Creating Shared Value: Beyond the usual corporate social responsibility

MANILA, Philippines - While more and more corporations have embraced the idea of corporate social responsibility (CSR) as a worthwhile endeavor when doing business, a 2006 study published in the Harvard Business Review has put forward a new model called Creating Shared Value (CSV) that elevates the concept of CSR from that of doing good to society to that of doing good for both business and society.

That study, Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, is authored by Harvard Business School Professor Michael E. Porter and FSG Social Impact Advisors Managing Director Mark R. Kramer. ‘’Both say that that the traditional justifications for and approaches to CSR are no longer adequate in the 21st century, such that CSR must be re-thought and advanced if it is to truly benefit both business and the society at large.

According to the study, there are usually four justifications for CSR: 1) moral obligation; 2) sustainability; 3) license to operate; and 4) reputation. The moral obligation premise refers to a company’s inherent responsibility to do the right thing. The sustainability principle contends that it is only by benefiting society that any business can hope to last in the long-term. The License to Operate principle reminds companies that they can only operate their business through the expressed or implied approval of governments, communities and other stakeholders. The Reputation rationale says that a company’s CSR efforts improve its image, thereby strengthening its brand, invigorating morale, and raising its stock value.

These four approaches to CSR, according to Porter and Kramer, fail to give any meaningful social impact and do little to strengthen a company’s long-term competitiveness because they “focus on the tension between business and society rather than on their interdependence.” CSR models based on any or a combination of these four approaches will inevitably be palliative (or worse, cosmetic), aimed at simply avoiding conflict with or pressure from governments, communities and other stakeholders.

In their report, Porter and Kramer point to CSV as the way to go for business to flourish while contributing to the betterment of society. Creating Shared Value does not pit business against society but rather recognizes that business and society are inter-dependent. A company depends on society for its existence and vice-versa; the life of a corporation and the life of a society must achieve an interdependence that is mutually beneficial. As such, the CSV model calls for campaigns that benefit society while being integral to the company’s business strategies.

Porter and Kramer cite Nestlé in their report as an example of a company that has adopted creating shared value principles. They refer to Nestle’s continuing collaboration with small farmers all over the world, which has become central to its business strategy, as a positive example of CSV. By making small farmers an integral part of the way it does business, Nestlé has entered into a symbiotic relationship with them— providing farmers with training, collection points, and technology know-how, and thus enabling them to improve their yield and assure Nestlé of a stable supply of hiqh-quality commodities. Bottomline: Nestlé, the small farmers, and their community all get value from the partnership.