Introduction: Economist Milton Friedman wrote an essay about corporate social

responsibility in the 1970s (Friedman, 2002). Though the primary focus of business always has
been to increase stockholders’ equity, many aspects of business management and societal
attitudes have changed drastically since the 1970s. Nowadays, enterprises are evaluated not only
by their stock price, but also their corporate social responsibility (CSR) and sustainability
initiatives. The Dow Jones Sustainability Index (DJSI) is a sustainability index similar to the
well known Dow Jones Index, which grades businesses based on CSR initiatives (Knoepfel,
2001).

Types of CSR: To some extent Friedman’s hypothesis is correct; businesses solely strive
to increase their stockholders’ equity. If a corporation is socially responsible, it could continue to
do well fiscally as well. Nowadays, increased awareness about pollution, greenhouse gases
emissions, and an emphasis on taking care of the community and employees have become an
essential aspect of running a business. Businesses have to fulfill four types of CSR, which
include environmental responsibilities (decreasing pollution), philanthropic initiatives, ethically
responsible business practices, and making economically wise business decisions. Businesses
certainly benefit from fulfilling these types of CSR. Patagonia is a well-known example of a
business that practices CSR (Reinhardt, Casadesus-Masanell, & Kim, 2010). Patagonia has
consistently put efforts to take care of its employees and nature while providing quality products
to its customers.

Benefits of CSR: With strategic CSR, the business’s reputation increases. With better
publicity, it can attract and retain talented staff as well as improve sales and customer loyalty.
This can lead to operational cost savings and in turn, better financial performance. The business
has to be fiscally responsible and efficient in order to survive in the long run. Hence, in today's
world, Friedman’s hypothesis is partially correct. In many businesses, CSR initiatives are far
from perfect. As explained by Rangan, CSR is a spillover effect rather than a strategic primary
business goal in most businesses. Often, CSR efforts are scattered. Businesses need to organize
and strategize CSR initiatives (Rangan, Chase, & Karim, 2015). There are a few exceptions to
the norm, such as the Shakti project by Unilever in India. In the Shakti project, Unilever India
empowered rural women to take dealerships for soap business bypassing the middlemen (Cross
& Street, 2009). It made loans available to these women and helped to eradicate poverty in those
sections of the society. IKEA has started a similar initiative called ‘People and Planet Initiative’
intended to use only sustainable resources for its manufacturing and sales (Larsson, 2014).

Summary 1: to summarize, due to increased societal awareness about equality and

environmental issues in today’s economy, Milton Friedman’s principles of CSR cannot be
applied universally. Today, Carroll’s model of corporate performance fits better (Carroll, 1979).

Business success: A successful business needs to do well in many fronts. Some of these
include strong leadership, strategic vision, strategic planning process, skilled employees,
operations, marketing, finances, and so forth. These factors are result of a successful corporate
vision and strategy.

Challenges to Competitive advantage: In last few decades, the speed of change has
increased due to a rapid evolution of technology. A product’s cycle reaches its zenith and nadir
in a relatively shorter time. Thanks to the rapid pace of information sharing facilitated by the
Internet, it is difficult to sustain a competitive advantage. Competitors efficiently benchmark
processes such as Just In Time (JIT) and the Toyota Production System (TPS) (Collins,
Muthusamy, & Carr, 2015). Hence, it is challenging to sustain a competitive advantage for any
business.

Long-Term corporate efficiency: However, it is more difficult to benchmark a

corporate strategy as compared to manufacturing and marketing processes. Usually, it takes time
for any business to evolve and implement its long-term goals. For a business to be successful, it
must have a strategic vision and a planning process to achieve that vision. Having only one of
these is not enough. The business will more likely be successful if the executive leadership are
actively involved in planning and executing these strategic processes. The process of cultural
change takes time. A firm cannot implement strategic principles overnight. It takes many years to
develop a corporate culture where corporate executives are in alignment with the vision and
mission of the firm. In these circumstances, the business is likely to be ethically balanced, be
fiscally responsible and socially prudent. With this approach, the firm will be able to maintain its
competitive advantage regarding corporate structure and vision.

Summary 2: A successful corporate vision and strategy are essential for success of any
business. Other factors such as skilled employees, operations, marketing, finances and research
are also important. In our opinion, competitive advantage due to corporate efficiency lasts longer
than competitive advantage due to other factors such as production or marketing systems.

References:
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Reinhardt, F., Casadesus-Masanell, R., & Kim, H. (2010). Patagonia.