Beyond Corporate Social Responsibility: Created Shared Value And Sustainable Development

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Beyond Corporate Social Responsibility: Created Shared Value And Sustainable Development


Abstract


The paper examines the paradigm shift in business sustainability strategy from corporate social responsibility (CSR) to created shared value. The created shared value as a revolutionary strategic management thinking is defined as the 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. It is expected to change the corporate mindset where they spend some money in philanthropic activities (a mere lip-service by corporations to placate societal disgruntlement) without sincerely trying to make a change in the society. It is also to revise the mental models that have constrained management thinking for years to improving competitive context and economic progress of business by companies’ making sincere commitment to bettering society. The concept of created shared tasks businesses to go beyond the ordinary CSR to addressing social and society’s issues in addition to their pursuit of profits as this would give rise to long-term company‘s profitability, competitiveness and sustainability. Interestingly, evidences abound of companies which have already keyed into the created shared value enjoying immense benefits of customers’ and society attraction, acceptance and loyalty, profit growth and competitive advantages. The paper concludes that created shared value has the potentials to unleash the next wave of global growth, economic prosperity and sustainable development when companies start to think a new and look at decisions and opportunities through the lens of shared value by incorporate social and societal values into their economic agenda. Corporate social responsibility, created share value, sustainable development.


Chapter One


Introduction

1.1 Background of the Study

The concept of Created Shared Value (CSV) has been pioneered by Professors Porter and Kramer of the Harvard University since 2011. Although the idea of shared value was first expressed in their publication in the Harvard Business Review on “Strategy and society: The link between competitive advantage and corporate social responsibility” in 2006 where they advocated a mutual dependence between corporations and society or a win-win business-society relationship to create competitive advantage. There would be a symbiotic relationship and reciprocity between business and society as firms redefine and readjust their concept of value in a broader, more “shared” perspective (Davenport,2011).This is because (shared)values of organizations and top management influence their strategies and strategic decisions (March & Simon,1958; Andrew,1980; Enz,1989)

The CSV is a new (r)evolutionary way of strategic business thinking in the business-society relationship which integrates social goals within business practice without distracting a firm from its primary purpose of achieving profit (Porter & Kramer,2011; Rocchi & Fererro,2014).This could trigger once again the greatest economic wealth, growth and innovation for humanity and business (Porter & Kramer, 2011). According to Porter and Kramer (2011),‘shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the community in which it operates’ and companies can create shared values through re-conceiving products and markets, redefining productivity in the value chain and building supportive industry clusters at the company’s locations. It is creating economic value in a way that also creates value for society by addressing its needs and challenges. The idea is combining “traditional objectives with additional benefits for society” (Altman & Berman, 2011).

Porter and Kramer’s propositions for the CSV have been laudable and applauded by many supporters (Bockstette & Stamp,2011; Hills et al.,2012; Pfitzer, Bockstette & Stamp, 2013;Visser,2013) in re-connecting the disconnected corporations’ successes to society’s development, particularly in the advancement of social causes to strategic level, specifying the roles of government in enhancing shared value and introducing a broader conception of capitalism-the “caring or conscious capitalism”. Without doubts, the world has experienced unparallel prosperity following the industrial revolution and the free-market economy. Ringmar (2005) argues that although capitalism has produced comparable levels of economic prosperity, it has also brought to human beings and societies the consequences of income inequality, erosion of non-market values, commodification and alienation of people and hence it should be controlled.

The arguments on CSR have revolved around the continuum of Professor Friedman’s neo-classical economic theory and Professor Freeman’s stakeholder theory. Although Porter and Kramer (2011) argue that CSV is not social responsibility, philanthropy or even sustainability, but instead, it is a modern manner to achieve long-term success with regards to economy terms. Bosch-Badia et al (2013) argue that shared value directs businesses to a more sustainable and stronger value chain. It does appear that CSV is beyond CSR-a new CSR agenda of business integrating social and economic goalsǃ Moczadlo (2015) argues that CSV is going beyond the pure business case approach of CSR because it requires integrating CSV into the core business and the long term strategic alignment of companies. The CSV is a win-win situation where an organization creates value for the society by tackling its needs and challenges in a way which also creates economic value to them. Epstein (2012) remarks that CSV could grow future markets and strengthens economies and communities. Spitzeck‐ and Chapman (2012) find that shared value strategies do enhance financial as well as socio environmental performance and build stronger clients’ relationships in Brazil.

