During class today, we discussed the fact that corporate social responsibility can be seen in different ways with different impacts on the company. The difference between corporate sustainability and CSR as charity was underlined. This made me think of a concept, in which I believe much potential is hidden: shared value creation. Creating Shared Value (CSV) is a concept introduced in Harvard Business Review article and dominated by Porter & Kramer. ‘Creation’ implies the fact that new value is created instead of redistributing existing value. Furthermore ‘Value’ can be defined as all revenue or cost advantages over all, and not just the earnings of the enterprise, as this was previously more the case.
To sum it up, we do not divide the pie pieces in another (more equitable) way.
Together, we make the pie bigger so that everyone gets more than he already had.
An example in the coffee industry will clarify this notion. Fair Trade coffee makes the consumer pay more in order that fair trade companies manage to give more to local producers. Even though quality stays the same, the premium price will give the opportunity to distribute the pie slices in a more fair and equitable way to protect and enhance human resources. On the other hand, Nespresso, which is a division of Nestlé, faced the problem of guaranteeing premium quality at all time. By building up cluster development in underdeveloped areas of Latin America and Africa, Nestlé provides agricultural specialists, loans for investment, training, storage facilities, pest control, fertilizers, quality control and local procurement of raw materials. This ensures the farmers to professionalise and manage to cover the growing demand for this premium product with their growing production capacities. This enlarges the pie off course and increases the strength of farmer’s positions and developments.
Having exemplified the concept of shared value creation, I believe the main task of a company to be to contribute to prosperity. Prosperity as a value, not only as profit. Economic and social values are definitely complementary. In my opinion, companies do have the know-how, organization and resources to positively affect business in a way that NGOs or fair trade foundations cannot. Each company would have to work on a specific set of issues that can be identified as having an impact on the value chain. Shared Value Creation is a sustainable strategy that connects partners, where opportunities need to be rediscovered working together to invest in our people and our planet for generations to come.