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Strategic CSR Can Create Competitive Advantage for Small Firms

Customers increasingly want to deal with socially and environmentally conscious businesses.

Customers increasingly want to deal with socially and environmentally conscious businesses. This presents opportunities for small- and medium-sized enterprise (SME) owners to develop new areas of competitive advantage. Capitalizing on sustainability opportunities can lead to longevity, but requires managers who can integrate a sustainable development framework into their company’s strategy.

Daniela Ortiz Avram (University of Applied Sciences) and Sven Kühne ask how social and environmental issues can help a firm’s competitive advantage, and what role these issues play in strategic planning. Recognizing the majority of research on sustainability focuses on large firms, the researchers tailored the traditional large-firm concept of CSR to help accommodate the unique characteristics of SMEs developing an effective sustainability-driven strategy.

Using an exploratory case study on a leading Austrian food company, the authors show how a family operated business of 100 employees can leverage sustainability principles in order to control 31 percent market share of a nation’s retail and wholesale food industry.

Past research suggests there are three interconnected sustainability strategies that can help small firms build competitive advantage: 1) pollution prevention (reducing emissions and waste through continuous improvement towards environmental goals) 2) product stewardship (measuring and reducing product impacts through tools such as life cycle analysis) and 3) sustainable development (having a strong overall sense of social and environmental purpose which frame initiatives).

The food company in this research used initiatives in each of these areas. In particular, they:

  • Coordinated with a local university to develop a water treatment system to recycle water the company used for cleaning

  • Rescheduled delivery from its trucks from morning to afternoon to reduce impacts of noise pollution for community stakeholders

  • Procured raw materials only from farmers using sustainable, animal-friendly practices

  • Offered its employees apartments and beyondindustry- standards benefits

  • Developed an in-house academy where employees can take free language courses in addition to job-related training

Overall, the company went beyond compliance and was consequently rewarded by its customers and the marketplace.

What can your company take from this research?

  1. Invest — at least a little — in pollution prevention. It helps your firm maintain its social “licence to operate” and be seen as complying with regulation and having concern over its community and societal impacts.

  2. Use product stewardship as an opportunity to appeal to key stakeholders. If you’re unsure of where to start, take a look at your value chain, and chart the social and environmental issues at each stage. Involve stakeholders in the conversation to identify what’s most important to them, and how you can better meet their needs.

  3. Know where you’re going. Building sustainability into strategy means having a clear vision of what your company hopes to achieve. Armed with that understanding, you’ll be able to easily identify the most important long-term initiatives. Even philanthropic projects can turn into opportunities to influence the dialogue on key issues if they’re aligned with your mission.In the words of Avram and Kühne, “the source of your competitive advantage can either be enhanced or destroyed by strategic and operational strategies you make today.” So, take this as an opportunity to step back, rethink your agenda and identify a few ways to incorporate sustainability into your business strategy so your firm will be thriving for generations to come.

Avram, Daniel Ortiz and Sven Kühne. (2008.) Implementing Responsible Business Behavior from a Strategic Management Perspective: Developing a Framework for Austrian SMEs. Journal of Business Ethics, 82:463-475.

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