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Understanding CSR The definition of CSR suffers greatly from an unfortunate lack of a consensus of what CSR actually means.

As a result, academics and practitioners have thus been free to define and interpret CSR as best fits their purpose, resulting in definitions and interpretations that are often biased by underlying value judgments and ideologies. For an example, The world Business Council on sustainable Development (2000:8) defines CSR as the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.1 There has been many other similar definitions, which results in confusions, so in an effort to move beyond this confusion, corporate leaders have turned for advice to a growing collection of increasingly sophisticated non-profit organizations, consulting firms, and academic experts.2 Michael E. Porter and Mark R. Kramers Theory of Shared Value Micheal Porter and Mark R. Kramer, laid out their case in a lengthy article in the Harvard Business Review, Creating Shared Value: How to Reinvent Capitalism and Unleash a Wave of Innovation and Growth. Since then, Porter and Kramer have been championing the shared-value thesis in conferences, meetings with corporate leaders, and even a conversation with White House advisers. The idea that companies can do well by doing good is certainly not new. It is an appealing proposition that over the years has been called triple bottom line (people, planet, profit), impact investing and sustainability all describing corporate

Inga Kristoffersen, Paul Gerrans, and Marilyn Clark-Murphy, The Corporate Social Responsibility and the Theory of

the Firm, October 2005, Working Paper 0505, UWA Business School, University of Western Australia, School of Accounting, Finance and Economics & FIMARC working paper series, Edith Cowan University. Web link - http://www.ecu.edu.au/__data/assets/pdf_file/0020/40736/wp0505ik.pdf, archived on 1-2-2013
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Micheal E. Porter and Mark R. Kramer, Strategy and Society, The link between Competitive Advantage and

Corporate Social Responsibility

initiatives that address social concerns including environmental pollution, naturalresource depletion, public health and the needs of the poor. The shared-value concept builds on those ideas, but it emphasizes profit-making not just as a possibility but as a priority. Shared value, Mr. Porter says, points toward a more sophisticated form of capitalism, in which the ability to address societal issues is integral to profit maximization instead of treated as outside the profit model. Social problems are looming market opportunities, according to Micheal Porter and Kramer. Several years ago, executives at General Electric began looking across its portfolio of industrial and consumer businesses, eyeing ways to apply new technology to reduce energy consumption. They were prompted by corporate customers voicing concerns about rising electrical and fuel costs, and by governments pushing for curbs on carbon emissions. The result was G.E.s ecomagination program 3(Launched on July 2010) , a business plan as well as a marketing campaign. In recent years, the company has invested heavily in technology to lower its products energy consumption, and the use of water and other resources in manufacturing. To date, more than 100 G.E. products have qualified, from jet engines to water filtration equipment to light bulbs. In 2010, such products generated sales of $18 billion, up from $10 billion in 2005, when the program began.4

CSR framework The essential test that should guide CSR is not whether a cause is worthy but whether it presents an opportunity to create shared valuethat is, a meaningful benefit for

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GE Ecomagination Challenge, retrieved from http://challenge.ecomagination.com/ct/a.bix?c=ideas, on 5-2-2013


STEVE LOHR, First, Make Money. Also, Do Good, August 13, 2011, New York Times, Business Day,

http://www.nytimes.com/2011/08/14/business/shared-value-gains-in-corporate-responsibility-efforts.html?pagewanted=all&_r=0, retrieved on 5-2-2013.

society that is also valuable to the business (Porter and Kramer, 2006: 8) 5. As a result, they show how a company can create a corporate social agenda, composed of responsive CSR and strategic CSR. Responsive CSR has two elements: acting as a good corporate citizen and mitigating adverse or anticipated adverse effects from the business activity, essentially from company operations. Responsive CSR is inherently limited, however, because it remains incidental to the companys business. Such an approach to CSR is a good start, but it is not proactive enough. McDonalds, well known for its support of hard-working franchisees, has also established its educational partnership with degree-granting institutions, offering tuition reimbursement and very high levels of internal promotion within its ranks, in addition to its waste reduction initiatives. Whole Foods has constructed an entire corporate value chain around its commitment to natural, organic products and environmentally friendly operating practices. Strategic CSR mounts a small number of initiatives whose social and business benefits are large and distinctive.6 In such a situation, shared values are identified and capitalized on; the business will benefit from a successful community and the community will benefit from a successful company.

