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Business-Society

DynamicJourney from CSR to

CSV

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Introduction

Origins of CSR and need for directors to act astrustee for interests of social claimants

Need to provide service without/ beyond profits

Second World War Interruptions and 1950s

Fundamental Idea: Business Corporations have

obligations to work for social betterment

Obligations can be

Mainstream and peripheralVoluntary or coerced by governments

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Why Corporations Started

Engaging in CSR?

Obligation from wide variety of sources

Possession of technical skills and

resources needed for social problems

Exercise of enlightened self-interest by

corporate executives

Desire of Corporations to be good citizensof respective communities

Fear of violence and social disruption

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The Problem with CSR1 Operational meaning is vague

Is it conformity to legal regulations or it refers to extralegal voluntary acts

Institutional Mechanisms through which idea of CSRcan be done

1. Business Response to traditional Market forces

2. Voluntary Response beyond immediateconsiderations

3. Government authorized business responses throughsubsidies

Trade-off between economic goals and costs versussocial goals and costs cannot be stated with precision

Moral Underpinnings are neither clear nor agreedupon

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CSR2: Addressing the CSR1

Shortcomings

Corporate Social Responsiveness: Capacity of

corporation to respond to social pressures

Key Questions?

1.Will it?/Does it?

2.How does it respond?

3.To what Extent?

4.With what effect?Ability to manage companys relations with

various social groups

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Difference Between CSR1 and

CSR2CSR1

Philosophical

Social problems are

treated as unrelatedphenomena and in

knee-jerk fashion

f (CEOs conscience)

Why/Whether?

CSR2

More practical and

responsive

Stress onprocess/systems

Anticipatory scanning

procedure to detect

emerging problems

Institutionalized company

policy for successful

implementation

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Making a Case for CSV Businesses prospering at expenses of broader community

More the businesses have engaged in CSR the more it isblamed Legitimacy has fallen leading politicians to setpolicies undermining competitiveness

The Problems: Are companies responsible? May be

Outdated approach to value creation

Overlooking wellbeing of customers-depletion of naturalresources- viability of key suppliers- economic distress ofcommunities in which they produce and sell

Shifting activities to cheaper locations with cheaper wages

Governments and NGOs exacerbated the problem byaddressing social concerns at the expense of business

Result: Presumed tradeoffs b/w economic efficiency andsocial progress institutionalized in decades of policy

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Creating Shared Value Defining Shared Value: Policies and operating practices

that enhance competitiveness of a company whilesimultaneously advancing economic and socialconditions in communities in which it operates

Salient Features of Shared Value

Focuses on identifying and expanding connectionsbetween societal and economic progress

Economic and social progress must be addressed using

value principles Value Creation traditionally= Revenues- Costs

Businesses rarely approached societal issues fromvalue perspective and at most these have been

treated peripherally

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Roots of Shared Value Intimate relationship b/w competitiveness of a

company and health of communities Business needs community for critical public assets and

supportive environment

Communities need business to provide jobs and wealth

creation opportunities for its citizens This inter-dependence means that public policies have

undermined productivity and competitiveness ofbusinesses especially in todays globalised economy

Shared value is neither about personal values nor aboutredistribution- It is about focusing on improving growingtechniques, strengthening local clusters, increasingfarmers efficiency, product quality and sustainability

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How is Shared Value Created?

Preconceiving products and markets

Redefining Productivity to Value Chain

Building supportive industry clusters at

companys locations

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Reconceiving Products and

Markets Increasing societal needs in terms of health care, housing,

greater financial security

Companies seem to have lost sight of basic questions- Isour product good for our customers / customers

customers?

F&B companies refocusing on fundamentals of betternutrition- Intel and IBM devising ways to help utilitiesharness digital intelligence

In India, rise of market based solutions to drive inclusivegrowth-e.g. Life spring hospitals, Vatsalya Hospitals

R P t t V

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Re e n ng Pro uct v ty n Va ueChain

Companys value chain affected by numerous societal issues

such as natural resources and water use, health and safety,working conditions, equal treatment

Many externalities actually inflict internal costs for the firm

Growing realization that congruence between societal progress

and productivity in value chain is far greater than traditionallybelieved

Synergy increases when firms approach societal issues fromshared value perspective-One can see CSV in the following forms

Energy use and logistics: Gyanesh Pandeys Husk Power systems,Sanjay Bhatnagars Waterhealth International and Paresh Rajdeof Suvidhaaa Infoserve

Resource Use: Coca -cola and Dow chemicals

Procurement: Nestle in Africa and Lat Am Coffee growing regions

Distribution: Project Shakti of Hindustan Unilever

E bli L l Cl t

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Enabling Local Cluster

Development

Need to broaden understanding of relevanceClusters: It not only means geographic

concentration of firms, service providers,logistical infrastructure but also means

institutions such as academic programs, tradeassociations, broader public assets like schools,colleges and VTCs,Clean water

Capable local suppliers foster greater logisticalefficiency- Boost productivity

Need to revive cluster thinking-Nestles alliancewith Rainforest International

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Comparing CSR and CSVCSR

Value: doing good

Basic Idea: citizenship,

philanthropy, sustainability

Profit Maximization: Separate

from profit

Agenda: External reportingand personal preferences

Impact: Impact limited by

corporate footprint

e.g.: Fair-trade purchasing

CSV

Value: economic andSocietal Benefits relative to

costs

Basic Idea: Joint company

and community value

creation

Profit Maximization: Integral

to profit maximization

Agenda: Company specific

Impact: realigns entire

company budget

e.g.: Transforming

procurement

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Ages and Stages of CSR Age of greed and defensive CSR

Charitable CSR and Age of Philanthropy

Promotional; CSR and age of Marketing

Strategic CSR and age of Management

Systemic CSR and Age of Responsibility

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Curses of Modern CSRPeripheral CSR: CSR restricted to largest

companies and mostly confined to PR ratherthan integrated across business

Incremental CSR: Adoption of qualityManagement Model, results in incrementalimprovements that cannot match scale andurgency of problems

Uneconomic CSR: CSR does not make sense asshort-term markets still reward companies thatexternalize costs to society

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Few Indian Examples.Cont

HealthcareLifespring Hospitals

Chain of low-cost maternity hospitals

>70% of customers from low-income communities

who earn Rs150-300 a day Delivery costs INR 4000/-

50:50 JV by Acumen fund and HLL Lifecare

Vaatsalya Hospitals

Affordable healthcare chain

Focus on non-urban market

One crore funding raised from angel investors

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ConclusionWayne Vissers DNA Model of CSR

Essence of CSR 2 DNA Model of VEGS

V Stands for Value Creation

E Stands for environmental Integrity

G stands for Good Governance

S stands for Societal contribution

Need for reorientation of purpose of business-Positive contribution to society is not a marginal

afterthought but a way of doing business