Corporate Social Responsibility and
Competitive Advantage
Chris Marquis
American Chamber of Commerce – Shanghai
April 10, 2012
Copyright © President & Fellows of Harvard College.
Why DO Corporations Engage in Corporate
Social Responsibility?
1. Out of the goodness of their heart?
2. Because they are forced to (e.g. by the government)?
3. Because it is good for their business?
4. Because it is good for society?
5. Because other companies do?
6. To help their leaders personal connections?
Why SHOULD Corporations Engage in Corporate
Social Responsibility?
1. Out of the goodness of their heart?
2. Because they are forced to (e.g. by the government)?
3. Because it is good for their business!
4. Because it is good for society?
5. Because other companies do?
6. To help their leaders personal connections?
Ways of Connecting Business and Social Value
Investors
Three types of CSR
strategies:
• Strategic philanthropy
• Internal process
reengineering
• Changing the external
environment
Employees
Reengineering
Internal Processes
COMPANY
Community
& Civil Society
Suppliers
Improved stakeholder
relationships can lead to:
• Cost reduction
• Revenue enhancement
• Increased market
value
• Improved competitive
conditions
An Example
5 Year, US$100,000,000 program to “educate and support (10,000) women
who run small and medium-sized enterprises in emerging economies by
providing them with management and business training.”
Question: Does this program make business
sense for Goldman Sachs? And if so, how?
What is the Logic?
Goldman Sachs and Key Stakeholders
Employees:
• Who does GS lose
employees to?
• How much does it cost
to replace GS banker?
COMPANY
Community
& Civil Society
Suppliers
Investors
Employees
What is the Logic?
Goldman Sachs and Key Stakeholders
Employees:
• Who does GS lose
employees to?
• How much does it cost
to replace GS banker?
Employees
COMPANY
Community
& Civil Society
Suppliers
Investors
Suppliers:
• Who supplies GS talent?
What is the Logic?
Goldman Sachs and Key Stakeholders
Employees:
• Who does GS lose
employees to?
• How much does it cost
to replace GS banker?
Employees
COMPANY
Community
& Civil Society
Suppliers
Customers:
• The idea of economic
value through investing
in women?
Investors
Suppliers:
• Who supplies GS talent?
What is the Logic?
Goldman Sachs and Key Stakeholders
Employees:
• Who does GS lose
employees to?
• How much does it cost
to replace GS banker?
Employees
Governments:
• Who is buying GS
services in emerging
markets? What do they
care about?
COMPANY
Community
& Civil Society
Suppliers
Customers:
• The idea of economic
value through investing
in women?
Investors
Suppliers:
• Who supplies GS talent?
Some Important Questions
(for Goldman Sachs and any CSR Initiative)
1. Why focus on the issue of educating women entrepreneurs?

What is it that nominates this as a priority for attention?

What reliable guide to social value affirms the importance of this
project?
2. What makes Goldman Sachs the right organization to undertake
this?

Unique assets allow them to do it more effectively?

Aligned with their core competencies?

They see the importance and others don’t?

“Business Case” for this works better for them than others?
3. What factors and design are necessary for Goldman Sachs
execute the program really well?
Lots of Academic Research to Back Up
(Potential) Connection
Employee Impacts

Socially responsible firms have easier access to quality workforce (Greening & Turban, 2000)

Companies’ corporate social performance is related positively to their reputations and to their
attractiveness as employers (Greening and Turban 1997)

Firms awarded family friendly status have abnormal stock price gains (Jones & Murrell, 2001)
Customer Impacts

Customer loyalty consistently shows high correlation to sales growth and profitability (Lim 2010)

86% Americans in a survey stated that if the quality and price of a product were equal, they would be
likely to switch brands in order to help support a cause (2004 Cone Corporate Citizenship Study)
Investor Impacts

Firms adopting a stringent global environmental standard have higher market values than firms
defaulting to less stringent host country standards (Dowell, Hart and Yeung 2000)

A company’s CSR activities create goodwill among shareholders when the company suffers a negative
reputation event (Godfrey, Merrill, and Hansen 2009)

Oldest SRI Index, the FTSE KLD 400 (previously Domini 400 social index), had returns of 9.51% (1990 –
2009), compared to 8.66% for the S&P 500 (Social Investment Forum 2010)

SRI investments performed as well as or better than non-SRI investments over half the time in studies
ranging from 1963 to 2004 (Mercer and UNEP Finance Initiative 2007)
Why Do (and Should) Corporations Engage in
CSR?
1. Out of the goodness of their heart?
2. Because they are forced to (e.g. by the government)?
3. Because it is good for their business?
4. Because it is good for society?
5. Because other companies do?
6. To help their leaders personal connections?
Are the factors that drive CSR in China different
than in other countries?
Some Key Dimensions of Present and Future CSR
Terrain in China
1. Government(s) as the key stakeholder

“Unlike in the US or Europe, in China, it is the government who currently sits at
the top of the CSR pyramid” (ChinaCSR.com, 2009).

E.g. “Harmonious Society” priorities reflected in 11th and 12th 5 Year Plans
2. The development of civil society mechanisms as a big opportunity for CSR

General publics (employees and consumers) – Philanthropy and reputation

Investors – Increasing accountability and transparency

Communities – Developing NGO infrastructure
3. NGO infrastructure issues

Are key partners for corporations for CSR service delivery (and there is a gap in
China)

Challenges include: Difficult to establish; Governmental approval needed;
Development of grassroots civil society; Culture of voluntarism; Lack of
resources and expertise to scale
Research Projects on Corporate CSR and
Environmentalism in China
Corporate Social Responsibility

Accounting to the Public: Internet Activism and Corporate Social Responsiveness
in Emerging Markets. (Strategic Management Journal)

Swire Beverages: Implementing CSR in China (HBS Case Study)
Sustainability and Corporate Transparency

Sustainability Reporting in China: Symbol or Substance? (Working Paper)

State Grid: Corporate Social Responsibility (HBS Case Study)

COSCO: Implementing Sustainability (HBS Case Study)
Environmental Policy and Implementation

Regulatory Uncertainty and Corporate Responses to Environmental Protection in
China (California Management Review)

China Greentech Initiative (HBS Case Study)
Environmental Entrepreneurship

China Environment Fund: Doing Well by Doing Good (HBS Case Study)

Chairman Zhang and Broad Group: Growth Dilemmas (HBS Case Study)
Thank you!
Chris Marquis
cmarquis@hbs.edu
Copyright © President & Fellows of Harvard College.