Social Responsibility Journal

A toolkit for designing firm level strategic corporate social responsibility (CSR) initiatives
Som Sekhar Bhattacharyya, Arunditya Sahay, Ashok Pratap Arora, Abha Chaturvedi,
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Som Sekhar Bhattacharyya, Arunditya Sahay, Ashok Pratap Arora, Abha Chaturvedi, (2008) "A toolkit for designing firm level
strategic corporate social responsibility (CSR) initiatives", Social Responsibility Journal, Vol. 4 Issue: 3, pp.265-282, https://
doi.org/10.1108/17471110810892802
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 A toolkit for designing firm level strategic
corporate social responsibility (CSR)
initiatives
Som Sekhar Bhattacharyya, Arunditya Sahay, Ashok Pratap Arora and Abha Chaturvedi
Som Sekhar Bhattacharyya
is a Doctoral Level
Research Fellow working in
the Area of Strategic
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Management, Arunditya
Sahay is Professor and
Head Strategic
Management Area, Ashok
Pratap Arora is Professor of
Marketing and Abha
Chaturvedi is Professor of
Human Resource
Management, all at the
Management Development
Institute, Gurgaon, India.
DOI 10.1108/17471110810892802
Abstract
Purpose – The purpose of this paper is to attempt to develop a framework that will help managers to
design firm level corporate social responsibility (CSR) initiatives which can be of strategic interest for an
organisation.
Design/methodology/approach – The paper reviews concepts from the domains of strategic
management and CSR literature. The concepts are deliberated and analyzed to build up a strategic
corporate social responsibility (CSR) framework. The article starts by identifying the salient stakeholders
of a firm, based on the three stakeholder attributes of power, legitimacy, and urgency. The framework
then talks about the identification of a firm’s interest in CSR, on the basis of firm value chain, context of
competitiveness and intention of creating new business opportunities. Finally, this literature talks about
the expected benefits to be achieved by carrying out strategic CSR initiatives.
Findings – In a competitive atmosphere, it is important to utilize the firm resources in a proper manner
and for a worthy cause. The undertaking of CSR initiatives calls for the sacrifice of firm resources.
Resources are scarce and valuable. Managers can design CSR initiatives in a number of ways. But the
real challenge for managers is to design firm CSR strategy in such a manner that it helps address a
social issue and also provides the organization with some business benefits.
Originality/value – Though managers are aware of the need and benefits of undertaking strategic CSR,
a comprehensive theoretical framework which can guide CSR managers to design and implement CSR
activities for strategic gains is not present. This study provides for such an integrated framework from the
stage of identification of stakeholders, to the design of CSR, to the nature of strategic gains to be
incurred.
Keywords Corporate social responsibility, Stakeholder analysis, Value chain, Competitive strategy
Paper type General review
1. Introduction
Doing good by the rich and the powerful for the poor and the needy has always been seen as
a virtue by most religions of the world. Ever since businesses have become a wealthy and
dominant institution in society, there has been a way of thinking which expected and extolled
that business firms take care of the weak and the destitute in the society. As time passed by,
business became a more powerful and dominant entity especially in the developed society
and simultaneously the world problems also increased and intensified both in the
environmental and social front. In the not so distant past, but not so recent past either (in the
modern business history perspective), it was believed by many and acted upon by few, that
business should take care of the pressing social and environmental problems.
Since the end of the Second World War, with rapid economic progress, global level
socio-environmental concerns and movements such as the Stockholm conference in 1972,
Earth Summit (Rio de Janeiro, 1992), Kyoto protocol on Global Warming in 1997 and the
World Summit on Sustainable Development (Johannesburg, 2002) emphasized the
increased expectation by political and other social institutions. This called for an
increased role of business towards social issues. Simultaneously, increased incidences of
VOL. 4 NO. 3 2008, pp. 265-282, Q Emerald Group Publishing Limited, ISSN 1747-1117 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 265
 corporate bad behaviour like the Bhopal Gas Tragedy in 1984 and others (Shell, Nike, Exxon
Mobile, Enron and WorldCom) in the 1990s and later, increasingly made many in the society
to demand from business firms to take responsibility of the harm/ills the firm business
activities caused to environment and society and further to undertake initiatives and actions
to minimize the negative impacts caused by the business firms. Also, it was expected that
business organizations contribute proactively towards alleviating the social ills present in the
society, arrest the degradation of natural environment and better the situation at large.
Business responded to these societal expectations and demands by a set of action oriented
initiatives given the generic name of corporate social responsibility (CSR). CSR gained
momentum from the 1970s onwards but by the close of the last millennium the doing of wide
spread, unrelated CSR drew more criticism than accolades (Levitt, 1958; Friedman, 1970;
Porter and Kramer, 2006). This lead to an increasing focus on such CSR programs which
provided business benefits. This type of CSR initiative is called strategic CSR (Lantos, 2001;
Porter and Kramer, 2006; Quester and Thompson, 2001; Burke and Logsdon, 1996;
McAlister and Ferrell, 2002). The concept of strategic CSR was approved by many as the
most pragmatic and effective social approach to be undertaken by a business organization.
There has been paucity in theoretical frameworks which provided a mechanism to undertake
strategic CSR (Burke and Logsdon, 1996; McAlister and Ferrell, 2002). This study provides
an action centric theoretical framework for planning strategic CSR.
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2. Corporate social responsibility (CSR) and strategic CSR?

