Corporate Social Responsibility and Competitive Advantage Harvard Case Solution & Analysis

Why is ethical behavior and corporate social responsibility good for business?

Corporate Social Responsibility

The European Commission Corporate Social Responsibility as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”. It stresses on companies to take actions above their legal obligations for society and the environment(EUROPEAN COMMISSION , 2011).

The “business case for CSR” refers to the reasons for businesses to pursue Corporate Social Responsibility (CSR) activities. It involves financial and non-financial reasons and evidences that show the importance of CSR for businesses. The phenomenon of CSR comes into being after World WarII and did not have any importance until the 1960s(Shabana, 2010).

Strategically, a move towards social responsibility is important for companies’ competitive advantage. It results in the efficient risk management system, cost efficiency, better customer relationship, innovation and innovation. It also allows them to build long-term employee relationship, the trust of citizens and customers is built on a company.  Whenever employees and customers trust the company where they buy their products and services, they always have the opportunity to grow(EUROPEAN COMMISSION , 2011).

According to European Commission, acting in a socially responsible way will lead to sustainable development and a very competitive market economy. It argues that they would achieve the objective of 75% employment target if businesses act socially(EUROPEAN COMMISSION , 2011).

Corporate Social responsibility is based on three factors known as Accountability, Sustainability and Transparency.

Sustainability, talks about the affects the present actions of the business activity   has on the future. If resources are utilized today, then they may not be available in future. For instance,if coal, iron and oil are used today, they may not available for future. Therefore, alternatives of these resources may be required in the future. Moreover, these resources may be depleted, resulting in higher operational costs for businesses to acquire them. In a nutshell, an organization should not use more resources than it can be regenerated(Aras, n.d.).

Accountability says that a business should accept the responsibility for its actions. Businesses should quantify the effects of its actions and convey them to those affected. It means communicating the information to stakeholders such as general public, shareholders, employees and others. Organizations should consider them a part of wider social network and should realize that these stakeholders can affect the way organizations work. In order to report their performance to stakeholders, they should develop Key performance Indicators (KPIs) such as number of employee accidents(Aras, n.d.)

Businesses should incorporate transparency in their corporate reporting methods and do not mislead the stakeholders. It is important for them because the external persons are not aware about the internal activities of the companies as the persons working there do(Aras, n.d.)

Husted and Allen stresses that the efforts for Corporate Social Responsibility is related to better financial performance. Businesses have now realized that caring for people, community and the environment are critical drivers for the long-term success of the business. The drivers of Corporate Social Responsibility are different in different parts of the world.In the United States of America, businesses look for financial justifications for the Corporate Social Responsibility while the European Union businesses rely on corporate accountability and sustainability for the same(Alessia D'Amato, n.d.).

If businesses want to function in a healthy climate in the long-term it should pursue CSR activities. Secondly, it will move away the burden of government regulations over them as there is no need of strict laws and regulations if the business is self-disciplined. Another argument in favor of Corporate Social Responsibility is that the businesses have talented personnel, organized functions and a large amount of capital at disposal, therefore they should be given a chance to solve the problems of society as others have failed to do so. Moreover, pro-acting is better than reacting as it is less costly as compared to solving these problems once they have occurred.Businesses should engage in CSR because the public supports it(Shabana, 2010)

            Cisco believes in creating value for their customers and consider CSR to strengthen their business. By committing themselves to the CSR, they develop their brand perception in the minds of consumers. It allows them to build relationships on trust with customers, investors, partners and other stakeholders(CISCO, 2013).

            Cisco’s technology allows people, processes and data connect with each other. Their CSR strategy encompasses supply chain, people, society and environment.They work with suppliers in such a way that maintain high levels of ethics,labor, rights and safety environment.  They train and assist their employees to achieve self-actualization level in their abilities. They also collaborate with other organizations to support needy children to acquire education and health care. They also help people in unfortunate events such as disaster relief efforts. They also have the objective to improve customers’ and environmental sustainability through technology and advocacy(CISCO, 2013)............................................

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