Does it pay to be environmentally/socially responsible? If so, underwhat conditions does it pay? Clara Melot Jennifer Steeves
Outline Definition of CSR The case against CSR The case for CSR Tangible vs intangible benefits Short term vs long term When does CSR pay? Opportunities for raising revenues Opportunities for decreasing costs Conclusion
Definition of CSR CSR = Corporate Social Responsibility Activities that “represent firms’ efforts to do more to address a wide variety of social problems than they would have done in the course of their normal pursuit of profits” (Vogel, 2005:4) Beyond the law Accountability to stakeholders
Old vs. New CSR Doing good to do good vs. doing good to do well (Vogel) Zero-sum to win-win (Fiorino) CSR sells, but does it pay?
The case against CSR Greenwash Costly Customers don’t really care Socially responsible funds don’t outperform other funds
Bottom line? Company’s main responsibility is to maximize profit for shareholders CSR doesn’t guarantee payoff
The case for CSR Intuitively, CSR should not pay Porter Hypothesis (applied to VEPs) allows us to draw a different conclusion.
Business as usual Good business relies on good practices because trade is based on trust. Part of CSR is achieved through efficient business
Tangible and intangible short term benefits CSR activities and outcomes can pay Why separate activities and outcomes? tangible= accountancy view intangible = economic benefits which can betricky to value.
Tangible and intangible long term benefits CSR activities can pay economically speaking. Through tangible and intangible benefits (marketing assets) …under certain conditions
Relationship betweenenvironmental and economic performance Lankoski, 2008
When does CSR pay?Opportunities for raising revenues
Better access to certain markets IF said firm sells to the public sector or is in a BtoB model. United Kingdom:Public procurement policy
Differentiating products IF there is : - credible information about the product’s added value - Consumer Willingness To Pay - Barrier to imitation Toyota was the first company to develop an accessible series model forhybrid technology
Selling pollution control technologies More likely if the company already has R&D facilities. Ciba Specialty Chemicals Co. And the Cibacron Ls Pattern
When does CSR Pay? Opportunities for reducing costs
Risk management & stakeholder relations IF firms are in highly regulated and publicly scrutinized industries APP
Cost of materials, energy and services IF firms: Have flexible production process Are in highly competitive industries Are in industries where MBIs were implemented Already have R&D facilitiesDow Chemicals’Waste ReductionAlways Pays (WRAP)
Cost of capital IF firms have shares exchanged on stock marketsExxon Mobil’s share price drop after Exxon Valdez oil spill
Cost of labour IF: Firm’s emissions affect workers’ health Firms seek to attract young, well-educated employees Firms are located in areas with strong environmental values97% of MBAs willing to forgo average of 14% expectedincome to work for firm with better CSR reputation
ConclusionCSR is not a panacea but a tool which is efficient under certain conditions
Strategic implication What contextual elements should business policy makers consider before implementing CSR strategies?
References Ambec, S. & Lanoie, P. (2008). Does it pay to be green? A systematic overview. The Academy of Management Perspectives 22 (4), pp.45-62 Fiorino, D. J. (2006). The new environmental regulation. London: MIT Press. Lankoski, L. (2007). Corporate responsibility activities and economic performance: A theory of why and how they are connected. Business Strategy and the Environment 17 (8), pp.536-547 Vogel, D. (2005). The market for virtue the potential and limits of corporate social responsibility. Brookings Institution, Washington, D.C.