The concept of CSR captures the dynamics of the relationship between business and
society (Davis et al., 1988). Bowen as early as 1953 talked about CSR in the context of
modern day business organizations and managements settings. But the concept of CSR is
not so new in the developed world (Hemphill, 2004; Youd-Thomas, 2005). Also in developing
countries like India, (the land of Gandhi and his theory of trusteeship) business organizations
like Tata Steel engineered socio- economic development in an entire region from the very
first decade of twentieth century and its business leaders are revered by the locals.
Let us look into what the concept of CSR stands for. The core theme of CSR is to deal,
interact and relate with stakeholders with an ethical approach (Hopkins, 2003) that is not
harming or hurting any stakeholder (Sethi, 1979; Carroll, 1979; Waddock, 2004; Andrews,
1971; Buchholz and Rosenthal, 2002; Wood, 1991; Jones, 2005). CSR represents the
voluntary (non enforced) set of activities of a business organization (Sethi, 1979; Carroll,
1979; Van Marrewijk, 2003). At the bare minimum CSR stands for being legally complaint to
the rules of the land (Sethi, 1979; Carroll, 1979). But the dominant theme and directive of
CSR is to better the condition of various stakeholders like the neighbouring local
communities, broader society and the natural environment (Riordan et al., 1997; Steiner,
1972; Frederick et al., 1992; Hopkins, 2003; Carroll and Buchholtz, 2003; Waddock, 2004;
Sethi, 1979; Carroll, 1979; Fukukawa and Moon, 2004; Kotler and Lee, 2005). In the present
day debate, CSR has been seen as a continuous process of engagement with the
stakeholders by a business firm (Boatright, 2000; Altman, 1998; Waddock, 2004).
As discussed in the previous section, the closing decades of the last millennium witnessed
events which made society expect that business institutions engage in CSR programs to
make the world a better place to live. Business firms responded in a predictable affirmative
manner by undertaking a wide variety of CSR activities. Business undertook CSR initiatives
of various colours of different shades. But such widespread proliferation of business action
(as CSR) attempting to address the wide range of social and environmental issues of the
present day world generated a lot of criticism. Many scholars and management thinkers
proclaimed that such type of CSR activities seemingly concerning each and every social
problems were neither doing good to business nor was doing good to the society (Levitt,
1958; Friedman, 1970; Lantos, 2001; Drucker, 2001; Porter and Kramer, 2006; 2002; Meehan
et al., 2006). This school of thinking was loaded with the concern that business
organizations, because of the very nature of their existential instincts and capabilities, didn’t
have the expertise to find effective and efficient solutions for social issues (Levitt, 1958). CSR
initiatives, unrelated to firm functions, would provide ineffective and inefficient solutions in