In fact, as awareness on global issues such as poverty, climate change and global warming, inequities keep increasing, CSR has become inescapable priority for firms and their managers the world over (Porter & Kramer, 2006; Jean & Yazdanifard,2015; Fjell & Rødland,2015) to be part of the solutions of the problems of society which they also created. The multinationals (MNCs) are being blamed for society’s failures (Porter & Kramer, 2011). Moreover, most of companies’ efforts have not pay off greatly in their productivity due to their disconnect from or ditch against society and not linking the CSR to their strategy (Porter & Kramer,2006).Porter and Kramer (2011) argue that there is a growing perception of companies’ successes at the expense of society’s social, environmental and economic problems. The companies’ CSR has not been strategic to be a source of business opportunity, innovation, revenue growth and competitive advantage and benefits to society (Moore,2014).

The CSV challenges the academic literature on CSR as well as business practice in the few years of its existence. No wonder, there have been increased study of CSV from different point of views, contexts such as industrial sectors and multinationals (Maltz & Schein,2012) social entrepreneurship (Pirson,2012) and countries e.g. Brazil (Spitzek & Chapman,2012), India (Vaidyanathan & Scott, 2012),and Australia (Leth & Hems, 2014).Some have tried to reconstruct/redesign or extend the original CSV framework by Porter and Kramer (Michelini & Fiorentino, 2012; Moon, Pare, Yim & Park, 2011) and/or widely applied the CSV to regional development, poverty reduction other discipline like finance and banking (Bockstette, Pfitzer, Smith, Bhavaraju, Priestley & Bhatt 2014), education (Mena & Zelaya,2013;Kramer & Tallant,2014.), global health (Peterson, Rehrig, Stamp & Kim,2012), oil, gas and mining companies (Hidalgo, Peterson, Sith & Foley, 2014), agriculture, business corporate strategy, low-income markets (Michelini,2012) and emerging markets (Hills, Russell, Borgonovi, Doty & Iyer,2012).

There are lots of literature and empirical evidences that the CSR approach in the developing countries of Africa including Nigeria has been mainly philanthropic and normative CSR (Visser,2006,2008;Visser,Matten, Pohl & Tolhurst,2007;Amaeshi,Adi, Ogbechie & Amao,2006) and there are increasing expectations by various stakeholders that corporate organizations, especially the multinational companies (MNCs) and transnational companies (TNCs) should go beyond profit maximization and regulatory compliance to taking up responsibilities that make significant impact on society by helping to remedy the social problems including the ones caused by them (Odia,2016).


1.2 Statement of the Problem

The CSV may just be the desired solution that the stakeholders have been waiting for to make corporations break away from restricted CSR involvement to embrace the broader view of “caring, conscious capitalism” and responds to social issues and problems. However, managers and entrepreneurs will need to develop and possess new skills and knowledge to create shared value (Bockstette & Stamp, 2011). Porter (2014) traces the evolving role of business in society from philanthropy (donation to worthy social cause, volunteering to CSR (compliance with community standards, good corporate citizenship and sustainability initiatives) to creating shared value (addressing societal needs and challenges with a business model at a profit)

While there are benefits and prospects associated of CSV to the society and businesses at least from evidences of companies that have keyed into the CSV, a research gap exists on how CVS can be linked to the sustainable, inclusive development of developing countries as well addressing the limitations and challenges of CSV such as the criticisms regarding the CSV, measurement issues, changing corporate mindsets to view environmental and social problems not as constraints but as business opportunities, and gaining support of top management of MNCs, TNCs and other companies to key in and their voluntary CSV compliance and getting support of governments and agencies at the local, national and international levels to encourage more businesses to adopt shared value strategies. Therefore the objective of the chapter is to examine the relationship between CSV and corporate sustainability. The rest of the chapter is divided into five sections: The immediate section clarifies CSR and exposes the problems with the present CSR. Section three considers CSV, the ways companies can create shared value as well as the differences between CSR and CSV. Section four addresses CSV Opportunities and Benefits in Developing Countries and the role of government and government policies on CSV, and examines CSV and sustainable development. The last section is the concluding remarks.


