Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility

Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility - An article summary per Porter and Kramer

Written for Thunderbird School of Global Management - Summer 2011

Summary

A very wise, Nobel Prize winner once said, “The social responsibility of business is to increase its profits."  Porter & Kramer’s “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility” obviously agree with this statement where they argue “successful corporations need a healthy society” and “…a healthy society needs successful companies”.  However, they disagree with the four prevailing justifications for CSR explaining that they all “focus on the tension between business and society rather than on their interdependence”.  These justifications include the moral appeal and duty to be a good citizen, sustainability emphasizing environmental and community stewardship, the explicit permission from government and community to operate – which they call “license to operate”, and reputation of brand, company, stock and employees.

            Porter & Kramer argue that a company must integrate society into their business strategy by identifying key points of intersection.  “Inside-out linkages” are where business and society meet through daily operations and create a positive or negative consequence.  “Outside-in linkages” are “external social conditions” that influence corporations.  These linkages are also the authors’ evidence to why CSR is important.

            The writers propose “creating a social dimension to the value proposition”, almost as if the “new bottom line” is represented by Net Income (Economic), Social, and Environmental returns.  And when the three value proposition segments are mutually-beneficial to each other, a firm has found the “most strategic CSR”.

Extension

            Personally, I was very displeased with this article and would like to suggest an extension.  In preparation for the reading I was hoping to learn why Porter & Kramer – very brilliant business strategists – believed how to implement CSR, but also a much better understanding of why it is important.  Without having a staunch opinion about CSR, and learning from economists like Milton Friedman, I was optimistic to hear why it was so important to today’s corporations in regards to strategy and success.  I didn’t feel I learned that from this article.

            Porter & Kramer identified the “four justifications for CSR” and denounced them all as missing the mark because they did not identify that society and corporations are actually interdependent, not in tension.  At this point the reader would expect to hear why then CSR is justified and important to today’s companies.  Instead, the discussion moved quickly into how to integrate business and society needs.

            There were several examples of companies merging the interdependent needs like Nestle in India, McDonalds and waste creation, DuPont and energy savings.  There is no doubt that these were beneficial to both society and the companies who modified their activities.  There is no doubt that we would all take steps to better our business and society if a given activity would accomplish both objectives.  However, I suppose that I was really just hoping that these two strategy experts would explain to me why CSR is important and an element to my business that I cannot and should not leave on the drawing board – disproving the Milton Friedman’s of the world.