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 the social and environmental front (Drucker, 2001). Porter and Kramer (2006) felt that thus
such wide range of unrelated CSR activities would not make any progress in alleviating
social situation and hence firms would drain and waste the scarce and valuable
shareholders resources (Levitt, 1958). Porter and Kramer, 2006 also wrote that most social
problems are too big to be addressed by fragmented social initiatives of business (Porter
and Kramer, 2006). Friedman (1970) had advocated business firms to find a strategic base
for undertaking social initiatives so that the CSR initiative is both prudent and pragmatic.
Further Friedman had also emphasized the absence of a convincing logical base for ethics
based normative CSR. Friedman (1970) found traditional CSR ambiguous.
All the arguments coming from different scholars from different backgrounds added with the
increased competition in the market place in an increasingly globalized world in the last few
decades forced business executives to re-examine the nature, extent and direction of their
firms’ CSR activities. The discontent with the traditional philanthropic (charity type) CSR led
to the development of strategic CSR. Strategic CSR, the latest emergent thought in CSR
literature, means, that CSR, apart from bettering the society, should make business sense or
strategic sense (Porter and Kramer, 2006; 2002; Crawford and Scaletta, 2005; Salzmann
et al., 2005; Meehan et al., 2006; Friedman, 1970; Kotler and Lee, 2005 Windsor, 2006;
Altman, 1998; Waddock, 2000; Ricks, 2005; Perrini, 2005; Stead and Stead, 2000; Jones,
2005; Lewis, 2003; Bhattacharya et al., 2004). Fry et al. (1982) was the first scholar to write
about philanthropy having a strategic perspective. Strategic philanthropy represented such
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action which helped business organizations attain business cause as well as serve social
purpose (Quester and Thompson, 2001; Ricks, 2005; McAlister and Ferrell, 2002). Many
now believe that strategic CSR is the answer to pitfalls of traditional CSR. A substantial
section of thinkers in CSR (Carroll, 2001; Burke and Logsdon, 1996; Marsden, 2000; Lantos,
2001; Porter and Kramer, 2006; 2002) are of the view that strategic CSR would do the most
good to the society as well as provide business with maximum benefits in the long run.
Strategic CSR has been seen as an intervention which can truly enhance company’s
business performance while attending to social causes, a sustainable win-win proposition
for both business and society as in the long run (Bruch, 2005). Carroll (2001) advocated that
Strategic CSR would help business firms to accomplish strategic business goals. Werther
and Chandler (2006) wrote that strategic CSR represents the philosophy of integrating CSR
into firm’s strategic perspective and operations. So, firms were advocated to indulge in CSR
activity themes related to its core business (Collins, 2003).
The notion of strategic gains from firm’s philanthropic action started growing in popularity
from around the mid-1980s (Jones, 1997; Carroll, 2001) and the concept of strategic CSR is
only expected to grow in the future times (Lantos, 2001). It is also evident that since the
1990s, there has been an increased emphasis on aligning firm social initiatives with the
business objectives (McAlister and Ferrell, 2002).
One can argue in a very objective manner that if business organization, by the very nature of
its business activities, serve social causes then it represents the most ideal state of affairs.
This could however, be seen as a utopian dream that, business by its very nature of business
(activities) benefit the society! Thus if strategic CSR initiatives are very synchronized to firm’s
business then CSR initiatives would be difficult to be distinguish from mainstream business
activities (Fukukawa and Moon, 2004; Porter and Kramer, 2006), it could be the best thing to
happen in the business and society sphere.

3. Importance need and benefit of strategic CSR

Firms that indulge in strategic CSR get benefits such as enhancement of business
performance in the short run and securing of long-term interests of the firm (Sze’kely and
Knirsch, 2005). Mescon and Tilson (1987) reported that many organizations were making
charitable/philanthropic contributions for gaining competitive edge. Saiia et al. (2003) also
corroborated for such a case based on certain empirical studies. Similarly Brammer and
Millington (2004) studying the corporate philanthropic donations between the periods of
1989/1990 and 1998/1999 discovered a pattern that indicated that such donations were
directed for securing more and more strategic business benefits. The social initiatives of

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 business organizations were increasingly becoming integrated to the corporate strategic
plans (Garone, 1999; Drumwright and Murphy, 2001). Jones (2005) based on the study of
the UK’s ten leading food retailers, observed that most firms had their own customized
approach to undertake CSR and interestingly most of such CSR initiatives formed part of the
core business activities for securing a long term financial security and growth for
stakeholders or were done to enhance the market position. Further, Jones (2005) provided
evidence to this as they reported that many of the environmental initiatives of the firms were
planned to reduce energy usage and waste generation and hence reduced operational level
costs. Based on KPMG’s International Survey of CSR reporting in 2005, Crawford and
Scaletta (2005) had discussed the top ten motivators for doing CSR for competitive gains.
Similarly, Perrini (2005), discussing the strategic CSR process, had highlighted seven
dominant themes in strategic CSR. Fombrun (1996; 2005) wrote that CSR and other such
initiative like Corporate Citizenship (CC) is undertaken by firm management as a strategic
intervention to manage reputational risks from stakeholders and thus to enrich and enhance
business opportunities. Marsden (2000) wrote that large business organizations of the likes
of Johnson & Johnson (Europe), Levi Strauss, NatWest Bank and American Express were
disengaging from indulging in tradition charity type normative philanthropic activities to
increasingly towards making social investments and taking up such social issue which were
attuned to the company business activities so as to generate measurable outcomes. All this
culminated when Neville et al. (2005) contended that there was a positive strategic fit in the
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relationship between the social performance of a firm and its financial performance. Thus, it
became important and pertinent for a firm to engage in strategic CSR but the important
question remained unanswered; how to design for strategic CSR initiatives?

