Nacer Gasmi - Corporate Innovation Strategies

While the idea of CSR is sometimes presented as a novelty (d’Humières and Chauveau 2001), concerns about the consequences of economic activities have always been prevalent. The idea of CSR, which involves discourse and practice between businesses and society, dates back at least to the beginning of the 20th Century in North America (Acquier and Gond 2007). In the industrial era, paternalism was an early modern form of CSR. Today, social practices must be sustainable because, as Lars Rebien Sorensen, CEO of the Novo Nordisk Group, pointed out, “corporate social responsibility is nothing more than maximizing the value of the company over time, because in the long run, social and environmental problems become financial problems” (Ignatius 2015). The justification for CSR is associated with the representation of the nature and role of the enterprise and its raison d’être .

The more a company is concerned about the impact its activities may have on the rest of society, the more it is considered a socially responsible company (Pasquero 2007). CSR thus becomes an exemplary positive theoretical approach, as it challenges the contractual-legal vision of the company. This contractual vision of CSR, which advocates a more partnership-based approach to corporate governance, is part of the process of creating shared value (CSV). The correlation between societal progress and commercial success is becoming increasingly apparent. To this end, “if all companies could stimulate societal progress in all regions of the world, the result would be a decrease in poverty, pollution, disease, and an increase in corporate profits” (Kramer and Pfitzer 2017). According to these authors, there are two reasons why CSR practice has become imperative for companies. The first concerns the questioning of the legitimacy of businesses, which have come to be perceived as thriving at the expense of the community as a whole. The second relates to the numerous global problems, ranging from inequality to global warming, which are of such magnitude that solutions require the expertise and inspirational models of the private sector. Much of the work on CSR focuses on its contributions to business and society. This type of strategy involves devising responses to social and environmental problems generated by a company’s internal activities, or to problems that are external to it. Until the 2000s, strategies for integrating these issues were mainly the prerogative of large companies. Environmental and societal issues, which threaten people and companies in all countries, require companies to redefine their societal strategies and business philosophy, in order to create new value and prosper, by sharply reducing negative societal externalities generated by their activities, or by creating positive externalities (Winston 2017). Thus, all companies, whatever their activity and size, must take into account both financial and non-financial issues in their daily management, that is, to move towards global performance, because, as Lash and Wellington (2007) point out, societal issues present risks that may be irreversible for them and for society. Companies’ interest in societal issues and their solutions is part of a strategic logic that requires all organizations to formalize their ideology. This ideology includes all of their values (social, environmental, organizational ethics) and shared beliefs about their mission (Desreumaux 2005), and goes beyond profit creation and compliance with regulations. The integration of societal issues into a company’s strategy therefore forms part of new trends that are raising awareness of two major strategic issues, united by a common goal.

The first issue corresponds to a strategy of legitimization anchored in the company’s institutional communication (Dimaggio and Powell 1983; Suchman 1995; Philips et al . 2004), and in the congruence of the company’s values with those deemed appropriate by society (Philippe 2006). The second issue, described as Porter’s hypothesis, subordinates societal investment to a vision based on the reduction of negative social and/or environmental externalities produced by the firm’s activities (societal performance) while improving its competitive advantage (financial performance). The concept of externalities generates external effects (positive or negative) that generally refer to relations between agents that do not pass through the price mechanism (i.e. non-market effects) and therefore do not receive monetary compensation. Positive societal externalities correspond to environmental and/or social practices that are perceived as generating private costs and collective environmental and social benefits. Their production thus contributes to the well-being of agents other than the adopter (Gasmi and Grolleau 2003). In the case of negative externalities, their counterpart is left to the stakeholders. Positive environmental and/or social externalities therefore result from innovations, to enable the company that develops them to “correct” market “failures” and, in particular, the negative external effects on society (Daudigeos and Valiorgue 2010), that result from its economic activity. Kapp (1971) defines these effects as direct or indirect losses incurred by third parties or the general public, as a result of a company’s activity. For example, a negative social externality may be associated with the manufacture of products that have a negative impact on customers (e.g. processed food products that lead to obesity), and a positive social externality may be associated with the manufacture of products that improve the health of customers (e.g. organically produced food products). Negative environmental effects can, for example, correspond to practices that generate greenhouse gas (GHG) emissions and therefore pollution, non-recycled waste, etc., while a positive environmental externality corresponds to practices that reduce these negative effects.

With the CSV approach, societal issues are the source of pressures that companies cannot avoid, but must be able to analyze and anticipate. The reinforcement of these pressures is likely to enhance the company’s image, as well as considerably reduce its room to maneuver, due to regulatory constraints, public protests, boycott operations organized by activists (environmentalists, etc.) and media campaigns (Boiral and Joly 1992; Gasmi and Grolleau 2005). As a result, many companies only became aware of this after being surprised by public reactions to issues that they had not previously thought of, as being part of their professional responsibilities (Porter and Kramer 2010). While in the past, companies were rarely seen as actors of societal change, in recent years, CSR practices based on CSV have made real opportunities for companies to reduce negative externalities, while improving their competitive advantage and their relationships with key stakeholders. The common principle of all approaches to these practices is that companies cannot limit their activities to the sole objective of profit maximization, without taking into account their responsibility to society as a whole. Governments and businesses must play a key role in reducing negative human-induced societal externalities and corporate activities in a meaningful way, in order to sustainably safeguard our planet and reduce global poverty. Of the world’s top 100 economic powers, 63 are corporations and only 37 are States (Strategor 2013, p. 339). Corporate engagement is essential and desirable, as it will have a considerable and positive impact on society. As a benchmark, institutions – especially supranational and national ones – must consider the importance they have afforded to reduce their budget deficit, by developing appropriate strategies in order to reduce the ecological and social deficit.

While environmental and social practices are becoming a major strategic issue for companies of all sizes (Berger-Douce 2007), many companies do not appreciate the opportunities and benefits of integrating social practices (Porter and Kramer 2010). A few companies are working to secure their value chain, processes and infrastructure, but most continue to operate in ignorance of the societal risks they may face. The importance of CSR practices in companies, and in society in general, is becoming increasingly strong (Lépineux et al . 2010), and the formalization of this responsibility is crucial for the company (Gasmi 2014). Not all companies have the same attitude towards CSR practices. Referring to the models proposed by Godet (1991) and Louppe and Rocaboy (1994), four types of strategies can be identified by characterizing social and environmental practices in the firm: 1) a strategy of inactivity or lack of interest in societal issues; 2) a strategy of reactivity to momentarily integrate this issue, in order to preserve the firm’s institutional image and propose ad hoc solutions; 3) a pre-emptive strategy to anticipate changes and prepare to react to them (comply with legal obligations, moral demands, etc.); 4) a proactive strategy with an inclusive attitude towards CSR issues, which are considered structural strategic priorities. While companies that integrate their societal strategy in a proactive and CSV-based approach are organizations that exploit the business opportunities offered by this type of strategy as far as possible, many of them do not really take advantage of these opportunities.