Wednesday, April 29, 2015

Is Creating Shared Value a Corporate's Responsibility?

The concept of value creation has triggered many dialogues in the field of business ethics. As identities of big corporations became more closely intertwined into the daily functions of a society, consumers grew more conscious of the end destination of their dollars. My big take-away from the article was that there no longer exists a strict dichotomy between commitment to social needs and profit generation; rather, for a continued, sustainable success of a firm, the two are inseparable. I will tie in creating shared value (CSV) with another popular business ethics concept, corporate social responsibility (CSR) and discuss real-life examples.

While reading the article, I saw similarities and differences between CSV and CSR. As far as similarities, both CSV and CSR seek to create value for the society though CSV takes up on a more indirect model while CSR occurs through more direct approaches, such as community-based initiatives. As a result, both CSV and CSR result in an improved public image of the firm. Both CSV and CSR mirror a shifting trend in the contemporary corporate world where the “nothing-but-profit” capitalistic mind slowly fades away. Lastly, both CSV and CSR involve partnering with external entities to engage in social missions.

However, differences between two ideas also exist. CSV is a combination of business management AND commitment to addressing a social need. However, CSR entails working with social needs on behalf of the society, apart from normal business functions. Also, while CSV focuses on generating revenues, increasing gross margin percentages, reducing variable costs, and improving system efficiency, CSR’s main objectives do not include revenue collection. In many cases, CSR projects are not-for-profit in nature, center around social causes, and are deficits. CSV attempts to address needs that exist at the intersection of the internal business and the external society encompassing it. However, CSR simply re-directs a company’s profit as a gesture to give back to the society.

A real-life example that relate to both CSV and CSR is SamSung, a multinational corporation. SamSung boasts in an enormous public presence in South Korea. Despite its record success in various sectors of business, it has drawn much criticism for brutal factory working conditions and business scandals that were covered through political lobbying. SamSung is very conscious of its public image and has dedicated extensively to CSR. Some of its initiatives include: blood drives, assistance to interracial family resettlements, reinvigoration of traditional Korean markets, mentoring business for the youth, vocational training and career advice for foreign women who marry Korean men, scholarships for studying abroad, and guide dog training for the blind. However, it lags behind other firms as very little has been reported on its efforts in CSV. Truly clever companies understand the benefit of CSV which is a win-win for both society and the firm – this is an area that SamSung, as a multinational corporation, can address to catch both birds.

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