1. Corporate Social Responsibility
and
Corporate Shared Values

2. • https://www.youtube.com/watch?v=fX0vMd9uNQY
• Can Wal-Mart Be Sustainable? Ask Patagonia Founder Yvon
Chouinard [video]

3. • Topic 1: Patagonia’s Business Model

4. • Value creation: While Patagonia raises WTP(willingness to pay)
with its differentiated environmental position (horizontal) and
high quality (vertical), these nevertheless result in higher cost.
• Value capture: The environmental position and quality also
allow Patagonia to charge high prices (20% above those of other
specialists), which cover the higher costs incurred.

5. • Is the standard notion of value creation as the wedge between
WTP and cost the right way to think about value creation in
the case of Patagonia

6. • While the wedge is an important part of Patagonia’s value creation, Patagonia also creates value
beyond its product. Casey Sheahan explains that “inspiring and implementing solutions to the
environmental crisis,” is the most important part ofthe mission statement . Its environmental
commitment increases WTP for the environment—a public good. By being a pioneer of sustainable
change, Patagonia thus sells two goods bundled together: its garments and a better environment.

7. • How is Patagonia’s environmental mission achieved?
• How does Patagonia inspire others to follow its lead?
• Is this business model sustainable?

8. • Topic 2: Patagonia’s Environmental Practices

9. • Which component of the environmental damage identity has Patagonia primarily addressed
(before the Product Lifecycle Initiative)?
• Environmental Damage ≡ (Damage / Stuff) x (Stuff / People) x People
• While its commitment to high quality and multi- functionality might reduce, to a limited extent,
“Stuff / People,” Patagonia has focused mostly on “Damage / Stuff,” through initiatives like the
switch to organic cotton and the production of synchilla fleece. The production of organic cotton
reduces the environmental impact of cotton on the depletion of soil. The synchilla fleece is made of
recycled plastic soda bottles. 150 synchilla fleeces saves a barrel of oil (42 gallons) and avoids about
half a ton of toxic air emissions.

10. •Which component of the environmental
damage identity has Patagonia primarily
addressed (before the Product Lifecycle
Initiative)?
•Environmental Damage ≡ (Damage / Stuff) x
(Stuff / People) x People

11. • Topic 3: Evaluating Patagonia’s Success in Achieving Its Goals
• Where does the additional willingness to pay (and ability to charge 20% price premium) come
from?

12. • Patagonia’s price is about 20% higher than other specialists (like North Face) for both performance
wear and sportswear . As noted earlier, the price premium is driven by quality, design, and
environmental stance, all of which differentiate the company from its competitors.

13. • Topic 4: The Product Lifecycle Initiative (PLI)

14. .
•Patagonia’s business model constitutes an
interesting and unique way to “to inspire and
implement solutions to the environmental crisis.”
However, it raises a sustainability issue to its
business model by requiring Patagonia to help
other firms adopt similar practices and thereby
reduce its own differentiation.

15. • What is the Product Lifecycle Initiative?

16. The PLI consists of four R’s: Reduce, Repair, Reuse, and Recycle.
PLI complements Patagonia’s original business model by making it more robust and less prone to
competitive imitation. Only a firm truly committed to the environment would tellcustomers to buy
less.
• How does each R help improve the environment?
• Each R affects the “environmental damage identity”:
 Reduce lowers “Stuff / People,” which Patagonia has been pursuing to date.
 Repair lowers “(New) Stuff / People” as people keep their garments longer.
 Reuse lowers “(New) Stuff / People” as the useful life of the garment is extended with a
different owner through a second market for garments.
 Recycle lowers “Damage / Stuff” by creating a second market for constituents, decreasing the
need for production of new fabrics.

17. • How can PLI be good for business?
• The only three ways in which PLI may make sense from a profit perspective is if “People,”
“Price” or “(Patagonia) Stuff / People” grow, while overall “Stuff / People” decreases.
• An increase in “Price” may help Patagonia’s profit goal as volume decreases, but certainly would
not help its environment goal: individuals would be buying less from Patagonia but more from
other garment manufacturers .
• An increase in “People” would likely mean that people are buying fewer units from other
manufacturers, as Patagonia attracts customers from its competitors while reducing the overall
demand for stuff. Insofar as there is a contract between Patagonia and customer, the customer
would become sticky.
• Lastly, it could be that current Patagonia customers reduce their overall demand for stuff while
buying a greater proportion of their clothing purchases from Patagonia, given that Patagonia
clothingprovides viable substitutes for a larger proportion of their clothing.

