Corporate Shared Value: The New Competitive Advantage

This is part of a series of articles by MBA students at California College of the Arts dMBA program. Follow along here.

By Shayta Roy

As an industrial designer, I work with a range of organizations, from small start-ups to large multi-national corporations, whose main objectives are to capture audiences, educate them about their brands and drive consumer interest. Recently however, I have struggled with an ethical debate, wondering If I am part of ‘the problem.’  Am I facilitating the exploitation of the world’s resources by corporations? My lack of trust in corporations, especially after reading such books as The Gangs of America by Ted Nace, have led me to investigate corporate social responsibility (CSR) and the shift towards corporate shared values (CSV).  Can corporations share common goals?  How does corporate sharing help organizations contribute to our welfare?

Trust is integral to the foundation of relationships and is defined as the “dependence on something future or contingent.”  Who do you trust? Do you trust your neighbors? How about the corporations that fill your aisles with product with the primary objective of serving your needs?  Over the past 30 years, we have witnessed prospering corporations alongside the unparalleled prosperity of the people around us. With widespread misery leading to more family conflict, more crime and less trust, there would be no surprise that you don’t trust corporations. As the environment and socio-economic climate deteriorate, corporate legitimacy fails. Corporations are seen to be the major cause of these and other social ills. No one likes being in the proverbial doghouse, so when the recession hit, corporations naturally began to gravitate towards corporate social responsibility in attempts to rebuild relationships through philanthropic endeavors of doing good.

It's the thought that counts, so we’ll give corporations a big high-five for good citizenship.  CSR, however has not proven to lead to sustainable growth on both economic and societal fronts, as it is generally separated from profit-driven core business practices and is limited by corporate budgets.  An emerging trend that is reshaping the capitalist landscape is the idea of corporate shared values.  Shared value is all about rethinking the effects that charitable dollars can create and how to achieve more with money than just its purchasing power. CSV means enhancing competitiveness through meaningful value propositions that not only boost shareholder value but serve as catalysts to advance social conditions in the communities in which it operates.  Michael E.Porter, the founding father and leader in this school of thought, pins shared value as the next evolution of capitalism, stating that “incorporating societal issues into strategy and operations is the next major transformation in management thinking.”

Profitability and growth from value sharing are achieved through three facets that are ‘mutually reinforcing’:

1. Re-identifying customer needs by addressing problems in communities and redesigning products and services to serve these needs 2. Innovating value-chains to enhance productivity and efficiencies 3. Enabling local development by taking into account local deficits and/or current offerings that are deemed insufficient

Underserved markets, pollution, large-scale inefficiencies and cultural barriers become opportunities in the world of CSV.  When organizations embrace CSV, they undertake the common goal of improving overall well-being and standards of living; the greatest factor in this equation is community.  Companies such as Unilever have demonstrated the potential for CSV to transform entire communities.

Although they may work closely with NGOs, governments and organizations such as the World Economic Forum, the degree to which businesses work to improve their own local communities varies widely. Over the past ten years or so, centers for social innovation (CSI) have been springing up around the nation to promote cross-disciplinary collaboration. Companies now have the opportunity to reach out to community groups though the CSI arm and engage in lively discussions around pertinent subjects that effect all parties at large.  Will the unspoken mandate of CSV evolving into a competitive necessity promote cross-organizational conference calls with shared community-driven goals in mind?

The new sharing economy has placed an emphasis on the proliferation of knowledge and assets to benefit all of humanity, rather than a select few, further probing me to explore the idea of greater cooperation among community and business sectors. Partnerships across public, private and non-profit would deem beneficial in aligning the goals of key decision makers with a wide spectrum of industry perspectives. A community charter, similar to this or this, that clearly identifies the means by which entities may strive to solve the big giants of poverty, unemployment, education, housing, disease and mental health in an efficient and scalable manner, only makes sense. Henry Ford once said, “If everyone is moving together, then success takes care of itself.” By garnering a common consensus to work as one unified driving force, mass change can take effect.

[Image credit: Nestlé, Flickr]