Strategy, Ethics and CSR

Introduction

1- Strategy is a deceptively simple notion. There are many definitions of it. So, let’s start by giving a definition that is intended to be as unifying as possible : a strategy is a coherent set of actions within an organization ; consistency of action refers to the consistency of individual actions across the organization and over time. (1)

As for the organization, “(…) we will say that the organization is a response to the problem of collective action. As soon as an activity cannot be carried out by a single and isolated individual, by the sole exercise of his capacities, the problem of collective action arises, of which the organization is the answer ” (J. Rojot, “Théorie des organisations”, 2003 ; quoting M. Crozier and E. Friedberg, “L’acteur et le Système”, 1977).

As for the corporation (or the business firm or the company), that is just one of the many forms of organization alongside with the hospital, the university, the Church, and public service organizations (listing borowed to I. Ansoff) ; it is a for-profit organization, an organization whose main objective is the making of profits (2).

2- Be that as it may, entire sections of society (citizens, consumers, employees, savers, etc.) no longer tolerate the corporation’s social role being reduced to the pursuit of profit. The social and environmental consequences of such a conception have become unbearable and the public is outraged.

The problem facing corporations today is therefore : how to integrate the social and environmental dimension, in other words CSR, into corporation’s strategy ? Or again, how to develop economically efficient and socially responsible strategies ?

Corporations can no longer be satisfied with getting around the difficulty and continuing to artificially superimpose a CSR strategy on top of their corporate strategy to enhance their public image ; the string is worn. The problem that corporations face today is existential (real if you prefer) : public opinion is outraged ; as for the political authorities (whether it be at the states, federal, national, European Union level, or at the level of international governmental organisations), it could become more threatening and constraining than it currently is on the subjet under the pressure of public opinion. Corporations are now bound to provide solutions that go beyond verbiage (incantatory speeches, wishful thinking) and symbolic actions.

However, it is not enough for the legislator to become more constraining for everything to follow automatically. Indeed, we must not underestimate the difficulties, in terms of conceptual frameworks and practical tools and methods, that corporations wishing to integrate CSR into their corporate strategy have to face. Ecological, social and economic issues cannot be reconciled by magic. The central question that should now mobilise all our attention and efforts is the question of ‘how’ ; how to do it in practice.

As for strategy researchers and consultants, they have a crucial role to play : they are required to produce relevant theoretical and practical frameworks, and useful recommendations, in order to help corporations comply with changing social values and regulations. In particular, strategy consulting firms will be forced in the short term to rethink their core offering by including CSR approach to strategic thinking. Society is running out of patience with corporations, and corporations will be running out of patience with their consultants if the latter continue to avoid the issues the former face ; the sooner consultants provide convincing answers to corporations, the better for them (and for corporations and society). Moreover, it is highly likely that the source of future competitive advantage in this sector is to be found in this area.

To understand the difficulties and obstacles to integrating the social and environmental dimension into corporation’s strategy in practice, let us rewind the CSR and corporate strategy ‘movies’ a bit.

Ethics and Corporate Social Responsibility

Business ethics

3- The classic approach to getting executives to develop more responsible strategies has been to appeal to ethics, to invoke the importance of moral conscience, and/or moral sense, and/or moral obligation, and/or moral responsibility, and/or moral reasoning, and/or moral judgment. In a word, it was a question of getting executives to superimpose a moral / ethical code on their managerial practices. What is known as ‘business ethics’ is the result of this superimposition of an ethical doctrine on professional practice of executives in corporations.

Which moral / ethical philosophy to choose? Think tanks for executives and literature on management tend to adopt a monistic approach : humanism, or religious / spiritualist moral philosophies (catholicism, protestantism, personalism, even buddhism) are in favor. It is ‘old school’ ethics you might say … and it dies hard ! Thus, the incantation to “put human being back at the center” (or to adopt a “person-centered approach”) in management sciences (3) and managerial practices, an incantation that spanned the entire 2010 decade, finds its philosophical origins in humanism (and american protestant personalism which developed much later).

As for teaching in management schools, a pluralist approach is favored. The great classic moral / ethical philosophies are discussed : Mill’s utilitarianism, Kant’s deontology, Rawls’ contractualism, Aristotle’s theory of virtues, Jonas’ principle of responsibility, Taylor’s communitarianism, Habermas’ discourse ethics. The objective of such teaching is to bring the student, the future manager, to adopt a critical posture vis-à-vis managerial theories and practices. (4)

It will be understood that there is not only one business ethics but as many business ethics as there are ethical doctrines.

Our discomfort vis-à-vis ethical doctrines is that they tend to define for us (for all of us) the content of ethics. They define values ​​which must be considered as transcendent, or absolute, or given ‘a priori’, or natural. Moreover, if it is possible to achieve a syncretism between certain doctrines, it is not the case among all. Which one should take precedence over the others ?

And above all, these ethical doctrines tell us nothing, or so little, or so badly, on how to resolve personal and interpersonal conflicts of values, on how to conduct moral / ethical reasoning individually or collectively and to arrive at a moral / ethical judgment. How to concretely apply this mantra to “put human being back at the center” in a complex world where values ​​and interests are most often contradictory ?