4. Designing strategic CSR

4.1 Identification of stakeholders

A business organization is nothing but a web of relationships with various stakeholders
(Waddock and Smith, 2000; Zadek et al., 2000). So, any attempt to develop a framework on
strategic CSR will start from stakeholders. The concept of stakeholders was championed by
Freeman (1984). A firm’s stakeholders are parties who can affect or is affected by firm
activities (Freeman, 1984) or in other words firm stakeholders are individual(s)/group(s) who
can significantly affect or are significantly affected by firm actions (Evan and Freeman,
1988). On similar lines Hopkins (2003) wrote that firm stakeholders have a concern, claim
(because of moral or legal reasons) (Langtry, 1994) and interest in firm activities (Hopkins,
2003). Also, stakeholders have the power to influence the firm. According to Langtry (1994),
stakeholders face the consequences because of firm’s decisions to act, or not to act.
Clarkson (1995) added a temporal dimension to this concept by saying that stakeholder firm
dynamics results from past, present or future firm activities.
All the definitions made certain segments of the society as stakeholders. And a lot of
literature is available on who are the stakeholders of business. Table I provides the lists of
some stakeholders.

Table I List of stakeholders

List of stakeholders (Freeman, 1984; Greenley
and Foxall, 1996; and Polonsky, 1996 listed eight List of stakeholders (Hopkins, 2003 listed seven
S. No. stakeholders of a business firm) stakeholders of a business firm)

1 Owners/shareholders Owners/investors (shareholders or stockholders)

2 Top management Management
3 Employees Employees
4 Customers Customers
5 Special interest groups Natural environment
6 Government The wider community (including government)
7 Suppliers Contractors/suppliers
8 Competitors

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 Some authors were of the opinion that stakeholders have to be classified either as primary
stakeholders or as secondary stakeholders. Primary stakeholders were seen as
stakeholders who impacted or related to the primary firm functions (Frederick et al., 1992)
and thus were important for the survival of the organization (Clarkson, 1995).While
Secondary stakeholders are concerned with the secondary (support) firm functions
(Frederick et al., 1992) and thus are not of existential importance to the firm (Clarkson,
1995).Thus primary stakeholders consists of shareholders, employees, customers,
suppliers etc. While a secondary stakeholder would typically be special-interest groups
(Clarkson, 1995).

