The role of business is to create value for its shareholders whilst, in the context of sustainability, creating value for society: the creation of private value for a firm which, in turn, creates public value.
The purpose of a CSM, or Corporate Sustainability Management, strategy is to determine how business can pave the way to becoming the gold standard in 21st Century sustainable business models and in doing so, create long-term customer loyalty, increase profits and calve out new markets.
CSM strategy sits across an entire business and can be used to analyse and create opportunities for both ‘quick wins’ and longer-term revenue streams. It is the cornerstone of sales, marketing, supply chain, customer experience and innovation.
It is crucial to encourage a top down (from board) and bottom up (from staff) approach to CSM. A variety of robust and strategically designed CSM initiatives are needed to really create value.
All Businesses Needs a CSM Strategy
Given the enormous global shift towards CSM, the question for corporations is not whether to engage in CSM, but what the best way forward is for crafting CSM programs that reflect a company’s business values, while addressing social, humanitarian and environmental challenges. Not only is sustainability at the forefront of business and innovation, it has become a key driver in tender processes, funding and consumer perceptions.
CSM can help with a range of areas including demonstrating the ‘human’ side of a corporation, developing a successful culture – “The Why”, building trust with customers and goodwill, reducing costs, increasing profit and enabling longevity.
Three Areas of CSM
There are three key segments that make up Corporate Social Responsibility:
Corporate Philanthropy (The Soul of the Company):
Direct funding or in-kind donations of products and services positively impact both internal culture and external communities. Whilst loosely linked to the core business strategy, such activities enhance a firm’s reputation in the local community and provide a degree of insulation from unanticipated risks by strengthening a company’s position in the event of potential reputational damage.
As corporate philanthropy evolves, it may become more strategic and integrate more closely with a company’s business priorities.
Examples include PNC’s “Grow Up Great” early childhood education program and Goldman Sachs’ “10,000 Women” initiative to train and support women entrepreneurs in developing countries.
Reengineering the Value Chain
The priority in this realm of CSM is increasing business opportunities and profitability, while also creating social and environmental benefits, by improving operational effectiveness throughout the value chain, be it upstream in the supply chain via cost savings or downstream in the distribution chain resulting in growth and increased profits.
The most comprehensive CSM strategies in this domain seek to reengineer a corporation’s entire value chain, including natural resource extraction, sourcing and usage, manufacturing, shipping and product management and delivery. The result is both internal (via improved culture and therefore productivity) and external – enhanced social and environmental value of products and therefore increased profits. According to research, customers are willing to pay between 5 and 8 percent more for products based on a company’s ethical and social responsibility activity.
Transforming the Ecosystem
The third CSM domain focuses on wide scale and disruptive change to a corporation’s business model, prioritising solutions to societal problems. Blue ocean innovation that creates new models and markets, whilst improving, for example, a particular niche area of a sector, works in tandem with this area of CSM. Although generally the remit of large organisations because of the investment required, it is an interesting area for successful and nimble SMEs that have the capabilities and networks to be proactive and to take calculated risks.
Collaborations between corporate, governmental and NGO interests are key. SMEs and large corporations should both invest in the creation of partnerships with global thought leaders in order to help shape future markets, whilst ‘doing good for mankind’.