December 7, 2006 | Read Time: 3 minutes
Corporate executives need to change the way they think about their companies’ social responsibility, according to two articles in the Harvard Business Review (December).
In “Strategy & Society,” Michael E. Porter and Mark R. Kramer say that executives should stop viewing corporate philanthropic activity as disconnected from business strategy.
“If corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that it can be a source of opportunity, innovation, and corporate advantage,” write Mr. Porter, a professor at the Harvard Business School, and Mr. Kramer, the managing director of FSG Social Impact Advisors, in Boston, a nonprofit consulting firm.
While businesses have awakened to the risks posed by their involvement in activities that contribute to environmental problems or encourage labor abuses, “the most common response has been neither strategic nor operational but cosmetic: public relations and media campaigns,” the authors write.
Instead, companies should be trying to identify the ways in which social issues intersect with their businesses, and figure out responses that are beneficial to both society and the corporation.
As an example, the authors cite Nestle’s creation of a milk business in India. When Nestle decided to enter that market in 1962, most local dairy farmers could barely subsist; they lacked adequate herds and had no refrigeration facilities, no way to transport the milk, and no way to test for quality. Nestle’s built refrigerated dairies, sent trucks to collect the milk, and supplied veterinarians to check the animals, nutritionists, agronomists, and quality-assurance experts.
When its first factory opened, only 180 local farmers could supply the milk. Today, Nestle buys milk from more than 75,000 of them.
“As Nestle has prospered, so has the community,” the authors say.
In the second article, “Disruptive Innovation for Social Change,” the authors say that while the United States spends more money per capita on a wide range of social problems, its performance continues to lag behind much of the Western world in areas like infant mortality and education. The reason, they say, is “not a lack of solutions but rather misdirected investment.”
Too much of the money spent to solve social problems, they say, “is used to maintain the status quo, because it is given to organizations that are wedded to their current solutions,” like large hospitals. To develop innovative solutions, corporations should identify groups that are focused on creating systemic social change and serving unmet needs with products and services that are simpler and less costly than existing alternatives.
The article was written by Clayton M. Christensen, a professor of business administration at the Harvard Business School; Heiner Baumann, a partner at New Profit, a Cambridge, Mass., organization; Rudy Ruggles, president of Collaborative Innovation Services, a consulting firm in Weston, Mass.; and Thomas M. Sadtler, vice president of professional services marketing at Computer Associates, a software company in Islandia, N.Y.