In short, ethical doctrines define for us the content of ethics without really informing the process by which we are supposed to apply this content in particular, and often complex, situations ! Therefore, the discourse of business ethics tends to be : i) dogmatic and moralistic (5) ; ii) vague and non-operational.

It should be noted that although moral and ethics have the same etymological origin (one Latin, the other Greek), current language tends to assimilate ‘moral proposition’ and ‘moralistic position’ so that the notion of moral is often heard in a pejorative manner. Some authors therefore prefer to avoid using the term ‘moral’ and will instead use its counterpart ‘ethics’ ; which we will tend to do later on.

Instrumental turn of CSR

4- The classic historical reconstruction of CSR presents it as heir to the corporate paternalism of the 19th century. It would have emerged in the United States in the 1950s, with the publication of the book “Social Responsibilities of the Businessman” by Howard Bowen in 1953, a work in which the terminology “social responsibility” would have appeared for the first time in managerial literature, a work in which religious ethics (Protestant) is central. This is the first stream of CSR, that of ‘business ethics’, the one discussed previously.

This conception of CSR was supplanted in the 1970s by the instrumental approach of CSR, approach whose aim was to demonstrate that the commitment to a CSR approach serves the economic interests of the corporation ; which amounted to combating Milton Friedman’s anti-CSR stance, and more generally the ambient skepticism reigning at the time in the business world vis-à-vis CSR, on their own ground, that of economic performance. This trend reached its peak in the 1980s and 1990s.

Regarding M. Friedman, let us recall that he published an infamous article in the newspaper ‘The New York Times’ in 1970, an article with a deliberately provocative title, “The Social Responsibility Of Business Is to Increase Its Profits“, an article to be considered as an anti-CSR manifesto. This position of M. Friedman was already clearly stated in his book “Capitalism and Freedom”, 1962 : “[In a free society], there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

The instrumental conception of CSR has been the subject of intense debate not only between proponents and opponents of CSR, but also even among supporters of CSR. Despite the internal criticism, mainly relating to the justification of commitment to a CSR approach by the sole argument of economic interest, it should be acknowledged that this instrumental approach has been very beneficial for the CSR movement. It made it possible to distance itself from the dogmatic and moralistic discourse of business ethics thanks to a change in the register of justification, and to adopt a less vague and more easily operationalized discourse thanks to the development of concepts, tools and methods of managerial inspiration : stakeholder theory and the notion of a group that may affect the activities of the corporation or be affected by it, the ‘Triple Bottom Line’ approach and the effort to define criteria for measuring social and environmental performance of the corporation, are a few examples of these positive steps.

This instrumental strand paved the way for the current conception of CSR (the third strand of CSR). We present below our understanding / interpretation of this new conception of CSR that emerged in the 1990s. Note that the three approaches to CSR coexist today, even if the third conception is the most widely shared.

Sociopolitical turn of CSR

5- The international CSR movement, by distancing itself from the discourse of business ethics, thanks to the instrumental approach, has succeeded, little by little and in a consensual manner, in specifying, standardizing, operationalizing, in the field of business management, the central notions of ethical judgment and responsibility.

The ethical judgment relates to the (indirect) consequences of a corporation’s actions, specifically the consequences on its social and ‘natural’ environment. Thus, things are much clearer. If some doubted it, it is not a question of ethics of conviction (which does not prevent individuals having convictions, on the contrary, they are necessary!), it is a question of ethics of responsibility (we refer here to the distinction made by Max Weber between ethics of conviction and ethics of responsibility (6) ).

The corporation has an ethical responsibility with regard to the consequences of its actions on the social and ‘natural’ environment. That the responsibility is ethical means that the corporation is held responsible for complying with values ​​(collectivist values ​​grouped together under the terminology of the preservation of the social and ‘natural’ environment) that are shared and have become a priority for a significant part of society (citizens, consumers, employees, savers, etc.) ; part of society, or stakeholders to use the terminology of CSR, which thus exerts a power, a force, a pressure on the corporation. The risk incurred if the corporation doesn’t comply with these social values ​​is a risk in terms of image, reputation, with potentially significant effects on the economic performance of the corporation if customers and employees turn away from the corporation.

This ethical responsibility must be distinguished from legal responsibility even though they are governed by a similar mechanism : the need to comply with certain values, sanction in the event of non-compliance. Ethical responsibility includes legal responsibility. Legal responsibility is a minimum level of responsibility. Ethical responsibility goes further. Stakeholder expectations go beyond mere compliance with laws and regulations. Moreover, if the expectations of stakeholders are adopted by public opinion, these expectations are then very likely to be engraved in law or regulation. Stakeholders act as a pilot fish for the legislator.