4.2 Mapping their interests/demands on CSR

Given the wide range of stakeholders of a business organization it is important to identify the
relevant and important stakeholders of a firm. Stakeholders can be identified broadly in two
ways. First way is based upon the normative way (Donaldson and Preston, 1995) where
stakeholders are chosen based on the values and moral standing of the firm management
(Kaler, 2003). Thus, a firm takes care or addresses an issue raised by a stakeholder because
the management finds it ethical to do so. Second way of stakeholder identification is the non-
normative (i.e. instrumental) (Donaldson and Preston, 1995) one in which stakeholder is
identified based on how much benefits can be gained from the stakeholder by certain
initiatives and at what cost (Kaler, 2003). Normative stakeholders might not bring any net
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benefit to the firm while non normative stakeholders would be expected to bring net benefit
to the firm. Many researchers suggest that firms that address their stakeholders’ concerns
exhibit better performance than firms that ignore stakeholders’ expectations (Agle et al.,
1999; Berman et al., 1999; Post et al., 2002, Wood and Jones, 1995). The way stakeholders
are identified can be viewed as the starting point for the conceptualization of the nature of
stakeholder theory (Kaler, 2003).
Mitchell et al. (1997, p. 858) proposed a very comprehensive criteria for the identification of
stakeholders on the lines of Freeman’s (1994) stakeholders who matter for a firm. Mitchell
and his colleagues theorized to identify stakeholders based on their salience as they termed
it. Stakeholder salience was a function of the stakeholder attributes of stakeholder power,
legitimacy and urgency. Stakeholder Power means that the stakeholder can harm, hurt and
damage firm assets and functioning. Powerful stakeholders are often politically connected
and thus, are the opinion leaders in the society and thus are very prominent in the society.
Legitimate stakeholders are harmed because of the firm business activities (Porter and
Kramer, 2006; Mitchell et al., 1997). Also stakeholders have legitimacy when the firm
management view the stakeholders’ claims as appropriate and reasonable (Suchman,
1995). This legitimacy is derived from the moral values, norms or beliefs of the firm
management (Suchman, 1995). Stakeholder urgency represents the degree of quickness to
which a stakeholder claims has to be attended to. It represents the time sensitivity and
criticality of the firm stakeholder relationship. A firm has to attend to a stakeholder
immediately because the stakeholders possess firm-specific assets (Mitchell et al., 1997).
Stakeholder salience emerges because of various combinations of the stakeholder
attributes (Mitchell et al., 1997). So, some stakeholders will exhibit only legitimacy, some only
power or some only urgency. But most stakeholders will have a combination of two or more of
the three stakeholders attributes. The salience of stakeholders of a firm will differ from one
firm to another. When a firm does CSR with a salient stakeholder (Mitchell et al., 1997) then
this CSR activity has to satisfy the needs and aspirations of the salient stakeholder. If the CSR
activity with a salient stakeholder goes wrong (unsatisfactory) then the salient stakeholder
might cause problem to the firm. van de Ven and Jeurissen (2005) had advocated that as
firms integrate CSR into its corporate strategic plan and action, the more and the better the
firm is, the more it will be able to satisfy the demands of its stakeholders. How to integrate the
CSR initiatives of a firm with its business started getting answered by Porter and Kramer
(2006). Thus to undertake strategic CSR initiatives, the firm management has to identify
salient stakeholders because it is the salient stakeholders who are important, relevant and
matter to the firm. Thus, based on the parameters of stakeholder attributes, first of all salient
stakeholders have to be identified.

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 Figure 1 shows how the salient stakeholders have to be identified from the broad range of
stakeholders of a firm based on Mitchell et al.’s (1997) concept of stakeholder salience.

Firms can identify the salient stakeholders based on the inputs from:
B Firm’s internal sources like its employees and managers who are associated or interact
with such stakeholders. Such type of firm employees can provide the firm management
necessary information about the salience of the stakeholders.
B Community Based Organizations (CBOs), Non Governmental Organizations (NGOs) and
other civil society institutions are the second possible source of figuring out the salient
stakeholders. These institutions can provide details about the nature of stakeholder
attributes demonstrating salience. These institutions can provide such information
because they are more embedded in the society than a business organization. Further, in
certain cases these institutions represent sections of society (can be stakeholders) and
also air the voice and concern of the society.

Once the salient stakeholders are identified, the interests of the salient stakeholders have to
be listed based on intimate, repeated interaction with the salient stakeholders. Figure 2
diagrammatically represents the set of activities to be undertaken for listing the salient
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Figure 1 Identification of salient stakeholders to be engaged for firm CSR

Figure 2 Generation of a list of salient stakeholders’ expectations and interests to be

engaged for firm CSR

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 stakeholders expectations and demands on the CSR front. The listed interests of the salient
stakeholders will provide the firm management a direction to anticipate and deliberate about
what the key, relevant stakeholders are expecting from the firm.

4.3 Firm’s interest for doing CSR: value chain and context of competitiveness
Once the salient stakeholders’ interests are identified then the best strategic interests of a
firm for doing CSR activities have to be found out. Porter and Kramer (2006) wrote that for
CSR to be strategic, CSR should contribute to firm value chain (Porter, 1985) practices
and/or improve the context of competitiveness (Porter, 1990). Porter and Kramer (2006) by
the example of Nestlé’s CSR initiatives, elaborated to enunciate that CSR integrated to the
value chain benefited nestle. Porter and Kramer (2006) wrote that Nestlé’s CSR activities
reinforced the primary activities and support activities of Nestlé’s firm value chain. Building
on this example, Porter and Kramer (2006) advocated that firm CSR programs could be so
designed that the CSR activity forms part of the firm value chain by contributing either to the
primary activities and/or the support activities. Such CSR initiatives help firms to secure
purchased inputs, reduce operational costs, smooth logistics and/or contribute to the
marketing and sales function of the value chain. Similarly, CSR activities could also be
intelligently planned to contribute to the support activities like procurement, manpower
development etc. of the firm value chain. This has been pictorially represented in Figure 3.
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Figure 3 Firm CSR interest area-1: firm CSR activities contributing to firm value chain
activities

