February 23, 2017
In 2011, the world was introduced to a revolutionary concept: “creating shared value.” Michael Porter and Mark Kramer were the first to coin the term and predict a massive migration from traditional corporate social responsibility projects to CSV in the years to follow. So what exactly is CSV?
Creating shared value, as the authors put it, refers to an operating model in which companies align their core social mission with the bottom line of their business in order to engage in best practices that have social and financial purpose. This steers away from traditional CSR practices that allocate resources towards causes or activities that are external to the company’s core business and focuses on an internal restructuring that aligns to embedded causes.
Ever since, big household names have geared efforts to evolve their corporate-citizenship programs to CSV standards, and many have been quite successful. It is not uncommon to read about the magnificent work that Unilever, IBM and Coca-Cola, to name a few, are doing in areas such as water conservancy, bottom-of-the-pyramid access and bridging the technology gap. Consumers are understanding how businesses hold the capacity to address big social and environmental issues and have started shifting their expectations. Now more than ever, companies are being held up to a higher standard of doing right by their business but at the same time doing right by the world.
This new trend leads to three big questions: What does CSV represent for big corporations? In the face of ever-changing consumer expectations, what can small and medium businesses bring to the CSV table? And is there a converging space?
Multinational companies, which have been stealing the spotlight for a while, have several advantages when it comes to aligning their business operations with CSV. Having a long trajectory and the seniority upper hand, they can rely on their sound financial structure to inject capital and sustain long-term alignment, even though the return on their investment won’t be immediately visible. They can bank on their economies of scale to decrease costs, build on established relationships with customers and have insight into consumer data that has been accrued over the years. All these provide corporations with a solid base upon which they can build their CSV vision.
In the case of small and medium businesses, this shift represents a challenge, but one in which they might ultimately have some competitive advantage. In an article by the Shared Value Initiative, Andrew Kassoy, co-founder of B Lab, argues that size is definitely an advantage that these businesses can exploit:
Small and medium enterprises are more agile and can quickly adapt and incorporate new practices, whereas larger organizations often struggle to make meaningful change at scale. For a small or medium-sized enterprise, it is also easier to get a full picture of their footprint: in the case of a large company with an extensive supply chain, it is hard to establish if their sourcing practices are sustainable every step of the way, down to their last contractor.
Additionally, these businesses are better at accurately measuring the impact of their initiatives, as opposed to a larger corporation, where bureaucracy comes largely into play, argues Grant Young, director of innovation for Zumio. Not to mention their upper hand with the creation and activation of a corporate culture that aligns with the CSV program and that ensures buy-in from all levels of the corporation, including leadership.
No matter the size, companies have to understand just how valuable CSV can be for their business. According to the report “Doing Well by Doing Good”, consulting firm Nielsen details that 55 percent of consumers worldwide are willing to pay extra for products and services coming from companies that are socially responsible. So in the face of ever-changing expectations, what is the intersection where small and medium businesses and big corporations converge?
Collaboration is they key. In his book Building the Impact Economy, author Maximilian Martin proposes “Super-tankers” to foster collaboration between small businesses and industry leaders. Small businesses provide the grassroots insights, the creative methods and the innovative solutions, while multinationals provide the capital, the working space and the business knowledge to foster achievable results. Super-tanking is bringing the best that both worlds have to offer in order to tackle social and environmental issues in a cohesive and inclusive manner.
Super-tanks have already started popping up in different industries. The Unilever Foundry, AARP’s Innovation Lab and Lowes Innovation Lab are just some of the pioneers of this uncharted territory, and they will soon start rolling out awe-inspiring products, services and initiatives that could have only been achieved by adding the two perspectives together.
In the words of leadership expert Steven Anderson, “Alone we are smart. Together we are brilliant.”