By focusing on the consequences of actions, CSR has positioned, as it should be, ethical considerations in the field of facts, of the empirical, of ‘what is observable’. Thus, dogmatism and vagueness are over ! We focus on the relations of causes and consequences, informed, when necessary, by the natural sciences and the human and social sciences (sciences whose goal is to reveal the hidden relations) : relation between CO2 emissions and climate change ; relationship between economic deregulation and social and fiscal dumping (7). Also moralistic discourses are over ! We only reach a judgment on the basis of observations of the consequences of actions and not on ‘a priori’. It is therefore possible to set up concrete criteria for evaluating business practices. The task of defining these criteria and evaluating business practices according to them is, without doubt, arduous and not exempt from manipulation, it has nevertheless been made possible, and this is a giant leap. 

The institutionalization of this meaning of the notion of CSR is recent as evidenced by the definitions given in the ISO 26000 standard (Afnor 2010) and the communication from the European Commission of October 25, 2011 (communication which amended, among other things, the definition given in the 2001 Green Paper) : “[Social Responsibility is the] responsibility of an organization with regard to the impacts of its decisions and activities on society and the environment (…)” (Afnor 2010).

And also (as a ‘logical’ continuation of the empirical character), in this understanding of the concept of CSR, we all participate, as it should be, in (the definition of) the content of ethics ; of an ethics therefore necessarily conceived as evolving. To the rebus the master-thinkers armed with their rigid doctrine that we would only have to follow. Taking up and reformulating an argument developed by the pragmatist philosopher William James (8), let’s say that we all participate in (the definition of) the content of ethics through our protests, our oppositions or on the contrary through our endorsements, our commitments in the face of the requests, the aspirations emanating from social groups or interest groups ; we participate through our cries of revolt, our cries of the wounded, or, on the contrary, through our sighs of relief, our cries of victory in the face of an established order or certain social transformations. In short, we all participate in the content of ethics through our participation in this vast experience that is social life. As for the thinker, a contributor among others, at best he may try to enlighten the content and/or the process of the ‘debate’.

To sum up, in this understanding of the notion of CSR, CSR must still be considered as a form of ethics, but it is to an empirical and experimental conception of ethics that we must then refer.

This understanding of CSR can be described as sociopolitical insofar as the evolution of social values leads, in a relationship of power / force / pressure exerted by (different sections of) society on corporations and on the political authorities, to an evolution of legislation / regulations, and to an evolution of corporations behaviour.

Different levels of commitment to CSR

6- Specifically, in the face of this sociopolitical evolution, corporations adopt several attitudes. Some of them follow the slow legislative and regulatory evolution and conform their strategy (on the constraining dimension of laws and regulations, i.e. on ‘hard law’) by undergoing change. This is the ‘minimalist’ posture (9). In this group, some corporations also engage in intense lobbying activity aimed at slowing down further this evolution in their sector or industry.

Another posture is to comply, on a voluntary basis, with a certain number of standards and recommendations, possibly sector-specific, often inspired by the good practices of corporations considered to be at the forefront of ‘good citizenship’ : product design and manufacturing standards, GRI guidelines, ISO 26000 standard, for example. This is the group of ‘good citizens’ corporations (9). These corporations conform in a certain way to a ‘soft law’, ie codified non-binding rules ; whether this ‘soft law’ is of public or private origin ; and in the latter case, whether it emanates from organizations dependent on corporations or not. In some cases, compliance with the rules makes it possible to obtain labels or certifications.

In the third group, ‘the most voluntarist’ (9), we find corporations, more and more numerous, not necessarily the largest or the most economically successful, which do not wait for laws and regulations, standards and recommendations, but go beyond these codified rules.

7- In the third group and part of the second, there are corporations headed by managers who are convinced of the importance of sustainable development and for whom corporate social responsibility is not just a constraint that we could be dispensed with, let alone a slogan. Others are well aware of the forces at work in society, and see them as opportunities for differentiation and the conquest of new markets. In both cases, corporations are actively engaged in change and are striving to develop more responsible strategies.  The distinction between enlightened self-interest (or rational altruism, or self-interested altruism) and disinterested altruism (or ‘noblesse oblige’ (10)) is irrelevant ; the notion of responsible action is neutral with respect to this distinction. And then enlightened self-interest (when it is rewarded) often ends up being transformed into disinterested altruism (by internalization of social values).

Figure 1

8- Despite these salutary advances in the CSR movement, which have made it possible to go beyond ineffective appeals to moral conscience alone or to economic interest alone by anchoring the movement in a conception of ethics in which the social and political dimensions are made explicit, the difficulty of integrating CSR into corporate’s strategy remains. Could it be that the origin of this difficulty lies in corporate strategy ?

Corporate strategy and CSR

9-  The association of corporate strategy and CSR is still too often considered ‘unnatural’, although this view does not necessarily equal to an anti-CSR position. This belief is the result of a reductive conception of strategy ; a vision according to which strategic thinking (reflection and action) would have no other aim than to enable the corporation to achieve economic objectives of profitability, growth or market share. Thus in this reductive vision, corporate strategy is concerned only with the question of economic efficiency and not with the ethical question. This reductive conception explains why, even today, CSR is too often artificially superimposed on corporate strategy (11) : on the one hand, economic strategy, a reductive vision of corporate strategy ; on the other hand, CSR strategy, decorrelated or weakly coupled with core activities ; a CSR strategy which most often consists of allocating a (tiny) part of the operating profit to ’causes’ far removed from the corporation’s value chain ; this is done for communication purposes.

