L7: CSV

the only group with a legitimate interest in the corporation are shareholders; managers are agents of shareholders

The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates (Porter, 2012)

CSR can be much more than a cost, a constraint, or a charitable deed—it can be a source of opportunity, innovation, and competitive advantage (Porter and Kramer, 2006)

«Societal needs, not just conventional economic needs, define markets, and social harms can create internal costs for firms.» Policies and operating practices that enhance the competitiveness of a company while simultaneously avancing the economic and social conditions in the communities in which it operates.

«If business is separated from values and ethics, and if change requires people to think about values and ethics, then change in business will be difficult. (See Freeman, 2000)

• Reconceiving products and markets

• Redefining productivity in value chain

• Building supportive clusters

• Are we satisfying the needs of all our potential consumers or not

• In this way we can create a positive social impact by providing services and products to lower-income and disadvantaged consumers and at the same time increasing our profitability.

• Summarizing: in order to create this kind of shared value an organization need to identify all the societal needs that can be embodied in its products and services and try to deploy them to acquire a competitive advantage.

CSR is like a company doing its day job to make money (doing well) and then doing some good deeds (doing good) like giving to charity or helping the community. It's kind of like a bonus, not really part of the job. The company might do this because they want to look good or because people expect them to do it. But it's separate from their main goal of making money, and they only spend a little part of their budget on it.

CSV is when a company mixes doing good right into its day job. It finds ways to make money (doing well) by making the world a better place (doing good). It’s part of the competition with other companies and helps them to earn more money in the long run. Here, doing good is not just an extra; it's part of the company's plan and affects the whole budget.

Strengths of CSV:

1. Attracts Interest: People working in business and those studying it find CSV appealing because it suggests companies can do well financially by doing good socially.

2. Makes Social Goals Important for Business: It encourages companies to think of social issues as part of their main business strategy, not just something to do on the side.

3. Defines Government's Role: It clearly suggests how governments should behave to support responsible actions by businesses.

4. Adds Substance to Conscious Capitalism: CSV gives more detail and substance to the broader idea of businesses being aware of their impact and acting responsibly, bringing together various related ideas under one concept.

Weaknesses of CSV:

1. Not New: It's criticized for not offering anything particularly new or innovative.

2. Oversimplifies the Challenge: It overlooks the potential conflicts between making money and doing social good.

3. Overly Simplistic About Compliance: It may be too optimistic about how easy it is for businesses to follow laws and do the right thing.

4. Too Narrow View of Business in Society: The CSV approach might not fully consider the complex role that corporations play in society.

• it is unoriginal: it was already applied to the non profit sector

• Does not provide guidance for the many situations where social and economic outcomeswill not be aligned for all stakeholders:

  • Companies in industries like tobacco focus on products with debatable societal benefits, prioritizing market success over social good.

  • Sustainability initiatives in supply chains often prioritize economic benefits for the purchasing company, sometimes at the expense of the broader social and environmental impacts.

  • Local cluster development can exacerbate local inequalities and create dependencies on specific industries, with decisions driven more by industrial potential than social needs.

• It is based on a shallow conception of the corporation’s role in society:

  • It explains how the corporation can transform (some) of its social and environmental problems into win-win solutions. In this sense, it largely follows the logic of the traditional model of competitive strategy, which demands that corporations establish barriers against the market entry of competitors.

“Organizations that run commercial operations with the goal of addressing a societal problem, thus adopting a social or environmental mission”

In this system, charities and traditional nonprofits assume the complementary role of helping disadvantaged populations that are not served by markets and are neglected or not easily reached by governments.

Social enterprises have distinctive advantages over focused commercial firms in sectors or domains that exhibit at least one of two key characteristics:

1. the production and delivery of products and services have potentially significant value spillovers that go beyond the transacting partners

2. transaction obstacles prevent the market from operating efficiently.

Either because of: -Market failures towards social problems -Profit driven organizations unable to exploit the full possibilities of shared value creation

1. Value Spillovers: When social enterprises make and sell products or services, they often create extra benefits that aren't just for the buyer and seller. For example, a company that sells affordable solar lamps not only provides light to the buyer but also benefits the environment and reduces health problems related to kerosene lamps for everyone.

2. Fixing Market Inefficiencies: Sometimes regular markets don't work well—they might ignore social problems or not provide good or services efficiently. Social enterprises step in to fill those gaps. For instance, where a for-profit company might not see a profit in offering affordable housing, a social enterprise might do so because it helps the community, even if it doesn’t make a lot of money.

The image mentions that these advantages can happen especially when there are market failures (when businesses and markets don't address social issues) or when profit-driven organizations miss out on opportunities to create both economic and social value.

Main shortcomings

Growing in number and interest but:

Fragile:

• risk of internal tensions

• mission drift due to holding incompatible goals

• difficult to achieve financial sustainability

  + Clients/Beneficiaries

In domains or activities where the positive value spillovers are important and happen automatically just by the fact of providing the product or service, then profit is strongly aligned with impact and the business model can be simpler and closer to commercial models. (Nuru Energy)

When value spillovers do not happen automatically and require additional effort from the organization providing the service. (Microfinance)

• Value spillover might happen or not happen

• Additional activities have to be enacted to ensure value spillover

• Commercial success relies on engaging customers who value and pay more than the cost of delivery.

• Hybrids address challenges such as inability to pay, access difficulties, and unwillingness to pay.

• Sustainable models involve separating paying clients from the intended beneficiaries.

• The degree of overlap between clients (payers) and beneficiaries highlights how hybrids overcome transaction obstacles.

• A critical issue arises when payers are not direct beneficiaries, diminishing market-driven feedback, competition, and innovation.

• Hybrid corporate form combining for-profit and non-profit characteristics.

• Directors consider societal impact in decision-making, beyond just maximizing profits.

• Considerations include impact on employees, community, society, and environment.

• Certified B Corporations balance purpose and profit, with legal obligations towards stakeholders.

• B Corps must meet B Lab's rigorous standards for social and environmental performance, accountability, and transparency.

• B Lab's assessment objectively measures business impact.

• Companies need a minimum of 80 out of 200 points to qualify for B Corp certification.