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 Once CSR activities are integrated to firm value chain the margin in the firm value chain
increases.
On similar line of thinking, Porter and Kramer (2006) advocated that when firm CSR activities
improve the context of competitiveness of the firm (Figure 4), the CSR activity becomes
strategic in nature. The reinforcement of context of competitiveness by firm CSR initiatives
would benefit the whole industry so firms have to secure and capture the improvement in the
context so that the firm benefits. Thus, Porter and Kramer (2006) argue strategic CSR
activities should be so designed that it improves the context of competitiveness of a firm/
industry and these benefits have to find a way into the firm value chain. But in developing
countries this logic of thinking needs to be altered. In the context of a developing country, the
firm context of competitiveness is weak. So even if the CSR initiative only betters the context
of competitiveness it is of strategic importance for the firms. Thus CSR activities directed
towards the competitive context could bring enormous opportunities of strategic
significance to the firm. Porter and Kramer (2006) wrote that CSR activities could improve
the input factors of production, such as skilled labour or necessary physical infrastructure
required to compete. Demand conditions of products and services in a given industry could
be influenced by CSR activities by setting higher standards for the quality of products and
services (in terms of product safety features, environment friendliness and socially
responsible performance features). CSR initiatives could also make the local demand
conditions more refined and of substantial size. CSR initiatives could be done to influence
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and frame rules and regulations for healthy competition, better investment climate,
protection of intellectual property etc so as to make inter firm rivalry situation favourable.
Finally, CSR could be designed to build capacity of the weak related and supporting
industries concerned or the raw material suppliers.
When firms undertake such CSR initiative, firms can gain both tangible (physical resources
such as raw material, human resource, increased profits etc) and intangible resources
(reputation, brand name, goodwill, know-how) which can be of strategic importance to the
firm (Russo and Fouts, 1997; Branco and Rodrigues, 2006). If such resources are unique to
the firm, valuable to the firm’s customers, rare, inimitable or imperfectly substitutable for the
competitors then such resources are strategic resources and can provide the firm
competitive advantage (Barney, 1991; Wernerfelt, 1984; 1995; Venugopal, 1999).
While CSR in firm Value Chain and context of Competitiveness are certain actual activity
descriptions, certain other CSR activities can also be of strategic importance for a firm and in
the next section this aspect is further explored.

Figure 4 Firm CSR interest area-2: firm CSR activities improving the context of
competitiveness for the firm

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 4.4 Social and environmental problems as new business opportunities
Society is abundant with a multitude of social and environmental problems varying in type
and magnitude. Two major problems before the world are widespread poverty and
environmental degradation. Poverty is a threat for the survival of the present generation while
environmental degradation is a threat for the healthy existence of not only the present
generation but more so of the future generation. Drucker (2001) was the most prominent
management thinker among others who advocated that business treats social and
environmental problems as business opportunities. This can help firms to develop market
based solutions to solve societal problems. This attitude on the part of firms can make the
society better off as well as create wealth for the shareholders. This thought gathered
momentum in the new millennium.

4.4.1 Poverty as business opportunity. Poverty is a wide spread reality in the modern world.
The poor people’s market has been seen as a gold mine for reaping business profits and it
has been named as ‘‘Bottom of the Pyramid’’ (BOP) market (Prahalad and Hart, 2002;
Prahalad, 2004). According to Prahalad (2004) focus on the BOP market should be a part of
core business and should not be just CSR initiatives. Bonini et al. (2006) wrote that by
catering to the BOP market (by satisfying unmet social needs and new consumer
preferences) business organizations can create market opportunities of substantial value.
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The development of the business of Micro Finance is an example of such nature. Prahalad
(2004) had attributed the micro credit initiatives of ICICI Bank (largest private bank of India)
as an innovation in finance. So, many banks, which are interested to get into the business of
micro finance, can start of as a pilot project (Brugmann and Prahalad, 2007) and later turn it
into self sustained profitable stand alone business venture. Sandra Waddock (2000)
illustrated this viewpoint by the example of Grameen Bank in Bangladesh. She discussed
the examples in Bangladesh where French firms like Danone (dairy products) and Telenor
(cellular telephones) have set up a joint venture with Grameen Bank to manufacture and sell
to bottom-of-the-pyramid. She wrote that many such Micro- and Mini-Social Venture Projects
can be initiated. In India, the concept of the Integrating Poor into Market Systems (IPMAS)
project of the International Development Enterprises of India (IDEI) and the India
Development Foundation is an example of bringing a market based solution to the poor
peoples’ market (Debroy and Khan, 2005). These are the mechanisms to bring business
solutions for the global poor (Rangan et al., 2007)

