Shared Value: Serving the world or serving the bottom line?
Is the concept of “Shared Value” (Porter and Kramer, 2011) a marketing tool that promotes MNC profit motives, or is it a strategy for improving outcomes for communities who are already at a disadvantage? Corporations have long stressed short-term profitability, sometimes at the expense of the wellness of the greater society in which they are anchored. Consequently, companies are now subject to heightened public scrutiny. Companies have been implicated in issues such as poverty, loss of natural resources, minority exploitation, and climate change. Businesses are sometimes seen as beneficiaries of society failure, but a number of incidents demonstrate how they have also contributed to widespread market failure, the depletion of natural resources required for their industrial operations, and unjust labor exploitation, among other problems (Crane et al., 2014). Numerous individuals feel that a capitalist approach to business and society prosperity are mutually incompatible. Consequently, attempts by businesses to bear some responsibility for the impacts they have had on the local population and natural environment are often viewed with skepticism. As an example, companies in the mining and oil and gas industries are often accused of participating in unethical and socially destructive activities while simultaneously generating sustainability and/or corporate responsibility reports. Ultimately, the concept of creating shared value (CSV) is meant to serve the world, yet it is currently used by multinationals to expand their bottom line agenda through profit maximization.
Through the CSV idea, firms are able to create strategies that are both economically beneficial and solve social issues. According to Porter and Kramer’s (2011) reasoning, the most important problem is that firms do not alter how they provide value for consumers. It is customary to quickly and completely equate economic value with immediate financial success. Even while businesses may have had some success with it in the past, the long-term viability of this strategy looks unlikely. A corporation’s long-term success today requires that it not only generate substantial profits, but also explain how its actions benefit society (Crane et al., 2014). Priority must be given to the owners, employees, and consumers of a company (Porter & Kramer, 2011), as well as the communities in which it operates (Wójcik, 2016). Based on Milton Friedman’s comments, social responsibility is essentially disruptive in a free society and that corporations have only one function, which is to spend their resources on profitable activities.
Stakeholders want the private sector to actively participate in tackling social concerns that have historically been the responsibility of governments and non-governmental organizations. This implies that interested parties want an active contribution from the corporate sector in tackling these concerns. To accommodate the ever-changing nature of civilization and the unique challenges that define our planet, Moon et al. (2011) found that a considerable departure from the status quo is necessary. In recent years, Corporate Social Responsibility (CSR) initiatives have been the driving force behind the management of firms’ relationships with their surrounding communities. As a key part of CSV, CSR initiatives often address social challenges as add-ons to core business operations (Visser & Kymal, 2015). Because society and business are interdependent (Kim, 2018), the shared values approach to doing business is justifiable (Crane et al., 2014). CSV requires that corporate strategies and operational procedures enhance the economic and social situations of the communities in which they operate at the same time. This helps the company to stay competitive while contributing to these areas (Moon et al., 2011). As a result, CSV provides businesses with a framework for having a positive social effect while preserving and enhancing their competitiveness. This is feasible with shared value generation. Porter and Kramer (2011) advocate for three essential implementation strategies: reinventing markets and commodities, redefining productivity throughout the value chain, and encouraging local cluster development.
Businesses that contribute significantly to society also have a positive economic effect. As a consequence, value creation transcends the conventional calculation of revenues earned against expenses incurred, and instead conceptualizes value in a more holistic manner by combining business success with ongoing social betterment. As part of a shared value strategy, firms must include social criteria into their value offerings. The first step for businesses wanting to create shared value is to evaluate the potential environmental and social benefits of their goods (Visser & Kymal, 2015). Delivering goods and/or services that address unmet societal needs, such as housing, healthcare, and education, necessitates the creation of economies of scale to rethink things and marketplaces. Providing goods and/or services that satisfy unmet societal needs might be beneficial. Firms may also consider redefining productivity across the value chain as a second potential solution. Evaluation of supply chain efficiency in terms of logistics, resource utilization, energy use, and staff productivity would be included in such initiatives. The last alternative is cluster creation through building or formation. It focuses on creating the institutions and infrastructure that surround commercial firms, including suppliers, service providers, and logistical infrastructure such as roads and ports. Enabling local cluster development also encourages cooperation between corporations, governments, and non-governmental organizations, which, when executed properly, has the potential to provide both scalable social value and corporate profits.
A factor to examine is how for-profit firms may confirm their participation in the CSV process. When it comes to reporting and communication, the capacity to monitor and evaluate shared value is crucial. As with assessing other non-financial data types, correctly measuring CSV has its own set of issues. After that, it will be possible to effectively monitor the expansion of both the social and economic elements (Crane et al., 2014). It is an iterative process that links economic results such as greater sales, a smaller market share, reduced operational costs, and improved distribution networks to social objectives such as fewer carbon emissions, better nutrition, better education, and higher earnings, among other social advantages. The linkage represents a step in the CSV measuring process. Even whether they are part of ESG (environmental, social, and governance) reporting or sustainability reporting, indicators that assess social impact and economic value are often provided in aggregated form. The issue with collecting these data is that companies lose sight of ESG metrics that are directly related to their financial success and social impact. This is problematic since these ESG measurements are directly tied to the financial performance of enterprises.
In summary, CSV offers a potential solution to this conundrum by pushing firms to determine if environmental, social, and governance (ESG) aspects are important to the financial performance of their enterprise. CSV necessitates that firms include social impact directly into their major business objectives in order to attain a competitive edge and long-term economic success. In contrast to the conventional strategy, which stresses incremental performance across a wide range of ESG criteria, this method promotes a holistic approach. Measurement, which is of vital significance, permits the supply of proof and a justification for the use of CSV.
References
Crane, A., Palazzo, G., Spence, L. J., & Matten, D. (2014). Contesting the value of “creating shared value”. California management review, 56(2), 130-153.
Kim, R. C. (2018). Can creating shared value (CSV) and the United Nations Sustainable Development Goals (UN SDGs) collaborate for a better world? Insights from East Asia. Sustainability, 10(11), 4128.
Moon, H. C., Parc, J., Yim, S. H., & Park, N. (2011). An extension of Porter and Kramer’s creating shared value (CSV): Reorienting strategies and seeking international cooperation. Journal of International and area studies, 49-64.
Porter, M. E., & Kramer, M. R. (2011). The Big Idea: Creating Shared Value. How to reinvent capitalism—and unleash a wave of innovation and growth. Harvard business review, 89(1-2). 62-77.
Visser, W., & Kymal, C. (2015). Integrated value creation (IVC): beyond corporate social responsibility (CSR) and creating shared value (CSV). Journal of International Business Ethics, 8(1), 29-43.
Wójcik, P. (2016). How creating shared value differs from corporate social responsibility. Journal of Management and Business Administration. Central Europe, (2), 32-55.