But it is not inevitable for corporate strategy to remain trapped in this reductive vision ! This reductive vision is moreover not in line with that of the founding fathers of the discipline.

Kenneth R. Andrews : reconciling CSR and corporate strategy

10- As proof, K. Andrews, still today an essential reference for MBA students, described in a 1971 book, “The Concept of Corporate Strategy”, the neoclassical model of the firm, model according to which the end pursued by the firm is the maximization of profit in the service of shareholders, as a ‘historical miscommunication’. And this ‘historical miscommunication’ is, according to him, one of the causes of the amoral conduct of corporations (the other cause being inter- and intra-corporation competition) :

“The definition of the corporation as serving only the financial interests of the shareholders [maximum enhancement of shareholder wealth] naturally leads to subordination of ethical concern to financial outcome. But apart from this historic miscommunication [made by economists of the pronouncements of the moral philosopher Adam Smith], other conditions of corporate life (…) tend to make the corporation inherently amoral [: internal and external competition leads to the temptation to forsake the high road for shortcuts, and to put pressure on people to achieve their plan].” (1987 Edition ; chapter 5, “The Company and Its Responsibilities to Society : Relating Corporate Strategy to Ethical Values” ; section, “The Inherently Amoral Corporation”).

In the following paragraph K. Andrews reminds us that the corporation is a social institution, and that its leaders must therefore take into account the moral and economic values governing society when formulating their strategy. He calls for a new theory and legal definition of the corporation, one that acknowledges its responsibility not only to its shareholders but also its other stakeholders :

“(…) the modern, large, publicly held corporation needs a new theory and a new legal definition to legitimize its acknowledgment of responsibility, not only to its shareholders but also to its own membership, its customers, and its communities. The established corporation has become an institution in society governed by moral as well as economic values. Its strategists need moral as well as economic motives and competence. The corporate strategy governing their approach to future success in competition includes combining personal and moral aspirations with the choice of products and services to be provided to markets at levels of quality and value that reflect both ethical and economic intent.”

See also note (12) for another kind of criticism made by K. Andrews of the notion of profit maximisation for shareholders.

It should be noted that Section 172 of the “Companies Act” (corporation law in UK, revised in 2006), and Article 1835 of the french civil law (revised on the occasion of the 2019 Act called “loi PACTE”) may be considered as a response to the call of K. Andrews for a new legal definition of the corporation. (13)

11- According to K. Andrews, there are four determinants of corporate strategy : what a corporation might do (it results from the identification of opportunities in the external environment) ; what it can do (it results from the analysis of the corporation’s key competencies and resources) ; what the people in a corporation want to do (it results from the analysis of the personal preferences of the CEO, top managers and employees ; these preferences being embedded in the corporation’s culture); what a corporation should do (it results from the analysis of the social values ​​governing the society and is reflected in the notion of corporate social responsibility).

K. Andrews recommends, in order to integrate these four dimensions, to retain a dominant dimension for the generation of strategic options, and to treat the other three dimensions as constraints allowing the options to be adapted and the final choice to be made.

The synthesis (or the ‘match’ to use the original terminology) of the two dimensions ‘opportunities’ and ‘capacities’ results in what K. Andrews calls ‘economic strategy’. This synthesis logically leads to the display of the options which seem a priori to be the most economically advantageous (in terms of profitability, growth, market share, etc.). But taking into account the two remaining dimensions, corporate culture and social responsibility, is there to temper the sole economic criterion. In the mind of K. Andrews, there is no question of neglecting or sacrificing the corporate culture in the name of the economic criterion. There is no question either, still in the name of the same criterion, of retaining an option that would be socially irresponsible. If none of the economic strategic options passes the filter of these two constraints, they must be reworked even though the economic criterion should be revised downwards. It is in this respect that K. Andrews strongly distances himself from the ‘historical miscommunication’ consisting in considering the corporation as an instrument of profit maximization for the benefit of shareholders. The corporation is made up of people, it has a ‘culture’ ; and it is not ‘outside society’. Neglecting these two dimensions, corporate culture and corporate social responsibility, does not work in practice… at least not for society and not in the medium / long term for the corporation.  

Figure 2

In contemporary literature, the terminologies ‘Outside / In approach’ and ‘Inside / Out approach’ are used to refer to economic strategy depending on the dominant dimension chosen : opportunities or capabilities. Unfortunately, the other two dimensions are too often forgotten, whether consciously or not : corporate culture and social responsibility. Therefore, the thought of K. Andrews is summarized in the SWOT canvas.

As part of an entrepreneurial approach, personal preferences are retained as the dominant dimension : a certain type of professional activity, independence, an individual or collective venture, let’s not neglect profit, power or prestige either (14). Let’s say to simplify things that the image of the modern entrepreneur is that of a person who invests in what he or she is passionate about ; as for that of the businessman, it is that of a person who invests his or her energy, time and money in what pays off ; as for that of the individual entrepreneur, or the entrepreneur who is voluntarily modest in his or her ambition, often a defector of big business, it is that of a person who does not compromise with the constraint of social responsibility. The search for meaning at work is all about making room for ‘passion’ and social responsibility.

