Chandler, Strategic Corporate Social Responsibility: Sustainable Value Creation, 6e

SAGE Publishing, 2023

Lecture Notes
Chapter 10: Strategic CSR
Learning Objectives
10-1 Define strategic CSR in terms of its five key components.
10-2 Explain the difference between strategic CSR and corporate philanthropy.
10-3 Explain the difference between strategic CSR and caring capitalism.
10-4 Explain the difference between strategic CSR and sharing value.
10-5 Understand what it means to say strategic CSR is not a choice for for-profit firms.

Chapter Summary
This chapter first discusses the synergistic relationship between the firm and its stakeholders, the importance
of the CSR perspective, and the concept of strategic CSR. The chapter then defines strategic CSR in terms of
five key components namely, CSR perspective, core operations, stakeholder perspective, optimize value, and
medium to long term. Next, it compares strategic CSR with corporate philanthropy, caring capitalism, and
sharing value. The chapter finally explains how strategic CSR is business, by differentiating between CSR
and Strategic CSR.

Annotated Chapter Outline

I. Introduction: This section discusses the synergistic relationship between the firm and its stakeholders, the
importance of the CSR perspective, and the concept of strategic CSR.
 Firm and its stakeholders are synonymous: The firm cannot function independently without its
stakeholders who benefit tremendously from the immense capacity of the for-profit firm to create value
and deliver societal progress.
 Firms solve economic, social, moral, and ethical problems:
o Firms create value and deliver societal progress by solving problems that have economic, social,
moral, and ethical components.
o By enforcing their expectations, stakeholders ensure it is in a firm’s best interest to operate in ways
that conform to those expectations, and that is how profit is generated.
 CSR is a key element of business strategy:
o Because of the synergistic relationship between the firm and its stakeholders, CSR is considered a
key element of business strategy.
o The firm becomes profitable and helps society to progress when it attends to stakeholder needs.
o In contrast, a firm that ignores its stakeholders threatens its own viability.
 CSR allows firms to embrace value creation:
o A CSR perspective allows executives to address stakeholder concerns in ways that carry strategic
value for the firm.
o In this sense, CSR is about the economic, legal, ethical, and discretionary issues that relate directly
to operations.
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o The solutions to these problems lie at the heart of a successful strategy that is illustrated by the
concept of “strategic corporate philanthropy.”
 Connection between means and ends is central to strategic CSR:
o Too often, the ends (profit maximization and share price growth) are used to justify the means
(operations that ignore stakeholder expectations).
o But, a firm seeking to implement a CSR perspective with strategic benefits is equally concerned
with both the ends of economic profitability and the means by which those profits are achieved.
o Thus, the connection between the means and ends is central to the concept of strategic CSR.
II. Defining Strategic CSR: This section defines strategic CSR in terms of five key components.
 Goal: to establish strategic CSR as a set of principles that differentiate it from related concepts such
as sustainability which focuses on ecological preservation and business ethics which constructs
normative prescriptions of right and wrong.
 Strategic CSR: a pragmatic philosophy grounded in the day-to-day operations of the firm and is
central to the firm’s value-creating activities and, ultimately, its success in the market.
 Five essential components of strategic CSR:
o Firms must incorporate a CSR perspective in their culture and strategic planning process.
o Any actions taken must be directly related to core operations.
 Five essential components of strategic CSR:
o Firms must seek to understand and respond to the needs of their stakeholders.
o Firms must aim to optimize value created.
o Firms must shift from a short-term perspective to managing relations with key stakeholders over
the medium to long term.
A. CSR Perspective
[Link] iterative relationship between the firm and its stakeholders:
a. Any definition of strategic CSR requires firms incorporate a CSR perspective within their
organizational culture and strategic planning process.
b. This presumes an iterative relationship between the firm and its stakeholders, with equal
responsibilities to convey needs and respond whenever possible.
[Link] Filter:
a. It is a screen through which strategic and tactical decisions are evaluated for their impact on the
firm’s stakeholders.
b. By embedding the profit incentive within a framework of progressive values, managers can
implement strategic CSR throughout operations.
