This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Jonathan Doh (Villanova University), Bryan W. Husted, (Tecnológico de Monterrey, EGADE Business School), Valentina Marano, (Northeastern University)
In the rapidly changing and inherently uncertain world of emerging markets, managers find themselves facing a delicate balance between potential opportunities and inherent risks. Corporate Social Responsibility (CSR) offers some tools that can help managers navigate these complexities. No longer confined to mere acts of philanthropy, CSR has now become an imperative of strategic importance. Recent research by Jonathan Doh and colleagues reviews relevant work in the area of CSR in emerging markets and shows that the development and implementation of robust CSR practices can be key to garnering credibility and securing a sustainable competitive edge.
Strategic Approaches and Stakeholder Engagement
In formulating a strategic approach, managers can benefit from the following guidelines. First, it is of utmost importance that companies, regardless of how strictly local regulations are enforced, adopt global CSR standards, such as those outlined by the United Nations' Sustainable Development Goals. By doing so, not only do they shield themselves from potential backlash, but they can also position their companies as forward-thinking leaders. Second, companies should refrain from crafting CSR programs in isolation, but instead, actively engage with host governments, communities, and non-governmental organizations (NGOs) in order to develop initiatives that are culturally sensitive and locally relevant. Third, adaptable organizations are likely to be more effective at meeting the needs of emerging markets by frequently reassessing and modifying CSR strategies, while simultaneously forging alliances with local organizations that offer insights into grassroots sentiments and augment the efficacy of their endeavors.
Supplier Relations and Reputational Risk
Importantly, CSR isn't just about what a company does; it's also about the company it keeps. Local suppliers' CSR performance can have a significant impact on a firm's standing, as their actions can either elevate or tarnish a company's reputation and legitimacy with stakeholders. If local suppliers engage in unethical or unsustainable practices, such as violating human rights, exploiting workers, or polluting the environment, the firm may face the risk of negative spillovers, reputational damage, stakeholder backlash, or legal liability. Therefore, it is important to monitor local suppliers and help them improve their practices by conducting audits, providing training, setting standards, or offering incentives.
Navigating Ethical Challenges through Collaboration
Pervasive corruption or the influence of criminal organizations can create ethical quandaries that challenge one's moral judgments. In such a complex terrain, ethical frameworks and standards such as the Global Compact voluntary code of conduct, the UN Sustainable Development Goals, and ISO 26000, can guide one's decisions. Together they provide comprehensive guidance on how to integrate and implement social responsibility into business strategies and operations.
Lastly, collective action can be a powerful tool in overcoming these challenges. Joining forces with other organizations in CSR initiatives can have a broader impact and help organizations share valuable resources and insights. Such organizations can be broad-based like the UN Global Compact, the World Business Council for Sustainable Development, and Business for Social Responsibility. Others focus on specific industries like the Extractive Industries Transparency Initiative, the Roundtable on Sustainable Palm Oil, or the Alliance for Water Stewardship. Alternatively, firms should consider partnering with local social enterprises or NGOs, such as microfinance institutions, fair trade organizations, or renewable energy providers.
CSR is a useful tool in the complex world of emerging markets. Use it wisely, and you'll not just survive but thrive.
Doh, J., Husted, B. & Marano, V. (2019). Corporate Social Responsibility in Emerging Markets. In A. McWilliams, D. Rupp, D. Siegel, G. K. Stahl & D. Waldman (Eds.), Oxford Handbook of Corporate Social Responsibility: Psychological and Organizational Perspectives (pp. 637-658). Oxford University Press.
If you are interested in learning more about this work, contact Professor Valentina Marano at: email@example.com