Beyond Corporate Social Responsibility: Created Shared Value and Sustainable Development
Chapter One
Objective Of The Study
The major and specific objectives of this study include;
Examine the relationship between CSV and corporate sustainability
Examine the CSR and exposes the problems with the present CSR.
Examine the ways companies can create shared value as well as the differences between CSR and CSV
Examine CSV Opportunities and Benefits in Developing Countries and the role of government and government policies on CSV, and examines CSV and sustainable development.
CHAPTER TWO
CSR AND EXPOSES THE PROBLEMS WITH THE PRESENT CSR
Corporate Social Responsibility
The notion of corporate social responsibility entered the world of business around 1960s, when, responding to public criticism, companies started social responsibility programs, defined their values and advertised these programs and the benefits they brought to society. However, J.J. Asongu, the president of the African Policy Institute, says the notion of CSR has been known to people for longer than that. Evidence of CSR can be found as long ago as around 1700 BC, when King of Ancient Mesopotamia implemented a code of behaviour for builders, innkeepers and farmers, emphasizing their responsibility to respect and not disturb citizens or do any harm by their actions [1]. Over the time, CSR has been described in numerous ways as business ethics, business responsibility, corporate citizenship, manifestation of corporate philanthropy, etc. [1], [2]. Corporate responsibility and social responsibility are other terms often used when speaking of CSR. The scope and meaning of CSR has been rather broad and constantly changing to incorporate new elements and better portray the viewpoints of specific companies. Hence, the understanding and definitions of CSR vary greatly. To better understand the concept of CSR, it is important to clarify what does “corporation” and “social responsibility” mean. As A. Crane and D. Matten point out, a corporation essentially is a separate entity in its own right. This is defined by two attributes – a corporation can exist independently of any individual investors, employees or customers (as long as they can find new ones) and it owns the assets associated with the corporation (i.e., factories, offices, computers, machines and other assets belong to corporation and not the shareholders) [2].
International standard ISO 26000:2010, Guidance on social responsibility, defines social responsibility as responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that [3]:
– contributes to sustainable development, including health and welfare of society;
– takes into account the expectations of stakeholders;
– is in compliance with applicable law and consistent with international norms of behaviour; and
– is integrated throughout the organization and practised in its relationships.
Thus, we can speak of social responsibility as attitudes and behaviour that are ethical and sensitive to social, cultural, economic and environmental issues. In the business context this means acting so as to respect and contribute to the needs and welfare of the community in which the company operates [2].
There are many dimensions to CSR – giving rise to different views and interpretations. The most common – and very simplified view of CSR is that of corporate philanthropy, charity and sponsorships [4]. Yet this is a narrow interpretation of the notion, reducing CSR to a transaction level where business is quite literally “paying back” the society. The reasons behind this transaction can range from purely ethical concerns and desire to help society develop to “making it up” for some environmental damage and polishing upcompany reputation [5]. However, CSR is more than that; philanthropy is just one aspect of it. J.J. Asongu outlines Wikipedia’s definition of CSR as the most successful one, describing CSR as “a concept that organizations, especially (but not only) corporations, have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations” [1]. Similarly, B. Louge and J. Wallace recognize the stakeholder theory as the cornerstone of CSR concept, since “CSR urges companies to identify all their important stakeholder groups and seek to “balance” the priorities and goals of each of these groups” [6]. J. Moon, S. Anastasiadis and F. Viganó consider CSR “a promising concept in this respect, because it is about beyond compliance contributions of companies to social, environmental and ethical concerns” [7] while A.B. Carroll and A.K. Buchholtz underline the various dimensions of CSR, as it “includes the economic, legal, ethical and philanthropic expectations placed on organizations by society at a given point in time” [8].
CHAPTER THREE
THE POSSIBLE WAYS COMPANIES CAN CREATE SHARED VALUE AND THE DIFFERENCES BETWEEN CSR AND CSV
CREATED SHARE VALUE
Porter and Kramer [9,10] defined CSV as the activities organized for one of three purposes, i.e., products, value chains, and cluster creation, and that there is positive influence on social benefits and organizational benefits.