4.4.2 Environmental degradation as business opportunities. While the perspective of looking

at social problems as business opportunities is a new one, the win-win perspective between
environmental initiatives and competitiveness (Porter, 1990; Porter and van der Linde, 1995)
has been a well accepted and popular view for firms for a long time now. Many studies have
demonstrated the positive relationship between firm environmental initiatives and business
performance (Shrivastava, 1995; Berry and Rondinelli, 1998; Russo and Fouts, 1997;
Azzone and Bertèle, 1994; Amara et al., 1999). Hargroves and Smith (2005) (founders of the
Natural Edge Project) wrote that the Environmental degraded state of the world is not just a
big problem which needs to be solved, but it provides enormous business opportunities.
Brugmann and Prahalad (2007), by taking the example of BP’s (formerly British Petroleum)
fuel-efficient stove for poor consumers in rural India and Porter and Kramer (2006), by taking
the example of Toyota’s Prius, the hybrid electric/gasoline vehicle emphasized the novelty
and enormity of the nature of business opportunities in the environmental space.

Even waste can be a gold mine for business profits and gains, as according to the estimates
of The Energy Research Institute, the business opportunity of waste management will be 10
billion dollars by 2050 (Pachauri, 2004). National Thermal Power Corporation (NTPC), the
sixth largest thermal power generator is innovating the process of capturing the vast
quantities of ash produced (wastes) at its coal-based stations in India and using the same to
generate extra income. NTPC is using the fly ash (wastes) for making bricks for construction
industry or making concrete mix. Further it is also used for mine stowing and road building
(NTPC, 2007).

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VOL. 4 NO. 3 2008 SOCIAL RESPONSIBILITY JOURNAL PAGE 273
 Global warming has brought new business opportunities. The Kyoto Protocol Mechanisms
(like International Emissions Trading (IET), Joint Implementation (JI) Clean Development
Mechanism (CDM) for firms (Boiral, 2006) are examples of this. Presently firms in developing
countries like India, are securing business gains from these new found business
opportunities. According to some estimates, India has the potential to attract $200 million
worth of foreign direct investment (FDI) per year from clean development mechanism (CDM)
implementation (Business Standard, 2003). Indian firms have already pocketed Rs1,500
crore in 2005 by selling carbon credits to the developed countries (The Indian Express,
2007).

The discussions above suggest that both the environmental market (green business
opportunities) and the market of the economically marginalized (people earning less than $2
a day residing in developing countries) can throw up new business opportunities and
emerging markets. Certain CSR initiatives can start off as a micro enterprises or new
business and can cater to satisfy certain needs of the society. Such new business activities
can be a pilot project at the first place and done as a CSR initiative (Brugmann and Prahalad,
2007). Later, the CSR activity (pilot project) can graduate to become an independent
business venture generating profit for the firm. Such CSR activities, which the top
management team plans and undertakes with the intent to create potentially new stand
alone profit making business venture of future, are of strategic importance to a firm as there
are enormous business opportunities to be availed in future (Figure 5). Thus, firm CSR
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activity done with the intention of creating new business opportunities is a strategic CSR
initiative.

Thus the interests of a business organization resides in three directions:

1. design and integrate the CSR initiatives of the firm such that the firm value chain (set of
activities internal to the firm done to produce and deliver finished goods and services to
customers from raw material inputs) activities become more effective and efficient;
2. plan such type of CSR interventions that will improve the context of competitiveness of the
firm / industry (external factors influencing a firm); and
3. undertake such CSR programs that can provide for new business opportunities (new
product market combination) for the firm in future.

Once the list of the firm’s strategic interests of doing CSR is listed, such CSR initiatives that
support both the firm’s strategic CSR interests as well as the interests of salient stakeholders
would have to be mapped. The common areas of interest of the firm and salient stakeholders
have to be targeted for doing CSR initiatives of strategic significance. This has been
pictorially represented in Figure 6 as step-4 in the formulation of strategic CSR. (Steps 1 to 2
have been discussed in section 4.2 (and see Figure 2)) Any firm should first prioritize to
undertake such type of CSR initiatives.

