CSR is no longer about risk mitigation and “doing no harm;” it’s about shared value creation.
Originally posted on the CSRwire website.
By Elaine Cohen
CSR is not what it used to be. Long gone are the days when managing your carbon emissions and contributing to the community were good enough. Today, the talk is about sustainable value creation. But is this a realistic objective for most companies?
CSR is no longer about risk mitigation and “doing no harm.” It’s no longer about being a responsible corporate citizen, paying taxes, developing employees or reducing carbon emissions. This kind of CSR activity may be a necessary stepping stone to sustainability but its return is limited. There is only so much money you can save by reducing your water consumption and only so many stakeholders you can appease by expanding your community outreach. The real prize is when the corporation moves beyond CSR.
According to the Committee for Encouraging Corporate Philanthropy (CECP), an international forum of business leaders focused on raising the level and quality of corporate philanthropy, CEOs are “looking for competitive advantage and sustainable profitability in new ways”. They are finding it in Sustainable Value Creation (SVC). A new report just published by CECP and Accenture, “Business at its Best: Driving Sustainable Value Creation,” confirms the importance of this shift in business thinking and offers a route to achieve it.
Sustainable Value Creation is defined as “a core business strategy focused on addressing fundamental societal issues by identifying new, scalable sources of competitive advantage that generate measurable profit and community benefit.” It’s about redirecting business efforts in a way that both makes money and empowers communities. An example appearing in the report is Pepsico’s support for corn-farmers in Mexico to improve the quality of corn supplied to Pepsico while creating economic benefits for small farmers and raising local community living standards. Another is Novartis’s establishment of a system of health educators in rural India to support improved access to medicine. Another is S.C. Johnson’s Community Cleaning Services (CCS) program in Africa, teaching locals how to clean public and shared lavatories. This last example may not sound all that sexy but it builds business and provides local economic growth and health benefits.
The SVC concept was not invented by CECP or Accenture. Michael Porter and Mark Kramer developed the Shared Value concept and framework with Nestlé, summarized in a report published in 2006, the Nestlé concept of CSR as implemented in Latin America (2006), which influenced Nestlé’s sustainability strategy in a fundamental way from that point forward. Nestlé issued its first annual global Shared Value Report in 2007 and now offers prizes to those who create Shared Value and runs a blog to share insights and practices. Porter and Kramer’s article, published in the Harvard Business Review in January 2011, “Creating shared value: How to reinvent capitalism and unleash a wave of innovation and growth” has been hailed by many as iconic and cites examples from Google, IBM, Nestlé, Unilever and Walmart.
What CECP’s report contributes to the concept of sustainable shared value is less about ‘what’ and more about ‘how’. It suggests an explicit framework for understanding the societal and business benefits of Sustainable Value Creation and a roadmap of R’s: (recognize, recalibrate, research, repeat, rewire and reinforce) as a direction for action. The approach was developed based on the experiences of several CEOs. Margaret Coady, CECP’s Director, told me: “Our objective was to help close the gap between vision and action. At present, the vision is clearer than the path to achieve it. We wanted to provide tools, with a focus on role of the CEO as the leader of change in the organization, to help create sustainable value. We see this as a further piece in the process of creating a portfolio of actions which fuse with corporate strategy, building on the best of the core business mandate requiring value creation for shareholders, CSR practices and corporate philanthropy.”
In “Business at its Best,” 26% of CEOs interviewed say SVC requires new models for measuring business value, which include societal metrics. This is some challenge. Margaret Coady says “companies need to adopt the mindset of seeing communities as customers and engage in research which enables measurement of impacts. The key thing is that this cannot be done alone. Companies have to engage with partners to do this effectively.”
Ultimately, though, this report still stops short of a comprehensive guidebook and the practicalities of getting started may still elude many companies. One of the hardest things about SVC, according to those CEOs interviewed, is identifying an initial set of societal issues that link to competitive advantage. This report is intended to familiarize companies with a methodology for mapping the right issues to focus on.
But is SVC just pie-in-the-sky? Globalization has enabled corporations to grow into pseudo-countries with an unprecedented scale of impact on society and environment. In return, corporations must act to safeguard our future and, in doing so, their own. Combining this with their business interest is a great vision, but how many will truly be able to make the seismic shift from responsibility to sustainability? With some exceptions, many companies have barely embraced the former and most companies are struggling with the challenge of defining their own measurable impacts on society let alone their impacts in society.
Most companies have on boarded sustainability without changing their core business model. For all but the largest companies, SVC might still be light years away. It is doubtful companies can leap into SVC without first managing and optimizing their internal operations and sustainability practices. Margaret Coady agrees that doing so provides the necessary authenticity for enduring partnerships, which are key to SVC success. Therefore, while the CECP roadmap may inspire, it may well be way beyond the reach of many.
About Elaine Cohen
Elaine Cohen is a Sustainability Consultant and Reporter at Beyond Business and blogger on sustainability reporting and author of CSR for HR: A necessary business partnership to advance responsible business practices.
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