As part of a ‘Social Business’ approach, the dominant dimension is social responsibility and it is often aligned with a personal preference for involvement in a ’cause’. The difficulty lies in adapting the strategic options so that they end up passing the ‘opportunities’ and ‘capacities’ filters and that the chosen option is economically viable. It is often very difficult. These causes are overlooked by traditional entrepreneurs because the economic equation seems intractable. Social entrepreneurs looking for challenges and meaning are well-served here !

In summary, formulating a corporate strategy in the spirit of K. Andrews is a much richer process than the pursuit of a ‘poor’ economic objective of profitability, growth, or market share. Corporate strategy is not just about economic strategy !

Figure 3

H. Igor Ansoff : ‘raison d’être’ and role of the company in society

12- In his book “Strategic Management”, published in 1979, I. Ansoff analyzes the evolution of social values ​​and society’s expectations vis-à-vis corporations over different historical periods, the industrial revolution ( 1820 – 1830 to 1900), the era of mass production (1900 to 1930), the era of mass marketing (1930 to 1950), before dwelling on the period starting in the 1950’s and in which he is immersed at the time of writing the book ; a period he considers as a social transition towards the post-industrial era.

This period of transition, which is characterized by an (over)abundance of goods and services for society, is also reflected in a change in the hierarchy of social values, and a strong contestation of the role of corporation within society ; specifically, of its role as an economic instrument of society. I. Ansoff predicts that this transition will lead, whether the social body of (top)managers wants it or not, whether they participate in it or not, to a redefinition of the social institution ‘corporation’ ; precisely to a redefinition of its ‘raison d’être’. He therefore invites managers to urgently address this issue of the legitimacy of the corporation in society and to propose a coherent vision concerning the way in which the corporation can continue to best serve society :

“The arrival of affluence casts doubts on economic growth as the main instrument of social progress. Social aspirations shift away from ‘quantity’ to ‘quality’ of life. (…)

Realignment of social priorities focuses attention on the negative side-effects of profit-seeking behavior : environmental pollution, fluctuations in economic activity, inflation, monopolistic practices, ‘manipulation’ of the consumer through artificial obsolescence, blatant advertising, incomplete disclosure, and low-quality after-sale service. (…) . The firm loses its position as the society’s ‘sacred cow’. But its ability to continue serving society is taken for granted. It is now assumed that the firm is able not only to remain economically efficient under stringent constraints (which only twenty years ago would have been considered fundamentally subversive and socially destructive) but also to undertake ‘social responsibility’.” (Edition 2007 ; chapiter 3, “The Environment in a Historical Perspective”)

And then a few chapters later : “One of the first consequences of the current rapid and drastic changes of societal values is to raise questions about the continued validity and the raison d’être of the existing institutions. When similar turbulent societal transitions occurred in the past, the result has been disappearance of some institutions, reshaping of others, and birth of new institutions designed to serve the new society.

A key question today is who will take the leadership in redefining the role of the ESO [Environment-Serving Organizations]. (…) The major initiative for redefining the roles is coming from the government and the public. (…)

A substantial minority of managers has accepted the fact that (…) the firm will be changed from a purely economic to a socio-economic instrument of society. But this minority is still small and dispersed. To date it has failed to produce a coherent business viewpoint on how the firm can best continue to serve society. Experiments continue and the outcome is hard to predict. But the main point seems clear. Passively or proactively, management will be increasingly preoccupied with the problem of business legitimacy.” (chapter 9, “Strategic Leadership” ; section, “Legitimizing leadership”).

Note that the following incorporation legal forms may be seen as a response to the call of I. Ansoff : “benefit corporation”, United States, 2010 ; “social purpose corporation”, United States, 2012 ; “public benefit corporation”, United States, 2013 ; “società benefit”, Italy, 2015 ; “société à mission”, France, 2019. (15)

Despite the relevance of the social analysis (even if the notion of post-industrial era may be disputed by some) and the prospective vision, we must admit that the strategic approach prescribed by I. Ansoff is too formal, analytical, quantitative, sequential, mechanistic. Il looks like a labyrinthine system. Fortunately, I. Ansoff and strategic planning fell into disuse in the 1980s.

13- As we have just seen, the perspective of the founding fathers of the discipline is far removed from the reductive vision of strategy which too often prevails today. The strategic approaches they prescribe push the practitioner to combine economic efficiency and social responsibility. For these fathers, formulating a corporate strategy consists in defining the path of efficient (collective) action within the framework of a complex system of values : personal and social values, themselves composed of individualistic and collectivist values. 

Why, despite the salutary advances of the CSR movement, despite the recommendations of the founding fathers of strategy (K. Andrews in particular), is it still difficult to integrate CSR into strategic thinking ? Above all, what are the conditions that would facilitate the integration of CSR into corporate strategy in practice ?