Porter and Kramer do not end their analysis at this level, if they did, they would be no different from other prevailing justifications for CSR. The difference between their argument and others is that they offer a substantive framework in which a company can implement social policies and practices. Although there are several arguments and criticisms against Porters theories, but their frameworks and guidelines are followed worldwide.

Sandra L. Gill, Ph.D, Corporate Social Responsibility: Issues and Implementation in APO Member Countries, September 30, 2007,

submitted to the, Asian Productivity Organization,Project Number 07-RP-13-GE-STM-A: Study Meeting on Social Dimensions of Productivity, Kuala Lumpur, Malaysia, May 2831, 2007
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Stephen Moore, Porter and Kramers strategy for success, Corporate social responsibility as competitive advantage, pp-2

If managed properly, a CSR approach can create value for both business and society simultaneously, With this thought Nolan, Norton & Co7 (brochure, April 2009) has created a development framework. The framework defines four phases of development ranging from a cosmetic to a strategic CSR approach (figure-01).

Figure 01, Source : Nolan, Norton and Co. How corporate social responsibility leads to value creation in times of economic downturn, brochure april 2009. Nolan, Norton & Co (brochure, april 2009) believes that a strategic approach towards CSR offers the companies a numerous number of opportunities for creating value in their value chain regardless of the economic cycle. A strategic approach in CSR may actually both turn out to be long and short term opportunities for value creation by : Identifying and developing new markets, customer groups or products. For example visionary and innovative car manufacturers realizing huge leaps in the market share by introducing energy efficient vehicles. In 1997 Toyota launched the Prius: a hybrid vehicle that helped to singlehandedly revolutionize the automobile industry. In an economy where Oil is priced so highly, it is inevitable that the cost of gas wouldn't reflect

Nolan, Norton & Co.(NNC), Netherland based consultation firm, which consults and guides the senior management of international

companies in the development and implementation of their corporate and business strategies, Driebergseweg 17, 3708 JA Zeist , The Netherlands, Phone: +31 (0)30 686 66 66, Fax. +31 (0)30 686 66 99, info@nolannorton.com, www.nolannorton.com

the price of the stock. The Prius boasts the most fuel-efficient car currently sold in the U.S., which saves the owners of these vehicles Millions in gas over the years As of 2009 in the U.S. alone, Toyota has sold over 600,000 hybrid vehicles and is continuing to sell them by the thousands.8 Secondly, it can help by Increasing customer, employee and shareholder loyalty and last but not the least, by reducing cost and increasing productivity for example, airlines turning in to energy efficient aircrafts which have cleaner engines and use less kerosene.9 Therefore, it can be said that, CSR is strategic when the purpose of CSR is for value creation and to build a unique competitive position than the competitors. It is applied from an inside out and outside in perspective. It brings substantial business related benefits to the firm and mostly it relates to the maximum extent possible to all primary and secondary processes in the value chain, from R&D to after sales service, including HR, Finance, IT, etc. Milton Friedman - The Social Responsibility of Business is to Increase Its Profits (The New York Times Magazine, September 13, 1970 ) Milton Friedman, US economist (1912-2006), states that a business's social responsibility lies in making profit 10.Some people believe in Friedman's ideas while others do not. In business, there are different situations that require different perspectives and methods of approach. On one hand, it is correct to say that the main focus of a business should be to make profit. Without profit, a business can not survive. In a way, Friedman's theory does promote social responsibility to society. The increase

