A Potential Strategy to Improve the CSR “Lobby’s” Chance of Winning the Battle for Hearts/Minds in the Corporate World

By Gideon Lowin

Introduction

CSR advocates should certainly take heart with the increasing adoption of CSR initiatives around the world; but traction with early adopters does not guarantee success across the broader private sector.

Even as they celebrate wins with early adopters, CSR promoters must turn their attention to the challenge of encouraging more widespread adoption, of a more diverse group of programs, across a larger swathe of the corporate world.

To “sell” CSR to a broader audience, CSR promoters must be sure to understand exactly what they are hawking, and specifically to whom they hope to sell it. In this way, the mission of promoting CSR looks very much like the launch of any new product; top priorities should include a clear definition of the product’s value proposition(s), and an actionable segmentation of the target customer base.

Product Definition

The acronym “CSR” may mean different things to different people, but the ways in which CSR initiatives create value are relatively clear. Broadly speaking, CSR initiatives’ value can be defined by the social value they create, and their financial impact on the implementing firm. Four main types of CSR initiatives emerge along these two dimensions:

The four archetypes are defined as follows:

Type 1 delivers positive financial returns along with significant social value. These initiatives are the ones grad school students really enjoy discussing;

Type 2 delivers positive financial returns, and a small amount of social value. These are the ones corporate PR groups really enjoy spinning;

Type 3 delivers negative financial returns (intentionally or unintentionally), and a small amount of social value. These are the ones grad students mostly try to ignore;

Type 4 delivers negative direct financial returns, but a significant amount of social value. “Socially conscious” firms often trumpet their participation in such initiatives, for both altruistic and signaling/marketing reasons.

Customer Segmentation

Our customer segmentation matrix is a close match to the one used to define sources of value. The same axes also identify four main types of CSR “customer”:

The four customer segments are defined as follows:

Group A emphasizes social mission over financial returns;

Group B emphasizes both social mission and financial returns;

Group C emphasizes financial returns over social mission;

Group D emphasizes neither financial returns nor social mission. These firms are probably not only unprofitable, but also fairly depressing places at which to work.

Organic Adoption

Even without the influence of CSR activists, some set of private firms will adopt some level of CSR programs.

Group A is the clear origin of early adopters. These firms are willing to trade financial performance for social value, and as a result will experiment proactively with CSR initiatives across Types 1-4.

Once Group A has demonstrated the financial impact of various initiatives, Group B will follow closely. Despite concerns regarding the financial risk of Type 3-4 initiatives, Group B will implement Types 1-2 in relatively straightforward fashion. Group B is unlikely to pursue Group 3 initiatives, but may experiment with Group 4 if the potential for social value significantly created outweighs the financial risk.

Putting aside the soon-to-be-insolvent members of Group D, Group C represents the customer segment least likely to adopt CSR on its own. Group C will ignore Type 3-4 initiatives, and hesitate to adopt Type 1-2 initiatives until presented with clear evidence of their financial value.

One could credibly argue that Group C will reject Type 1-2 initiatives even after presented with evidence of their NPV-positive nature; in many organizations, any project labeled “CSR” will attract unjustified opposition simply due to the acronym’s association with NPV-negative ideals.

In the long run, however, Group C is likely to adopt some portion of available Type 1-2 programs due to accumulated evidence of their financial value, and simple market forces. If Type 1-2 initiatives do increase profitability, Group C must adopt these activities to keep pace with the competitive strength they provide to competitors in Group A and Group B.

The Role of the Advocate: Short Term

The product and customer segmentation above describe a gradual path to CSR adoption in some portion of the corporate world. It falls to the CSR advocate to accelerate that path, and increase the number of CSR participants as rapidly as possible.

The segmentations above have clear implications for the near-term role and responsibilities of various groups seeking to promote CSR. Potential action items include:

Group A: Collaborate to broaden the funnel. Given Group A’s willingness to take financial risk in pursuit of social value, these firms are ideal partners to push the boundaries of CSR thinking. CSR organizations should identify Group A firms, brainstorm ideas with relatively more uncertain financial impact, and monitor implementation to understand what does and does not actually work.

Group B: Document CSR best practices to speed adoption. Group B will happily implement CSR initiatives that do not destroy significant value, but may be less proactive in seeking these initiatives out. As such, CSR organizations should bridge the gap between Group A and Group B by clearly communicating best practices and prioritized lists of CSR initiatives. In this manner, Group B can feel more confident in the value of the programs they select, and adopt a wider range of initiatives in more rapid fashion.

Group C: Develop new marketing channels. As noted above, a major issue with CSR initiatives is the NPV-negative connotation they carry today. The reputation has been earned not only by projects which truly destroyed short-term financial value, but also by CSR advocates with an outspoken emphasis on social value over NPV-positive projects. As a result, Group C firms may initially hesitate to trust the recommendations of organizations known to be advocates of CSR.

To overcome this obstacle, CSR advocates should train other organizations to deliver key messages to Group C firms (e.g., for-profit consultancies, industry organizations). This type of “leadership from the back” will increase credibility of the NPV-positive CSR story, and ultimately speed Group C firms’ adoption of Type 1-2 CSR programs.

The Role of the Advocate: Long Term

Of course, in the long run CSR advocates will need to do more than merely leverage and accelerate firms’ natural willingness to experiment with CSR. Given the fact that Group C firms likely comprise the majority of private sector corporations – and the certainty that Type 4 CSR programs have the potential to deliver significant positive social value to the world – CSR advocates must work to shift behavior within these firms more dramatically.

One potential strategy would be for advocates of CSR to transform Type 4 programs from NPV-negative standing to an NPV-positive position. While such initiatives may always negatively impact a firm’s short-term financial position, there is a strong argument that implementing CSR can boost a firm’s chances of attracting top-tier human capital in the long run – with positive implications for the firm’s long-run financial position.

This argument, of course, rests on the assumption that top-tier talent might preference employment at mission-driven corporations; if true, rational corporations will happily make costly investments to signal their mission-driven nature. It becomes the CSR advocate’s responsibility to encourage “top talent” to adopt this perspective; in marketing terms, this idea represents a “pull” strategy distinct from the B2B “push” activities discussed in the Short Term Role portion of this post.

This task of education and influence is, to be sure, a major and daunting one; but a targeted effort may increase the chances of success. CSR advocates should identify specific industries with heavy populations of Group C firms (e.g., manufacturing firms) and focus their educational outreach on top-tier talent feeding into those industries (e.g., top engineering schools). This approach is not immediately scalable, and does not represent a silver bullet; but it may offer a feasible path to major behavioral change.

Conclusion

As advocates of CSR shift their attention from early adopters to more reluctant members of the corporate community, a coherent marketing message will become increasingly important. As with any business campaign, the CSR lobby’s strategy must be informed by a specific definition of the group’s value proposition to each of several key customer segments. The task of changing corporate behavior is monumental; but a tailored message and clear set of objectives will can only help these groups increase their odds of success.

Advertisements

About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

One Response to “A Potential Strategy to Improve the CSR “Lobby’s” Chance of Winning the Battle for Hearts/Minds in the Corporate World”

  1. By John Macomber

    Useful segmentation. Is it feasible to develop an idea of the size of the key segments, now and over time? Would some segments grow as some of the investments are better understood? Will the bad competitors in bad segments shrivel up and go away forever, or will there always be new bad competitors entering those segments for some reason?

    The HBS Social Enterprise Initiative tries in particular to support and share best practices among those impact investors who expect to grow and endure:
    http://www.hbs.edu/socialenterprise/20-years-of-impact/advancing-the-field/impact-investing.html

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: