One of the things that we try to continually prove is how important corporate social responsibility (CSR) is in business and how it NEEDS to be incorporated into your strategy. We have ways that we can help you with this, but we also need to show you why this is vital.
In approaching your business's strategy from an academic angle, we are going to take one of the most referenced articles on business strategy and apply it to CSR. "What is Strategy?" is written by Harvard Business School professor Michael E. Porter. The article is organized into five different parts to define what is and is not strategy, citing several different examples of each.
An Overview: Where are you at?
Over five different posts, we will examine CSR's fit into Porter's definition of strategy using his five sections as a framework:
- "[Operational effectiveness] refers to any number of practices that allow a company to better utilize its inputs... Strategic positioning means performing different activities from rivals' or performing similar activities in different ways" (3).
Porter makes the distinct differentiation between having highly efficient operations and strategy. Having a more effective operation will reduce unit costs, but this is not sustainable as competitors can copy your techniques and additional value is not provided. Adding value can increase your prices and margins further.
However, if a business can do several of these operational efficiencies together or do them differently from the rest of the industry, then that business can build a strong competitive position that becomes tougher to imitate.
2. The Productivity Frontier
The graphic to the right is the Productivity Frontier which shows "the maximum value that a company delivering a particular product or service can create at a given cost, using the best available technologies, skills, management techniques, and purchased inputs" (3).
For all companies, they are placed underneath the Productivity Frontier arc. As they incorporate more practices that increase their effectiveness they move closer to the Productivity Frontier line.
CSR: Operational Effectiveness v. Competitive Strategy
Sustainability practices are a key piece to CSR that many companies promote. Many companies can purchase new energy-efficient machines or use solar power for all their energy needs. However, these are just improvements to their operational effectiveness and moving closer towards the Productivity Frontier.
The key to making this a strategy is doing many of these activities at once in a capacity that is different from competitors. For example, when New Belgium Brewery in Fort Collins in 1999 became the first brewery to purchase 100% of its electricity from a wind farm, in which employees chose instead of bonuses, this was a strategic move as this was a similar activity compared to competition but done in a different way. Since, New Belgium has continued to incorporate several other energy saving practices including, more recently, implementing an internal energy tax and becoming a certified B Corp. Other breweries may match one or a few of the practices New Belgium does, but because New Belgium has done it for so long and incorporated sustainability with many other facets of their organization, they have established a competitive advantage and position that is unlike any other in the Colorado and National craft brewing industries.
New Belgium started giving in 1995, its company culture is well-known and respected, and they are very successful as they are the third largest craft brewer in the US. For small and mid-size businesses, the time to take advantage of CSR is now.
Brian Phipps is the Founder and a Strategist at Confluence in Denver, Colorado that consults small and mid-size businesses to increase their positive impacts and community connections in their corporate giving and social responsibility practices. To find out more go to www.ConfluenceLLC.com.