Creating Shared Value Versus Corporate Social Responsibility: An In-Depth Discussion

The purpose of this assignment is to apply the knowledge gained in this unit and present yourviews on how the business–society relationship has changed over time. In particular, you are toinvestigate and discuss the concept of shared value (SV), first put forward by Porter and Kramer in2011.

This assignment assesses the following unit learning outcomes:

1. Research and demonstrate an awareness of important issues and trends highlighting the business-society interface.

2. Explore the nature of business and economic processes using social analysis and consideringthe stakeholder perspectives and priorities.

3. Explore and critique contemporary, cross-cultural and cross-functional initiatives.

Differentiation between CSR and CSV

Business and society are largely related to each other. When the society is responsible to promote a business by using its products and services then the business has a social and moral obligation of contributing to the society. The relationship is largely reciprocal and hence when a business prospers it is likely to contribute to the prosperity of a society. In the contemporary market environment more and more companies are thinking over their social roles and accordingly making amendments to improve their operations that help them to stay attached with the society. In this scenario of developing a social responsibility, the strategy has become a key part of the organisational business plan but it doesn’t mean that organisations have been highly responsible towards the society as there are certain incidents that have shown the irresponsible and unethical behavior of organisations which have also been largely criticised (Moczadlo, 2015). This is where the concept of creating shared value has emerged as an important stream of discussion for contemporary research scholars. A certain school of thought has differentiated between creating shared value and corporate social responsibility that has given rise to worldwide business debate. The present study takes an opportunity to discuss CSV and CSR elaborately and also delve deep into their efficacy with real-life examples.

• Definition of CSV
• Explanation of CSV
• Its practical applications

In the age of globalisation businesses are no longer considered as the key to the development of a good society rather the capitalist system is questioned for its ignorance and avoidance of social, environmental and economic catastrophe caused in the society. In this system prospering in a highly negative and competitive market has become next to impossible for many organisations. Over the years many organisations have sunk without a trace due to the excessive business competition but those who have survived not only thought about the commercial perspective of business but it also focused on understanding the social perspective as well. Over the years consumers have grown to be more educated and this has given rise to an ethical consumer base that not only think about the product but the place of origin and how they have been made and that is how they choose their products (Crane et al., 2014). In this situation number of social concepts made rounds in business organisations where Corporate Social Responsibility stood to be one of the key concepts, but with time this concept took the backseat and new concept came to the spotlight which is much more constricted and focused on developing a relationship with the society that is creating shared value.

Creating Shared Value or CSV is a powerful concept considering the recent business environment and it is there to be used by organisations. CSV is a more constricted concept that underpins sustainability for an organisation in the best possible manner. The concept of CSV is a stronger version of CSR which focuses on creating value through the creation of economic value at the same time contributing to addressing the various challenges in the society and addressing the needs of the people (Spitzeck and Chapman, 2012). It is a broad concept but easy to understand as it doesn’t complicate things and assists organisations to create shared value through various activities. When organisations focus only on the financial perspective they increase their profit but gets detached from society and the people and this is where CSV helps to a large extent (Kramer, 2011). It helps the organisations to improve their financial performance but with a contribution to the environmental development, contribution to the public health, developing affordable accommodation et cetera. The aspect of creating social value has been embraced by many organisations in the recent past, one of the most common being Nestle. There are various aspects that CSV includes, for instance, environmental improvement, education, improving workforce lifestyles, health, safety and security of people, housing, community, and economic development, efficient use of water and energy strategies etc. This is a cycle that an organisation could embrace and move towards overall development of the society. CSV as a tool focuses on touching all the key points of societal development that not only helps the organisation to increase its importance from the societal perspective but it also helps the organisation to ensure long-term sustainability (Beschorner, 2014).

Creating Shared Value: Discussion

                                                                    CSV Strategy (Beschorner, 2014)

One of the major applications of CSV by organisations is through wealth redistribution. This is an excellent application where an organisation focuses on utilising its surplus and even profit for the overall development of the society. It could be used for better energy efficiency, development of health and social services and by understanding the needs of the customers through products and services. For instance, most of the multinational organisations in the modern-day market focus on improving the supply chain in such a way that helps to reduced energy, use reduced environmental pollution and emphasises on ethical operations (Michelini and Fiorentino, 2012). It could be said that CSV is the next innovation in companies because it helps to connect organisational development with the community and accordingly helps the community to grow with shared value for each and every stakeholder across the ecosystem.

