Kasturi Rangan on CSR realities

Despite the widely accepted ideal of companies pursuing "shared value"- creating economic value in ways that also create value for society - Kasturi Rangan and two colleagues argue in a recent HBR piece that research suggests this is not the norm.

Most companies actually practice a multifaceted version of CSR that runs the gamut from pure philanthropy to environmental sustainability to the active pursuit of shared value. Further, well-managed companies seem less interested in totally integrating CSR with their business strategies and goals than in devising a cogent CSR program aligned with the company's purpose and values. But although many companies embrace this broad vision of CSR, they are hampered by poor coordination and a lack of logic connecting their various programs, and must develop coherent CSR strategies. Rangan lists the following practices to create such strategies:

  • Focusing on philanthropy - Programs in this theater are not designed to produce profits or directly improve business performance;
  • Improving operational effectiveness - Programs in this theater function within existing business models to deliver social or environmental benefits in ways that support a company's operations across the value chain, often improving efficiency and effectiveness; and
  • Transforming the business model - Programs in this theater create new forms of business specifically to address social or environmental challenges.

Once a company opts to pursue those three practices, managers can begin the rigorous undertaking of bringing discipline and coherence to the portfolio as a whole by following the four steps:

  • Pruning and aligning programs - The initial step for many firms is to bring coherence to the existing programs in each theater. To do so, they must reduce or eliminate initiatives that do not address an important social or environmental problem in keeping with the company's purpose, identity, and values;
  • Developing metrics to gauge performance - Gauging the success of a theater one program requires measuring its nonfinancial outputs;
  • Coordinating programs across theaters - Forming a coherent portfolio, one whose initiatives are mutually reinforcing and consistent with the firm’s business purpose and values; and
  • Developing an interdisciplinary CSR strategy - Establish a position whose primary responsibility is to integrate initiatives across all three theaters, regularly convening the key players in each theater to ensure ongoing communication and alignment, even if responsibility for individual initiatives remains dispersed.

-- Clara Shen

Measuring social impact

Embracing the metrics of mutuality