Executive Interviews: Interview with Mark R Kramer on Corporate Social Responsibility
September 2007 - By Dr. Nagendra V Chowdary

Prof Mark R Kramer
Founder and Managing Directorof FSG.
Senior Fellow in the CSR Initiative of the Mossavar-Rahmani Center for Business in Government at Harvard's Kennedy School of Government.

• What's "social" in their responsibility? Companies' benefit immensely from Corporate Social Responsibility initiatives as the image improves and propels business prospects. The (un!) intended consequences are quite fathomable. Adam Smith observed, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self love." Are corporates, therefore, doing what's minimum expected of them rather than doing a "selfless" service to the society in which they operate?
  The reality is, today, that global businesses are expected to contribute to philanthropy, observe reasonable working conditions, avoid hazardous products, and act as responsible corporate citizens.Whether selfless or selfish, such standards are now necessary to preserve the company's reputation as a desirable business partner and a sound shareholder investment. Beyond this, we encourage companies to address social issues that relate to their business as a matter of "enlightened self interest." Onemay ignore themin the short term, but in the longer term they are essential to a sustainable self interest.

• What is the importance ofCorporate Social Responsibility initiatives?Why should companies embrace them? Can CSR be a competitive advantage for companies?
  We do think that CSR can be a competitive advantage, and cite many examples in the article to support that assertion. The initiatives are only important, however, if they are meaningfully tied to corporate strategy and embedded in corporate activities.

  †A companys competitive context consists of four interrelated elements of the local business environment that shape potential productivity: factor conditions, or the available inputs of production; demand conditions; the context for strategy and rivalry; and related and supporting industries. This framework is summarized in the exhibit 'The Four Elements of CompetitiveContext' and described in detail in Michael E. Porter's The Competitive Advantage of Nations. Weakness in any part of this context can erode the competitiveness of a nation or region as business location.

  There is no inherent contradiction between improving competitive context and making a sincere commitment to bettering society. Indeed, aswe've seen themore closely a company's philanthropy is linked to its competitive context, the greater the company's contribution to societywill be. Other areas, where the company neither creates added value nor derives benefit, should appropriately be left as Friedman asserts to individual donors following their own charitable impulses. If systematically pursued in a way that maximizes the value created, context focused philanthropy can offer companies a new set of competitive tools that well justifies the investment of resources. At the same time, it can unlock a vastlymore powerfulway tomake the world a better place.†

• Do you think every formof business should undertake Corporate Social Responsibility initiatives? Many a times, it is argued that for small companies (although their societal impact can be substantial), this can be a luxury that they can seldomafford.
  We do believe that small companies can undertake CSR in their localities, and would benefit by it. FSG conducted a study for the Government of Denmark two years ago, looking at the CSR practices of small businesses, and the competitive benefits that resulted. We found a number of CSR activities that meaningfully affected employees, communities, costs, and competitive differentiation in ways that conferred economic benefits even on businesses that employed less than 50 people.

• Should companies from some industries be more "socially conscious" than other industries. For instance, Oil and Petroleum, Chemicals, Textiles, Automobile, Shipping, Steel, Airlines and Aerospace, Food, Pharmaceuticals, etc.
  Every industry affects social and environmental issues, and also depends for its success on the presence of certain social and environmental conditions. Therefore, every company should be attentive to CSR issues. Some industries, of course, have more risky or harmful consequences to the activities in their value chain than do others. These industries will have more at stake in mitigating obviously harmful impacts in order to avoid societal harm, regulation or liability. As a result, they may devote more resources more urgently to these issues. But it is not a question of being more socially conscious all companies benefit from being socially conscious in their strategy and operations.