RESEARCH & IDEAS

Corporate Social Responsibilityin a DownturnQ&A with: V. Kasturi RanganPublished: August 3, 2009Author: Martha Lagace

Financial turmoil is not a reason to scaleback on CSR programsquite the opposite,says HBS professor V. Kasturi "Kash"Rangan. As a marketing scholar Rangan isoptimistic about strategic CSR efforts thatprovide value in communities and society. Q&AKey concepts include: Corporate social responsibility (CSR)

means "activities undertaken by businessesthat enhance their value in the communityand society and thus benefit their reputationand brand," says Rangan.

CSR should be treated as a businessdiscipline and practiced with the sameprofessionalism and rigor as other aspectsof a firm's strategy. "For example, many ofthe programs that come under the umbrellaof 'climate change' have the potential tobenefit the environment as well as acompany's bottom line," Rangan adds.

Good examples are the early childhoodliteracy initiative of PNC, a financialservices organization based in Pittsburgh,and the 10,000 Women initiative ofGoldman Sachs, which facilitates a businesseducation for underserved women.

Companies should classify their CSRprograms according to the ability toenhance and even transform the firm'sbusiness practices.

Is the economic downturn affecting thewillingness and readiness of companies to lookat the economic, social, and environmentalimpact of their business practices? Or is this aperfect time to reassess current programs andadapt them to changingand in many casesincreasingneeds in society?

V. Kasturi "Kash" Rangan, the Malcolm P.McNair Professor of Marketing at HarvardBusiness School, argues that corporate socialresponsibility (CSR) initiatives are morenecessary than ever. Rangan says that whencarefully planned and managed, such efforts canstrategically tackle important societal issues andat the same time enhance business success,yielding a "double bottom line."

And there's no time like the present, headds. "Effective programs that serve the

community in a compelling way, and that alsodemonstrate a strong potential to influence thebusiness, must be retained and grown."

At HBS, Rangan serves as cochair of theSocial Enterprise Initiative (with Herman B."Dutch" Leonard) and as faculty chair of theExecutive Education program Corporate SocialResponsibility: Strategies to Create Businessand Social Value (to be held November 4-7,2009). He has taught a variety of MBA courses,including the second-year electives Business atthe Base of the Pyramid and Customers,Commerce and Society: Business Value and thePrivate Creation of Social Value.

Rangan agreed to take part in an e-mailQ&A with HBS Working Knowledge todescribe the value of corporate socialresponsibility to businesses in economicallyuncertain times.

Martha Lagace: What is corporate socialresponsibility as you define it?

Kash Rangan: Activities undertaken bybusinesses that enhance their value in thecommunity and society and thus benefit theirreputation and brand. In general these activitiescreate a win-win for the company and its largergroup of stakeholders.

Q: Many nonprofits from museums tofood banks are worried about the dwindlingnumber of donors and their future in themidst of our market turmoil. Is the role andimportance of corporate social responsibilityevolving during the current recession?

A: There is no doubt that corporations areengaging in less philanthropy, but that is notnecessarily bad as long as they cut theineffective ones and consolidate those that aresynergistic to their business.

Here is where the problem might arise: Ibelieve the tendency is to makeacross-the-board cuts, without reflecting on thecompany's business strategy and its relationshipto the larger environment. Some companies willend up making very poor decisions that willhamper their ability to leverage their reputationswhen the recession turns around.

Q: How would you advise that executivesbest communicate their CSR efforts to

stakeholders when the economy is in suchturmoil?

A: This is the time for executives toundertake a CSR audit and classify theprograms according to their ability to enhance,and in some cases transform, the firm's businesspractices. We have built a simple classificationsystem that when combined with an"assessment" model could yield powerfuldiagnostics on how to migrate and manage acompany's portfolio of CSR programs.

Effective programs that serve thecommunity in a compelling way, and that alsodemonstrate a strong potential to influence thebusiness, must be retained and grown. This isalso the best time to be pruning initiatives thathave lost their relevance and leverage.

Q: What constitutes effective CSR? Canit always be measured or otherwise justifiedin a strategic business sense?

A: PNC [a financial services organizationbased in Pittsburgh] is an excellent example ofhow a business has focused on a cause that thecompany, its employees, and its customersdeeply care about: early childhood literacy. Notonly is support for the program continuing atthe projected pace, there already are signs ofhow the program has started to impact PNC'sbusiness initiatives. The leading indicators arethere; as for business impact, it is still too earlyto call.

There are other programs as well, some ofwhich directly address opportunities in a firm'ssupply chain or demand chain (i.e., thecustomer-facing side of the business), which areeasier to quantify because of their direct impacton the top or bottom line.

Q: Assuming that organizations valuetheir CSR initiatives, how do you think theycould best craft a strategy to prepare forfuture storms, not just the current one?

A: As I mentioned earlier, CSR should beviewed as a business discipline and practicedwith the same rigor as other aspects of a firm'sstrategy. Remember, however, that rigor doesnot always equate to short-term financialprofits. It means that a company should aim tomanage the broader environment for the

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business to be engaged to its stakeholders increating value for itself and the community inwhich it operates.

But the assessment of what that value isshould be undertaken rigorously. While there

might not be a neat quantitative metric, at theleast there should be a robust logic model that isable to connect the dots and make a credibleprojection.

About the authorMartha Lagace is the senior editor of HBS

Working Knowledge.

HARVARD BUSINESS SCHOOL | WORKING KNOWLEDGE | HBSWK.HBS.EDU

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Corporate Social Responsibility in a DownturnAbout the author