Inthe backdrop of the effects of companies on the environment, 21stcentury firms have corporate social responsibility (hereafter CSR)programs deeply embedded in the frameworks of their organizationalstructures. On account of the production processes of differentorganizations, the state of the environment is regressing at anastounding rate because of a myriad of environmental issues likepollution for instance. Therefore, companies have CSR strategies thatmitigate the effects of their production processes on theenvironment. So what is corporate social responsibility and how can aCSR strategy help a firm have competitive advantage?
Evenif there is no globally accepted definition of CSR, it is widelyacknowledged as an organization’s responsive obligation to engagein socially responsible trading protocols. A company that has a CSRstrategy in play is acting as a good corporate citizen by mitigatingany possible harm that could ensue from the company’s value chainactivity. A company’s effective management of the externalities itcreates through an effective “spillover” management strategymakes the firm gain a substantial degree of competitive advantage.
Sohow can a CSR strategy help a firm have competitive advantage? Acompany can have competitive advantage when it engages a CSR strategythat is not being employed by a competing company. In this regard, anorganization can also be said to have a competitive advantage when itis employing a CSR tactic that is adding value and when it is notsimultaneously being employed by any present or potential competitor.As the awareness for global problems increases, customers are moredrawn to firms that give back to the society. Hence, a sociallysustainable company has better chances of generating moreturnovers. Moreover, a value adding CSR strategy improves thereputation of a company. Correspondingly, highly qualified employeessearch for employment in firms that have operative CSR strategieswhen making decisions on where to work, implying an extensiveorganizational pool of knowledge which by itself, makes a firm havecompetitive advantage. Also, such companies are likely to retaintheir employees since they have a better chance of protecting theirrights in the long run. In the light of all these factors, aneffective CSR strategy does help a firm have competitive advantage.
Evidently,CSR is focused on three major organizational impact pointsconceptualized in Elkington’s Triple Bottom Line (hereafter TBL).Coined by John Elkington, TBL is a term which demonstrates the threemost primary impact points of a firm. It captures the economic,social and environmental impact points of a firm. It is anaccountability measure that basically contains the three P’s:Profit,Peopleand Planet.It is the measure that shows the level to which a company issheltering the full cost of conducting its value chain activities.This idea has picked more prominence in the last five years,following an increased global awareness of corporate malpractice. .
Theadvantages of CSR are identical to the previously discussed elementsthat give firms competitive advantage with regard to customer andemployee preference, and upgrading the characterof a company as a good corporate citizen. The main disadvantage ofCSR is that the costs of implementing a CSR program many at timesoutweigh the monetary gains. Therefore, smaller businesses may findit economically irrational to take part in socially gratifyingactivities. Furthermore, the concept of corporate greenwashingmight be another demerit of CSR programs. A company may publicizethat they will implement CSR programs but fail to do so. Hence, amanager may be very cautious about failing to implement operative CSRprograms for the sake of his/her job protection.
GrassrootsFair trade is a store in Alaska that has an alternative businessmodel, through which it helps the poor and disadvantaged people tomarket their goods so that they may get better prices subsequentlyimproving their lives. By selling fair trade products, the companygets more customers since people do not mind spending more onproducts that are from honorably healthier sources. Grassroots mayidentify itself with large companies to better their reputation, andin return get financial assistance. A manager will have to considerthe advertisement costs of fair trade products since they have ahigher price. Also, the pricing of such products may pose as achallenge since a manager has to give a price that gives a profitablemargin to the producers but still encourage repeat purchases fromAlaska consumers.
Thebest advantage to Grassroot’s CSR activities in Alaska is thatpromoting its products as fair trade products is fundamentallypromoting social principles over generating profits in the societywhich by design, is a CSR activity. The store’s normal activitiesare aimed at advancing the poor people in the Alaska’s community,which is a CSR notion. The practice of fair trade by Grassroots givesthe company a good reputation, making their products striking toconsumers. However, the store has no control on the pricing of theircommodities, which is often determined by the fair trade bodiescontingent on the purchasing price from producers.