April 04, 2006
Analysis Advocates Strategic Approach to Corporate Social Responsibility
by Bill Baue
McKinsey Quarterly provides in-depth analysis of its January 2006 survey documenting increasing
executive interest in CSR, a finding correlated by an American Society for Quality poll.
Polls of the business community continue to document rising interest in corporate social
responsibility (CSR). Unfortunately, they also continue to reveal significant lags in implementing
commitment to CSR. Perhaps the most interesting aspect of this ongoing flow of CSR polls and
surveys is the increasing depth of analysis applied to their findings.
A recent poll by the
American Society for Quality (ASQ), the
appointee for creating and administering the US Technical Advisory Group (TAG) for the
International Organization for Standardization (ISO) 26000 Social Responsibility standards, documents rising interest in CSR.
The poll of 100 business leaders from Fortune 500 companies, conducted in
February 2006, also reveals significant lags in implementing commitment to CSR. According to the
ASQ poll, 96 percent of business leaders think their company's CSR behavior will greatly impact the
nationís economic future, but more than 40 percent still do not have any policy in place to guide
their company's actions.
These findings correlate with the McKinsey Quarterly Global
Survey of Business Executives, which polled more than 4,000 executives from 116 countries
in December 2005. While the January 2006 edition of McKinsey Quarterly published the
results of the survey, the latest edition of the publication includes an in-depth analysis of the
survey findings, entitled "When social
issues become strategic".
The McKinsey Quarterly analysis takes a long step
beyond the statistical picture the survey paints of the CSR landscape in broad brushstrokes by
filling in the details with a pointillist's eye, extrapolating the real world significance of the
survey's findings. Indeed, its most striking aspect is the forceful language used to assert the
vital importance of CSR.
"Business leaders must become involved in sociopolitical debate
not only because their companies have so much to add but also because they have a strategic
interest in doing so," state McKinsey analysts Sheila Bonini, Lenny Mendonca, and Jeremy
Oppenheim. "Social and political forces, after all, can alter an industry's strategic landscape
fundamentally; they can torpedo the reputations of businesses that have been caught unawares and
are seen as being culpable; and they can create valuable market opportunities by highlighting unmet
social needs and new consumer preferences."
The McKinsey analysis maps out the
social contract businesses must honor, extending it well beyond the traditional understanding of
abiding by formal laws to encompass less formal stakeholder expectations and, increasingly,
"frontier" expectations that are still developing. The authors cite obesity as an example, where
responsibility has shifted from individuals who choose what to eat to companies that make or sell
unhealthy foods, just as the debate around tobacco shifted from individual smokers to companies'
marketing of addictive products.
The McKinsey analysts also point to the role of
civil society in framing expectations.
"Trust in nongovernmental organizations (NGOs),
citizens' groups, and online information sources has risen as inexorably as faith in
business--Enron, WorldCom--has declined," they write.
While some debate the relative merit
of these NGO stances, the McKinsey analysts take a more practical approach of acknowledging
the reality of stakeholder power--instead of fighting it, they recommend acknowledging it and
working with it.
"We believe that the case for adopting a wholeheartedly strategic
approach to the sociopolitical agenda is threefold," they say. "First, these forces can alter an
industry's landscape in fundamental ways."
"Second, the immediate financial and
longer-term reputational impact of social issues that backfire can be enormous," they add, citing
the Monsanto (MON) genetically modified organism
debacle and the Exxon (XOM) Valdez oil spill. "Finally,
new product or market strategies can emerge from changing social and political forces." Think
The analysis also recommends what might seem the antithesis of competitive
capitalism: namely, collaboration and cooperation. They note that Coca-Cola (KO) and PepsiCo (PEP) have experienced success
through a common approach of implementing policy prohibiting the marketing of their core carbonated
soft drinks to children under 12.
"As a rule, companies should consider responding on
their own if they think they can capture the first-mover advantage (as BP did in acknowledging the dangers
of global warming), if they are a target, or if a collective approach is too difficult or costly,"
the analysts state. "Collaboration can be attractive if the stakeholders regard all companies as
equally culpable, if regulation is imposed on an entire industry, or if isolated, individual action
would clearly destroy value."
The shifting perception of CSR is extremely significant for
the ISO 26000 Social Responsibility standards, due out in the fourth quarter of 2008, which will
solidify how CSR is measured and managed. The ASQ poll is a tentative first step in the direction
of gauging mainstream business community attitudes toward CSR. The McKinsey analysis is a
much more important bellwether of CSR, because it merges statistical data (namely the Global
Survey of Business Executives findings) with real-world examples to create a more well-rounded