The Marketing Effects and Limits of CSR
How much is enough when it comes to CSR? This examination is based on the principles and views of Peter Drucker, and his concept of "bounded goodness."
What is the effect of corporate social responsibility (CSR) principles on marketing and the extent to which a company should conduct CSR activities? In particular, the author of this paper focuses on an issue that haunts many of today's businesses: determining how much CSR is enough. According to the author, CSR should be pursued only as long as a firm's profitability can be maintained and the company has the competence and authority to continue its CSR activities. Effective responses to social impacts and social problems may also be found through business opportunities or regulation.
Thought leaders have long debated the role and relevance of CSR in business. This paper elaborates on Peter Drucker's view that once a company's responsibility to its economic interests is satisfied, other social responsibilities should be considered.
Social impacts are the consequences—often unintended—of a company's activities (e.g., product defects or children's obesity linked to advertising). Businesses should take steps to eliminate or reduce these negative impacts. Marketing can address social impacts, for example, through product recalls or by banning advertising that targets vulnerable groups.
Social problems are the indirect effects of a company's activities that affect society in general. Although social problems can be addressed through similar channels as those used to reduce social impacts, a company's responsibility to address some social problems—for example, AIDS or climate change—is less clear. Profitable solutions to social problems include business opportunities such as promoting fair trade products and building hybrid vehicles.
A company should limit its CSR activities when it experiences constraints such as those the author terms "bounded goodness": its survival is threatened (e.g., when both maintaining profitability and reducing social impacts becomes too costly), the company is not competent to act on the CSR activities, or the company's response to CSR activities infringes on another group's authority.
The extent to which a company pursues its CSR responsibilities should be addressed on a case-by-case basis, taking into account social norms and consumer expectations. For example, it may be appropriate in one culture for a pharmaceutical company to invest in health infrastructure, whereas in another culture, such a relationship may be seen as inappropriate.
Implications for Managers
When managers build a CSR strategy and consider whether sufficient action is being taken to address the social impacts resulting from their business, they should consider Drucker's four criteria: (i) Does it undermine a company's economic health or social function? (ii) How much regulatory intervention is present and appropriate? (iii) Does the company have the competency to address the problem, or is the problem better addressed by another group? (iv) Does a company have the authority to intervene, or would doing so infringe on local cultures or governments?
Opportunities may be available to convert social problems into business ventures or to seek regulation to minimize the competitive disadvantage of addressing a social problem.
Managers can generate discussions within their company regarding the extent of their company's CSR responsibility.
Implications for Researchers
Future research can explore the extent of marketing's responsibilities to CSR by examining successful marketing activities (e.g., preventative product recalls) compared to activities that are still in question (e.g., cause-related campaigns, such as Product Red) to increase our understanding of the scope and factors of "bounded goodness."
This paper reviews Drucker's writings with the aim to identify the limits of CSR activities in marketing. The author presents historical and recent examples from both successful and unsuccessful marketing efforts.