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Shared Value = ?
Definition: “The concept of shared value can be defined as practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”
- create returns on investment for the company’s shareholders at the same time as ensuring benefits for the company’s other stakeholders.
- Put simply: Value creation for all stakeholders (including the company and its shareholders) at the same time!!
- Opposing to CSR models where positive effects for the company through CSR are seen as greenwashing
How CSV is different from CSR (text)
Creating shared value (CSV) should supersede corporate social responsibility (CSR) in guiding the investments of companies in their communities. CSR programs focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain over the long run. In contrast, CSV is integral to a company’s profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value.
How CSV is different from CSR (table, 6 differences + example)
CSR:
- value: doing good
- citizenship, philanthropy, sustainability
- in response to external pressure
- separate from profit maximization
- agenda is determined by external reporting
- Impact limited by corporate footprint and CSR budget
e. g. buying fair trade
CSV:
- value: economic and societal benefits
- joint company and community value creation
- integral to competing
- integral to profit maximization
- agenda is company specific
- realigns the entire company budget
e. g. transforming procurement to increase quality
Caroll’s 4 part definition of CSR: description + pyramid
Social responsibility consists of 4 components that, when taken together, define what businesses should do. They are not mutually exclusive (schließen sich nicht gegenseitig aus) and are to be treated separately and might overlap to some extent.
Economic Responsibilities
To be profitable as a company, minimize cost and maximize sales are at the base of economic responsibilities. Economic performance is the foundation upon which all others rest and is required by the society.
Make a profit consistent with expectations for international businesses;
Legal Responsibilities:
It is also required by society to obey the law, because the law mirrors what the country’s society regards as right or wrong. May be different from country to country. Play by the rules of the game.
Obey the law of host countries as well as international law;
ethical responsibilities
The ethical responsibilities are not required but expected by society. Ethical responsibilities embrace those activities that are expected or prohibited by society even though they may not be codified into law. To assert ethical leadership, avoid questionable practices or operate above the minimum standard of the law could be examples for the ethical responsibilities.
To what is right, just and fair. Avoid harm.
Be ethical in its practices, taking host-country and global standards into consideration;
Philanthropic Responsibilities:
To be a good corporate citizen and improve the quality of life for the society is the aim of these responsibilities. Corporate contributions, to support the community by providing programs or engagement in volunteerism can be examples for the philanthropic responsibilities. To some extent the philanthropic responsibilities are desired and expected by the country’s (!) society.
Be a good corporate citizen, especially as defined by the host country’s expectations.
Vision 1 (Benabou + Tirole)
Vision 1: “Win-win” (“doing well by doing good)
- Idea: CSR makes firm more profitable
- Explanation: firms often suffer short-term bias (e.g. manager focus on short term profit)
- CSR is about taking long-term perspective to maximize profits
- Also, Strategic CSR (s.a., Baron 2001) = socially responsible actions which also increase the corporate value or future profits, e.g. special ethical guidelines that improve the image of a company and activities that increase the demand for its products
Vision 2 (Benabou + Tirole)
Vision 2: “Delegated philanthropy (“the firm as a channel for the expression of citizen values”)
- Idea: Stakeholders are willing to pay money to achieve social goals
- Explanation: Philanthropy is delegated due to information and transaction costs that are lower for company (e.g. costumers buy fair-trade coffee at Starbucks instead of sending money to farmers) firms acts prosocial on behalf of stakeholders
- Corporations profit as they attract customers and workers, improve their image, …
- this demand for CSR by stakeholders provides incentives for corporations to act good or just to signal doing good (dark side of image concerns), e.g. greenwashing (= disseminating a misleading picture of environmental friendliness)
challenges:
o Free riding: individual vs collective rationality, most people declare themselves willing to pay to improve environment, but attitudes are different when it becomes concrete
o Information: consumers and employees need information about company; data collection or access is needed (e.g. rating agencies or value reports by firms)
o Defining what is socially responsible: e.g. NGOs reselling confiscated ivory will be frowned on by the public for behaving ‘immorally’, even when this move lowers the price of ivory and thereby discourages poachers
Vision 3 (Benabou + Tirole)
- Idea: CSR actions not motivated by stakeholder’s willingness to sacrifice money to do good but by management & board members. E.g. firms donate to charity or institutions the board member likes.
- Criticized (e.g. by Friedman s.a.) since Board should spent its own money instead of the stakeholders if they care about environment etc.
- Corporate Governance implications, e.g. a broader mission of company than just maximizing shareholder value implies cost that reduces incentives for investors
General Description Basu+Palazzo
Authors propose a model of sensemaking explaining how managers think, discuss, and act with respect to their key stakeholders and the world at large. They also propose a set of cognitive, linguistic, and conative dimensions to identify such an intrinsic orientation that guides CSR-related activities. Recognizing patterns of interrelationships among these dimensions might lead to a better understanding of a firm’s CSR impact.
Sensemaking involves a tripartite view of processes:
1) Cognitive
2) Linguistic
3) Conative
Cognitive view
implies thinking about the organization´s relationships with its stakeholders and views about the broader world (i.e. the “common good” that goes beyond what’s good for business)
=> What firms think
Linguistic view
how the organization explains reasons for engaging in specific activities to others
=> What firms say
