Making the most of corporate social responsibility PART II
Continuing the conversation—Authors’ response
to reader comments
In January 2010, the
authors reviewed our readers’ comments on their original article and weighed in
on the conversation with new insights and suggestions.
Many thanks to those who read and
considered the ideas in our article “Making the most of corporate social
responsibility”—and particularly to those who shared their thoughts and
experiences on smart partnering. As many rightly pointed out, there has been a
groundswell of interest in CSR, as well as a growing number of powerful
examples of smart partnering. This momentum reflects an improved understanding
of the potential benefits to companies and the increasing maturity of social
organizations. Both see the potential for mutually creating value.
Our aim was to advance
the debate on how to make CSR an integral part of core strategic thinking
rather than a feel-good add-on to it. Where should we take this conversation?
Many of the responses came from academics or from executives responsible for
CSR activities in their firms. While this is natural, it raises the question of
how best to engage (or help these executives to engage) senior business leaders
who make strategic choices and set the direction of companies—particularly the
next generation of leaders, who face more pressing global and societal issues
than ever before.
Three challenges
Our work, that of
others in this field, and the input of McKinsey Quarterlyreaders
suggest that there are three basic challenges to making smart partnering a
strategic imperative and opportunity for companies. They also suggest ways to
overcome those challenges.
1. Get CSR on the
strategy table
For CSR to achieve its
potential, it must focus on key areas of interaction between a firm and its
environment and address value creation activities at the center of the
strategic agenda. The challenge is to get innovative CSR thinking on the table
when business strategies are being explored and decided. How can we make CSR
approaches an integral part of the strategic toolbox for business unit leaders?
First, the potential
benefits of CSR, notably smart partnering, need to be demonstrated in practice
if mainstream senior business leaders are to recognize the significant
opportunities it offers. That is why sharing your and our examples is so
important. Next, key CSR executives must be part of core strategy processes.
Ultimately, CSR must cease to be a separate function and become part of the
skill set of all business leaders as an innovative way to solve critical
problems.
2. Stretch your
strategic ambition for CSR
Several readers spoke
of favorably received CSR activities within their organizations in the realms
of philanthropy and partnering. As we suggested, the starting point in any CSR
strategy should be to outline the CSR activities a company already undertakes
and to be clear on their intent and fit within the overall portfolio. Where CSR
activities are primarily philanthropic in nature, they can create a strong base
for building a company’s reputation and engaging employees. Philanthropy also
has other obvious advantages: it is relatively easy to undertake, can often be
set off against tax, and requires less effort and commitment across the
organization.
The questions with this
approach are: What benefits are being left on the table, both for society and
the business? What opportunities are being missed? The challenge is to stretch
strategic ambitions for CSR and to move actively toward smart partnering, where
the biggest opportunities are to be found. Stretching means going beyond common
practice. While it is extremely encouraging to see a growing recognition of the
benefits of CSR for building employee engagement, this is only the tip of the
iceberg. In the examples we described, the benefits matrices set out much
broader ambitions and arrays of benefits (short and long term, tangible and
intangible) for both society and core business strategies. How can you stretch
your company’s ambitions in a similar way? Whom do you need to involve,
particularly among mainstream business leaders, to gain new perspectives and
challenge conventional wisdom?
3. Reinforce your core
values, internally and externally
When corporate visions
and strategies are described, there is often a reference to core values, which
shape individual behavior and expectations about how we work and interact
together. But we often limit discussions about values to internal behavior and
actions. As several readers noted, shouldn’t senior executives also be held
accountable for how companies live core values in their interactions with all
stakeholders?
Businesses have an
impact on societies, and vice versa, so there is a need to recognize the mutual
responsibilities that this entails. Within societies, trust in businesses is
low, public scrutiny of firms is constant, customer choice criteria include the
reputations and values of suppliers, and the next generation of leaders will
choose employers whose values match their own. For businesses, one potential
challenge is whether the way they operate externally—not just internally—will
ultimately have an impact on their “license to operate.” Many companies that
approach CSR strategically recognize this symbiosis and build on strong values,
living them internally and externally.
Clearly, we do not
advocate smart-partnering initiatives solely because they reinforce a company’s
core values; this is heading into the realm of propaganda. But as you consider
the benefits of a potential initiative, do explicitly consider its impact on
your corporate values. If you cannot see a direct link to them, think about how
you could create one—for example, reinforcing values through employee
involvement or building additional external relationships based on the
initiative.
Moving forward
What’s your next step?