Conditions for integrating CSR into corporate strategy

Need for a metatheoretical reconstruction to overcome conceptual obstacles

14- In our view, there are two reasons for this. The first reason is related to the developments of strategy as an academic discipline. The developments of strategy did not stop with K. Andrews, as we can imagine ! In order to become an academic discipline, strategy has sought scientific legitimacy by borrowing concepts from the most represented strands in economics and organization theory : neoclassical economics ; industrial economics ; behavioral economics; contractual and cognitive theories of the firm ; decision theory (by Herbert Simon). In so doing, it has appropriated : i) their conception of individual and collective action ; ii) their conception of the environment and the world. In other words, strategy has approriated the metatheoretical frameworks of mainstream economics and organization theory.

But these conceptions are based on dichotomies and reductionisms (16) : separation of ends and means, separation of thought and action, separation of facts and values ; separation between the ‘economic world of business’ and the ‘social world’, separation between the ‘economic man’ and the ‘social man’, and more generally fragmentation of the social system into closed subsystems, governed by laws of their own (the last straw in the field of the human and the social !).

These simplifications are convenient, they are intended, for the researcher, to give the illusion of proceeding in a scientific way, and, for the practitioner, to base the practice on this (so-called) science. The problem is that these institutionalized separations erect conceptual barriers and taboos that prevent us from thinking (reflecting and acting) in an integrated way. They create a ‘conceptual barrier’ to the integration, in academic disciplines and in practices, of CSR and corporate strategy. We therefore find ourselves today with disjointed academic disciplines and professional practices that are difficult to reconcile : on the one hand, corporate strategy (the discipline and the practice), on the other, CSR (the discipline and the practice) !

Rephrased tersely by way of summary : K. Andrews’ seminal thought prescribes to the strategy practitioner the integration of ethics / CSR into corporate strategy ; during the development of strategy as an academic discipline, in the post-foundational era, the indiscriminate import of separatist (isolationist if you prefer) metatheoretical frameworks from ‘mainstream’ economics and organization theory, import in order to gain the status of a scientific discipline, had the negative consequence of losing the original integration. Hence this impression of regression compared to the founding writings of K. Andrews.

A metatheoretical reconstruction is therefore necessary if we wish to reconnect with the original integration. It is not inevitable for corporate strategy as an academic discipline to remain under the tutelage of economics and organizational theory (17) . Moreover, we believe that corporate strategy could have seized the issue of CSR as a great opportunity to break out of these tutelage by proceeding, at the time of the sociopolitical turn of CSR, to this reconstruction.

15- Let us briefly illustrate the link between the import of separatist metatheoretical frameworks from mainstream economics and organizational theory and the barriers to integrating CSR into corporate strategy, in practice.

In a 1983 article, “The Case for Corporate Social Responsibility”, inviting large corporations to behave in a socially responsible manner, H. Mintzberg asks whether the structure of large corporations may explain the amoral conduct too often observed in practice. His answer is as follows : “(…) the root of the problem may lie beyond structure (…). The ‘professional’ manager is a ‘hired gun’ , so to speak, concerned with means not ends. But that very distinction may prove to be the problem, depersonalizing relationships and breeding socially irresponsible behavior. (…) The ‘professional’ manager can become encapsulated, insulated from the consequences of his actions (…).”   

Thus, for H. Mintzberg, managerial practice in large corporations is based on the separation of ends and means (he refers on the subject to an ‘important’ article by the American sociologist Daniel Bell, an article from 1972 entitled “The corporation and society in the 1970’s”) and this separation constitutes a barrier to the integration of CSR into the strategy of large corporations. In other words, he denounces an epistemology of managerial practice based on the ends-means principle.

A little further on in the article, H. Mintzberg harshly criticizes M. Friedman’s anti-CSR doctrine : “(…) the strategic decisions of large organizations inevitably involve social as well as economic consequences, inextricably interwined. That is what renders the arguments of Friedman, (…), so utterly false. (…) Every time a large corporation makes an important decision – to introduce a new product line, to locate a plant, to close down a division – it generates all kind of social consequences. Size alone makes economic decisions social. (…) The corporation gets caught in its own web of power. It cannot claim neutrality. (…) In other words, there is no such a thing as a purely economic strategic decision in big business. Every [economic strategic decision] is also social (or, if you prefer, political). Only a conceptual ostrich, with his head deeply buried in economic theory, could possibly use the distinction between economic and social goals to dismiss social responsibility.”  

H. Mintzberg criticizes here the separation between the economic world and the social world ; a separation that has been institutionalized by neoclassical economics. M. Friedman argues against the (voluntary) endorsement of CSR by corporations by using this separatist framework. H. Mintzberg, denounces the absurdity of this framework.

Need to deliberate on means and ends to overcome values conflicts

16-The second reason for the difficulty in integrating CSR into strategic thinking in practice is related to a methodological gap. K. Andrews invites the practitioner to take into account economic interest, personal preferences and social responsibility in formulating a corporate strategy, but he does not detail the reasoning to be carried out in an attempt to resolve the conflicts of values ​​that are bound to arise. However, in order to attempt to resolve conflicts of values, it is necessary to deliberate not only on means but also on ends ; it is therefore necessary to have a problem-solving approach relating to means and ends. This is missing in K. Andrews’ work. The approach he proposes, which consists of retaining a dominant dimension as an objective and treating the other dimensions as constraints, is a problem solving method related to means ; this is the classical method inspired by H. Simon.

