Test

Companies should consider the business environment internally and externally to understand whether a shift to ESR activities will really benefit the company. The five strategic goals that Siegel outlines, in Table 2, are great examples of how ESR objectives can benefit the bottom line. The goal for firms is still to maximize the value to shareholders; however, the changing environment in business has brought to light more abstract ways of accumulating that value such as considering stakeholders, green tactics, and philanthropic drivers. No matter the spin that firms may place on how proficient they are at any of these activities, their end goal should and can be to increase value by exploiting their ESR activities.Siegel stated that one of the shortcomings of current studies of ESR activities was the “endogeneity” of the situation, the lack of direct cause and effect. Depending on how firms structure their strategy could determine which aspect affects the other, financial success that fosters ESR activities or ESR that foster financial success. Mature firms would more likely use their financial success to meet the evolving needs of their shareholders and customers, while embryonic firms would more likely use a philosophy based on ESR activities to provide value. British Petroleum stands as an example of a mature firm that has incorporated environmentally conscious activities into its existing business model to great financial success. While current events have thrown BP’s integrity into question, this challenge is not unique to the company or the industry. In comparison, TOMS Shoes is an example of how an embryonic company has made ESR activity its core business model and created value based on their strategy. For every shoe TOMS sells, one is given to an individual who cannot afford shoes. TOMS has created socially reponsability value in addition to financial value for its stakeholders by providing this model, touting sales of 13 million.Perception of value in some cases has shifted to incorporate more than just an ending dollar amount. The challenge for each firm is to understand the activities and inputs that will to provide their stakeholders with the highest value. In this way, firms can do well by doing good. Customers have become more eclectic in their desired value; management’s task of providing maximum value has not changed but has gained some layers which go beyond traditional dollars and cents and encompass a broadening scope of value added components. ESR activities are simply another way in which management can create value. But as Siegel points out not all industries will perceive value the same. In the end management’s analysis of internal and external variables will provide insight into how these activities can be leveraged to create that value.