Benchmarking Corporate Social 
Responsibility and knowledge-based 
Competitiveness 
Boris Cizelj, Jose Jacob Kalayil 
1. Corporate Social Responsibility 
1.1 The origin and the current context 
The World Commission on Environment and Development (better known as the Brundtland 
Commission) in 1987 defined sustainable development as ‘development that meets the needs 
of the present without compromising the ability of future generations to meet their own 
needs’. The recent crisis, to say the least has plunged many nations into deficits that will take 
decades to unwind and thereby driving the cost of growth higher – inevitably compromising 
the ability of future generations to meet their needs. The IMF puts the total cost of surviving 
the financial crisis to $11.9 trillion, the staggering total is equivalent to around a fifth of the 
entire globe's annual economic output and includes capital injections pumped into banks in 
order to prevent them from collapse, the cost of soaking up so-called toxic assets, guarantees 
over debt and liquidity support from central banks. 
In a recent survey titled “Ethics at work” conducted by ‘MT and the Institute of Business 
ethics’ it was found that only three-quarters of the managers in the survey disagreed with the 
statement 'It is acceptable to artificially increase profits in the books so long as no money is 
stolen'. It is even unimaginable about how an organization could then explain this to the 
workers who lose their pensions when the scheme unravels. The central question will then be 
– what could drive an ethical and sustainable business approach? If it’s the tightening of 
regulation the very fact that an act like the Sarbannes-Oxley – which put the need for clear 
ethical frameworks, training and responsibility at centre-stage, could not avert the recent 
financial crisis, leads us to search for something that is more comprehensive. An approach 
that will create the business case for sustainability with both the stakeholder and shareholder 
drive the business leadership in the right direction. 
In this context CSR has now become one of the key aspects to evaluate an organization’s 
current position and prospect for future growth. When the investor of today has seen large 
organizations like ‘Lehman brothers’ and many others go bust, the focus has once again come 
back to sustainable investment. The key expectation form the stake holder community is to 
know - if the organization can see the big picture and can unlock value not only within but 
even beyond itself. 
1.2. The Strategic shift 
While profit and growth remained the greatest concern of investors in the past, the current 
global events bring back the question and importance given to sustainability. This brings CSR 
to the strategic realm of running a business and therefore having a clear and well defined plan 
will be critical. In the past CSR has largely been viewed as a fashionable addendum, almost a 
PR chapter in the annual report of organizations and is often considered a charitable 
expression or action. The future however will see CSR as one of the key strategic elements of 
the corporate plan and this will see the painful yet constant re-definition of the scope and 
limits of CSR. One thing is however certain that many analytical tools and means will evolve 
to analyze and evaluate the CSR based effectiveness of organizations. On the regulatory front 
however the view some progress to create frameworks that pressure organizations to take the 
larger and holistic view. In the draft report titled “Financial accounting standards 
Environmental liabilities, intangible assets and Climate change risk” prepared for the ‘Office 
of economics and Innovation’, Washington in April 2008 – there is a strong case to formalize 
the disclosure of environmental liabilities and climate risk. The larger question still will be - if 
these recommendations will be implemented and passed as a bill under the larger 
Environmental Planning and Assessment (EPA 1979) act of the US. The current oil disaster in 
the Gulf of Mexico will undoubtedly create a new climate among American legislators, and 
the fact that British Petroleum’s strategy has pushed the company to hazardous attitude 
towards risk, will have a strong impact. 
Over the last few decades, heightened natural disaster activity has impacted virtually all 
nations. According to Swiss Re’s sigma study, “Natural catastrophes and man-made disasters 
in 2008 which was one of the worst years for natural and man-made catastrophes creating a 
total economic loss of USD 269 billion and claiming more than 240,000 lives” if we were to 
compare this just USD 20 billion insured losses in the year 1990. It is therefore critical that 
business asses and audit the impact that they are creating on the eco-system as a whole not 
just not measure profitability, and a comprehensive framework for CSR is in place within 
each organization. 
However the objective of this article is to offer a philosophy which is rooted in the very 
definition of an enterprise and therefore serves as a platform or starting point so that the 
strategic view on CSR is clear and not lost in complex analytical matrices as they evolve. 
