90 What is strategic practice of stakeholder theory?

One reason that the term “corporate social responsibility” is critiqued is because it is conceived as essentially corporate philanthropy, that is, giving away the value created by a business. While this may result in increased goodwill among stakeholders such as customers or regulators (and thus be justified under fiduciary principles) this traditional CSR behavior may fail to take advantage of the value that can be created by integrating CSR principles throughout an organization. In this Question we will consider strategic CSR broadly, and we will address how philanthropy can be strategic later.

Consider a scene from The Office, in which Dunder Mifflin sponsors a fun run to raise awareness for rabies.

Sponsoring the race does provide a benefit to the company–the community sees company employees, those employees may have a positive experience with the race, and so on. Yet, the benefit to the company (and to rabies awareness, in all honesty) is probably small.

In contrast, consider a firm that embeds principles from stakeholder analysis into its core operations. This may include incorporating stakeholder analysis in both the strategy and tactics of the firm, managing and creating long-term relationships with key stakeholders, and creating social and business value. For example, a company that listens deeply to its employees and develops their talent, has a strong relationship with customers, keeps the environment in its local communities healthy, and so on, will likely enable long-term success much more than a company that ignores its employees, angers their customers, and sickens community members through environmental harms.

In general, a company can make one of two kinds of choices regarding CSR / ESG issues. First, they can act offensively. They can be proactive and lead on these issues while they are emerging or consolidating (in terms of the Zadek Civil Learning Model). This may give the company a comparative advantage if the issue moves towards becoming institutionalized. Or, companies can act defensively, but responding to issues after they have already crossed the SRT. Often, this means dealing with litigation, protests, walk-outs, or other measures taken against the company. We will consider specific ways to implement these principles at a strategic level during this Part.