Shared Value or CSR

The world economy is trying to recover from one of the biggest downturns in history. People are being laid off in record numbers. Unemployment rates are unacceptable. Poverty reaches all corners of the globe. And those who make money are being looked at more closely. What are they doing to help? How are they giving back? For years this has job has been given to a department known as corporate social responsibility (CSR). These businessmen and women are tasked with creating or developing programs that give back to the community in one way or another.  
 

CSR has been great for marketing and building a company’s reputation, but their solutions are usually short-term. A lot of these programs require constant management from the parent company and the resources are spent with little return. It has been considered poor form to actually make any money off of these projects. Working with the poorest sector it can be hard to come to terms with profiting off what was once intended to be a philanthropic venture. However, the idea of shared value is making headway and in the last 5 years more and more companies are seeing the potential.

The idea of shared value is simply defined as “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.” A major difference from a CSR philosophy is that these programs focus on improving the social and economic status of the geographic area.

Shared value is actually more beneficial for both the larger company and the poor or the economy of the third world country they are trying to assist. By helping to build a self-sustaining economy and making money off their ventures they are giving local people more reason to work hard and improve the quality of their products.

Plenty of companies are having issues with moving to a new set of rules for their projects. They are stuck in the outdated ideas of CSR and aren’t seeing any value in creating programs that may generate long-term profits. One of the hot ideas in CSR is a buy-one-give-one model. For example, Americans can buy a pair of shoes and another is given to a shoeless child in another country. It’s immediate gratification and appears to be a great idea. But what happens to the shoe maker in the other country? Less people will be buying shoes from him. The child has shoes for the short-term, but what happens when they get too small or worn out? A shared value take on this can be seen in Adidas’ program in Bangladesh with Grameen Bank. They are working to build a plant in Bangladesh that will provide jobs to the poor and create a product that can be sold for less than one Euro. This puts money back into the economy, provides a product that is available to more people and Adidas will get the benefits in the long-term.     

Companies are in their markets to make money. There is no reason why their philanthropic ventures cannot add to their overall value. Businesses aren’t used to seeing a problem in society and thinking how can we make an impact, but also make this work for us? Leora Black writes, “Companies could bring business and society back together if they redefined their purpose as creating ‘shared value’— generating economic value in a way that also produces value for society by addressing its challenges.”

How does a company find a way to convert their CSR values into ones that operate on the shared value model? The first option is to look at the products they make and where they are marketed. Can they be made cheaper or in the locations where they are sold? Can a new product line be developed geared towards the poorest sector? Another option is to take a close look at their value chain. How many executives know the ins and outs of their products from beginning to end? Looking at the source and the livelihoods of those supplying the raw materials may reveal a great opportunity to create a new program.  A third way to create a shared value program is developing a stronger support system for the company at all of its locations.

Sustainable programs are highly valued by the poorest sectors. These create a reason to keep improving their products by strengthening the buyer-supplier relationship. “Shared value could reshape capitalism and its relationship to society. It could also drive the next wave of innovation and productivity growth in the global economy as it opens managers’ eyes to immense human needs that must be met, large new markets to be served, and the internal costs of social deficits—as well as the competitive advantages available from addressing them,” says Michael Porter.

There is nothing wrong with profiting from shared value projects. They are more sustainable for the company as well as the group of people who they are trying to help. It is nothing to hide and the more programs that emerge with these ideas, the more society will see the true benefits. In a world that is so afraid of blogger or public relations backlash it is hard to want to pioneer a new field of thought. However the concept of shared value is gaining momentum. It’s time for more big businesses to jump on board and make the change. Everyone benefits. What’s so wrong with that?