Thus, in the absence of a method of deliberation on means and ends, or if one prefers, of a problem-solving approach relating to means and ends, it is tempting to restrict the formulation of a corporate strategy to the formulation of a simple economic strategy (to therefore retain only the economic interest ; to stick to the SWOT) ; and then to supplement the economic strategy with a ‘social strategy’ that is weakly coupled with, or even decorrelated from, the core activities of the corporation. This is possibly the reason why, despite the recommendations of K. Andrews, despite the salutary advances of ‘CSR thinking’, despite the awareness of the imperative of social responsibility by the actors of the corporation, CSR still too often gives the impression that it is treated as an adjunct, a supplement, to the corporation’s strategy.

In §3, we criticized ethical doctrines for saying nothing, or so little, or so badly, about how to resolve personal and interpersonal conflicts of values, to conduct ethical reasoning individually or collectively and to arrive at an ethical judgment. We fall back on the same difficulty with K. Andrews : “Since the identification of economic opportunity, the determination of corporate capability, the personal values ​​of the senior management group, and their aspirations to social responsibility might lead in four different directions, reconciling the outcomes in such a way as to leave the firm economically viable and its unfrustrated leaders constitutes the art of strategic decision .” ( “Public Responsibility in the Private Corporation”, 1972).

What a pity for K. Andrews to relegate the reconciliation of divergent interests (the resolution of conflicts of values if one prefers) to the field of art (art in the sense of tacit know-how acquired by a long practice) and not ‘science’ ; what a missed opportunity too.

Conclusion

17- In this article, we have identified two difficulties / barriers / obstacles to the integration of the CSR approach into strategy development : a conceptual obstacle at the level of the metatheoretical frameworks imported by strategic management ; and a methodological gap at the level of the deliberation process.

We believe that it is possible to overcome these two difficulties by drawing on John Dewey’s philosophy of pragmatism (on his metaphysics, epistemology, theory of the formation of values, and his theory of reflective thought and action) (18) (19) (20). Specifically, we believe that it is possible to operationalize J. Dewey’s thought to derive new metatheoretical frameworks and a process of deliberation on means and ends. Indeed, this pragmatist philosophical framework is a framework of choice given : i) the effort of philosophical reconstruction undertaken by J. Dewey himself to go beyond the traditional dichotomies of philosophy (mind versus body ; rationalism versus empiricism ; materialism or realism versus idealism ; etc.) ; ii) J. Dewey’s effort to formalize what he calls a “complete act of thought” ; iii) the compatibility of the sociopolitical vision of CSR with the pragmatist conception of ethics.

18- This is what we will be tackling in the next series of articles. But let us warn the reader to avoid any disappointment : there is no miracle, no magic formula, no strategic approach at the end of the road which will make it possible to formulate a perfect economically efficient and socially responsible strategy ; nor is there any mathematical demonstration that tells us that corporations must integrate CSR into their corporate strategy instead of proceeding with an artificial superposition. Ultimately, the limit to our behavior, to all of us, remains the awareness of the balance of power. The only thing we can do is to propose the most convincing explanatory / comprehensive framework and the most operational methods and tools possible.


Notes

(1) It is a custom in the field of strategy to make a distinction between ‘corporate strategy’ and ‘business strategy’. This is how Kenneth Andrews sees this distinction : “In an organization of any size or diversity, ‘corporate strategy’ usually applies to the whole enterprise, while ‘business strategy’, less comprehensive, defines the choice of product or service and market of individual businesses within the firm. Business strategy is the determination of how a company will compete in a given business and position itself among its competitors. Corporate strategy defines the businesses in which a company will compete, (…).” (“The Concept of Corporate Strategy”, 1971, chapter 2, section “What strategy is”)

In the rest of this article, we will use the expression ‘corporate strategy’ to refer to strategy as this terminology include the notion of ‘business strategy’ as well. We will avoid using the term ‘strategy’ alone, insofar as this term might also refer to any substrategy (‘CSR strategy’ for exemple ).

(2) It is difficult, if not impossible, to refer to any canonical definition regarding what one call ‘a company’ or ‘a business firm’. There is a lack of clarity in this area. Although the corporation has a legal existence and definition (as a legal ‘person’ that has standing to sue and be sued, distinct from its stockholders), this definition is of no help here. Here we simply refer, by using the terms ‘business firm’ or ‘company’ or ‘corporation’, to the customary use of these terms in this kind of context, namely that they refer to an organization whose main objective is the pursuit of profit.

(3) See for exemple T.C. Powell : ‘Behavioral Strategy’, 2011 ; and ‘Strategic Management and the Person’, 2014.

(4) J. Pasquero, “Éthique des affaires“, in “Dictionnaire critique de la RSE”, direction N. Postel and R. Sobel, 2013.

(5) Moralistic in the sense that this qualfiier refers to a person who assumes the role of saying what is moral and what is not, based on subjective considerations and personal beliefs that are set up as ‘absolute truths’.

