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From CSR to shared value - the new competitive advantage for businesses

14-October-2013
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From CSR to shared value - the new competitive advantage for businesses

“Business is the only institution in the world that can provide value to the society and environment,” said acclaimed professor Michael Porter of Harvard University, during his keynote address at Institute for Competitiveness Porter Prize Strategy Awards. The Awards took place on October 11 in Gurgaon.

It is believed that a business is run only to make money, but the fact is that it has evolved and is able to contribute more to social and environmental issues than the Government or NGO.

Lack of funds to resolve societal challenges, along with traditional ways of dealing with these problems not working anymore, businesses are meeting the needs by creative thinking; they are working harder to show they care. Businesses are places where prosperity has to be created, and as they stand aware today, with sustainability as the prime issue.

The traditional way a business contributed to the society was through philanthropy or CSR (Corporate Social Responsibility). “CSR is a part of the business, which is run on the side of the main business and thus, does not make much impact. The most powerful way in which a business can make an impact is through an evolved business model, where business makes profit by meeting societal and environmental needs. And this gives birth to the ‘shared value’ proposition,” said Porter.

If businesses invent products according to social needs, with a business model in place, it can resolve problems. Many companies might believe that their CSR does the same, but there is a difference. 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. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

There are numerous ways in which addressing societal concerns can yield productivity benefits to the firm. For example, when a firm invests in a wellness programme, society benefits because employees and their families become healthier, and the firm minimises employee absences and lost productivity. Porter believes that businesses can make profound money by shared value.

Companies resisted efforts towards societal improvements as they thought that it might affect their profits, but with more studies about these issues, we learn that the solutions to such problems do not ask for a profit compromise. Businesses need to decide their focus in order to create shared value effectively, which is slowly becoming the new competitive advantage for businesses.
 

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