Strategy And Society Porter

HBR
Spotlight

Making a Real Difference

by Michael E. Porter and Mark R. Kramer

Strategy
G

& Society
The Link Between Competitive Advantage and Corporate Social Responsibility
overnments, activists, and the media have become adept at holding companies to account for the social consequences of their activities. Myriad organizations rank companies on the performance of theircorporate social responsibility (CSR), and, despite sometimes questionable methodologies, these rankings attract considerable publicity. As a result, CSR has emerged as an inescapable priority for business leaders in every country. Many companies have already done much to improve the social and environmental consequences of their activities, yet these efforts have not been nearly as productive as theycould be – for two reasons. First, they pit business against society, when clearly the two are interdependent. Second, they pressure companies to think of corporate social responsibility in generic ways instead of in the way most appropriate to each firm’s strategy.
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HBR
Spotlight

Making a Real Difference

The fact is, the prevailingapproaches to CSR are so fragmented and so disconnected from business and strategy as to obscure many of the greatest opportunities for companies to benefit society. If, instead, corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or acharitable deed–it can be a source of opportunity, innovation, and competitive advantage. In this article, we propose a new way to look at the relationship between business and society that does not treat corporate success and social welfare as a zero-sum game. We introduce a framework companies can use to

companies discovered that they were expected to respond to the AIDS pandemic in Africa eventhough it was far removed from their primary product lines and markets. Fast-food and packaged food companies are now being held responsible for obesity and poor nutrition. Activist organizations of all kinds, both on the right and the left, have grown much more aggressive and effective in bringing public pressure to bear on corporations. Activists may target the most visible or successful companiesmerely to draw attention to an issue, even if those corporations actually have had little impact on the problem at hand. Nestlé, for example, the world’s largest purveyor of bottled water, has become a major target in the global debate about access to fresh water, despite the fact

The prevailing approaches to CSR are so disconnected from business as to obscure many of the greatestopportunities for companies to benefit society.
identify all of the effects, both positive and negative, they have on society; determine which ones to address; and suggest effective ways to do so. When looked at strategically, corporate social responsibility can become a source of tremendous social progress, as the business applies its considerable resources, expertise, and insights to activities thatbenefit society. that Nestlé’s bottled water sales consume just 0.0008% of the world’s fresh water supply. The inefficiency of agricultural irrigation, which uses 70% of the world’s supply annually, is a far more pressing issue, but it offers no equally convenient multinational corporation to target. Debates about CSR have moved all the way into corporate boardrooms. In 2005, 360 different CSR-relatedshareholder resolutions were filed on issues ranging from labor conditions to global warming. Government regulation increasingly mandates social responsibility reporting. Pending legislation in the UK, for example, would require every publicly listed company to disclose ethical, social, and environmental risks in its annual report. These pressures clearly demonstrate the extent to which external...