johnelkington.com - publications

A special report by European Business Forum (EBF)
on Corporate Social Responsibility

Summer 2004

Biting the bullet points
By John Elkington

CSR issues are likely to drive waves of creative destruction that companies may not be able to predict

I have just addressed a Conference Board event in New York on business and sustainability. My theme: the future. Fine, you may say, but what's that got to do with the connections between corporate social responsibility (CSR) and philanthropy that Michael Porter and Mark Kramer explore (see the full EBF report)? A great deal, I would argue. For the issues we discussed in New York have the potential to blow apart the tidy rigour of the three Porter/Kramer bullet points.
But first, a few overall reactions. Like Professor Porter, I spoke at the EABiS event in Copenhagen in autumn 2003 - though, to my chagrin, I had to fly in the day after his speech. Still, while the man may have gone, the shock-waves of what he was understood to have said were still ricocheting around Denmark.

As I arrived, a number of people told me that Porter had characterised CSR as little more than corporate philanthropy. This I found hard to believe, partly because of the sophistication of his thinking, partly because of his clear, long-standing interest in such issues as the environmental impact of Dutch intensive flower production. So the first couple of paragraphs of the Porter/Kramer article in this Special Report come as no great surprise, even if they were a relief.

I wonder, though, whether the 'deeply embedded assumptions' referenced by Porter and Kramer don't cut both ways? So, for example, I had originally arrived in New York for the Conference Board event from Washington, DC, where SustainAbility had convened a small number of companies to discuss the question whether there is a growing transatlantic divide in perceptions of CSR. The consensus was that there is a growing divide - and I suspect that the misunderstanding of Professor Porter's Copenhagen arguments were but one more symptom of that trend. Any misunderstandings were no doubt aggravated by the radically different approaches to philanthropy practised in the US.

So I began reading the Porter/Kramer article and, to my horror, jumped to the conclusion that this was going to be hideously boring: I agreed with most of what they say. But then I got to the bullet points. They are neat, elegant and true, as far as they go. Yet, at least on an initial reading, they miss two key points.

First, the bullet points seem to assume a world where companies and value chains evolve in predictable ways. Generic issues, the unimaginative reader might assume, will remain generic. Of course, no one could imagine Michael Porter assuming any such thing, but some social and environmental issues, such as climate change, may be generic for many businesses at present, but are unlikely to remain so. Instead, they will drive waves of creative destruction and Value will migrate from climate-unfriendly sectors to climate-friendly sectors.

Second, and conceivably because of that first assumption, of a world that favours large existing incumbents, Porter and Kaplan focus more on risk than on opportunities. We are asked to think about "aspects of the social environment that constrain the productivity of the business in the locations where it operates." OK, but surely the competitive context also contains a multitude of opportunities?
To take their software company example, might such a company not develop a highly profitable suite of hospital products that helped cure or prevent diseases like HIV/AIDS? Just as Bill Gates and his colleagues stripped tens of billions of dollars of value from leaden footed competitors, so companies that get ahead of the sustainability curve - be it in agriculture, construction, mobility or finance - will enjoy competitive advantage. At the New York event, a top General Motors executive made the point that today's mobility systems are profoundly unsustainable. Clearly that's a risk to GM and other providers, but isn't it also an opportunity for hybrids, fuel cells and hydrogen technology?

Indeed, given Porter's work on competitive advantage, I began to wonder whether Porter/Kramer hadn't been distracted by the CSR language? Their thesis seems to assume that CSR objectives lie largely outside the normal marketplace, which at the moment is unquestionably true. If you are a pharmaceutical company, it's a drag (financially, at least) to have to give your drugs to developing countries free or at cost. But some companies - and growing numbers of entrepreneurs - will work out how to convert today's drag factors into tomorrow's market accelerators.

That said, I welcome the involvement of people of the stature of Professor Porter in the debate, congratulate European Business Forum for helping tease out some of the issues, and very much hope that the Porter camp will increasingly integrate the emerging issues likely to be associated with a world of 9bn people later in the century into their leading edge work on corporate and national competitivity.

And the future of CSR? Well, I totally agree with the point that 'broad, unfocused support of multiple causes' - often viewed as an example of corporate responsibility and good citizenship - "has little impact." In fact, we have just completed a report for the UN Global Compact which argues that: first, current voluntary initiatives are ill-fitted to addressing the sort of challenges distilled in the UN Millennium Development Goals; second, scalability must increasingly be a central feature of all corporate responsibility initiatives; and third, governments will have an increasingly crucial role to play in shaping markets with incentives, both positive and negative.

The problem with the second point, of course, is that most CSR people don't have a clue about business models or how to go to scale. So expect a shake-out when the current CSR bubble inevitably deflates. But even if the language changes, the challenges will remain - and so will the risks and the opportunities.