1.3 Objective of the Study

The major and specific objectives of this study include;

  1. Examine the relationship between CSV and corporate sustainability
  2. Examine the CSR and exposes the problems with the present CSR.
  3. Examine the ways companies can create shared value as well as the differences between CSR and CSV
  4. Examine CSV Opportunities and Benefits in Developing Countries and the role of government and government policies on CSV, and examines CSV and sustainable development.

1.4 Research Question

  1. What is CSR and the problems with the present CSR?
  2. In what ways can companies create shared value as well as the differences between CSR and CSV?
  3. What are the CSV Opportunities and Benefits in Developing Countries and the role of government and government policies on CSV, and examines CSV and sustainable development.

1.5 Significance of the Study

This study will extensively analyse the relationship between CSV and corporate sustainability, and the problems of cooperate social responsibilities. The study will enlighten manufacturing and non manufacturing firms on the ways companies can create shared value as well as the differences between CSR and CSV. This will also apprise the relevant Government officials on the opportunities and Benefits of CSV in Developing Countries and the role of government and government policies on CSV, and examines CSV and sustainable development.

Additionally, the study will contribute to the body of existing literature and hence will be useful to students and researchers who may be willing to conduct a research on related topics.


1.6 Scope and Limitations of the Study

The study specifically covers the relationship between CSV and corporate sustainability, the CSR and exposes the problems with the present CSR, the ways companies can create shared value as well as the differences between CSR and CSV and CSV Opportunities and Benefits in Developing Countries and the role of government and government policies on CSV, and CSV and sustainable development.

On the limitation to this study, the researcher acknowledged that, as with any study of this nature, certain issues were unavoidable. Accessing a large quantity of materials and informants who witnessed the expulsion encountered to be a significant problem. This was largely due to a lack of financial backing.


1.7 Methodology of the Study

The researcher followed the accepted rules of the x-factor method in order to offer a high-quality work. The usual, analytical, and critical examination and description of evidence was used in the qualitative method. The researcher began the study by examining and studying the facts in the secondary sources that were pertinent to the study’s problem. Notes were meticulously taken during the data collection course to allow the researcher to understand the major ideas and important elements of the materials gathered, as well as the perspectives and conclusions of authors whose works were indispensable to the study.

In examining the study, both secondary and primary sources were utilised. As part of the historical requirement, the researcher began by reviewing the required secondary documents. Books, monographs, and brochures on economics, sociology, migration, and political science.


1.8 Definition of Terms

Corporate Social Responsibility:

This refers to the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.

Created Share Value:

This is a paradigm shift in corporate social responsibility and sustainability strategy where business create economic values and values for societies through the simultaneous pursuit of economic, social and societal goals. Companies can create shared values through re-conceiving products and markets, redefining productivity in the value chain and building supportive industry clusters at the company’s locations.

Shared Value:

This can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the community in which it operates.

Sustainable Development:

This refers to development that meets the needs of the present generation without compromising the ability of the future generations to meet their needs.


Chapter Five


Conclusion and Recommendation

5.1 Conclusion

The CSV is a (r)evolutionary strategic management thinking meant to enhance the companies’ competitive- ness while simultaneously advancing their economic and social conditions in the society they operate. It challenges the constrained corporate mindset of lip-service philanthropic CSR activities of business over half a century to making it a major solver of society’s problems in a much beneficial and profitable ways through creation of shared values. Created shared value tasks companies in developing countries to go beyond CSR to addressing social and society’s issues in addition to their pursuit of profits by in- corporating social and societal values into their economic agenda. The shared values created by these companies in developing countries would give rise to long-term corporate profitability, competitive- ness and sustainable development of host communities and countries. Interestingly, evidence abound of companies at least of global multinational and transnational companies in developed and developing countries, which have already keyed into the CSV enjoying immense profits, sales growth and sustainable competitive advantages through integration of social and economic goal while also addressing societal needs. Therefore, companies including extractive and mining industries in developing countries must begin to take a long-term approach to social investments and prosperity of company, host communities or countries by embracing the pillars of shared value of re-conceiving new products and services, identifying new market opportunities and enabling clusters development. It has been demonstrated that the created shared value has the potentials to foster unparalleled economic growth, prosperity and sustainable development in countries when companies start to think a new and look at decisions and opportunities through the lens of shared value.