According to Porter and Kramer (2011), 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 community in which it operates. Shared value was born due to the need to address societal needs, mostly in the bottom-of-the-pyramid segments of the customers (Kreckova, 2015). Shared value creation focuses on identifying and expanding the connections between societal and economic progress. It describes how firms can incorporate CSR activities to their overall business strategy so that they not solely represent a cost but also create value for the firm in terms of a unique market position. Creating shared value implies ethical standards and complying with the law, and it also considers any mitigation after harms that may affect results of business practices. Shared value involves creating economic value in a way that also creates value for society by addressing its needs and challenges. It aligns CSR activities with core business activities to generate business returns and thereby create a business case for sustained commitment and investment (Porter & Kramer 2011). Shared value positions social engagement as a “long-term investment that is intrinsic to business success.” (Bockstette & Stamp 2011, p. 21). A shared value perspective recognizes the interdependency between business and society. It is creating economic value in a way that also creates value for society by addressing its needs and challenges. The idea is combining “traditional objectives with additional benefits for society” (Altman & Berman, 2011). Again shared value is being referred to as a new way to address the underlying root causes of community concerns and unlock economic opportunities for companies in the extractives sector which have made little progress using current approaches (philanthropy, reputation building, local content requirements), with rising disputes, unending conflicts, violence and militancy like in the Niger Delta Region of Nigeria. CSV is a differentiation strategy (Spitzeck & Chapman 2012) that creates business value by tackling social issues or converting social issues into tangible business opportunities based on three pillars of (i) re-conceiving products and markets, (ii) re-defining productivity in the value chain and (iii) enabling local clusters development (Porter & Kramer, 2011; Porter, Hills, Pfitzer, Patscheke & Hawkins, 2012). Although there are numerous social issues as generic, value chain social impacts and social dimensions of competitive context impacts, the CSV concept focuses particularly on those issues within the business context that have significant impact on firm competitiveness.
CHAPTER FOUR
CREATED SHARED VALUE IN THE EXTRACTIVE INDUSTRIES, CSV OPPORTUNITIES AND BENEFITS IN DEVELOPING COUNTRIES, AND CSV AND SUSTAINABLE DEVELOPMENT.
Created Shared Value In The Extractive Industries
According to Porter (2014), the extractives sector represents a significant opportunity for impact on society given its unique characteristics which include: $3.5 trillion in annual revenues (about 5% of global GDP as at 2012); long time horizon for operations; multiple points of interaction with local communities; and often located in remote areas with major societal needs and poor infrastructure, generate employment, revenues for the government and with significant impact on procurement and the gross domestic product (GDP). The economic value created by extractive companies can transform the lives of millions living in resource-rich, cash-poor countries. The extractives sectors are a critical source for economic and social development in many of these countries. But most developing countries have failed to fully capitalize on the societal opportunities created by oil and gas or mining companies. Instead there are increasing conflicts, agitations and militancy in this sector and countries like the Niger Delta region of Nigeria and the platinum mines in South Africa. Consequently, 23 out of the 25 nations that depend most heavily on minerals and fuels are poor with low Human Development Index (HDI) and GDP.
The local content, “non-technical” risk management and current CSR approach used by the extractive industries have largely limited the actualization of this objective. Therefore, shared value is advocated as a new way to address the underlying root causes of community concerns and unlock economic op- portunities for companies in the extractive sector including the oil and gas industry (Hidalgo, Peterson, Sith & Foley, 2014; Organization for Economic Co-operation and Development-OECD, 2016; Swartout, 2016).
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
CONCLUSION
The CSV is a (r)evolutionary strategic management thinking meant to enhance the companies’ competitive- ness while simultaneously advancing their economic and social conditions in the society they operate. It challenges the constrained corporate mindset of lip-service philanthropic CSR activities of business over half a century to making it a major solver of society’s problems in a much beneficial and profitable ways through creation of shared values. Created shared value tasks companies in developing countries to go beyond CSR to addressing social and society’s issues in addition to their pursuit of profits by in- corporating social and societal values into their economic agenda. The shared values created by these companies in developing countries would give rise to long-term corporate profitability, competitive- ness and sustainable development of host communities and countries. Interestingly, evidence abound of companies at least of global multinational and transnational companies in developed and developing countries, which have already keyed into the CSV enjoying immense profits, sales growth and sustainable competitive advantages through integration of social and economic goal while also addressing societal needs. Therefore, companies including extractive and mining industries in developing countries must begin to take a long-term approach to social investments and prosperity of company, host communities or countries by embracing the pillars of shared value of re-conceiving new products and services, iden- tifying new market opportunities and enabling clusters development. It has been demonstrated that the created shared value has the potentials to foster unparalleled economic growth, prosperity and sustainable development in countries when companies start to think a new and look at decisions and opportunities through the lens of shared value.