1.3 The Philosophy and Framework for the strategic view on CSR 
1.3.1 The traditional approach 
In this approach if we were to simplify the concept of enterprise then we could consider the 4 
key factors of production – Raw materials, labour, capital and machinery that form the 
fundamental elements that help the entrepreneur run the enterprise and create a profit. In the 
current economic philosophy the entrepreneur is evaluated and rewarded based on his ability 
to create a profit. This is illustrated in the figure below: 
 
The whole enterprise in this model is equated to an investment and a ‘cost’ is attached to 
every aspect of the enterprise, the objective then of the entrepreneur is to create revenues 
greater than the cost and thereby create a profit. In the classical Smithsonian logic, the market 
will reward or punish the company for correct or false cost/benefit calculation. Now, there are 
other forces (government, media, political parties, NGOs) as well, who determine whether 
and to what extent a company is contributing to society (general good). 
1.3.2 The new inclusive approach 
The new approach gives each factor of production the importance and looks at every factor as 
a strategic contributor to the growth and profitability of the enterprise. This then creates a new 
paradigm in the way businesses operate and grow. The famous Australian businesswoman - 
Janet Holmes à Court, recently said “We have to shift our emphasis from economic efficiency 
and materialism towards a sustainable quality of life and to healing of our society, of our 
people and our ecological systems” 
1.3.2.1 Raw materials 
The entrepreneur has to have a vision of how the enterprise will contribute to the 
replenishment or optimal use of the natural resources that the enterprise is using. This is 
extremely relevant as we know that natural resources are depleting at an alarming rate and 
therefore the only way to ensure sustainability is that every enterprise based on its size and 
capacity plans to minimize the net effect of what it takes away from the global eco-system. 
Some examples of this could be: 
 Companies that use timbre as the main input in their production contribute by 
supporting forestation efforts; 
 Organizations that are highly energy reliant use – renewable sources of energy and 
increase this percentage year on year; 
 Those that use natural minerals can invest in creating ways to use less of the natural 
resources and move to supplementary elements through innovation and technology; 
 Companies that sell bottled water can be part of initiatives that can help replenish the 
ground water level. 
1.3.2.2 Plant and Machinery 
The key questions here will be – can the production plants and machines be carbon neutral? 
Can the throughput be increased at the same level of power consumption? What are the by-
products of the process of production; can there be ways to reduce the impact of these on the 
environment? 
To create solutions that makes plant and machinery eco-friendly and to see year on year a 
decrease in wastage and resource utilization - through an increase in efficiency, productivity 
and best practices implementation. 
1.3.2.2 Labour 
To look at employees as a key stakeholders in the organization who could incrementally add 
value with the time that they spend in the organization. Investing, not only in employee 
welfare initiatives but also to create an environment and culture so that they can grow in many 
ways (not just as labour force but also as human capital) within the organization. This will be 
one of the key success factors of the future - as organizations compete in the knowledge 
economy – where the drivers of sustainability and growth will be creativity and innovation. 
The new approach seeks to view the organization as a comprehensive system and to achieve 
the goal of sustainability in every aspect that contributes to the formation of the enterprise. 
Any effort to benchmark CSR of organizations has to therefore look at this complete picture 
and measure organizational effectiveness – with a view to evaluate how the organization uses 
with responsibility every element that contributes to its success. Therefore there may be 
different benchmarks and methods of evaluation for different types of industries and so there 
can’t be a one size fits all solution. 
The new approach calls for a comprehensive view to see if the enterprise take on the 
traditional and exploitative view towards resources or will use the sustainable and 
collaborative view to every aspect that contributes to its success and growth. 
2. Knowledge based Competitiveness 
The foundation for progress in economies and societies has always been knowledge and in 
today’s global economy it has become one of the critical factors for competitiveness, growth 
and sustainability. The “knowledge revolution” as we know it today has been facilitated by 
ease of access and use of knowledge and information. It will be right to say that the future will 
belong to those organizations/regions/nations that fully leverage knowledge based 
competitiveness. Even the American president Bill Clinton has said “in today's knowledge-
based economy, what you earn depends on what you learn”. 
2.1 Organizational framework to facilitate benchmarking of knowledge based 
competiveness 
Organizations that have the desire to leverage the full potential of knowledge based 
competitiveness should have a comprehensive approach to derive the full benefits of effective 
knowledge management. The framework around which this can be achieved is represented 
below: 
 
2.1.1. Knowledge as an asset  
Knowledge is clearly considered an asset in today’s global enterprise therefore, like every 
asset it has to be well managed to deliver greater benefits and results. Charles Darwin’s 
insight “It is not the strongest of the species that survive, nor the most intelligent, but the one 
most responsive to change” . The ability to respond to change effectively will remain in 
unlocking the knowledge potential with the right Knowledge management skills. The key for 
organizational success in the future will therefore be the effectiveness and efficiency with 
which knowledge is managed. Knowledge Management (KM) will therefore be a strategic 
function and will be one of the most valued elements within the organization. 
