In business, it’s common to spend a lot of money on things that don’t seem to help the bottom line. When was the last time you saw a company provide free meals or donate money to help those who were struggling?
People are usually surprised by these efforts because of a huge donation the company gave. They don’t think about the financial side of that donation and if that’s helping or hurting the company.
Most would simply assume the CEOs are just trying to be good people because they’re doing well in life and they want to give back. It’s the right thing to do.
Wonderful gestures to help society, the environment, etc. are appreciated, but there may be more to them than just being good. That’s the essence of corporate social responsibility and creating shared value (CSV, not to be confused with comma-separated values on a spreadsheet).
CSR’s everywhere, but CSV may be the future
You’ll find examples of corporate social responsibility (CSR) all around you. Basically, CSR is when a business is socially accountable to itself and to society. This can be seen through programs that “give back” in some way.
Similarly, creating shared value (CSV) is a business concept in which a business’ needs align the community’s needs. While CSR and CSV seem to have similar results, they’re different in what they mean and how they benefit the community.
A company may choose one over the other, and these days, CSV may offer a more holistic approach, even if its name isn’t as ubiquitous as CSR. It helps to know the difference, and the aim here is to give the basics for telling them apart.
Comparison table of CSR and CSV
This table gives an outline and we’ll get into more specifics below.
|Value: doing good||Value: economic and societal benefits relative to cost|
|Separate from profit maximization||Integral to profit maximization|
|Citizenship, philanthropy, sustainability||Joint company and community value creation|
|Impact limited by corporate footprint and CSR budget||Realigns the entire company budget|
|External reporting and personal preferences determine the agenda||Agenda is company-specific and internally generated|
|Discretionary or in response to external pressure||Integral to competing|
|Example: fair trade purchasing||Example: transforming procurement to increase quality and yield|
What is corporate social responsibility (CSR)?
The base of CSR is that the business is part of the community, so it has a responsibility to be a good citizen of and within it.
The business will have a dedicated program with a goal of finding ways to improve something in the world.
The 4 main types of CSR
CSR can be broken up into four types:
|Philanthropy||Charitable giving of time or funds to help communities||Kraft Heinz gives meals to food banks|
|Environmental Conservatism||Efforts to reduce pollution||Xerox Green World Alliance recycles printer supplies for free to reduce waste in landfills|
|Diversity/labor practices||Improvements in how employees are treated and make sure all types of people are hired||Mitsubishi Electric Workforce Diversity program to increase number of women working with them|
|Volunteerism||Corporations encourage employees to volunteer their time||The National Football League (NFL) encouraging its players to help in their communities|
The benefits of CSR programs in a community and in the world are varied and have been seen time and time again.
CSR programs no doubt provide real value to the communities that they serve. They can bring people together in a simple way over a common goal.
What is creating shared value (CSV)?
On the other end, CSV has its roots in “perfecting capitalism.”
Scholars Michael Porter and Mark Kramer of the Harvard Business School raised the notion in, Creating Shared Value: Redefining Capitalism and the Role of the Corporation in Society.
Basically, CSV asserts that the community’s needs and the business’ needs are connected.
This is because the business is a part of the community. So it’s in the company’s best interest to improve the community because that will then improve their business.
This is typically achieved by improving one of three things:
- Products and markets: This works by creating new products that serve a need in the community. Businesses can also improve services to reach those who are underserved.
- Value chain: A business can simplify how it is run, such as time, money, effort, and employees.
- Local and regional business surroundings: A business can improve local guidelines and its operations. This can also include improvements to other parts of the community that interact with the business.
Adidas and Grameen Bank
Adidas provides a good example of CSV.
Adidas saw a need to make a low-cost shoe that the poor in Bangladesh needed. The company teamed up with the Bangladesh-born microfinancing group, Grameen Bank, and the process was good for everyone involved.
So how did it work?
Well, Adidas made money because it sold shoes to poor people who lived in a heavily populated country. Grameen Bank also made money by being a partner in the deal. And in its case, it could go back into the self-labeled, “Bank for the Poor.”
The most important thing, though, was that the poor people were given the chance to buy inexpensive shoes. Everyone was a winner in this scenario.
CSR loses money, and that’s basically the point
It’s important to understand that under a CSR program, the company will lose money. Why would anyone want to lose money though? Because they want to portray a certain helping image to their community.
For example, when Kraft Heinz donates a meal to a food bank, that meal brings in zero dollars, but Kraft Heinz still has to pay for that meal. The company just lost money by donating to a good cause. Even though there are social benefits of giving meals to the poor, the practice does not earn revenue; quite the opposite.
This limits the amount of CSR programs a company chooses to have because of the money that will be lost. If a lot of these programs are being carried out, then a company will continually lose money since it cannot sustain itself.
CSV is not a simple cut against revenue
A CSV program, however, can have an unlimited amount because it will still give the company money. The major difference is that CSV is about value, while CSR is about responsibility.
A business practicing CSV will use capitalism to make more money and improve the value of the community at the same time.
CSV is said to be the next step of capitalism. It’s the successful people in the world showing others how to be successful as they were.
They improve society so that others can follow.
Aligning with the community
Businesses whose values and interests are the same as those of the community are probably the most powerful influence because they are able to improve society. For that reason, capitalism, when it is functioning in society and not solely for profit, has lifted more people out of poverty than any other economic system in the world’s history.
Most agree that it’s important for successful businesses to work to improve society.
After all, there is more to life than money. Many businesspeople understand this concept and want to either create or continues programs to help those who need it.
Those with the ability to be able to have programs like that into their business model can add even more value to their entire communities.
How to publicize your CSR and CSV
If you’re doing CSR or CSV, you should definitely be writing about it. Scize Writing can assist with reports and web content. Scize Editing can help make sure your written word is error-free. And Scize Marketing pushes your achievements to a wider audience. Contact us if you’d like some ideas. We’d like to create shared value with you.