Sunday, September 30, 2012

First CSR, now CSV! Convergence of Business & Society

Earlier, corporations only concern was their business and competition. Society & Environment came into equation only in late 60's with rise of CSR (Corporate Social Responsiblity). CSR became important to corporations to comply with regulations, society's expectations and to preserve their reputation. Over the time, various approach to CSR came in practice. 

Philanthrophy emerged to be a widely used approach. It is simple to implement and does manage to grab a positive mind share of the public. However, it has hardly any operational or strategic connect to the business.

Another approach to CSR have been to forumulate internal regulations which a business complies with. This was done in order to insulate the business from any risks to brand image arising out of interfaces with external stakeholders like suppliers, distributors, customers, NGOs etc. The benefits were more in terms of avoidable costs of negative publicity and loss of brand equity.

Gradually, CSR's connect with Business strategy became more obvious as focus shifted to markets at 'Bottom of Pyramid'. Also, several business realised that CSR initaitves can lower the cost of externalities on their business. For instance, reducing carbon footrpint has direct benefits of reduced fuel costs and earned carbon credits. CSR became increasingly realised as imperative for building long-term sustainable and competitive business model.

However, business conditions continued to evolve.
  • Due to recession, capitalism as a whole became a target. Companies were accused of being greedy and in-sensitive to society.
  • Fundamental shifts took place in market conditions whice was fuelled and accelerated by social networking. Consumers now want empowerment and a say in building their product/service experience. Society is now more vocal about its expectations from businessess.
  • New products and services now require co-creation and collaboration among firms from diverse industries. Increasingly, we now talk about business ecosystems and working partnerships.
A response to these changing business conditions came in form of CSV ('Creating Shared Value' by Michael Porter & Mark Kramer). Though treated separately, it can also be considered as another evolved form of CSR. CSV attempts to remove any conflicts between business profits and society welfare by espousing innovative ways to enlarge the pool of economic and social value. For instance, a food company looking into improving productivity of farmers and agri supply chain can create a far better social benefits. The food company in turns gain by a strong inbound supply chain and increased sales volumes.

Most of the time, impact of Creating Shared Value on business benefits is not very obvious and hazzy. Certain amount of commitment and staying on the course is required till one gains clarity. And more than often, innovative approaches are required to identify and leverage the sweet spots where business and social benefits converge.

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