Businesses are institutional members of society and have an obligation to help improve it. This obligation has long been known as the Corporate Social Responsibility, popularly abbreviated as CSR.
The recently concluded Shared Value Forum 2015 in Melbourne, Australia on the theme “Act. Measure. Grow” saw yet another corporate strategy concept in the form of Creating Shared Value (CSV), a concept that was codified by competitive advantage and corporate strategy gurus Michael Potter and Mark Kramer of Harvard Business School. Although this is apparently being peddled as a new knowledge, Professor Muhammad Yunus probably has given the concept its first shape and form through his Grameen Bank and its micro-credit financing initiative.
The CSV is a compelling idea worth sharing. We should reach out to it, thrash it out and see how best we can adopt, internalise and practice it so that we could realise its full potential.
Roughly speaking, the CSV is an innovatory manifestation of the traditional CSR. It is about re-defining our business practices, re-conceiving our products and putting in place the necessary supporting institutions and organisations so that all these can be brought together to solve societal problems, to do right by all stakeholders and to make a profit out of it! Essentially, in the words of Kramer himself, it is “to do more than just give.”
The whole notion of creating shared value is that there is a role for businesses to play in solving social problems through activities that are relevant to their own businesses, by creating value for businesses themselves and for those that they serve. And the thinking behind this is that it is not only the right thing to do, but it can also be a profitable thing to do.
To give it some perspective, think about a bank that implements the CSV. The bank re-define its business policies and practices so that it helps both existing and prospective customers from getting into debt traps by offering them useful assistance in managing their finances or restructuring their debt. This not only helps the bank extend the loyalty of its existing customers but also attract new ones. To give it a more meaningful application in the domestic context, one of our national banks that was roiled by a Nu 700 M non-performing loans only a year ago could have potentially had its dire situation under control if only it realigned itself along the CSV philosophy. The bank went about trying out everything possible including penalties, reminders, expanding the credit recovery team, and even legal suits to bring the situation under control. However, this only added to the cost of the non-performing loans.
I personally think the micro-credit financing scheme of the Grameen Bank in Bangladesh started by Prof Muhammad Yunus in 1983 is a fantastic example of the CSV, although I have not seen it being acknowledged by anyone. The bank gives out small loans to the poor who do not qualify for credits from major banks. The bank has been able to emancipate millions from poverty.
In the CSR framework, the moral minimum (of obligation to the society) is pretty much decided by the companies themselves depending on external pressure whether it is economical, legal, or ethical that they are subjected to. In Bhutan, the moral minimum of our CSR appears to be more discretionary, more like charitable givers, as manifested in responses to compulsions from outside, most of which often have nothing to with the businesses themselves: constructing a lhakhang, planting trees, clean-up campaigns, blood donation, conducting Buddhist rites and rituals, philanthropy, and so on. It is exactly what Porter describes as CSR activities being separate from the businesses that they are in. It is also seen to be lending itself more to the broad maximal view of the CSR framework that emphasies on addressing societal expectations and demand of the social norms and values prevalent in the society rather than improving their businesses practices so as to benefit the communities as the CSV suggests. While there is no denying that these are all good, businesses can do more than just give.
Our companies spend quite a lot of money on philanthropy and CSR activities that are not necessarily related to their business operation. On the other hand, the government incurs significant cost on addressing social issues. Creating shared value can play a critical role here by our companies by focusing on areas in their business that address important social challenges, and making their businesses operate in a way that address these issues that are relevant to the businesses they are in.
The CSV is in the interest of all stakeholders, which is why we should give it a serious thought.