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7/27/2019 Shared Value Piyush 41

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EXECUTIVE SUMMARY: SHARED VALUE

The article has its core in busting the misconceptions that shroud the business

world and their policies and practices when it comes to defining the appropriate

corporate social responsibility of the firm. For most of the firms this starts with

externalities and the pressure put on them by the government and social

organizations and ends with an array of disjointed and incoherent activities which

fill up their annual CSR report and acts as a cure to relieve the pressure and build

their reputation of a caring organization.

This is nothing but a feel good exercise as it not only fails to improve the economic

or social conditions of the community in which they operate but also fails to

enhance their competitive position in the market that they cater to. This article

starts with statement which in itself is suggestive of the change which are required

and which must be instituted if the companies want to have a sustainable and

profiting business in the long run.

The article reiterates the point that long gone are those days when businesses couldsee themselves as total unrelated and unconcerned with the needs, requirements

and problems surrounding the community which they serve, today companies are

quickly identifying and noticing that social needs and business gains are co-

dependent and thats the core of the idea of Shared Value for it means to conduct

business in such way as to enhance your profitability and at the same time improve

the economic and social condition of the community in which they operate.

Article implies that contrary to formal belief that social concerns and responsibility

are an impediment to the profit margins of the company and are nothing but a

necessary hole in the pocket for the sake of their business, they act as an

opportunity for the businesses to reap benefits while being socially relevant and


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responsible. There are several examples to support this view, number of companies

like NESTLE, GE, WELLS FARGO, WALMART etc have modeled their

businesses in such a way that benefit the society as well generate dividends for

their shareholders in values far greater than before.

These societal benefits are not superficial and go far beyond the concept of

REDISTRIBUTION where companies share a part of their business profit with

their suppliers and communities in which they operate. This is about collaboration,

co-creation of value, NESTLE for example provides financing, shares technology

and help its suppliers in production of coffee which ensures that it will have

uninterrupted supply of quality coffee, which means increased profits and this

offsets the cost incurred in helping their suppliers, who are also more prosperous

because their produce has increased in quality and quantity and in turn their

income from its sale.

Many other companies are realizing this very fast that they depend on the societal

resources, infrastructure and people to ensure the sustainability and profitability of

their business. Companies must recognize the social problem related to their line of

business and address it such a way which increases their gains and makes a

positive impact in society for example Microsoft has invested millions of dollars of

money in educational institutes to improve the educational levels and conditions of

these non performing school, this serves two purpose first improves the

educational condition of the people as well provides competent and educated

individuals which are productive to the companies when recruited. Similarly

Marriott has started an initiative which provides unemployed individuals with

basic level of the on the job training, this isnt just beneficial community service as


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most these people are employed by Marriott which saves training cost and also the

retention rate for these people is an impressive 61% after the 1st year.

Companies must identify value chain activities like procurement, distribution,

production where they can create shared value. Initiate working conditions to use

resources like water and electricity are no longer considered a burden or external

pressure but are necessary exercises to reduce cost and increase efficiency.

Companies must realize that creating shared value is NOT PHILANTHROPY but

is in their own self interest, if this becomes the norm then even the govt. can roll

out policies which are supportive of these businesses and not restrictive and

imposing.

COMPARISON:

The article STRATEGY and SOCIETY also stresses on the need of creating shared

value and the integration of social needs and business gains but its main focus is on

highlighting the interdependency between the corporate and society. The outside-in

linkage talks about the factors such as human resource, rules governing the

business, size and sophistication of the demand and the local availability of the

supporting businesses whereas the inside-out linkage talks about the dependency of

society on the business firms to improve economic conditions and income

generation as well the impact of the businesses on the environment and resources.

The article also highlights the difference between RESPONSIVE CSR and

STRATEGIC CSR whereas the focus of the SHARED VALUE article is on

defining how to create shared value by focus on social needs concerning your

business and modeling your business in a way that its results in societal benefits as

well as business gains for the concerned company.


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