CREATION SHARE VALUE SHAAHIN ,SHAHSAVARI

Growing Challenges External pressures for corporate social responsibility continue to grow Many companies are engaged in an unprecedented range of CSR activities But the legitimacy of business continues to erode Most companies treat CSR and community issues as separate from their core business agenda

Company practice in CSR leaves much room for improvement Unfocused Still a major PR component to choices Reactive Limited impact And concern with social issues will be a defining characteristic of the post-crisis era

The Boundaries of Capitalism: Prevailing Thinking Companies create benefits for society through performing their traditional market functions and maximizing profits Revenues Employment and wages Purchases Investments Taxes Companies should not be expected to take on extra social and community functions

Corporate activity and economic growth can have adverse societal impacts in areas such as the environment, health, safety, and community development There are social tradeoffs and externalities in doing business that must be mitigated through regulation, taxation, and redistribution The private sector is often seen as the problem

The connection between competitive advantage and social issues There are numerous ways in which addressing societal concerns can yield productivity benefits to a firm. Consider, for example, what happens when a firm invests in wellness program. Society benefits because employees and their families become healthier, and the firm minimizes employee absence and lost productivity. The graphic below depicts some areas where the connections are strongest.

Shared value Can be defined as policies and operating practices that enhance the competitiveness of the 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 connection between societal and economic progress.

The Concept of Shared Value The pursuit of value should animate improvement towards both economic and social objectives Shared value arises from a deeper understanding of the drivers of competitiveness and competitive advantage Achieving shared value requires new operating practices, new technologies, and new approaches to competing

CSV CSR

Levels of Shared Value Reconceiving products and markets Redefining productivity in the value chain Enable local cluster development A broader understanding of the economics of productivity and the external influences on the corporation

Creating Shared Value The Need for Collaboration Collaboration within the private sector can be a more effective vehicle to improve external context than solo efforts, especially in areas more removed from a company’s own business operations Cross-sector collaborations with NGOs, governments, educational organizations, professional bodies, and civil society can leverage their skills, expertise, relationships, and convening power to address social and community issues _ A new brand of NGO has emerged that sees its role as facilitating the creation of shared value with corporations

Measuring Shared Value Financial Value Revenue Productivity Long-term sustainability of performance But financial market pressures have deterred fundamental performance improvement opportunities Societal Value Job qualities Improvement in employee health and skill level Environment performance Cluster vitality Local economic performance Human development metrics for the community Examine the sum of financial and societal value

Adding a Social Dimension to Strategy Customers and business partners value social performance, not just economic performance Companies can have the greatest societal impact in areas tightly connected to their business This is where societal performance and economic performance intersect most closely Societal improvements create shared value for the competitiveness of the business

Companies should incorporate a social dimension to their value proposition Shared value will reinforce the company’s unique strategic positioning This social dimension of strategy can be more sustainable than conventional cost and quality advantages

Identifying Opportunities for Shared Value Finding those Areas where Shareholder Interest and Society’s Interest Most Strongly Intersect Potential Areas Product attributes Underpenetrated markets Process / value chain choices Locational decisions for facilities, purchasing, and hiring Productivity constraints in external context

Organization Centered in operating units in major locations Units in developing countries or in underserved / affected areas are potential innovation sources

Many social deficits or community challenges can be turned into shared value opportunities by the appropriate company. There are often substantial opportunities for shared value with disadvantaged citizens / communities and in developing countries in which the company does business.

The Purpose of Business There is an opportunity to transform thinking and practice about the role of the corporation in society, around the concept of shared value. Shared value arises from a deeper understanding of doing business that transcend narrower conceptions of economic efficiency that have guided operating practices in recent decades. The shared value perspective will provide new catalysts for economic growth and the next wave of innovation and productivity in the global economy.

Businesses acting as businesses, not as charitable givers, are arguably the most powerful force for addressing many pressing issues facing our society. This transformation in practice will give purpose to the corporation and to capitalism itself, and represents our best chance to legitimize business again.