• Definition of CSR
• Explanation of CSR
• Application of CSR

Corporate Social Responsibility is one of the common concepts that organisations integrate into their business strategy to relate to the community. The concept of CSR is comparatively older and has been applied by many organisations all across the world which shows its importance in the contemporary business environment. Hence, CSR could be defined as a strategy which helps an organisation to involve social and environmental concerns with their business objectives to get closer to the people of the society with the sole focus of increasing its sales and revenue.  Through CSR the organisation could emphasise on social, environmental and economic issues of the society and at the same time address the needs and wants of the consumers (Kross, 2017). There are a number of organisations all across the world who emphasise on the application of CSR. For instance, Wal-Mart and Tesco are the two biggest retail organisations in the world that focus on contributing to the management of carbon emission and education on environmental issues in their respective areas. CSR as a tool has long been effective because it helped organisations to develop a societal connection and hence has been embraced by many organisations (Lindgreen and Swaen, 2010).

• The rise of MNCs based on power/influence
• Socioeconomic and environmental issues and major examples
• Difference between CSR and CSV

In the era of high competition, those organisations sustain that can take the pressure and continue by addressing the needs and wants of the consumers and also by taking into account the social, environmental and economic issues of the society. Most of the organisations in the modern-day market are either operating on huge power or maybe through influence (Tai and Chuang, 2014). Companies who operate with the help of power mainly operate with the power culture and don’t have a proper connection with the society. It is extremely important to note that these organisations have controversies but there is hardly any force to suppress these organisations.  One of the common examples being Maggie noodles from Nestle created a stir in the Indian market when it was tested positive of carcinogen but it did not stop their sales which means the power clearly won, even though the controversy did reduce its sales but the product was not completely banned (Yoon and Lee, 2014). Apart from this, it is important to note that there are certain organisations that operate completely on influence. These organisations are largely loved by people that influence the organisation to sustain in the market. For instance, companies like Tesco, Wal-Mart and other bigger retailers like Woolworths operate on influence as consumers love these organisations and due to the customer loyalty these companies are successful even after occasional controversies that could taint the image of the organisation (Florin and Schmidt, 2011).

Corporate Social Responsibility: Discussion

People are highly educated about the unethical behavior of companies, especially with the recent socioeconomic and environmental disasters affecting the societies and the economies. One of the major economic controversies that happened in the recent past is the Enron case. Enron scandal showed the society that companies could operate in their self-interest. The Enron employees received lower pay and shareholders lost billions due to false financial reporting by the organisation which clearly revealed that CSR was merely a tool that was never being used by the organisation. Similarly, companies like BP faced huge criticism when its onshore extraction site faced fault and a huge amount of oil was spilled in the Gulf of Mexico that created one of the biggest oil spill scandal in the history of its operations (Michelini and Fiorentino, 2012). It showed a lack of planning by the organisation which led to one of the biggest environmental issues garnering huge criticism. This incident led to the death of a number of aquatic animals and even affected the staffs of the organisation at the location. Another similar incident happened in 2015 in the village of Bento Rodrigues, Brazil when an iron ore tailing dam broke down creating one of the biggest man-made catastrophes in Brazil. Around 17 lives were lost and it completely destroyed the land that was suitable for farming and number of other projects. These incidents created controversies in the minds of the people all across the world creating more questions on their approach to CSR. In light of the above facts, it is extremely important to understand the difference between CSR and CSV (Yoon and Lee, 2014).

CSR is a tool that most of the organisations deploy in order to address the social and environmental issues of the society but one of the major issues of CSR is its consideration as a cost to the company. On the other hand, CSV is a strategy that involves maintaining a strong growth for the business simultaneously by doing jobs which would support the social, environmental and economic development of the society (Kramer, 2011). Hence, it is considered a profitable venture for the organisation. This is where the major difference lies between these two approaches because CSR is considered a cost center whereas CSV is creating shared value which creates values for each and every stakeholder present in the society including the business (Moore, 2014). One of the major examples of CSV in action is implemented by Adidas group where it has tied up with Grameen Bank owner Muhd. Yunus the Nobel Prize winner to manufacture cheap shoes for the poor Bangladeshi people that are considered as a great initiative by both the organisations and have also helped them to reach the masses with the focus of receiving effective profit due to the creation of economy of scale (Lapi?a, Borkus, and Stari?eca, 2012). CSR is largely considered a responsibility for the organisation whereas CSV is all about creating value for the business to sustain in the market for a long time (McWilliams, 2015). One of the effective examples of this is H.J Heinz developing a micronutrient campaign to fulfill the issue of iron deficiency and malnutrition among children all across the world. This not only helps in wide-scale publicity of the company but also to effectively address a valid health issue in the world eventually creating value (Moczadlo, 2015).

