Making business sense out of corporate social responsibility

Most entrepreneurs, businessmen and CEOs would subscribe to Milton Friedman’s statement that “the business of business is business”. So what is the role of corporate social responsibility (CSR) in business? Is it about philanthropy, moralizing business or just regulatory compliance, especially since the 2009 law? According the Mauritius Employers Federation’s (MEF) Survey of 2011, “Report on the Practical Implementation of CSR under the New Legislation”, 46% of the respondents believe that CSR can be used as a way of improving image and competitiveness of the enterprise. This is not very far from results obtained by the global survey of the IBM Institute for Business Value in 2008, in which over two-thirds (68 percent) of the business leaders surveyed are focusing on CSR activities to create new revenue streams. However there seems to be contradiction between belief about the strategic importance of CSR in Mauritian enterprises and implementation.

According to the MEF survey, only about 11% current CSR activities are of strategic nature, while the majority is of philanthropic nature. In sharp contrast, the IBM survey shows that over half (54 percent) of the respondents believe that their companies’ CSR activities are already giving them an advantage over their top competitors. Since it is their money, it is obvious that enterprises would like to use their CSR funds more effectively. The MEF survey reveals that submitting CSR funds to the MRA is the least preferred option, most of the enterprises prefer to fund NGOs – which ultimately turns out to be a form of “outsourcing their CSR”. This is the explanation of the above-mentioned contradiction. And this in turn could be caused by two factors.

The first one being that the qualifying criteria used by the National Empowerment Fund (NEF) does not allow for strategic CSR initiatives due to some incoherence. For example, Entrepreneurship and SME development projects are targeted at the “individuals under the poverty line”. Entrepreneurship is already beyond most educated and well-off people and to expect it from poverty-stricken individuals is quite unfair. The other reason would be that most Mauritian enterprises lack the awareness and methodo-logy to effectively integrate their CSR activities into their respective strategies. Awareness can be developed through research and integrated thinking (ref: No 66 of Business Magazine).

Research shows that there is growing qualitative evidence that well designed CSR activities can improve brand value, reputation, customer satisfaction, employee recruitment and motivation – all of which improve the bottom line. The challenge then is to devise CSR projects which deliver the strategic benefits for the enterprise and which fulfil their responsibilities to the society also. One way of doing this according to a McKinsey study is through “partnering” – which is about designing CSR projects which split the benefits between the enterprise and society. And the best way of achieving this is to design CSR programs which are related to the business model and the core strategic objectives of the enterprise. For example, instead of funding research in cancer, a car manufacturer/ car dealership would better fund projects in alternative fuels – which can add revenue streams and open new markets to the enterprise. In addition to that, the fit between the brand and the CSR activity reinforces the branding, reputation and customer satisfaction according to some very recent research.

A consulting firm can facilitate the meeting of budding entrepreneurs with established businessmen who will act as voluntary mentors – thus contributing to progress of the society through the success of entrepreneurs and at the same time expanding its own client base. For enterprises interested to climb the CSR Value Scale, from regulatory compliance up to the “Growth Platform” where the new partnerships and innovations generate revenue, there is an intermediary stage which can be more easily attained, that of “Efficiency” by means of measurable cost savings through efficient or win-win scenarios.

Efficiency was one of the Top Three priorities of companies aligning sustainability to their strategic goals according to McKinsey Global Survey. Cost-savings, from the social/environmental perspective, can indeed be framed as an effective CSR objective because of efficient consumption of energy and materials for example; it is a contribution to the society and also improves the bottom line of the enterprise! This principle has been highlighted in the book “Built to Last”, in which the authors have researched visionary enterprises – which have survived and outpaced their competitors by large factors. And one of the distinguishing features of these visionary enterprises is that their ideologies have always transcended purely economic considerations. The secret it would seem, is that focusing just on the bottom line is not very beneficial in the long term for a number of reasons. It would make business sense to be more committed to corporate social responsibilities!