When the interests of the salient stakeholders and the strategic interests of the firm don’t
match (as shown in Figure 7), it needs further deliberation in the firm management to decide
whether to satisfy the need of the strategic benefits of the firm and forgo the interests of the
salient stakeholders or to uphold the interests of the salient stakeholders and relegate the
strategic interests of the firm.

Figure 5 Firm CSR interest area-3: firm CSR activity done with the intention of creating
new business opportunities

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 Figure 6 Matching of firm CSR interests with the interests of salient stakeholders on the
CSR front
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Figure 7 Firm strategic interests not matching with the interests and expectations of salient
stakeholders

Figure 8 shows a schematic diagram to plan for strategic CSR.

Once the strategic perspective of CSR is set, synchronizing firm needs and the needs of
salient stakeholders, the efficient delivery of the strategic CSR is need to be done. The
implementation of strategic CSR is beyond the scope of this paper and thus is not discussed
here.

4.5 Benefits expected from strategic CSR

Firms which undertake strategic CSR activities expect to get benefits from it (Burke and
Logsdon, 1996; McAlister and Ferrell, 2002). Burke and Logsdon (1996) had talked about
some of these benefits as dimensions of strategic CSR. Strategic CSR initiatives are
expected to specifically benefit the firm (Burke and Logsdon, 1996). Altman (1998) wrote
when firms’ economic benefits are identified, corporate social initiatives become more
strategic. Strategic CSR should help in attaining competitive advantage, i.e. the CSR
initiative should lead to better effectiveness and efficient in business function activities thus
providing cost leadership or should differentiate the firms products in the socially
responsible features or environmentally friendly performance dimension. Thus strategic
CSR should help in attaining one of the two generic firm strategies for achieving competitive

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VOL. 4 NO. 3 2008 SOCIAL RESPONSIBILITY JOURNAL PAGE 275
 Figure 8 Strategic CSR design model
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advantage (Rumelt, 1980; Porter, 1985; Day and Wensley, 1988; Hunt, 2000; Miles and
Covin, 2000; Karna et al., 2003; Crawford and Scaletta, 2005). New products which are for
the economically marginalized (BOP) or the socially marginalized (physically challenged)
would provide new product-markets and hence would reap in new benefits. Strategic CSR
also leads to an increased credibility, recognition and visibility of the firm from both the key
internal and external stakeholders (Burke and Logsdon, 1996). It builds up corporate image
and thus can help get favourable treatments from government policy decisions, easy and
favourable access to funding, favourable media attention, healthy social license to operate
amongst local communities and enjoy favourable customer choice. Such Strategic CSR
initiative can also mitigate negative corporate image caused by past corporate bad
behaviour and hence help in protecting the firm reputation from being tarnished. Further it
helps the firm to protect from more stringent government investigations and regulations. A
good corporate image from CSR initiatives can reduce the nature and extent of risks and
threats which a firm faces from the external environment. It can reduce the possibility of the
firm being subjected to government, quasi government administrative regulations and also
protect the firm from suffering from economic and financial losses (because of the firm
business activities being affected) caused by socio-political unrest. Thus risk mitigation is
another major benefit of strategic CSR. Figure 9 provides the benefits to be expected of
strategic CSR initiative.

5. Conclusions and future directions

Strategic CSR is the prudent type of social intervention to be done in the present day
context, when there is a highly expectant society which wants business to contribute socially.
Also there is increased competition in the marketplace which calls for the use of firm
resource with the best jurisprudence. This study provided a comprehensive perspective for
designing a strategic CSR program for a firm. It started from identifying the salient
stakeholders based on the three stakeholders attributes of power, legitimacy and urgency.
The framework then talked about the identification of firm’s interest in CSR on the value chain,

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 Figure 9 Benefits of strategic CSR
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context of competitiveness and intention of creating new business opportunities. Finally the
framework talked about the expected benefits to be incurred from undertaking the strategic
CSR initiatives. This article also deliberated on the process (as steps) of planning the
strategic CSR initiatives. If the approach suggested for designing the strategic CSR
intervention is implemented then any firm can reap benefits from its CSR activities. This
framework can be modified theoretically if some researcher in future can do an empirical
positivistic case based research study. If the case based research is a longitudinal one, it will
provide insights into the process of designing the strategic CSR initiative.

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