You're a major energy firm opening shop in a war-torn Middle Eastern country. The challenge? Ensure strong profit margins. The twist? Minimize the impact on local people and ecosystems.
While some companies may actually face such a scenario, this was the challenge faced by teams of MBA students at the Rotman International Net Impact Corporate Social Responsibility Case Competition held recently at the University of Toronto's Rotman School of Management.
The winner: the HEC Montréal team.
Ian Philp, a member of the HEC team, had heard plenty of criticism that corporate social responsibility (CSR) is a waste of time for business leaders and companies. Though incorporating social, environmental and economic concerns into a company's values and operations is laudable, skeptics say, the business benefits are often too difficult to quantify and the issue is typically a non-starter for many traditional, profit-hungry investors.
But this position is quickly becoming outdated as companies realize the benefits of CSR.
At the competition, Mr. Philp said his team focused not only on winning the event, but honing skills they regard as critically important to their future business success.
"I think there's a bit of a misconception about CSR in some circles that it's all touchy-feely and is a lot about looking for environmental impact and that's all," Mr. Philp explains. "The understanding I have is that it's about determining who the stakeholders are, figuring out which ones you need to take into account and then weighing their interests off against each other."
Clearly, Mr. Philp's take on CSR was the right one - his team beat about 30 competitors to take the top prize at the competition, which asked MBA students to weigh the options of a major Canadian energy firm opening resource-extraction operations in the oil-rich, but war-torn, nation of Kurdistan.
The HEC team focused on the social, financial and environmental implications of the theoretical operation, mapped the potential risks to the corporation and prepared a strategy to tackle those challenges, all while minimizing impact on local peoples and ecosystems but still ensuring strong profit margins.
"I think companies are realizing that CSR is not only an ethical obligation, but it can also be a source of competitive advantage," says Mr. Philp.
Indeed, as companies of all sizes attempt to address the CSR concerns of key stakeholders such as consumers, governments or weary shareholders, their corporate strategies are increasingly focused on achieving bottom-line objectives in a socially responsible, transparent fashion.
And as a growing body of research shows, it's becoming increasingly easy for CEOs to make the business case for investments in the CSR realm. According to a 2009 study by Toronto-based market research firm GlobeScan, 57 per cent of Canadian consumers claimed they had punished companies who they regarded as socially irresponsible by taking their business elsewhere.
The 2009 Edelman Goodpurpose survey - a study conducted in 10 countries including Canada - found that 71 per cent of respondents felt brands and companies spend too much on advertising and marketing and should put more into good causes, an increase of nearly 10 per cent from 2008. A decisive 67 per cent said they would switch to a different brand if it supported a good cause.
"The viewpoint of the role of corporations in society has been changing," says Paul Klein, founder of Impakt, a Toronto-based consulting firm that helps businesses drive revenue through community investments and partnerships. "The social purpose of a corporation is now being seen as almost equal to its business purpose."
As Mr. Klein points out, companies of all sizes - from massive retailers such as Wal-Mart to tiny firms - are demanding transparency and accountability on the part of their supply chain as they attempt to define themselves as responsible corporate citizens.
They're also using CSR to attract top talent.
"It's clearly the case that university students these days have a much stronger attraction to companies that are seen by them to be doing things in the environment and marketplace that are socially responsible," explains Scott Carson, director of the MBA program at Queen's University in Kingston, Ont.
And as businesses explore socially conscious options, MBA programs across the country are following as they strive to prepare the next generation of corporate leaders. It's the reason most business schools now include CSR-focused courses in their curriculum, or actively integrate CSR elements into existing programs.
"I want the next captains of industry to know how to deal with (CSR) themselves rather than having to hire in a specialist," says Rod Lohin, executive director of Rotman's AIC Institute for Corporate Citizenship.
"When (business trends) take on central relevance and become something a CEO deals with and understands how to turn into some kind of advantage, that's where they become really relevant, and that's where I think CSR is going."
Many MBA graduates are already busy translating their CSR expertise into real-world business results.
Michelle Chislett, a Toronto-based renewable energy consultant and 2006 graduate of the MBA program at York University's Schulich School of Business, was able to parlay CSR knowledge she acquired in sustainability and financial ethics courses into her work developing and marketing solar energy systems.
"That certainly did help me in this industry because the whole purpose and education portion of renewable energy involved CSR and educating others about why renewable energy is beneficial and why we're building this infrastructure," she says. "Because of the way I was taught, I could help educate others."
Which raises another pressing issue: how best to teach CSR. The question has kept academics and MBA program directors across the country debating which method is most likely to produce socially aware leaders. While some argue that CSR is a discipline unto itself and should be taught accordingly, many schools such as Rotman integrate corporate responsibility lessons into most of their programs.
Some students, such as Schulich's Mark Schnitzer, would prefer a combination of approaches. But he is quick to point out that how CSR is taught is far less important than the fact that it's part of every MBA curriculum.
"Having [CSR-specific]courses helps students solve social and ethical issues that may arise in their careers, not only as an individual, but within their organization," he says. "There's a lot of benefit to having them … but I think there should be a component of CSR in every course. In every aspect of business from finance to accounting to marketing, there's always that line that involves communities and working with people."
Special to The Globe and Mail