Although, the created shared value approach is being embraced and applied by most global multinational corporations, there is no known study in Nigeria. Therefore a study of the current CSR practices is recommended on whether the shared value concept is already being practiced by indigenous companies in Nigeria, the influencing factors and challenges of creating shared value in turbulent environments.


5.2 Recommendation

In an era of increasingly stakeholders’ knowledgeable demands and expectations amidst the increasing global challenges, integrating economic and social goals will demonstrate corporation’s real concerns and ability to achieve the “win-wins” of the shared value model, long-term sustainability, competitive advantage and economic prosperity. In order to give concrete meaning to the concept of CSV in developing economies, the companies must change the philanthropic way that CSR is presently conceptualized and organized because of its limitations in helping them to achieve competitive advantages and adequately address societal problems. Based on the shared value approach, companies in developing countries should restructure and prioritize CSR to be part of their organizational culture, value and core business strategy that emphasizes sustainability by redefining corporate leadership and integrating economic and social goals in their business pursuits in addressing societal problems. The integration makes CSR a core element of strategy, structure and process, eliminates distinct CSR functions in the organization and makes CSR a mutual responsibility across the firm – from top down and thereby increasing its cred- ibility and implementation.

However, achieving shared value will require a radical and collective rethinking of management practice by all parties. There must be strong commitment at the executive, top management level and employees; Leading managers of global players as well as of small and medium companies in developing countries must discuss and take CSR very seriously by going beyond “green washing” or “window dressing”. They must begin to embrace and transmit the CSV vision and ideology among all employees of their organizations through re-conceiving new products and services in new markets, improving productivity and developing clusters. Therefore, companies would need to incorporate shared value thinking into the operations of employees at all levels of their businesses to really transform capitalism and bring about inclusive and sustainable development. The realization of the SDGs in 2030 requires that companies in developing countries have a major mindset change towards the adoption of the CSV agenda. This will involve the companies working inside out and embracing top down leadership, commitment and strategy as well as a bottom up overhauling of the operating models to reflect total commitment; CSV takes time, energy, tenacity and patience to embed and thus the process requires change managers and skilled leaders rather than programme managers (Bockstette & Stamp, 2011; AT Kearney, 2015). In fact, achieving a successful, sustainable and scalable shared value requires significant changes in the way that corporations do business. Therefore, businesses in developing countries must change their business models and current CSR philosophy to include shared value creation and business value sustainability.

Government and regulators in developing countries should recognize their roles in helping businesses to create shared value by focusing on measuring environmental performance and introducing standards, phase‐in periods and support for technology that would promote innovation, improve the environment and increase competitiveness of business simultaneously. They would need to limit the pursuit of exploitative, unfair or deceptive practices in which companies benefit at the expense of society. Governments can help companies create shared value by: creating enabling policies and regulations, showing collabora- tion by acting as knowledge broker, serving as convener of interested stakeholders, acting as operating partner for shared value strategies and incentivizing shared value investments. Regulatory authorities like the National Hydrocarbon Agency (NHA) in Columbia must promote shared value creation through its regulatory framework. Although local content presents one of the clearest opportunities to create shared value, governments in developing countries particularly those with rich minerals and extractive industries must collaborate with companies to access opportunities to deliver real value for business and society across different areas of investments based on shared value approach.

On the other hand, companies must take a long-term view toward solving societal issues that would benefit the business by investing in improved business unit operations’ knowledge of societal issues. They should measure societal outcomes and their impact on the business, and work with other multina- tional companies, NGOs and governments to create shared value. They must also take concrete actions to shift the current dynamic relationships between the corporations and government from one that views for instance extractive companies as contractors who pay for the privilege of carrying out extraction to one that sees these companies as development partners who could help solve societal issues of concern to government and create shared values through direct engagement with various levels of governments and communities, capacity building and indirect support for independent, third-party efforts. Faculties and business schools would also need to broaden their curricula and teaching to include: efficient use and stewardship of all forms of resources, human and societal needs and how to serve non‐traditional customer groups; because these would define the next‐generation thinking on value chains.


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