First, engage with key senior business leaders to identify two or three
critical interactions with society. Then for each, map out what you have to
offer in capabilities, knowledge, resources, relationships, and so on that
would make a difference in addressing the challenges you have identified, both
for your business and society. Consider what ideal partners could offer to
complement the things you bring to these challenges. For the Unilever–Kericho
example in our original article, a critical interaction with society involved
raw materials (in particular, tea). Mapping the possible complementary
strengths of a partnership could produce a kind of balance sheet.
Use the balance sheets
you have developed as a starting point in identifying issues and discussing
them with key internal stakeholders and potential external partners. In a world
of burgeoning technology, we may even one day see some type of CSR “dating
agency” where potential partners could share their balance sheets. As
discussions progress, a balance sheet can also help you and your partners
construct the benefits array and business case for your smart-partnering
initiative.
In this sort of
process, experienced CSR executives can really start to move CSR onto the
strategic agenda by engaging executives on real business challenges. That means
helping these executives to identify the opportunities, share concrete
examples, think more broadly about solutions, and move forward.
Smart partnering is
good business. Our readers’ experiences and ideas confirm that momentum is
building toward a time when CSR will be absorbed into core strategy and
business activities rather than treated as an orphan in need of a special
label. With your help, this momentum will build. Share your experiences, shape
your activity portfolios, develop your balance sheets and benefits matrices,
and challenge the business community to keep changing mind-sets for the better.
Addressing rural distribution challenges in India
More than 70 percent of India’s population resides in
rural villages scattered over large geographic areas with very low per capita
consumption rates. For multinationals, the cost of reaching and serving these
rural markets is significant, as typical urban distribution approaches do not
work. Hindustan Unilever Limited’s Project Shakti overcame these challenges by
actively understanding critical societal and organizational needs. HUL
partnered with three self-help groups, whose members were appointed as Shakti
entrepreneurs in chosen villages. These entrepreneurs were women, since a key
aim for the partnership was to help the rural female population develop
independence and self-esteem. The entrepreneurs received extensive training and
borrowed money from their self-help groups to purchase HUL products, which they
then sold in their villages. By 2008, Shakti provided employment for 42,000
women entrepreneurs covering nearly 130,000 villages and 3 million households
every month. In the same year, HUL sales through the project approached $100
million. Dalip Sehgal, then executive director of New Ventures at HUL, noted:
“Shakti is a quintessential win-win initiative and overcame challenges on a
number of fronts. It is a sales and distribution initiative that delivers
growth, a communication initiative that builds brands, a micro-enterprise
initiative that creates livelihoods, a social initiative that improves the
standard of life, and catalyzes affluence in rural India. What makes Shakti
uniquely scalable and sustainable is the fact that it contributes not only to
HUL but also to the community it is a part of.”
Ensuring sustainable supplies of critical raw materials
Unilever’s Lipton unit is the world’s
largest buyer of tea. In 1999, Unilever Tea Kenya started a pilot program in
Kericho, in southwestern Kenya, to apply company sustainability principles to
the production of tea. The initiative focused on improving productivity,
sustainability, and environmental management, as well as energy and habitat
conservation. For Unilever, growing pressure on natural resources means that
securing high-quality supplies of critical raw materials in the long term is of
paramount strategic importance.
The Kericho initiative had a direct impact
on the company’s ability to control the supply of tea not just today but also
into the future, while simultaneously enhancing Unilever’s corporate reputation
with both consumers and employees. Company leadership felt that higher
short-term costs were far outweighed by the long-term strategic edge Unilever
gained for its raw-materials supplies and brands. In 2008, as a signal of its
commitment, Unilever expanded the scope of its sustainable-agriculture program,
pursuing certification from the Rainforest Alliance for all Lipton tea farms by
2015.
For society, the initiative increased farmer revenue
through a 10 to 15 percent premium paid above market prices. Additionally, it
focused on topics of significant concern for governments and farmers alike,
including improving farmer skills, environmental protection, and sustainable
production methods (such as developing a self-sufficient ecosystem), as well as
enhancing local associated jobs. All these factors contributed to strengthened
rural income, skills, and living standards.
By Tracey Keys, Thomas W. Malnight, and Kees
van der Graaf
https://www.mckinsey.com/global-themes/leadership/making-the-most-of-corporate-social-responsibility?cid=other-eml-cls-mkq-mck-oth-1803&hlkid=328abc2ea51748e28360b6d4349af2cc&hctky=1627601&hdpid=deb02d51-67b0-40c3-9cf8-4678412cc4cb
No comments:
Post a Comment