just as strong as they are in the largest corporations.”30

The study also found that good corporate citizenship was driven by a variety of internal
and external forces. Traditions and values, reputation or image, and business strategy were
internal forces, with consumers forming the most significant external pressures and cited by

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David Chandler and William B. Werther, Jr.

more than 50% of the respondents. Lack of resources and a lack of top-management
commitment, however, were perceived to be the greatest barriers to good corporate citizenship.
Encouragingly, only 9% of the respondents reported seeing no benefit to the firm for good
corporate citizenship.31
These findings are supported by anecdotal evidence from a variety of top firms.
Companies such as Nike,32 Starbucks,33 Microsoft,34 Timberland,35 and others have grouped
CSR related activities into CSR, Corporate Responsibility, Sustainability, or Ethics and
Compliance departments. Those that are most successful are led by senior executives in the firm,
such as Nike’s Vice President, Sustainable Business and Innovation.36 Though not all firms have
interwoven CSR into their operations to this extent, these kinds of internal organizational
structures are likely to be increasingly common as CSR grows in importance.

In spite of progress by individual firms, however, there is still great room for
improvement. The Economist, in a special report on CSR, notes that in spite of the
increased profile of CSR in recent years, firms are still slow to grasp the full implications
of what it means for day-to-day operations.

As we begin to understand more about how firms react to emerging issues, such as CSR,
we understand more about their learning stages and how they translate that learning into action.
Simon Zadek, the founder and CEO of AccountAbility,3 has made an important contribution in
this effort by identifying the five stages of learning that organizations go through “when it comes
to developing a sense of corporate responsibility.”39

The Five Stages of CSR Learning

1. Defensive (to deny responsibility)
2. Compliance (to do the minimum required)
3. Managerial (to begin integrating CSR into management practices)
4. Strategic (to embed CSR within the strategy planning process)

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David Chandler and William B. Werther, Jr.

5. Civil (to promote CSR practices industry-wide).40

It is relatively easy to map this taxonomy onto the CSR Threshold model outlined above.
While an industry or culture might be approaching its threshold (the point at which CSR
becomes a strategic imperative), there is still likely to be variance among firms in terms of
individual executives’ attitudes to these ideas. Assuming that a firm has decided to implement
CSR, therefore, how does it actually go about becoming socially responsible?

IMPLEMENTATION: SHORT- TO MEDIUM TERM

The urgency with which CSR policies are implemented depends on the perceived CSR
threshold and the priority the issue holds for the firm’s leaders. Implementation is about common
sense policies that represent a means to integrate a stakeholder perspective throughout
operations, thus protecting the often huge investments corporations make in their public image,
investor confidence, and brands. The eventual goal should be for CSR to form an integral
component of a business’ culture, as reflected in its day-to-day operations. The challenge is to
move to a position at which all employees approach their work using a CSR Filter. The
following steps offer an overview of how any corporation can further the integration of CSR into
its operating practices and organizational culture over the short to medium term.

Executive Investment
The CEO must actively sponsor CSR. Executive ownership of this issue is the foundation
of an effective CSR policy and is central to ensuring that CSR is institutionalized as a core
component of day-to-day operating practice. This commitment from senior management is
crucial for effective implementation. Executives must exhibit leadership to infuse a stakeholder
perspective. Otherwise, any CSR policy or statement will quickly become a hollow gesture.
To be effective, however, CSR needs both visibility and sponsorship within the
organization. Backing by the CEO equals sponsorship, and the creation of a CSR officer
position, staffed by a company executive with a direct reporting relationship to the board of

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