CSR Strategy Needs Organizational structure and process

1. New Balance Case
Strategic Corporate Social Responsibility
Professor A. Scott Carson
COMM 401 Strategy
Topic 2

2. TEAMS
2

3. 3
• Course objective: Create team experience that
– Closely approximates what you will experience in the work environment
– Follows best practices in the structuring of teams
– Learning to deal with team dynamics
– Provides a robust course experience using
• Class time to work on problems in breakout, then to present ideas to the class
• The Capsim Simulation throughout the term
• Teams to be established based on:
1. Individual skills (i.e., finance, accounting, marketing, operations, OB/HRM)
2. Business perspective
• Canadian and international students
• Gender balance
• Announcement of teams: End of the week of January 13th
Team Structure and Rationale

4. Name
Country
Subject Specialization Please order in 1st, 2nd, 3rd preference
Finance
Operations/Decision Sciences
Accounting
Organizational Behaviour/Human
Marketing
Strategy

5. 5
45 min. and return to class.
Team pairs develop common answer.
Write on the white board. Class discussion.
TEAMS 1 & 2: What should New Balance focus on to have the greatest impact in terms of both social and
business results? Should it concentrate on two to three areas where it is particularly strong or address two
to three areas identified as posing the highest risks?
TEAMS 3 & 4: How should New Balance maintain its culture and values of social responsibility given its fast
growth through acquisitions of different brands? Is it possible to promote growth and social responsibility
at the same time?
TEAMS 5 & 6: What does an industry leader look like? Is leadership about continual internal improvement
or about being a strong public champion? Should the company partner with industry peers, NGOs and
governments to address issues beyond its reach today?
TEAMS 7 & 8:What are the roles of the CEO and the owners— James and Anne Davis — in moving forward
with an integrated CSR strategy? Who should be leading the process?
TEAMS 9 & 10: What is the role of senior management? Is it sufficient for senior management to fire the
starting pistol and expect that people will feel empowered to move forward? Or should it take a more
active role in mapping the direction, providing goals, guidance, recognition and continuous
communication?
New Balance Case

6. CORPORATE SOCIAL RESPONSIBILITY AND
STRATEGY – MORAL BASIS AND TWO APPROACHES

7. MORAL BASIS FOR CSR
7

8. 8
• Usual approaches
–CSR because it is good in itself
–CSR because you are expected to do it
–CSR because you are forced into it
• CSR because it creates strategic advantage
Moral Basis for CSR

9. 9
Approach 1: Porter’s Strategic Prioritizing of CSR
Generic CSR
Issues
Do not effect company’s
long run competitiveness
Are not materially
affected by company’s
operations
Value chain
social impacts
Issues significantly
impacted by the
company’s operations
Social
dimensions of
company’s
competitiveness
Issues in the external
environment that impact
• Underlying drivers of
company’s competitiveness
• In locations where it operates

10. Porter’s Value Chain and CSR
Organizational Infrastructure
Human Resource Management
Technology Development and Policy
Acquisition of Goods and Services
Receiving
and
Storing
Inputs
Operations
Making the
Product or
Service
Physically
Moving
the
Product
or
Service to
Customer
Marketing
& Sales
Service to
customer
Ethical research, product safety
conservation, recycling
Reporting practices, regulations, transparency
fairness
Education/training, working cond.
diversity/discrimination, healthcare
Bribery, child labour,
natural resources
Transportation:
congestion,
emissions
Emissions, waste, biodiversity
energy/water usage, safety
hazardous materials
Packaging, disposal,
Transportation impacts
Truthful advertising, pricing practices,
privacy, consumer information
Disposal of obsolete
products, handling of
dangerous substances,
Customer privacy

11. Porter’s Responsive/Strategic CSR Framework
Generic Social
Impacts
Value Chain Social
Impacts
Competitive
Context
Good Citizenship
(moral actor)
Mitigate harm for value
chain activities
(social license)
Strategic philanthropy the
leverages capabilities to
improve important areas of
competitive context
Responsive CSR
Transform value chain
activities to benefit society
while reinforcing strategy
Strategic CSR
Porter and Kramer 2006

12. 12
Three “theaters” of CSR (Rangan, Chase, Karim: “The Truth about CSR”, Harvard Business Review, Jan-Feb, 2015)
1. Philanthropy
– Not designed to produce profit or improve business performance
• Donations, engagement with community initiatives, support for employee
volunteering
2. Improving Operational efficiency
– Functioning within existing business model to deliver social and environmental benefits
• Support company’s operations across its value chain (i.e., Porter model)
• Improve efficiency and effectiveness
– Revenue generation, decrease costs, or both
» Short term: Sustainability initiatives, e.g., reduce resource use, waste or
emissions
» Longer term: Enhance productivity, employee retention or reputation, e.g.,
investments in employee healthcare investments, working conditions,
education
Approach 1: Does CSR need to focus on competitive advantage
and profit?

13. 13
3. Transforming the business model
– Creating new forms of business specifically to address social or environmental
challenges
• Improved business performance from achieving social and environmental
results
– Can be narrow initiatives (rather than comprehensive programs):
• In developing countries providing micro finance loans to help local people
establish small businesses to support corporate operations
– E.g., Unilever project in India to finance and train remote village women to
sell soaps and detergents door to door.
» Retail delivery channel for Unilever
» Income to women entrepreneurs

14. 14
Step 1: Achieving coherence: Rationalizing programs within each theatre
• Reduce or eliminate initiatives that don’t address important social or environmental
problem, e.g., CEO’s vanity donations
• Reduce or eliminate programs not consistent with company’s purpose, identity and
values, e.g., employee volunteering in projects unrelated to company
• Multiple offices of same company pursuing different donations or volunteering
initiatives preventing overall impact
Step 2: Developing metrics to gauge performance
• Metrics will differ with each theatre
• Theater 1: non-financial outputs
– Inputs: volunteer hours spent by employees, funding provided
– Outputs: number of beneficiaries, improvements (qualitatively assessed), third
party contributions or partnerships created that result from initiative
Four steps toward unified program

15. 15
• Theater 2:
– Generally more tangible results to measure, e.g., quantifying energy and waste
reduction on profit (reduced costs on fuel consumption) or air quality (CO2
emissions)
– Tracking may be required over long term to measure results
• Failure to achieve results should result in amending or cancelling the initiative
• Theater 3:
– New business models create measurement challenges
• E.g., project in India where company provides micro finance to farmers to
develop new irrigation technology to increase crop yields supported by
contracts to purchase output at guaranteed prices
• Measures would be tied to crop yield data along with social or environmental
value

16. 16
Step 3: Coordinating programs across theatres
• Not all programs need to address the same social challenge
• Taken together they must form a coherent portfolio
– Initiative mutually reinforcing
– Consistent with purpose and values of the firm
– E.g. Sustainability it initiatives to reduce waste (Theatre 2) support by donation and
employee volunteering programs in waste reduction entities
Step 4: Interdisciplinary strategy for CSR
• Coordination at the top of the firm
– Establish a senior-level position with responsibility for assuring coordination across
the firm
– Regularly convening meetings of those responsible for Theater 1, 2, 3, initiatives
– Top-down and bottom-up strategies

17. 17
CSR Strategy Needs Organizational Structure and Process
• Organization: Reporting structure that supports CSR as a priority
• Reporting relationships: clear assignment of responsibilities
within the organization
• Incentives: performance-based compensation for reaching
clearly established and measurable targets