[Link] to engage with stakeholders to identify their needs and concerns:
a. The firm must engage with its internal and external stakeholders to identify their needs and
concerns.
b. Once the firm understands the issues that are important to its stakeholders, it becomes easier to
create value for them.
[Link]-driven business can be profitable:
a. Employees are motivated to work for purposeful firms.
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b. For example, surveys suggest that 82% of American workers would be willing to be paid less to
work for a company with ethical business practices than receive higher pay at a company with
questionable ethics.
[Link]’ employees are undervalued:
a. Companies fail at a fundamental level to treat their employees with respect, although it is clear
that when employees are disenchanted and demotivated, they can wreak more damage on a
company than competitors.
b. To the extent that a firm treats its employees as a cost, employees are likely to feel the
organization deserves neither their loyalty nor 100% of their effort.
c. To the extent that employees are valued by management and highlighted as the key to customer
satisfaction, employees are likely to be more engaged, productive, and loyal.
d. By not valuing its employees, each year, the average company loses anywhere from 20% to 50%
of its employee base.
[Link] to create a positive and inclusive workplace culture:
a. Senior executives like to think of themselves as central to the firm’s success, but the best strategy
is useless unless it is implemented by engaged and creative employees.
b. A “bottom-line” benefit for a firm from strategic CSR comes from employees who are one of
the most rewarding places to look.
c. Although it takes effort to create a positive and inclusive workplace culture, the return on
investment tends to offset any corresponding risk.
d. This is an essential component of integrated CSR throughout core operations.
B. Core Operations
[Link]’s action should be directly related to its day-to-day operations:
a. The second component of strategic CSR, core operations, states that any action a firm takes
should be directly related to its day-to-day operations.
b. The same action will vary across firm in terms of whether it can be classified as strategic CSR,
depending on the firm’s expertise and the issue’s relevance to the vision and mission.
[Link] create value as a direct result of their unique mix of resources and competencies:
a. Firms vary in their areas of expertise and target market segments because that is how they define
their niche and survive in a competitive environment.
b. As a result, the firm creates the most value when it focuses on what it does best, which is defined
by its core operations.
[Link] CSR is about the firm’s operational decisions:
a. Every aspect of business involves economic, social, moral, and ethical considerations.
b. The primary role of the manager is to make decisions that balance these factors in prioritizing the
diverse interests of those who have a stake in the firm’s operations.
C. Stakeholder Perspective
[Link] by firms in all decision making: The third component of strategic CSR is that firms
incorporate a stakeholder perspective in all decision making.
2.A barrier to implementation of stakeholder perspective:
a. The primary emphasis given to the shareholders’ interest.
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b. Solution: expanding firm’s view to include all stakeholders, which includes responding to
stakeholder concerns and anticipating these concerns.
[Link] for stakeholders to incentivize firms to meet their needs:
a. The stakeholders should be willing to incentivize firms to meet their needs by actively
discriminating in favor of those firms that best meet expectations.
b. Managers can increase the chance of creating value more broadly and building a sustainable
competitive advantage, by making decisions that are in the interests of the firm’s broad range of
stakeholders.
[Link] issue of prioritization:
a. An essential aspect of the shift to a stakeholder model is the issue of prioritization.
b. Stakeholder interests and expectations often conflict and so prioritization is the most effective
means to deal with stakeholder conflict.
c. If a firm has two stakeholder groups whose demands conflict, it makes sense for it to respond
more wholeheartedly to the more important of the two, while attempting not to offend the other.
[Link] on firms’ prioritization of stakeholder:
a. Critics suggest that firms tend to give top priority to their shareholders.
b. Firms need to understand that shareholders are only one of its stakeholder and different
stakeholders should be prioritized for different issues.
c. But, firms have a blind loyalty to any one stakeholder group (particularly shareholders who do
not have the same risk exposure or value to the firm as other stakeholders) over the others.
[Link] should not automatically be managers’ primary concern: A consideration of the interests
of a broader set of stakeholders will better serve the interests of the firm.
