Classification of CSR Practices (Rangan ea)
Elwin Poortman, Analyst, Netherlands
The topic of corporate responsibility has been captioned under many names, including strategic philanthropy, corporate citizenship, and social responsibility. As the names suggest, each embodies a certain perspective with regard to the role of businesses in society. Rangan, Chase and Karim have examined CSR practices of large MNE’s and constructed a framework of 3 different CSR practices:
Source: Rangan, K., Chase, L.A., Karim, S. (2012) "Why Every Company Needs a CSR Strategy and How to Build It", Harvard Business Papers VOL 12-088
- PHILANTHROPIC GIVING: This practice focuses on philanthropy; either in the form of direct funding to non-profit and community service organizations, or via indirect donations or consumptions of products and services that relate to non-profits and marginalized populations. Corporate philanthropy may be characterized as the goodwill of a company, expressing the social and environmental priorities of the company since it is does not directly relate to profits or benefits to the company. Within this practice, a business engages in CSR because it is a good thing to do, motivated by the logic that since the business is an integral part of society it has an obligation to contribute to community needs. In general this CSR practice enhances a firm’s reputation in the local community.
- RE-ENGINEERING THE VALUE CHAIN: The priority of this CSR practice is to increase business opportunities and profits, while also creating social and environmental benefits. This can be done by improving operational effectiveness within the company or throughout the value chain. This CSR approach, which has become increasingly popular among scholars and corporate leaders, may be considered roughly similar to the “shared value” framework, in which corporations seek to simultaneously create economic and social value. Enterprises recognize the value of innovative and technological solutions that reduce operating costs while mitigating social and environmental impacts. Initiatives that belong to this CSR practice are examined on their ability to improve the core business activities while simultaneously returning social value. The most successful CSR strategies in this domain seek to reengineer a corporation’s entire value chain, including natural resource extraction and sourcing, manufacturing, shipping and product delivery. Currently, this practice appears to be favored by many large MNE's.
- TRANSFORMING THE SYSTEM: The third CSR practice embodies a disruptive change to a corporation’s business model that puts the priority first on designing solutions to societal problems, which would then lead to long term financial returns. This is fundamentally different compared to the incremental and self-interested change of the other two practices. “Transforming the system” is expressed by the attempts of a company to create societal value by significantly addressing critical social or environmental needs that are within reach of the business, but that may not return immediate business profits. Unlike the other 2 practices, corporate endeavors within this practice may not emerge from the company’s core competencies, but may require the corporation to fundamentally change its business model and develop new skills and strategies.