• Role of various stakeholders
• Impact on various stakeholders

Different approaches to business

Different stakeholders play a different role in implementing CSV. The profit-seeking organisations want to create value for consumers who should back the organisation by supporting their activities. The Government has to lay a good platform for organisations to operate effectively. On the other hand, the nonprofit seeking organisations could come forward and collaborate to effectively address the social, environmental and economic issues in the society and create value for every stakeholder in the society.  The employees should support the organisations constantly in order to make sure the organisations are able to achieve their social objectives and create shared value for the community (Del Baldo, 2014). Adidas and Heinz are perfect examples of companies that could create value with staffs providing effective support to the communities and consumers leading to excellent attachment of the company with the society. It could thus be justifiably stated that the different entities or stakeholders play a crucial role in creating value through the support of the organisations and helps to develop a society successfully (Moore, 2014).

Conclusion

To conclude it could be said that CSR and CSV are not to be used in the exchange of each other as CSV is much constricted with respect to its focus as compared to CSR which is a broader concept and also adds cost to the company, unlike CSV that creates value for each entity attached with the organisation. The present study has discussed CSV and CSR effectively and showed the differentiation that has led to the successful completion of the project.

References

Beschorner, T., 2014. Creating shared value: The one-trick pony approach. Business Ethics Journal Review, 1(17), pp.106-112.

Crane, A., Palazzo, G., Spence, L.J. and Matten, D., 2014. Contesting the value of “creating shared value”. California management review, 56(2), pp.130-153.

Del Baldo, M., 2014. Developing businesses and fighting poverty: Critical reflections on the theories and practices of CSR, CSV, and inclusive business. In Emerging research directions in social entrepreneurship (pp. 191-223). Springer, Dordrecht.

Florin, J. and Schmidt, E., 2011. Creating shared value in the hybrid venture arena: A business model innovation perspective. Journal of Social Entrepreneurship, 2(2), pp.165-197.

McWilliams, A., 2015. Corporate social responsibility. Wiley encyclopedia of management, pp.1-4.

Hrdinová, G., Sakál, P. and Fidlerová, H., 2012. Sustainable logistics and its role in value chain of industrial business with context of CSR and CSV. In Carpathian Logistics Congress 2012 (p. 6).

Kross, K., 2017. Corporate social responsibility (CSR). In Profession and Purpose, pp. 54-62. Routledge.

Lapi?a, I., Borkus, I. and Stari?eca, O., 2012. Corporate social responsibility and creating shared value: Case of Latvia. World Academy of Science, Engineering and Technology, 6, pp.1605-1611.

Michelini, L. and Fiorentino, D., 2012. New business models for creating shared value. Social Responsibility Journal, 8(4), pp.561-577.

Moczadlo, R., 2015. Creating Competitive Advantages–The European CSR-Strategy Compared With Porter's And Kramer's Shared Value Approach. Ekonomski vjesnik: Review of Contemporary Entrepreneurship, Business, and Economic Issues, 28(1), pp.243-256.

Moore, C., 2014. Corporate social responsibility and creating shared value. Heiffer International, pp.1-6.

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Tai, F.M. and Chuang, S.H., 2014. Corporate social responsibility. Ibusiness, 6(03), p.117.

Yoon, G. and Lee, E., 2014. A Comparitive Study on the effects of CSR and CSV: The Moderating Role of Self-efficacy and Message Involvement. The Korean Journal of Advertising, 25(2), pp.53-72.

Spitzeck, H. and Chapman, S., 2012. Creating shared value as a differentiation strategy–the example of BASF in Brazil. Corporate Governance: The international journal of business in society, 12(4), pp.499-513.

Kramer, M., 2011. CSR vs. CSV–What’s the difference?. FSG Creating Shared Value Blog, https://www. fsg. org/KnowledgeExchange/Blogs/CreatingSharedValue/PostID/66. aspx (19.02. 2014).