D. Optimize Value
[Link] production and consumption:
a. The goal of optimizing value is to seek a balance between the production and consumption
activities in society to build a standard of living that meets the needs of the collective.
b. The production part includes incorporating costs that firms currently seek to externalize.
c. The consumption part includes incorporating costs that society currently seeks to avoid.
d. If this balance is achieved and the benefits and costs are spread over all stakeholders, firms will
be significantly closer to optimizing value for society.
[Link] of profit maximization: Its goal is both impossible to achieve and distorts decision making.
[Link] of profit optimization:
a. It automatically reorients the manager toward the interests of a broader set of constituent
interests.
b. It speaks to compromise and mediation, rather than trade-offs among winners and losers.
c. While the idea of a maximum suggests an absolute point (a definitive amount), an optimum
suggests a more relative state of existence.
[Link] to pursue strategies in harmless ways:
a. Strategic CSR bridges all aspects of the firm’s value-creating process.
b. Societies benefit greatly from the innovation that firms create in pursuit of profits.
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c. Nevertheless, firms are expected to pursue their strategies in ways that do not harm others and,
more importantly, solve societal problems.
[Link] of social benefit and harm changes constantly: The firm’s stakeholders will determine
what is considered responsible behavior.
[Link] perspectives of firms altered by globalization and affluence:
a. Past perspectives of firms as profit engines for a narrow slice of society have been altered by
globalization and growing affluence.
b. Interconnected societies have more knowledge and more choice, while wealthier societies have
the resources to demand more.
c. Stakeholders convey what they value by interacting with the firm over time.
E. Medium to Long Term
[Link] from a short-term to a medium- or long-term perspective:
a. The most important component of strategic CSR is the shift from a short-term perspective when
managing the firm’s resources and stakeholder relations to a medium- or long-term perspective.
b. A strategic CSR perspective emphasizes the latter, recognizing the short-term variability caused
by the need to invest today for the future.
[Link] horizons alter priorities and decisions:
a. If managers alter their horizons from the next quarter or next season to the next decade or
beyond, they immediately alter the priorities and the decisions they make.
b. If a CEO is interested only in the next quarter, it is difficult to make the case for strategic CSR.
c. If the CEO is concerned with the existence of the firm 5, 10, or 20 years from now, the value of
building lasting, trust-based ties to key stakeholders increases exponentially.
d. If firms hope to remain viable, then they must create value broadly among their various
constituents.
[Link] to balance competing interests of stakeholders: When the expectations of different stakeholders
naturally conflict, firms need to balance the competing interests, both among stakeholders and within
stakeholder groups.
[Link] of stock options and other compensation tools:
a. The development of stock options and other compensation tools designed to solve the principal–
agent conflict and align the interests of shareholders and managers has distorted the conditions
under which decisions are made.
b. The effect influences behavior as executives accommodate the demands of the firm’s short-term
investors.
c. Research suggests both executives and directors are willing to sacrifice the organization’s future
in favor of raising its short-term stock price.
[Link] focus on underlying value of a firm:
a. Almost everyone in the investment world plays a role in creating the challenges companies face
in setting their sights on the far horizon.
b. With the short-term perspective, the focus is less on the underlying value of a business and more
on the pursuit of shareholder returns.
c. In response, some CEOs are seeking a longer term approach.
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[Link] CSR as an enlightened approach to management:
a. It retains the focus on creating value that is emphasized by a traditional bottom-line business
model.
b. It creates such value over a broader base of the firm’s stakeholders and over a longer time
perspective.
c. The central question of strategic CSR: How do we allocate scarce resources in a way that
produces optimal stakeholder outcomes?
[Link] to create value over medium to long term:
a. To implement strategic CSR meaningfully, firms must focus on creating value over the medium
to long term in areas of expertise related to core operations.
b. A short-term focus, driven by quarterly earnings guidelines for investors with little at stake in the
firm, has no value to firms committed to implementing strategic CSR.
III. Strategic CSR Is Not an Option: This section compares strategic CSR with corporate philanthropy, caring
capitalism, and sharing value.
 Strategic CSR is a philosophy of management that infuses the firm. It is not a peripheral activity; it is
central to everything the firm does.
 All firms do strategic CSR:
o All business decisions have economic, social, moral, and ethical dimensions.
o All firms do strategic CSR, whether they realize it or not; it is just that some firms do it better than
others.
