Threats to the environment.
Threats to society.
Threats to the economy.
What
if these problems were not threats? What if they were opportunities?
The strategy of engaging businesses to social issues via charities and
public relations is outdated. In this mindset, looking after social
issues is seen as detrimental to a company’s bottom line. As a result,
these initiatives are seen as secondary goals. When the going gets
though, they will often be neglected or completely abandoned. This is
where Creating Shared Value (CSV) comes into play; it allows a company
to help solve societal issues while also improving their shareholder
value. How? By engaging business as business. In
a 2012 article by Mark Kramer, titled “Better ways of doing business: Creating shared value”, he explained how using business resources to
drive social progress can be sustainable and profitable. According to
Kramer, there are three primary facets to CSV
1) Reconceiving products and markets: GE has committed to spend $1
billion towards a cancer project and $100 million of this will be spent
through their Healthymagination division. They are using this $100
million to develop a new business ecosystem. This is their way of
reconceiving products and markets. When they spend money towards cancer
research, it allows them to further the development of new equipment and
procedures. This allows researchers to explore new avenues. In the long
run, this should accelerate the development of cancer research. By
being at the forefront of development, new opportunities and markets
will be created. GE will be in a preferential position to provide for
the market as they played a key role in creating it.
2) Redefining productivity in the value chain: Coca-Cola bottlers in East Africa have created micro distribution center (MCD) that involve thousands of micro-entrepreneurs serving as the local distribution centers to retail outlets. Many of the MDC owners are first-time entrepreneurs, and approximately a thousand are women. This model deals with a key distribution challenge for the company and accounts for more than 80% of the company’s sales in East African countries. By doing this, Coca-Cola has redefined the productivity in their value chain. They have found a way to meet a core business need while also providing local economic development opportunities in a high potential emerging market.
3) Enabling local cluster development: In the “Creating Shared Value” article from Porter and Kramer, the authors give a great example to demonstrate this concept. Yara, the Norwegian-based mineral fertilizer company, realized that there was a logistical problem in Africa due to a lack of proper infrastructure. Farmers were not able to get efficient access to fertilizers and other agricultural supplies. Additionally, they had difficulty transporting their crops to market efficiently. To solve this issue, Yara teamed up with the local governments in Tanzania and Mozambique as well as with the norwegian government. They invested $60 million in a program to develop roads and ports in those areas. The impact in Mozambique alone is expected to benefit more than 200,000 small farmers and create 350,000 new jobs. This will help grow the local agriculture, which will in turn help Yara grow its business.
The article and the examples show how CSV enables companies to benefit from the threats to the environment, to society and to the economy without leading to its detriment. By engaging businesses as business, it allows them to better serve society by doing what they do best. When they take a CSV approach to an issue, they are more likely to be committed to improving the situation at hand in the long run. Companies are more deeply invested in the process, as they have many levels of resources at work as opposed to a strictly financial contribution. At the end of the day, businesses need to be sustainable. Creating shared value demonstrates that it is possible to solve societal issues while also turning a profit.
Marcel Dupuis and Justin Landry
Cool post guys. I think the concept of CSV is really interesting, and to be honest I had never really heard that much about it until this weeks seminars. I certainly agree with you that businesses are more invested and committed to CSV initiatives because there is potential for financial returns for the business and that is part of the goal of starting the initiatives in the first place. On the other hand, CSR is generally more in the way of charitable giving, in that there is no real measurable benefit to the company in making these contributions, they are just doing it to make the world a better place. The problem with this, though, is that companies tend to just dump money on issues without actually caring about what the outcome is, or many times they just make these contributions because it wil make them look good in the eyes of the consumer. It seems possible to me that CSV could be the CSR of the future. It seems kind of senseless to give money away to charities and communities without any return when you can provide these entities with the same benefits while also helping your own financial bottom line.
ReplyDelete- Carson Dillon
I agree with Carson. Like him i really didnt know what CSV was until the seminars yesterday. since learning about it i find it very interesting. The only thing is that i see CSV becoming the new CSR in the sense that given enough time with the new concept businesses will find ways to use it solely for cost cutting purposes that may not actually be for the betterment of society. As we have seen with CSR many businesses are just doing it to look good and in some cases are actually making themselves look worse. with CSV i think it will be important for businesses to make absolutely sure that whatever initiatives they decide to take do, in fact adress a need within society and are not more favorable to the needs of the business. The idea is shared value, meaning both sides must benefit equally in order for the business to look like the good guy.
DeleteCSV is a very appealing idea. Especially as it's definition is intrinsic with success both societally and economically. I do like the idea of businesses moving away from the idea that helping society is a secondary purpose or objective of business. That businesses can re-conceive a profit seeking (capitalist) attitude that is beneficial to the society. CSV makes CSR look like an inherently bolted on strategy in comparison when we allow our ideas of capitalism to be shifted. If companies adopt CSV as a core strategy to their organization we will realize less scrutiny from society on businesses and the two will be able to procure mutual rewards from one another allowing both the business and society to thrive.
ReplyDelete-Nolan Hanson
Great post! I agree with Carson - I wasn't really aware of the formal concept of creating shared value, though I believe we have been learning aspects of it during our time at Mount Allison. I think that the idea of creating shared value is something that companies should really take seriously - if you are creating a product or service that is meeting an immediate and pressing need of society, you can be sure that there will be demand for it (but you can't be sure that there will be demand for a product like the Snuggie for example).
ReplyDeleteI think this also relates to Devinney's article that we read about corporate social responsibility. He cited that "the good" of companies what that they are in a good position to gauge the overall wants and needs of consumers and can be highly effective instruments of social policy (p.48). So, the question of whether or not companies are able to have a positive effect on society in the long run is not a question. The real question is whether or not they will continue to benefit society in the long term and continue.
Unlike Nolan, I see CSR as a component of integrity that is needed in creating shared value, rather than a competing idea. I think the creating shared value is more than CSR - it is creating overall sustainability, taking advantage and creating opportunities and ensuring that your company has integrity.
I too wasn't familiar with the concept of CSV until the last week of class. I think CSV is a very interesting concept for companies as it has potential financial benefits associated with it. CSR on the other hand aims to give back to the society and that too is a good initiative that companies take. I agree with Carson that in the future CSV will become the new CSR because if there is financial benefits associated with it, and both parties benefit, why wouldn't more business take that path? It may seem like a better strategy to implement for more businesses in the future.
ReplyDelete