18. Conclusion
• Patagonia’s business model design is guided by its mission, which allows Patagonia to create value
beyond the wedge between WTP and cost.
• An interesting point to note here is that the Product Lifecycle Initiative provides an example of how
a change in business model constitutes a strategy.
• Finally, the case might lead one to reflect on the tension between traditional business practice and
the environment, and on the ways in which firms can contribute either to environmental problems
or their solutions

19. • When it comes to corporate
social responsibility, most
companies don’t become
model citizens overnight.
Take Nike: When protesters
railed against sweatshop
conditions at its overseas
suppliers, Nike claimed, “It’s
not our job to worry about
other countries’ labor
conditions.” Later it
grudgingly hired high- profile
firms to verify enforcement
of labor codes. But these
firms had little auditing
experience, and protests
persisted.

20. • As Nike discovered, getting defensive or
merely complying with public demands for
responsible practices won’t protect your
company’s brand or solve social ills. How
to do well and do good? Zadek
recommends this approach: shift your
mind-set from safeguarding your reputation
to reinventing your business in ways that
make a real difference to society.
• By moving beyond defensiveness and
compliance, Nike ultimately became a
leader in progressive business practices.
No longer an object of civil activism, it’s a
key participant in major civil society
initiatives.

21. •A company’s journey through these two dimensions of learning—organizational and societal— invariably
leads it to engage in “civil learning.”
Organizational Learning:
•“It’s not our job to fix that.” In the defensive stage, the company is faced with often unex- pected
criticism, usually from civil activists and the media but sometimes from direct stakeholders such as
customers, employees, and investors.
•“We’ll do just as much as we have to.” At the compliance stage, it’s clear that a corporate policy must
be established and observed, usually in ways that can be made visible to critics.
•“It’s the business, stupid.” At the managerial stage, the company realizes that it’s facing a long-term
problem that cannot be swatted away with attempts at compliance or a publicrelations strategy.

22. • “It gives us a competitive edge.” A companyat the strategic stage learns how realigning itsstrategy to
address responsible business practices can give it a leg up on the competition and contribute to the
organization’s long-termsuccess.
• “We need to make sure everybody does it.”In the final civil stage, companies promote collective
action to address society’s concerns

24. • Societal Learning
• A generation ago, most people didn’t think tobacco was a dangerous health threat. Just a
few years ago, obesity was seen as a combination of genetics and unhealthy lifestyle
choices—certainly not the responsibility of food companies. Today, ageism is rarely seen
as a corporate responsibility issue beyond compliance with the law—but in an era of dra-
matic demographic shifts, it soon will be.
• The trick, then, is for companies to be able to predict and credibly respond to society’s changing awareness of
particular issues. The task is daunting, given the complexity of the issues as well as stakeholders’ volatile and
sometimes underinformed expectations about business’ capacities and responsibilities to address social
problems.

25. • The Civil-Learning Tool
• The civil-learning tool is intended to help companies see where they and their competitors fall on a
particular societal issue. It can help organizations figure out how to develop and position their future
business strategies in ways that society will embrace.
• The tool factors in the two different types oflearning, organizational and societal. When anissue is
just starting to evolve, companies can get away with defensive actions and deflectionsof
responsibility. But the more mature an issue becomes, the further up the learning curve an
organization must be to avoid risk and to take advantage of opportunities.
• As the tool makes clear, there is a point where the risky red zone turns into the higher-opportunity
green zone. The question for most companies is, “Where is that line for my organization?” The
answer de- pends on a host of factors, and a company’s actions can actually shift the line in its
favor.A company might step way out in front of animmature issue while most of its rivals are still in
defensive mode.

26. Companies don’t become model
citizens overnight. Nike’s
metamorphosis from the poster
child for irresponsibility to a
leader inprogressive practices
reveals the five stages of
organizational growth.

28. Meaning and definition of CSR
Corporate social responsibility (CSR) is a
self-regulating business model that helps
a company be socially accountable — to
itself, its stakeholders, and the public
CSR is new to India or it was
prevailing in some other form?

29. Does CSR apply to your company?
• Yes if,
Net worth> 500 crore Net profit>5 crore
Turnover>1000 crore
or or
In any of the previous three years…

30. CSR and
Strategy
What are
the
dilemma?
Defining CSR - No acceptable
definition
Profit maximization v. CSR: the
manager’s dilemma
Do companies and managers have
a duty to stakeholders?
Can businesses ‘do well by doing
good’?