As organizations globalize and establish a global footprint – Knowledge management will 
have to rest on the IT backbone, so that access the KM system is available anytime and 
everywhere. Therefore the IT strategy of organizations of the future will have to see a clear 
and strategic integration with the KM strategy of the organization. 
2.1.2. The Layers for Knowledge intervention 
To tap into the true potential of residual knowledge within the organization, it is best to view 
the approach to KM in different layers and seek to make each layer more effective with time. 
At a basic level these could be defined as the – Individual, group, repository and external. 
2.1.2.1 The Individual 
While the employees of an organization are hired based on the competencies they already 
have, organizations in the knowledge economy require that their employees are constantly 
updating and enhancing their level of knowledge. The individual thereby becomes one of the 
important layers for knowledge based competitiveness. The KM strategy should therefore 
have clear rewards and recognition methods for individuals to enhance their level of 
knowledge based competence. There should also be convenient avenues for employees to 
improve their level of knowledge like – webinars, podcasts and training programs. 
2.1.2.2 Group Initiatives 
When experts from specific areas of specialization are categorized as different groups and 
there are constant knowledge-sharing formal and informal events within the organization, this 
could facilitate the leveraging of knowledge-based competitiveness. If this is done with a 
view to foster and reward an intra-organization partnership approach to resolve challenges for 
the client or customer the organization will create with greater frequency innovative solutions. 
The real challenge is to draw up the guidelines and policies for such collaborative approach to 
knowledge sharing and problem-solving. To be effective in this aspect of KM requires the 
organization to take a long term view and invest time, effort and resources to establish the 
strategic groups with the right inter-connections, evaluation methods and reward systems. 
2.1.2.3 The Knowledge Repository 
The effectiveness of a KM repository system can be evaluated based on the time taken to find 
the relevant knowledge from the entire repository. There has to be clear categorization and 
classification of the information that goes into the repository system so that it is easy to 
retrieve information. The knowledge worker of tomorrow has to spend more time on 
developing creative solutions to the problem at hand rather than searching through loads of 
data. Globalization has forced the cycle time for competitive innovation to reduce drastically - 
now to become the fastest organizations one can expect competition from literally anywhere. 
2.1.2.3 External Assimilation 
The external eco-system is creating information and knowledge at an incredible pace, it is 
therefore important that the organizations who want to stay ahead of competition can 
assimilate this knowledge. The key challenge will be to have a system that can again separate 
the relevant knowledge from the rest and then categorize and deposit the same in the 
repository. This then will ensure that the KM system is update and current, which will make 
the reliability of the system high and therefore the employees, can increase their efficiency 
and productivity. 
2.2 The culture of innovation 
Knowledge in itself will be under-utilized unless it is deployed to create innovative solutions 
to improve the quality of life in society. The challenge therefore that the organizations of the 
future will face is not only to create a knowledge based and centric organization but to instill 
in the organization a culture of innovation and creativity. Recognizing this very fact Bill gates 
once admitted that … “We are always saying to ourselves.. we have to innovate. We got to 
come up with that breakthrough. In fact, the way software works.. so long as you are using 
your existing software.. you don't pay us anything at all. So we're only paid for breakthroughs. 
One of the key questions that need to be addressed in this regard is – How the organization 
views failure? To innovate and be creative a tolerable level of risk taking had to be 
encouraged within the organization. This will then require that there are special rules, policies 
and fast-track evaluation and reward methods to encourage creative projects and initiatives 
within the organization. 
From the financial point of view – analysts will measure the degree of innovativeness and 
competitiveness of organizations based on the percentage of revenue generated from new 
products/services. To foster a culture of creativity and innovation is longer a desirable 
element but an essential aspect for creating stakeholder confidence in the success and growth 
prospect of an organization. 
3. Benchmarking comprehensive corporate excellence 
Achieving excellence in times of intense global competition, under pressure of CSR criteria 
and demands for sustainability, the need for constant innovation, constructive and strategic 
HR policy, as well as respecting gender balance in management board and at senior 
management positions, is certainly anything but an easy task. However in these conditions, 
elements which were earlier considered company cost, is gradually becoming an element of 
comparative advantage. 