A. Not Philanthropy
[Link] CSR is about day-to-day operations, rather than about philanthropy.
[Link] for spending in areas outside of expertise:
a. Any money being spent by the firm in areas outside of its expertise is likely not the most
efficient use of money.
b. However, investment should be made if the main justification for an expenditure is
brand awareness and the firm feels that the values underpinning the cause align with
those of the firm’s stakeholders.
c. But responsibility for it should be where it belongs, in the marketing department.
[Link] for donating or supporting a cause:
a. When the firm to donate money or support a cause, the responsibility for that decision
should lie with the relevant functional area.
b. By being a part of the firm’s core functions, the relevant expertise can be applied for
optimal effect.
[Link] connection between CSR and philanthropy:
a. Even with specific tax advantages associated with donations, if employed strategically,
the main benefit from the payment is often marketing-related.
b. Without a direct connection to operations, it is difficult to make arguments for firms
donating large sums in areas in which they lack expertise, as corporate philanthropy is
often inefficient and ineffective.
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c. So, for-profit firms should focus on identifying problems for which there is a clear
market-based solution, and then deliver that solution as efficiently as possible with the
goal of creating value for all of their stakeholders.
[Link] CSR de-emphasizes actions without market solution:
a. Strategic CSR is a managing philosophy that focuses on firms’ areas of operational
expertise and de-emphasizes actions for which either there is no market solution or the
firm is not well suited to deliver.
b. That is how value is optimized over the medium to long term.
B. Not Caring Capitalism
[Link] CSR is market capitalism:
a. High-profile actors have sought to reform the principles of the marketplace by urging
firms to adopt goals beyond profit.
b. The concept of “inclusive capitalism” argues that those with the power and the means
have a responsibility to help make society stronger and more inclusive for those who
don’t.
c. Strategic CSR rejects these attempts as not only futile but counterproductive.
[Link] in implementing the efforts to alter the ends of capitalism:
a. The ends of capitalism that matter do not matter so much as the means by which the
ends are pursued.
b. Although efforts to alter the ends of capitalism are made with the best of intentions,
the difficulties in implementation quickly become apparent when these ideas are
explored in a little more detail.
[Link] of Gates’ creative capitalism:
a. Bill Gates introduced creative capitalism, an approach where governments,
businesses, and nonprofits work together to stretch the reach of market forces so that
more people can make a profit, or gain recognition, doing work that eases the world’s
inequities.
b. But, it is unclear what Gates actually means by “creative capitalism” and how it is to
be realized.
c. Gates weaved back-and-forth between an argument based on market forces and one
based on an appeal to the altruistic side of firms and their stakeholders without
offering any clear guidance as to how priorities among competing claims should be
set.
[Link] as the best means of allocating scarce resources:
a. Although the market is imperfect, it remains the best means of allocating scarce
resources.
b. The main argument against creative capitalism is that real capitalism is much more
effective; the larger the profits, the better job the company tends to have done.
c. Strategic CSR, implemented throughout the firm via a stakeholder perspective and a
focus on medium- to long-term value creation, optimizes performance.
[Link] on Muhammad Yunus’ concept of social business:
a. His concept touches on ideas similar to those of Gates.
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b. In reality, both Yunus and Gates express a form of social entrepreneurship, which
demands that firms replace profit seeking with something that amounts to altruism, a
new sector of the economy made up of companies run as private businesses but
making no profits.
c. Such business models have limited market appeal.
d. While some consumers wish to pay the associated price premiums, these same
values cannot be assumed market-wide.
[Link] and drawbacks of microfinance:
a. It is a philosophy introduced by Yunus in contrast to economic theory.
b. It is effective because it extends the market to consumers whose demand was
thought to be insufficient for traditional finance models and who were thus ignored
by mainstream financial institutions.
c. The microfinance industry is grounded in business fundamentals.
d. However, the drawback of social business is that it depends on the kindness of
strangers.
C. Not Caring Capitalism
[Link] CSR is about creating value, and not about sharing value.
