Wednesday, April 29, 2015

CSV: Creating Shared Value or Conning Societal Values?

The article “Creating Shared Value” (CSV) does great at exploring the strengths of the concept of creating shared societal values by a business that benefit a larger audience than just the corporation itself. However, there are a few holes that can be poked thorough the logic usually used to support the theory of creating shared value.

Most importantly, the idea of CSV ignores the inherent tensions between societal and economic goals. Many decisions, it can be argued, are not clear win-wins but often pose themselves in terms of dilemmas. In many cases, the idea that the organization should pursue financial good which would automatically lead to societal good is severely improbable, if not impossible. Companies that produce products of questionable social good (e.g. tobacco products) present a pertinent example as considerable financial gains can be enjoyed by the company at the expense of giving up social gain.

Secondly, the idea of CSV relegates CSR as a concept that does not create value. That may not always be the case as organization’s investment in CSR may create immense societal value, most of which may be indirect and many of which may not directly impute to the firm organizing the CSR program. Merck Pharmaceuticals has undertaken a lifelong aim of distributing Mectizan – a drug that cures river blindness in Africa – free of cost to all areas where it is needed where all expenses of production and distribution are borne by the company.  Whereas the value that the company benefits from in terms of enhanced brand value might not be great, the societal value of having generations upon generations of healthy, productive, disease-free individuals would be immense and far exceed the private cost incurred by Merck. A narrow focus on pursuing activities according to the CSV principle ignores the immense incremental societal value created. Even Porter and Kramer had claimed in an earlier article that: “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”.

Thirdly, CSV is seemingly based on a narrow perception that places a great deal of emphasis on business compliance and completely ignores the naiveté of such a suggestion. It accounts for a shallow perception of an organization’s role in society and perpetuates the profit-maximizing belief that has doggedly maligned capitalism for much of history. The notion that CSR was valuable because it involved organizations viewing their societal role as more than profit maximization and as an active contributor towards improving societal values and creating social good irrelevant of the maxim of profit maximization. CSR enabled firms to push the envelope beyond compliance and towards societal elements irrelevant to their core business.

The inherent criticism here indicates that whilst there is great merit in the idea of creating shared value; often, industrial capitalism destroys natural capital created over thousands of years of evolution. To generate real value, CSV needs to recognize the fact that capitalism is not always a benign process and can play a role in consuming natural resources and destroying social value.

Sources
1.      http://www.dirkmatten.com/Papers/C/Crane%20et%20al%202014%20in%20CMR.pdf
2.      Porter and Kramer (2006), op. cit., p. 78-92.
3.      http://www.merck.com/about/featured-stories/mectizan1.html
4.      J.L. Badaracco, Defining Moments: When Managers Must Choose Between Right and Right (Boston, MA: Harvard Business School Press, 1997).
5.      http://www.theguardian.com/sustainable-business/sustainability-with-john-elkington/corporate-social-resposibility-creating-shared-value
6.      http://www.theguardian.com/sustainable-business/sustainability-with-john-elkington/shared-value-john-elkington-sustainability

7.      http://craneandmatten.blogspot.com/2014/03/four-big-problems-with-creating-shared.html

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