Some companies are already realizing this and actually benefit from claims such as “bio”, fair 
trade”, and similar. General customer awareness is gradually developing in the direction of 
rewarding socially responsible companies by accepting higher prices for products and services 
performed and offered in line with principles of CSR. In other words, besides the “stick” of 
authorities for not complying with the ever stricter rules, the market is providing “the carrot” 
for responsible and creative companies. 
This is why it is even more important for companies to benchmark their performance not only 
in classical domains, such as value of their shares, rate of return on capital, but also to observe 
how company manages to progress in broader areas of sustainability and corporate social 
responsibility. These areas could be covered through following, and other domains: 
1. Quality of human capital and RTD output: composition of their staff in terms of 
education and training, links to knowledge networks, including those in diaspora, RTD 
investment, cooperation with external research institutions, intensity of development 
and the speed of applying new technologies, and patents registered and approved. 
2. Management style Quality of management functions to provide leadership, define the 
mission and operational objectives, distribute authority and responsibility, to motivate 
management and staff. 
3. Financial stability and position at the international financial markets Availability 
of credit and applicable conditions, level of exposure to financial credits and long term 
loans, as well as their structure; structure and value of company assets; interests of 
foreign investors for the company. 
4. Market position, brands and licencing Market shares and their trends, position of 
key brands and important licencies (both active and passive). 
5. Responsible resource management Sustainable management of all resources, 
including energy, and responsible attitude towards the environment. 
6. Gender balance and equality issues: Conditions allowing women to participate in 
company management on equal footing with male managers. Share of women in the 
Board, as well as in all management positions. Full gender balance is not just 
politically correct, but has been proven advantageous for quality of decision making. 
It will be useful to develop a system of mostly quantifiable indicators by which companies 
could monitor their own progress, as well as their performance vis-à-vis other companies in 
their branch, compared to their regional or national average, etc. The authors of the article are 
committed to prepare such a methodology. 
4. Conclusion 
As we enter the knowledge era and the forces of Globalization get stronger, the world of 
tomorrow will see an extreme degree of competition and pursuit of excellence. Those 
organizations that have the DNA to be socially responsible and leverage fully knowledge 
based competitiveness through a culture of innovation will succeed in the long run. While 
investors, regulators and society in the new age increase their level of scrutiny and oversight 
on organizations only the best can break the threshold and reach the category of stellar 
organizations. The society of the future will put an immense level of stress on the corporate 
leaders to constantly search for value addition and innovation. Organizations will have to be 
nimble, smart and most importantly socially responsible to ensure success and growth. A 
system of comprehensive excellence in various domains of sustainability and corporate social 
responsibility would certainly help them in these pursuits. 
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O avtorjih 
Dr. Boris Cizelj je redni profesor za področje mednarodnih odnosov in dekan Doba Fakultete. 
Svoje bogate raziskovalne in lobistične izkušnje prenaša na kolege iz gospodarstva, saj poleg 
svojega vodenja Slovenskega gospodarskega in raziskovalnega združenja v Bruslju sprejema 
delegacije slovenskih podjetij, organizira njihovo izobraževanje in posreduje med njimi in 
organi Evropske unije.  
Kot gostujoči profesor od leta 2001 sodeluje z Evropskim centrom za mir in razvoj v 
Beogradu, poleg tega je v svoji karieri predaval na številnih univerzah in institucijah. Svoje 
bogate izkušnje in znanje s področja mednarodnih ekonomskih odnosov prenaša na mlajše 
generacije v okviru predmetov z evropskimi vsebinami na številnih univerzah po Evropi. V 
Bruslju predseduje več evropskim mrežam (NIROC od 2000, EREF in RIBN od 2005) ter je 
podpredsednik Upravnega odbora Evropskega instituta za industrijski leadership. E-naslov: 
boris.cizelj@siol.net 
Jose Jacob Kalayil is an Independent Consultant Engaged with various mid-sized corporations 
from Europe. He helps the clients to establish their presence in the Indian market through – 
Partner Identification. He develops the marketing and Brand strategies for India entry and 
advises clients on the right structural strategy for effective and efficient India operations. As 
an Assistant Professor and International Programmes co-ordinator he is responsible for 
guidance to the ‘Student Research cell’, ‘Entrepreneurship Cell’ and ‘Social initiatives’ of the 
Institute. E-mail: sirjosejacob@gmail.com