By Aditi Seshadri
Corporate Social Responsibility (CSR) is ever more so important today, most directly because of the April 2014 mandate for companies to invest 2% of their net profits in CSR projects, but also because of the private sector’s eroding ‘license to operate’ due to the growing inequalities in societies.
Historically, companies have viewed their CSR commitments through a philanthropic lens—they are spending some of their profits in the community to garner positive PR and customer goodwill. Today, many businesses are taking the next step in the evolution of CSR – moving towards responsible business and recognizing that CSR needs to be strategic and core to the business model.
According to this Harvard Business School working paper, there are three kinds of CSR, frameworks that define the broad strategies and nature of CSR activities companies undertake
1) Philanthropic giving – Either in the form of direct funding to nonprofit and community service organizations, employee community service projects, or in kind donations of products and services to nonprofits and underserved populations. Within privately held companies, the values of the controlling owners often determine the company’s philanthropic priorities, while charitable endeavors for publicly held companies may be influenced by boards of directors and executive management. Within this theatre a business engages in CSR because it is a good thing to do, motivated by the logic that since the corporation is an integral part of society it has an obligation to contribute to community needs.
2) Reengineering the value chain – The priority in this realm of CSR is increasing business opportunities and profitability, while also creating social and environmental benefits, by improving operational effectiveness throughout the value chain be it upstream in the supply chain or downstream in the distribution chain. Unlike philanthropic giving, which is evaluated by its social and environmental return, initiatives in the second CSR domain are predicated on their ability to improve the corporate bottom line while simultaneously returning social value. The most comprehensive CSR strategies in this domain seek to reengineer a corporation’s entire value chain, including natural resource extraction and sourcing, manufacturing, shipping and product delivery.  
3) Transforming the ecosystem – This is emblematic of wide scale and disruptive change to a corporation’s business model that puts the priority first on crafting a solution to a societal problem, which would then lead to financial returns in the longer run. The company attempts to create societal value by significantly addressing a critical social or environmental need that is within its business reach, but that may not return immediate business profits. Unlike the first and second CSR domains, corporate endeavors within the third domain may not emerge from the company’s 10 core competencies, but may require the corporation to fundamentally change its business model and develop new skills and strategies.
Whichever kind of CSR approach a company has, what does it actually take to develop an effective CSR strategy?
Strategic corporate social responsibility executed well is effective corporate social responsibility.
This excellent CSR Wire article lists, among other things, the following good practices:
* Commitment from senior leadership and management of the firm including board of directors, must make an authentic, firm, and public commitment to CSR efforts, and engage with them.
* Determine the top three business objectives of the company and develop CSR goals that will contribute to the achievement of those business objectives.
* After business objectives are determined, align CSR goals with the firm’s core competencies.
* Fully integrate CSR efforts into the governance of the company and into existing management systems.
* Finally, develop clear performance metrics, or key performance indicators, to measure the impact of your CSR efforts.
Also read:
Making the most of CSR