Chris Marino, Toyota Prius: Revolutionizing the idea of Corporate Social Responsibility, September 28, Strategy

Innovation and Entrepreneurship, http://www.mayaavi.com/2010/09/toyota-prius-revolutionizing-idea-of.html, archieved on 3-02-2013

Nolan, Norton and Co. How corporate social responsibility leads to value creation in times of economic downturn, brochure april 2009, info@nolannorton.com, www.nolannorton.com, archived on 3-02-2013.
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Milton Friedman, The Social Responsibility of Business is to Increase its Profit, The New York Times Magazine, September 13, 1970. Copyright @ 1970 by The New York Times Company, archived from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html, on 5-2-2013

of profits in a company benefits the economy which benefits the citizens of that economy. Friedman also believed that social responsibility should not be forced by the government. While most economists agree with this notion, many believe that he may have gone to an extreme by saying that it is the company's only social responsibility. Companies can still maintain their successful path while pursuing several different methods of social responsibility simultaneously. Responsibility to stakeholders can still be achieved while helping to strengthen the community. For example, companies can conduct research to provide a safer product to consumers.11 Corporate Social Responsibility A Four Domain Approach Definitions of CSR fall in to two general schools of thought, those who argue that business is obligated only to maximize profits within the boundaries of the law and minimal ethical constraints ( Friedman 1970, Levitt 1958 ), and those who have suggested a broader range of obligations toward society ( Andrews 1973, Carroll 1979, David and Blomstrom 1975, Epsteim 1987, McGuire 1963 ). In order to bridge the gap between economists and other expectations Archie Carroll (1979) took an effort to culminate the following definition of CSR: The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point of time(1979:500, emphasis added) As a helpful way of graphically plotting the components of his CSR definition, he later came up with his four-part categorization in to a Pyramid of Corporate Social Responsibility (1991:1993).

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Bartkowiak, G. (2006). Practical Aspects of a Social Responsibility in Business. Dialogue &

Universalism, 16(5/6), 133-140, retrieved on 5-02-2013, from Academic Search Complete database.

Figure - 02 Carrolls Four categories or domains of CSR have been utilized by numerous number of theorists (Watrick and Cochran 1985; Wood 1991; Swanson 1995,1999) and by empirical researchers ( Aupperle 1984, Aupperle, Carroll, and Hatfield 1985, Ibrahim and Angelidis 1993, 1994, 1995, Mallott 1993, ONeil and Saunders and Mc Carthy 1989, Pinkston and Carroll 1996, Smith, Wokutch, Harrington, Dennis 2001, Spencer and Butler 1987, Strong and Meyer 1992 ).Several Business and society and business ethics texts have incorporated Carrolls CSR domains ( Boatright 1993, Buchholz 1995, weiss 1994 ) or have depicted the CSR pyramid ( Carroll and Buchholtz 2003, Jackson,

Miller and Miller 1997, Sexty 1995, Trevino and Nelson 1995 ). According to Wood and Jones ( 1996:45 ), Carrolls four domains have enjoyed wide popularity among SIM ( Social Issues in Management ) Scholars Such use suggests that carrolls CSR domains and pyramid framework remain a leaving paradigm of CSR in the social issues in management field.12 Criticisms on Porters Shared Value Model (SVM) The problem with SVM lies less with what it highlights about the business society relationship and more with what it hides. First, social and environmental issues for SVM are understood as opportunities for influencing a companys competitive context and potentially its cluster (i.e., the interconnected businesses in its geographic location). As Porter and Kramer say: The acid test of good corporate philanthropy is whether the desired social change is so beneficial to the company that the organization would pursue the change even if no one ever knew about it (2003, 15). The same logic of context analysis applies to how companies should use CSR or to assess participation in broad initiatives aimed at creating shared value. In terms of CSR, a company should perform a full analysis of the impacts of its value chain, select the most advantageous issues to address, and then create a social agenda around those issues or attempt to find a way to build those social issues into the companys value proposition (Porter and Kramer 2006, 8391). Porter and Kramer provide numerous examples throughout their essays that they take to be positive evidence of SVM in action. They point to at least thirty two different companies in these essays whose initiatives are presented as either using or exemplifying the principles of SVM. The companies are predominately U.S.-based with a handful of non-U.S.-based companies The Cisco Networking Academy is the paradigmatic example of SVM as it is used to highlight how the program hit the sweet-spot between social value and business value
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Mark S. Schwartz and Archie B. Carroll, Corporate Social Responsibility : A Three domain Approach, Copyright @

