What Gets Measured gets Done

I personally a priori do not expect from a business neither any good will, nor morality or nobleness. We have some exceptions in business world but they just prove the rule. As long as there are shareholders’ interests and goals of profit maximization, businesses will be always after new possibilities of cutting costs and ways of raising incomes at the first place. All the other types of activities (unless their implementation is forced by a third side), which do not increase a company’s bottom line in a traditional way, are either window dressing, or in some cases attempts (successful or not) to Create Shared Value (CSV). CSV is a concept introduced by Michael Porter in 2011. The main difference between CSV and CSR is that the latter is about responsibility, whereas CSV is about creating value. According to CSR concept businesses are put against society. CSV, on the contrary, focuses more on the opportunities for competitive advantage from building a social value proposition into business strategy. Therefore, the concept of CSV brings us from Milton Friedman’s famous assertion that “the social responsibility of business is to increase its profits” to the next stage of capitalism (or it just redefines it), where companies in cooperation with society and sometimes with each other multiply their own wealth and thus in a sustainable way raise prosperity of the whole community. Indeed, focusing on profits cannot make a more successful civilization; it just makes some people richer, whereas a transparent business that collaborates with non-profit and governmental sectors can reach a sustained competitive advantage in the business model of XXI century.

Talking about CSV instead of CSR makes it easier to analyze business strategies and activities because it dispenses you from necessity of assessing business as a moral entity, or a subject with some moral obligations and responsibilities. It is easier partly because it is not clear whether it is fair to say that a business should share because it has money (do we use the same moral reasoning for rich people? do we have right to do so?), partly because we cannot say and cannot know where bounds of governmental responsibilities end and corporate responsibilities start, or just because it is even not correct to proclaim some corporate deeds as good ones and call the others as bad. Thus, if we talk about CSR and mean CSV then CSR should be seen as a separate project or dimension, which in the end will contribute to a company’s competitive advantage and thus should be thoroughly planned so it could be measured.

According to Porter and Kramer, “the fact is, the prevailing approaches to CSR are so fragmented and so disconnected from business and strategy as to obscure many of the greatest opportunities for companies to benefit society. If, instead, corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed — it can be a source of opportunity, innovation, and competitive advantage.”

Very often we can observe corporate CSR efforts that are neither strategic nor well communicated. To be effective in CSR efforts—and to enjoy all the potential benefits—these companies need to do more than simply just do good in their communities and their CSR should not be executed in an ad hoc, nonintegrated fashion. Sooner or later, if a company qualifies for a leading position in the market, it will have to approach CSR strategically as an important component of its overall business strategy along with marketing, research and development, innovation and operations. It will have to effectively tell its CSR story, which can be monitored, estimated and followed-up. Only when CSR is incorporated into an overall strategy can we normally measure and assess it. In all other cases, to some extent, it is just waste of money for a business or a non-sustainable activity that has unsustained effect for the society.

The worst thing is that until the concept of CSV, or at least the concept of CSR, is generally accepted and commonly used it is still difficult to measure and compare corporations in terms of their responsibilities, boundaries of these responsibilities, and consequences of non-compliance. It turns out that until that time, the best corporate position is “the less you say the less they will ask for”.

 

*-citation of Peter Ferdinand Drucker.

Sources: 1)      Oh, Mr Porter. The new big idea from business’s greatest living guru seems a bit undercooked//Economist, March 10, 2011 2)      Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility by Michael E. Porter and Mark R. Kramer//Harward Business Review, December, 2006