Although, the created shared value approach is being embraced and applied by most global multina- tional corporations, there is no known study in Nigeria. Therefore a study of the current CSR practices is recommended on whether the shared value concept is already being practiced by indigenous companies in Nigeria, the influencing factors and challenges of creating shared value in turbulent environments.
RECOMMENDATION
In an era of increasingly stakeholders’ knowledgeable demands and expectations amidst the increasing global challenges, integrating economic and social goals will demonstrate corporation’s real concerns and ability to achieve the “win-wins” of the shared value model, long-term sustainability, competitive advantage and economic prosperity. In order to give concrete meaning to the concept of CSV in developing economies, the companies must change the philanthropic way that CSR is presently conceptualized and organized because of its limitations in helping them to achieve competitive advantages and adequately address societal problems. Based on the shared value approach, companies in developing countries should restructure and prioritize CSR to be part of their organizational culture, value and core business strategy that emphasizes sustainability by redefining corporate leadership and integrating economic and social goals in their business pursuits in addressing societal problems. The integration makes CSR a core element of strategy, structure and process, eliminates distinct CSR functions in the organization and makes CSR a mutual responsibility across the firm – from top down and thereby increasing its cred- ibility and implementation.
However, achieving shared value will require a radical and collective rethinking of management practice by all parties. There must be strong commitment at the executive, top management level and employees; Leading managers of global players as well as of small and medium companies in developing countries must discuss and take CSR very seriously by going beyond “green washing” or “window dressing”. They must begin to embrace and transmit the CSV vision and ideology among all employees of their organizations through re-conceiving new products and services in new markets, improving productivity and developing clusters. Therefore, companies would need to incorporate shared value thinking into the operations of employees at all levels of their businesses to really transform capitalism and bring about inclusive and sustainable development. The realization of the SDGs in 2030 requires that companies in developing countries have a major mindset change towards the adoption of the CSV agenda. This will involve the companies working inside out and embracing top down leadership, commitment and strategy as well as a bottom up overhauling of the operating models to reflect total commitment; CSV takes time, energy, tenacity and patience to embed and thus the process requires change managers and skilled leaders rather than programme managers (Bockstette & Stamp, 2011; AT Kearney, 2015). In fact, achieving a successful, sustainable and scalable shared value requires significant changes in the way that corporations do business. Therefore, businesses in developing countries must change their business models and current CSR philosophy to include shared value creation and business value sustainability.
Government and regulators in developing countries should recognize their roles in helping businesses to create shared value by focusing on measuring environmental performance and introducing standards, phase‐in periods and support for technology that would promote innovation, improve the environment and increase competitiveness of business simultaneously. They would need to limit the pursuit of exploitative, unfair or deceptive practices in which companies benefit at the expense of society. Governments can help companies create shared value by: creating enabling policies and regulations, showing collabora- tion by acting as knowledge broker, serving as convener of interested stakeholders, acting as operating partner for shared value strategies and incentivizing shared value investments. Regulatory authorities like the National Hydrocarbon Agency (NHA) in Columbia must promote shared value creation through its regulatory framework. Although local content presents one of the clearest opportunities to create shared value, governments in developing countries particularly those with rich minerals and extractive industries must collaborate with companies to access opportunities to deliver real value for business and society across different areas of investments based on shared value approach.
On the other hand, companies must take a long-term view toward solving societal issues that would benefit the business by investing in improved business unit operations’ knowledge of societal issues. They should measure societal outcomes and their impact on the business, and work with other multina- tional companies, NGOs and governments to create shared value. They must also take concrete actions to shift the current dynamic relationships between the corporations and government from one that views for instance extractive companies as contractors who pay for the privilege of carrying out extraction to one that sees these companies as development partners who could help solve societal issues of concern to government and create shared values through direct engagement with various levels of governments and communities, capacity building and indirect support for independent, third-party efforts. Faculties and business schools would also need to broaden their curricula and teaching to include: efficient use and stewardship of all forms of resources, human and societal needs and how to serve non‐traditional customer groups; because these would define the next‐generation thinking on value chains.
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