2003, Business Ethics quarterly, Volume 13, Issue 4, ISSN 1052-150X

because the philanthropic activity became a strategic asset for shaping the companys competitive context (Porter and Kramer 2006, 1213). The main negative example is of Avons support of breast cancer research, which is used to show a purely reputational approach with no contribution to improving the companys competitive context. The examples for strategic CSR, and for what Porter and Kramer refer to as the reinvention of capitalism, focus on revising the operations of a companys value chain and on product/service innovations. In these examples, the mention of strategic philanthropy basically disappears while illustrations of self-interested behavior to create economic value by creating social value prevail (2011, 17). The paradigm case is Nestls milk district in India. They use the example to illustrate how Nestls efforts to secure a stable supply of commodities led to a symbiotic and positive economic growth for an otherwise impoverished area within India (2006, 90). In terms of reinventing capitalism, the Nestl example is portrayed as a wealth creating activity in contrast to the Fair Trade movement, which Porter and Kramer characterize as a wealth redistributing activity (2011, 5). One of the criticisms of SVM is that it is not an entirely new idea. As pointed out in the Economists March 10, 2011 Schumpeter Blog: There is a striking similarity between shared value and Jed Emersons concept of blended value, in which firms seek simultaneously to pursue profit and social and environmental targets. In addition, there seems to be crucial overlap with Stuart Harts (2005) book, Capitalism at the Crossroads. The rhetoric around shared value is also reminiscent of C.K. Prahalads and Allen Hammonds (2002) work on serving the worlds poor. It seems, as Elkington (2004) points out, that shared value has not advanced the concept of CSR practice but simply indicates that a leading business theorist is now paying attention to environmental risks as business opportunities.

Third, there may be a deeper critique of Porter and Kramers effort to build an umbrella framework about the business-society relationship than the position that they have simply repackaged innovative ideas from the late twentieth century. Indeed, it may be that Porter and Kramers emphasis on finding the business and social value sweet spots, leads to blind spots about what societies value. This may be especially true in regard to addressing the adverse harms of business conduct. 13

Conclusion Although there has been numorous number of theories supporting as well as criticizing porters theories, but from my point of view, I completely agree with the theories of Porter and kramer, and I strongly believe that it is very important to add CSR activities in the value chain. As matter of fact, I agree that, CSR at certain point becomes very cosmetic, that is just for show, if the companies are not getting certain benefits out of it. As a result, If sharing CSR activities for firms benefit and as well as the society might come out to be effective and beneficial for both the company and society. If we look in terms of corporate benefits, adding CSR strategically with company value chain will allow the company to have the luxury of higher profits, and this has been proven by many companies like Nestle, GE, Toyota, and many others which used both strategic and responsive forms of CSR in their value chain, thus creating value for both the company and the society.

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Michael Bzdak, Johnson & Johnson / Rutgers University, USA, Mark Aakhus, Rutgers University, USA, Revisiting the Role of Shared Value in the Business-Society Relationship, Business & Professional Ethics Journal, 31:2, 2012, pp. 231246, DOI: 10.5840/bpej201231211, Web https://secure.pdcnet.org/8525737F0058014C/file/6E4E42B35696BA70C1257A1400461E6D/$FILE/bpej_2012_003 1_0002_0039_0054.pdf, retrieve d on 7-2-2013

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