Societal, Environmental and Stakeholder Drivers of Competitive Advantage in International Firms

The configuration and context of business at the global level is transforming with the growing need for sustainability coupled with growth. The intensified competition, consumer expectations, governance imperative and natural resource crunch have driven corporate leadership to synthesize their corporate social responsibilities with corporate strategies. Investors are incorporating sustainability evaluations in their due diligence, employees adhere to firms with reputation and stakeholder pressures unfurl innovation. However, there is a distinct need for an appropriate framework for the implementation of CSR programs that dove-tail with the firm strategies. A related challenge is the diffusion of the CSRstrategy linkage down the line from the leadership level to the operational level. This research aims to establish a dynamic framework based on societal, environmental and stakeholder drivers of international firms, who follow best practices, and their effect on the Economic Value Added © and perceived Competitive Advantage. The distinctiveness here is the dynamic nature of the framework that companies may choose and adapt to benchmark their CSR performance periodically. In a way, the linkage between the societal, environmental and stakeholder drivers and EVA can motivate corporate leadership to adopt CSR vigorously so as to drive the firm towards sustainability through best practices with performance. The case analysis showed that Global and Asian emphasis on the value drivers are not very different and it is possible to consider a common set of Societal, Environmental and Stakeholder drivers. These drivers are applicable irrespective of Industry and location differences. This study is distinctive as it links the apparently intangible values of societal, environmental and stakeholder drivers with the measurable Economic Value Added. Another distinguishing feature of this research is that it identifies the difference between firms' internal perception of Competitive Advantage derived from the societal, environmental and stakeholder drivers and its actual effect as assessed by Economic Value Added. This research endeavored to unshackle the mere intuitive appeal of CSR and install a dynamic framework of Societal, Environmental and Stakeholder drivers' linkage with Economic Value Added and perceived Competitive Advantage for firms to adopt. When firms are aware of the relevant critical drivers, they could effectively adapt to emerging-markets. A firm could adopt a proactive stance in order to surpass compliance, to be ahead of environmental demands and to invest more environmental measures to exceed legislative demands. The company might decide to adopt a market-oriented strategy with adaptive component, by engaging with consumers, enter new markets with eco-products and reorient through constant tracking of competitors' actions. As evident from this research, firms develop codes of conduct like ethical orientation, demonstrating expected behavior, ongoing process improvement and real-time reporting. A significant implication from this research is the involvement of stakeholders in the form of drivers in a firm's strategy becomes a valuable capability which leads to perceived competitive advantage. The key drivers are not definitive. Individual companies need to review their initiatives and applicability closely. The challenge for companies is to permeate the entire hierarchy in the spirit of value adding initiatives derived from Societal, Environmental and Stakeholder drivers. The dynamic framework evolved through this research contributes towards this objective. The Societal, Environmental and Stakeholder drivers may be adapted in their own meaningful way at the ground level. The overall firm reputation could aggregate from the cumulative slices of value driven steps at the operational level and up the hierarchy. The case studies and the survey undertaken in this research study indicates the applicability of Societal, Environmental and Stakeholder drivers across regions (USA and Asia), across industries (sample firms were selected from 17 different industries), across differing levels of Gross Domestic Product (sample firms are from highly varying GDP countries). This research study contributes to the aspect of attracting investments by linking the Societal, Environmental and Stakeholder drivers with Economic Value Added (EVA). The Foreign Direct Investors closely monitor the EVA while deciding the destination for their investment capital. Firms with good reputation on product and service quality, ability to attract, develop and retain talent and have superior societal and environmental performance, attract capital resources. A significant contribution in terms of the research methodology is to highlight the role of EVA as an assessor of Competitive Advantage. EVA has the potential to become an integral entity in the strategy implementation process of a firm. Capital investors aim to maximize the company's stream of future EVAs. When linked with incentives, EVA may drive the managers to take decisions that lead to creation of value. The findings create opportunities for further research. Firms could be interested to benchmark their CSR performance and identify the critical drivers periodically. Firms with negative EVA or low positive EVA could be endeavoring to review its position. Future research could address the issue that managers face, to objectively judge the Societal, Environmental and Stakeholder drivers' impact on the creation of value. Such research would probe key processes, established systems and decision making, which would be re-aligned to create added value. The scope of future research should be broadened to include regions not included like Europe, South America and Africa. Due to the growing relevance of the BRIC (Brazil, Russia, India and China) as nodal points for growth, the research must address correlations between the impact of growth on sustainability issues like global warming and societal issues like quality of life. The new growth nodes are appearing to be preferred destinations for investors. Companies are increasingly under scrutiny not only for the creation of value but for good governance that incorporates the Societal, Environmental and Stakeholder drivers. Managers are being motivated by EVA-linked rewards as a sustainable metric for performance. Customers, suppliers and network partners are valuing the reputations of companies with whom they are associated. Corporate entities who can add momentum to their core strategy with the sustainable prime movers, viz., the Societal, Environmental and Stakeholder drivers, would emerge as the successful companies of the future.