(6) The fact that there can be no question of ethics of conviction in the field of business seems obvious when one considers that, in Weber’s mind, the ethics of conviction is that of scientist, of science, of axiological rationality as opposed to the ethics of responsibility, which is that of politician, of practice, of teleological rationality.

(7) Herbert Simon uses a well-turned expression to translate this link between the revelation of the hidden relations by the sciences and ethics: “The intellectual awakening is also a moral awakening”. Here is the full extract in which he uses this expression : “Barbara Ward and others have pointed out to us that the largest crises in our word today are crises of aspirations. (…) For centuries, human actions have been creating all kinds of unintended and unexpected consequences. We could live in good conscience with these actions to the extent that we were unaware of their consequences. Today, we can trace minute and indirect effects of our behavior: the relation of smoking to cancer, the relation of the brittleness of eagles‘ eggs to the presence of DDT in the environment. With this new ability to trace effects, we feel responsible for them in a way we previously did not. The intellectual awakening is also a moral awakening.” (“Administrative Behavior”, (1997, [1947]), “Commentary on Chapter VIII : Communication”, section “Applying Information Technology to Organization Design”, sous-section “Conclusion”)

(8) W. James, “La volonté de croire”, Chap VI “Les moralistes et la vie morale”, 1896.

(9) The terms ‘minimalist’, ‘good citizen’, ‘voluntarist’ are borrowed from the (french) book ‘Strategor’, 5th Edition, Chap 23.

(10) H. Mintzberg, 1983, “The case for social responsibility”: ‘enlightened self-interest’ versus ‘noblesse oblige’.

(11) See A. Desreumaux, “Stratégie“, in “Dictionnaire critique de la RSE”, direction N. Postel and R. Soble, 2013.

(12) K. Andrews, “Public Responsibility in the Private Corporation”, 1972 : “The notion that the shareholder of a large, publicly held corporation is its owner grows increasingly indefensible. He owns shares, which represent so small a commitment on his part that he may through the mechanisms of the stockmarket shed it instantly. Management, to whom has come a virtually permanent delegation of authority for continuing direction of the publicly held corporation, is still bound to run the company to serve shareholder interest. But neither by law nor by custom does it have the simple obligation to pursue maximum profit.”

(13) See our article “Stratégie, éthique et RSE“, §12.

(14) When profit motive is part of the personal preferences, there is alignment with the economic dimension. When K. Andrews talks about corporate culture, there is no contradiction with including profit, power or prestige in personal preferences : some ‘adhocracies’ bring together professionals driven by profit, power and prestige (the American series ‘Suits’ captures this type of corporate culture); and some large companies (both private and public) are ‘undermined’ by a culture in which political gamesmanship (at all levels) is central.

(15) Regarding ‘société à mission’, see our article “Stratégie d’entreprise et RSE : l’esprit de la loi PACTE“.

(16) This statement must be strongly qualified with regard to Edith Penrose’s cognitive theory of the firm.

(17) A. Desreumaux writes: “(…) strategic management, rather than following the agenda of other disciplines, and in particular those from which it has already borrowed a lot, [must] engage in a work of original theoretical production in relation to the central object that is the company, the organization or, more broadly, the collective action. This work is beginning to take shape (Desreumaux and Bréchet, 1998; Bréchet and Desreumaux, 2005) (…).” (“Refaire de la stratégie?”, 2008).

To continue the list, we need also to refer to : J-P. Brechet and A. Desreumaux, “Repenser l’entreprise : une théorie de l’entreprise fondée sur le Projet”, 2018.

(18) A-C Martinet writes: “Of all the fields of management science, strategy is perhaps the one that most needs to combine epistemic work, pragmatic concern and ethical clarification in the wake of the American pragmatist philosophers Dewey, James, Mead and Peirce (Dumez et al., 2007; Martinet, 2007b).” (“50 ans de recherche en stratégie : normalisation ou pluralisme épistémologique ?”, 2008).

(19) A proposal for a reconstruction of organisation theory (one of the foster mothers of strategy), drawing on the different strands of classical and modern pragmatism, has been put forward by Philippe Lorino, distinguished professor emeritus at ESSEC : “Pragmatism and Organization Studies”, 2018. The book won the EGOS Book Award 2019, awarded by the European Group for Organization Studies. The book is a scholarly contribution to a conversation among scientists. It aims to open up a new research agenda, a pragmatist agenda, in the disciplinary field of organization theory.

(20) We do not think that the the social and political philosophy of J. Dewey is of much help here (even if it is experiencing a strong revival of interest in France around the notions of radical / participatory / deliberative democracy). We tend to concede to the (usual) criticism that Dewey’s social and political philosophy lacks a theory of power.


Postscript

This article is a translation and a shorter version of the original french article “Stratégie, éthique et RSE” published initially on the website of our strategy consulting firm StraTThInc.. Indeed, the author does not enter here into the details of the french context and law called ‘loi PACTE 2019’. The reader that would be interested in diving into the details of the original paper may use the widget “Google Translate” located in the footer of the StraTThInc. website.

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