31. AB Carroll: “CSR is the conduct of a business so that it is economically
profitable, law abiding, ethical and socially supportive”.

32. Corporate Social Performance Model

33. Evolution of CSR
SN Time period Economic currents State role Corporate CSR
1 1850-1914 Industrialization Colonial Extraction Dynastic Charity
2 1914-1947 Trade barrier for new
Industries
Colonial exploitative Support freedom struggle
3 1947-1960 Socialism,
Protectionism
Five Year Plans Support new state; launch
new rural initiatives
4 1961-1990 Heavy regulation License raj; development
failure
Corporate trusts
5 1991-2013 Liberalization Shrinking in production;
expanding in social
provision
Family trust, Public-
Private partnership, NGO,
Sponsorship
6 2013- present Globalization Need to manage inequality;
new reforms to liberalize
further
Introduction of mandatory
CSR- 2%

34. Now what for CSR?
• 1. CSR committee: Three or more directors with at least one independent director.
• 2. CSR policy: Activity/ Programme
• 3. Spend 2%: Of average net profit of last three years
• 4. Disclosure: Annual report and on website
• New amendments (1st Aug, 2019)- Fine+ imprisonment
• Fines for both the company and defaulting officers ranging from Rs 50,000 to Rs 25 lakh
and Officers also liable for imprisonment of up to three years, as per the provisions in the
Companies Amendment Bill, 2019

35. What CSR rule mandate?
Activities must be in project or
programme mode
May invest, an amount not exceeding
5% of total CSR expenditure on
capacity building of CSR personnel
Must be based on CSR policy &
Schedule VII of Companies Act
Must have strong monitoring and
reporting system
Preferably in local region of operation
Salaries to regular CSR staff &
volunteers can be included in CSR
expenditure
May undertake activities through a not
profit of reputation or own foundation

36. What is not CSR?
Expenses on activities
required for any compliance
On- off events such as
advertisements/ awards/
sponsorship
Activities benefiting only the
employees of the company &
their family
Expenses on activities in
pursuance of Normal course
of business

37. CSR spending

38. Top 10 companies by CSR spend

39. Development Sector wise break up of CSR Spend
32%
26%
14%
12%
4%
2%
2%
2%
2%
1% 1% 1%
1%
0.22%
0.21%
Education
Health & WASH
Environment
Rural Development
Women Empowernment
PM Relief Fund
Others
Sports Promotion
Art & Culture
Slum development
Administrative Overheads
Swachh Bharat Kosh
Any Other fund
Clean Ganga Fund
Contribution to Corpus
₹ 2728
₹ 2246
₹ 1213
₹ 1017
₹ 326
₹ 192
₹ 165
₹ 157
₹ 160
₹ 123 ₹ 123 ₹ 121 ₹ 36
₹ 19
₹ 18
(Amt. in ₹Crore)
(Amt. in ₹Crore)

40. Mode of implementation

41. Reason’s for CSR
Develop good
relationship with
local community
Sources of
Innovation
Customer
retention
Employee
engagement
Being sensitive to
all stakeholders
Brand image Reputation

42. Toward Corporate Shared Values

43. Shared Value: Corporate policies and practices that enhance the competitive advantage and
profitability of the company while simultaneously advancing social and economic conditions in the
communities in which it sells and operates.
Shared value is not corporate social responsibility, philanthropy, or even sustainability, but a new way to
achieve economic success.

44. CSR VS CSV

45. Creating Shared Value: Levels of Shared Value
Reconceiving product
and Markets
Redefining Productivity
and value chain
Building supportive
clusters

46. Creating Shared Value: Levels of Shared Value

47. 1. Reconceiving product and Markets
Bamboo Bike
https://www.youtube.com/watch?v=-SGxk6jgGC0
Affordable Purified drinking water- WaterHealth
https://www.youtube.com/watch?v=lHpFyiRmrS8

48. 1. Reconceiving product and Markets

49. 2. Redefining Productivity
and value chain
• Naryan Hrudyalaya- Low cost
healthcare in India
• Dr. Devi Shetty
• Affordable heart surgery for the lower
and middle income patients
• https://www.youtube.com/watch?v=
8bQ1P2TiT_U

50. 2. Redefining Productivity and value chain

51. 3. Building supportive
clusters
• Cluster of supporting companies and
infrastructure.
• Silicon Valley- IT
• https://www.youtube.com/watch?v=UO-
8CMdeSHA
• Patanjali- Haridwar
• Surat- Textile

52. 3. Building supportive clusters