Beyond corporate social responsibility: Integrated external engagement
Companies must incorporate interaction with stakeholders into decision making at every level of the
organization.
March 2013 | byJohn Browne and Robin Nuttall
Traditional corporate social responsibility (CSR) is failing to deliver, for both companies and
society. Executives need a new approach to engaging the external environment. We believe that the best
one is to integrate external engagement deeply into business decision making at every level of a company.
In this article, we show how to make that kind of integrated external engagement (IEE) a reality. We set
out to answer three questions. Are companies doing well at external engagement? Where might they be
going wrong? How can they do better?
Are companies doing well at external engagement?
Properly understood, external engagement means the efforts a company makes to manage its relationship
with the external world. This relationship can and should include a wide variety of activities: not just
corporate philanthropy, community programs, and political lobbying, but also aspects of product design,
recruiting policy, and project execution. In practice, however, most companies have relied on three tools
for external engagement: a full-time CSR team in the head office, some high-profile (but relatively cheap)
initiatives, and a glossy annual review of progress.
That traditional approach has had some positive effects. Companies certainly consider the external
environment more carefully than they did in the past, and their philanthropic programs have helped many
people. But in a majority of cases, CSR has failed to fulfill its core purpose—to build stronger
relationships with the external world. The Occupy movement in the United States is the most visible sign
of discontent, but polls show that levels of trust in business are below 55 percent in many countries. A
significant minority views business executives as villains, enriching themselves at the expense of society.
Even firms with the glossiest CSR reports have found themselves cast as public enemies. Take major Wall
Street firms in the aftermath of the financial crisis or BP after the Gulf of Mexico spill: their relationships
with the external world have been shattered, and they have lost billions of dollars of value as a result.
Many executives recognize that their current approach is inadequate. In a recent McKinsey survey of more
than 3,500 executives around the world, less than 20 percent of the respondents reported having frequent
success influencing government policy and the outcome of regulatory decisions.1
This problem creates an
opportunity for significant competitive advantage. In marketing or operations, companies struggle to raise their performance a few percentage points above that of their competitors. But as leading-edge companies
such as Statoil and Unilever have discovered, effective external engagement can set you far above your
rivals.