Strategic CSR becomes CSV

Strategic CSR becomes CSV

Harvard professor Michael E Porter - one of the world's most influential thinkers on management and competitiveness - has introduced a new business principle called creating shared value.

In an article entitled "The Big Idea: Creating Shared Value", published earlier this year, Porter and co-author Mark R Kramer stressed that shared value was not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success.

The authors said the principle of shared value involved creating economic value in a way that also created value for society by addressing its needs and challenges. It 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 communities in which it operates. Creation of shared value focuses on identifying and expanding the connections between societal and economic progress.

Moreover, the authors said that creating shared value (CSV) should supersede corporate social responsibility (CSR) in guiding the investments of companies in their communities. CSR programmes focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain in the long term. CSV, on the other hand, is integral to a company's profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value.

In a December 2006 article co-authored with Kramer and entitled "The Link between Competitive Advantage and Corporate Social Responsibility", Porter coined the term "Strategic CSR", and defined it as going beyond good corporate citizenship and mitigating harmful value-chain impacts by mounting a small number of initiatives whose social and business benefits were large and distinctive. By investing in social aspects of contexts that strengthened company competitiveness, Porter and Kramer were convinced that strategic CSR would unlock shared value, and become increasingly important to competitive success.

While responsive CSR depends on being a good corporate citizen and addressing every social harm that a business creates, strategic CSR is far more selective. Companies are called on to address hundreds of social issues, but only a few represent opportunities to make a real difference to society or to confer a competitive advantage.

Strategic CSR involves both inside-out and outside-in dimensions working in tandem. It is here that the opportunities for shared value truly lie. Perceiving social responsibility as building shared value, rather than as damage control or as a PR campaign, will require dramatically different thinking in business. Addressing social issues by creating shared value will lead to self-sustaining solutions that do not depend on private or government subsidies.

Since Porter's 2006 article, CSR has become widely used as a PR campaign or marketing tool. Thereby, it has been devalued. Porter, along with other gurus in this field, has subsequently tried to shift his contribution to the issue by recycling his former "strategic CSR" as the more recent "creating shared value" - with an additional challenge: CSV, he says, is an integral part of a company's efforts to maximise its profits.