How Can Firms Increase Their Social Impact?

CSR

publication date 30 / 06 / 2017

Frank FIGGE

Private businesses face increasing demands to address social problems such as climate change or poverty alleviation. But why should firms do so? Because it is the right thing to do or because it pays to be socially responsible? There is a longstanding tug-of-war between those who argue for a moral obligation and proponents of strategic Corporate Social Responsibility (CSR). But which way is more promising to increase the social impact of firms?

In a recent article in Organization Studies two KEDGE Business School professors, Tobias Hahn and Frank Figge, together with two UK colleagues, argue that the two camps need to come together to address this issue. They make the case that ambidextrous firms will have the strongest social impact. Ambidexterity describes the ability of organizations to pursue two competing activities at the same time. Their main idea is that firms that adopt strategic and moral initiatives at the same time – even if they seem to contradict each other – will do better in terms of social impact.

The good thing about strategic CSR is that it addresses social issues that come at a net benefit to the firm. The downside is that this does not work for all social problems. There are two ways strategic and moral initiatives can support each other.

A firm that only pursues strategic CSR will also address certain social problems. But many pressing social problems do not easily translate into business benefits. A firm that also follows moral CSR can compensate for this gap and also address social problems that are highly relevant but where business benefits are absent. The global cement firm Holcim is one example. Holcim implemented a host of strategic initiatives such as energy saving to cut both CO2 emissions and costs. However, Holcim also implemented initiatives on biodiversity conservation at their sites even though no immediate business benefits were available. Overall, their social impact increased because Holcim addressed a broader set of social issues by combining both strategic and moral initiatives.

Moral and strategic CSR can also enable each other over time. A firm that starts addressing a social problem through strategic initiatives can create leeway for moral responses over time. For instance, beer brewer Heineken started to offer HIV/AIDS treatment to its employees in sub-Saharan Africa to avoid the loss of workforce. Over time the success of this initiative offered legitimacy to deploying HIV/AIDS treatments to members of the local communities beyond Heineken employees, resulting in a significantly stronger social impact. Similarly, moral CSR initiatives can pave the way for strategic CSR. For example, Starbucks started to source fair trade coffee as a response to moral stakeholder demands. By gaining experience in sourcing and marketing fair trade coffee, Starbucks started to target conscious consumers and generate commercial gains from fair trade coffee. This move scaled up fair trade coffee leading to a higher positive social impact.

So are moral arguments or business arguments better to increase the social impact of business? Either/or is probably not the best answer. Firms that can juggle both moral and strategic initiatives will probably offer the strongest contributions to addressing social problems.

Hahn, T., Pinkse, J., Preuss, L. & Figge, F. (2016) Ambidexterity for Corporate Social Performance. Organization Studies, 37(2), 213-235.

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