Dr Virginia Munro reflects on the current lack of understanding of shared value and why this needs to change.
Countries and governments around the world are facing fluctuating COVID scenarios, the urgency of vaccine deployment and escalating climate change. Add to that increasing levels of social media comments, an influx of social innovations, tech gadgets, and apps, and we’re bombarded with posts, both good and bad.
In this context, we have also suffered job losses, insecurity, isolation and the loss of loved ones, resulting in a global increase in mental health problems and a universal panic for “survival”.
These are the individual and collective crises that we are experiencing today. In this context, companies are increasingly asked to help them. But holding back many businesses is a lack of understanding of what is required.
Will a new, more “responsible” business strategy be the answer? Will Shared value; integrated value; transformed value creation; a new type of corporate social responsibility (CSR) – or another substitute or alternative thematic aid?
The increased use of different labels and trade terms to be successful in these new environments is adding to the confusion. In addition, many of us refer to these different labels as being “replaced” by other terms, such as sustainability, ESG, corporate citizenship, CSR, shared value, integrated value, B-Corp, social entrepreneurship, etc. But instead of one label being “replaced” by another, all of these terms overlap and complement each other.
No matter what model, strategy, or term an individual or business chooses, society does not fully understand what many of these new terms mean.
In this article, I focus on the lack of understanding of shared value.
During my research, I discovered that business leaders do not fully understand what shared value is. A simple giveaway could be the comment “Yes, we have common values” (with an “s” on the values).
They refer here to the fact that they share the same values as their employees, their customers and their community. However, “shared value” is not about sharing the same “values” with others. Instead, it is a business model or methodology that consumes all of an organization’s operations and shares the “value” gained through monetary and social means.
Another source of confusion in understanding shared value is that it is often referred to as Creating Shared Value (CSV). Essentially, they mean the same thing, except that the latter is the more formal term used in academic literature. Both terms can therefore be used.
Another issue that can cause misunderstandings is the ongoing debate between CSR and CSV. One concept is often referred to as the “development” of the other. There is also a belief that one can be integrated into the other. Currently, only a small part of the literature is available for examine both sides of the argument.
Part of this debate is important to understand, as business examples like Intel were first referred to as CSR examples, and many CSV projects were originally developed by the corporate CSR department. Therefore, there is a lot of integration of the terms, which suggests that there is room for CSR and CSV to share the stage in solving the wicked challenges of society, if the two are properly integrated. .
Simply put, a shared value exists between the organization’s products, profits, productivity and supply chain, as well as within the communities where the organization is located. His founders, Michael Porter and Mark Kramer, define it such as: “Policies and operating practices that enhance a company’s competitiveness while advancing economic and social conditions in the communities in which it operates”.
The word “simultaneously” is essential to understanding shared value. However, to fully pass the litmus test for an example of shared value, three pillars must be present. The project or social initiative must:
- rethink products and markets
- redefining productivity in the value chain
- create industrial support clusters on company sites.
Understanding the complex layers of shared value as a term or business model is embodied by the integration of these three pillars.
A good example of understanding the pillars in action is my favorite case study of a Korean and Vietnamese partnership.
CJ CheilJedang is a food production enterprise requiring ongoing agricultural products. It has partnered with the Korea International Cooperation Agency (KOICA) to tackle endemic poverty in a region of Vietnam by integrating rural Vietnamese farmers into their supply chain.
To do this, they have developed a shared value strategy and partnership, improving their manufacturing and distribution while improving the lives and capacities of local Vietnamese farmers. As a result, their province (Ninh Thuan) has also become a thriving and sustainable farming community, through increased wealth and the development of infrastructure, technology and skills.
At the same time, CJ CheilJedang also benefits from continuous and high quality raw food ingredients for its retail business.
The mapping of these achievements to the CSV framework and the three pillars listed above illustrates the development of this unique public-private collaboration:
- Redefining Productivity in the Value Chain – CJ CheilJedang provided the latest agricultural techniques and practices and redesigned the province’s agricultural water supply system (infrastructure). Through technical assistance, model farms and research facilities, local farmers receive timely information and, with a stable and secure market, farmers receive a fair price, thus improving the local environment and the chain. company value.
- Improve the local operating environment – in addition to the above, many tactics have been used to strengthen Vietnamese agriculture by increasing profits and strengthening the skills of farmers. It also strengthened the capacity of the community by supporting farmers’ unions, providing microcredits and renovating educational institutions and facilities in the city.
- Advancing Partnerships and Responsible Business Leadership – A global partnership network organized by CJ CheilJedang connects the company with KOICA, the Vietnamese central government, the Ninh Thuan provincial government and Syngenta (a global Swiss agribusiness). These relationships also improved CJ CheilJedang’s business knowledge and integration.
Overall, understanding the concept of CSV is essential because: “… [it] includes a methodology (and business model) for ‘scaling up’ and therefore potentially assistance at higher levels. The CSV framework is of great interest because it allows (companies and) organizations, multinational companies and companies to work on the concept of solving social problems. However, it can also be quite intimidating for companies that not only see so many opportunities, but also face constraints as an organization, especially when a large-scale reinvention of their operations may be required ”. (Extract from my book, CSR for objective, shared value and in-depth transformation: the new responsibility)
This is where the three pillar framework comes in handy and where shared value projects combined with other existing strategies such as CSR and organizational social projects provide a head start towards CSV integration. and the profound transformation required for the survival of the planet.
To improve understanding, universities need to empower their students, so that the next generation understands shared value alongside “normal” business training. This then translates into a deeper understanding of shared value, its impact on business and society, and how these types of projects can be implemented in complex ways.
Understanding shared value at a deeper level is therefore one of the first steps towards the new ecosystem transformation that we urgently need to accomplish. This combined knowledge, alongside future of social responsibility, provides the vehicle necessary for businesses to seek a better balance between profit and the common good. This balance is now the most important strategy for our “survival”, both individual and collective.