Wednesday, April 15, 2015

Confusions over corporate social responsibility and the creation of shared value

The term corporate social responsibility emerged during the 1960s. In 2006, Michael Porter and Mark Kramer popularised the term creating shared value. Whereas corporate social responsibility focused on doing the right thing because it was the right thing, something leading to a compliance focus, creating shared value suggested that corporations could actually make money by benefiting the communities within which they lived and operated. I quote from the wikipedia article on creating shared values:
The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Recognizing and capitalizing on these connections between societal and economic progress has the power to unleash the next wave of global growth and to redefine capitalism.
That's a big claim. I mention is now because Mark Kramer has been in Australia as guest speaker at a conference arguing that:
The Australian government should outsource social services to the private sector by providing tax breaks to corporations behind business ideas that help the vulnerable, leading US business scholar Mark Kramer has said.

The co-founder and managing director of US-based social impact advisory firm FSG said the government played a key role in galvanising companies to come up with services that would be both lucrative for the provider, and beneficial to the disadvantaged and neglected sectors of society – a concept he labelled "shared value".

On the surface, the idea that Governments should provide tax breaks to galvanise the private sector to come up with innovative solutions has little to do with the original concept of creating shared values. That focused on business doing things because, in the end, business would benefit, a very different concept from providing tax subsidies to unleash business creativity to solve social problems.

I mention this now in part because I am interested in the evolution of ideas about the role of business in society and the way this translates to rules and structures, more because it links to a very current trend, the search for "innovative solutions" in meeting social needs at a time when government action is increasingly constrained by the combination of cash constraints changing views about the role of government.

I call it the search for a magic bullet, and it doesn't work. This doesn't mean that I am necessarily opposed to the concepts of either corporate social responsibility or the creation of shared vales. It's just that I find current discussions very confused. Certainly they confuse me!.


Noric Dilanchian said...

Jim, as you'll recall, you and I first worked together back in about 1992 by focusing on a glossary of terms relating to emerging terms such as intellectual capital. We found that we shared a common interest and brought out respective experiences and reading to collaboratively settle a glossary that we then used to guide years of work. I continue to use the evolved version of the glossary year after year in agreement after agreement that I draft.

Sometimes I hit a wall where a client or someone else queries the direction of the writing. When the writing involves use of the glossary it is usually because the critic has insufficient familiarity with the meaning of terms used.

Recent experience of this was very useful as it propelled further development of the glossary. The glossary is a cascading list of terms defined over about 7 pages and it ended near definition of the word "standard". In our office we did a day's or so of research writing a research note that drilled down below standard to define the next cascade point, leading to definitions of terms such as accredited, certified and and technical specification.

Now let's return to your topic. Briefly, I see in politics and business a reality that has possibly always been present. It is a failure to use words consistently or by reference to their source meaning.

Last night a friend on LinkedIn shared a post in which the writer sought contribution of the "funniest business buzzwords". I took the word funniest to have its broadest meaning, including amusing as well as nutty. My short list comprised these words - business model, innovation, disrupt, awesome, NDA and aggressive. That last word gets to me when people think that only aggressive lawyers get results. They simply have not properly understood children's about slow and steady wins the race.

Evan said...

"The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent."

Mutually dependent on Singapore, Switzerland, Ireland and tax havens.

Big business hype and spin.

There are interesting things happening with young entrepreneurs creating companies doing worthwhile things. And there is the sharing trend and perhaps a revival of interest in co-op's. There was a new kind of corporation interested in doing worthwhile things created in California I think.

But generally corporates care only about profit.

P.S. "We are not a charity" = we are sociopaths happily benefiting from our amorality.

Winton Bates said...

Evan, perhaps companies should have to pay tithes i.e. a 10% tax rate?

Jim Belshaw said...

Hi Noric. That comment took me back. Part of the point of the taxonomy was definitional clarification, avoiding confusion. But the changing definitions, the addition of definitions, also reflected the ever changing world of business and management fashion.

Winton, I'm sure a 10% tithe could be avoided. It depends on the cost of avoiding v the gains!

Winton Bates said...

Jim, perhaps the shareholders would accept a moral obligation to pay 10%.

Jim Belshaw said...

Moral obligations indeed! That's very libertarian. There is an issue here that's niggling in my brain. What is the historical record on company social contributions.