[Link] of Michael Porter and Mark Kramer’s idea: Similar to the ideas of Gates and
Yunus, the idea of Michael Porter and Mark Kramer also attempts to overturn centuries
of economic theory and practice to reinvent the purpose of the firm “as creating shared
value, not just profit per se.
[Link]’s shared value versus strategic CSR:
a. The motivating force is different and will lead to different outcomes in
terms of the venture’s ultimate success or failure.
b. The difference comes down to the focus of the firm and the relevance to
core operations of the issue at hand.
[Link]-profit firms are best suited to market capitalism:
a. Although for-profit firms can help with caring capitalism, they are much better
suited to market capitalism.
b. In contrast to Porter and Kramer’s argument that charitable goals should be
considered equally with operational goals, governments and nonprofits should focus
on problems that are ignored or not solved by market.
[Link] solutions to societal problems via market forces:
a. Business is about finding solutions to societal problems via market forces.
b. The solutions to these problems optimize value by combining scarce and
valuable resources to meet the needs of a wide range of stakeholders over
the medium to long term.
c. Firms can use their expertise to meet nonoperational goals, but this should
not be their primary concern.
[Link] to carry out operations in sustainable manner:
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a. The difference between a firm with integrated strategic CSR and a firm
that ignores strategic CSR, is how it operates the core aspects of its
business.
b. There is a more responsible way to treat the suppliers, to pay the
employees, to comply with laws, and so on, and there is a less responsible
way of doing all these things.
c. Firms that seek to carry out their operations in a sustainable manner create
more value for society than any amount of philanthropy can achieve.
IV. Strategic CSR Is Business: This section explains how strategic CSR is business, by differentiating between
CSR and Strategic CSR.
 Strategic CSR is about creating value for stakeholders: It focuses on the firm’s areas of expertise to solve
market-based problems in pursuit of profit over the medium to long term.
 Strategic CSR is the way business is conducted:
o This is because the scale and scope of strategic CSR are so thoroughly embedded in core
operations.
o When a firm does any one of the many thousands of things it does every day, it is engaging in
strategic CSR.
o All of these business decisions have economic, social, moral, and ethical dimensions.
 Strategic CSR is what firms do:
o Some firms do it better and more deliberately than others.
o If a firm talks about operations and strategy in the language of strategic CSR, then it can get better
at it.
o If the firm ignores these ideas, it will keep operating the same as it has always done, which is
dangerous because vigilant and informed stakeholders who incentivize firms to attend to their
values and priorities will ensure that this measure of performance will increasingly become a
predictor of market success.
 In strategic CSR, for-profit firm is usually the solution:
o Although firms have committed great harm over time, they have also propelled society forward
and are largely responsible for our current standard of living.
o An essential aspect of understanding this is realizing that firms merely reflect the values of their
collective set of stakeholders.
 The profit motive is central to strategic CSR: This is because a firm remains viable by meeting the needs
and concerns of its stakeholders.
 Strategic CSR focuses on core operations (i.e., everything the firm does).
 Strategic CSR understands that right and wrong are constantly being redefined by society (all
stakeholders).
 Strategic CSR understands that what is ideal is whatever society wants at any particular time.
 Need to define and deliver values:
o Firms must look to their stakeholders to define value as they understand it, and then to try and
deliver that value.
o Firms need to pay attention to whatever their stakeholders think is important.
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o In Strategic CSR, it is anything for which stakeholders are willing to hold the firm to account.
o Danger for firms when society shifts on an issue: In such cases, firms that had previously ignored
the issue are caught with their values, policies, and practices out of alignment with the society in
which they are based.
 Role of managers in overcoming the danger:
o Effective managers can see the shifts in societal values before they occur and make sure their firm
is on the “right side of history.”
o Ideally, the firm will have already established a strong values-based culture that guides decision
making and positions it always slightly ahead of its constantly evolving stakeholders on multiple
issues of concern.
 The importance of strategic planning and daily operations:
o Once firms understand that they are embedded in a network of complex stakeholder relations and
that they need to manage these relations effectively, strategic planning and daily operations
represent the most effective means to manage the tradeoffs and priority setting.
o Regardless of how firms manage these relationships and how they draw lines of key stakeholders,
strategic CSR is the way that business is conducted in the 21st century.