The advent of ISO 26000 has made CSR a new business buzz word in corporate strategy, the focus on creating shared value with communities is still somewhat missing.
What comprises today’s corporate citizens’ responsibilities? What is the motivating factor(s) involved? More importantly, what is the role being played by corporations towards better servicing society today?
Corporate Social Responsibility (CSR) initiatives, such as the ISO 26000 – a voluntary standard concerning compliance to social norms and sustainable development for all kinds of organisations, and Global Reporting Initiative (GRI) are paving the way and compelling companies to have regular sustainability reporting which takes into consideration social and environmental aspects.
Also, some companies treat CSR as a mere means of branding with social or green campaigns in a rather unplanned manner, or as a means of betterment of the market share for their products and services. It is not unusual and rather very common that CSR function falls under the corporate communications or marketing team, and is not fully incorporated into the company’s strategies and policies.
What and why?
Creating Shared Value (CSV) is a very different approach when compared to CSR. It is not based on meeting a set of standard external criteria or on philanthropy but is integrally linked to the core business strategies and operations. There is dual purpose utilisation for companies that work closely with society in a way so that they can address a variety of community needs along with deriving business value for themselves.
What is required is an active approach towards creating shared value. CSV, the new improved CSR, aims at actively engaging the community while focusing on benefiting both the community and the business.
Nestle is one company that has been practising CSV and the same remains to be a core element of Nestle’s way of doing business. Sanjay Khajuria, Senior Vice President, Corporate Affairs, Nestle India Ltd, shares, “’Creating Shared Value’ or ‘Saanjhapan’ as we call it, is about the impact of our business and engagement through it, going beyond philanthropy.” He explains further and says that in colloquial thinking, ‘Saanjhapan’ reflects joint benefit and their desire to create prosperity and help improve the quality of life for people in an inclusive manner. “Creating shared value is a fundamental part of Nestlé’s way of doing business that focuses on specific areas of the company’s core business activities – water, nutrition, and rural development, where value can best be created both for society and shareholders. We apply this philosophy in a manner that touches all our stakeholders across the value chain: farmers, consumers, communities around our factories, employees, associates, vendors and investors,” adds Khajuria.
Initiatives taken
Khajuria avers that Nestlé’s continuous excellence is at the heart of their business, seeking to delight consumers and improve the quality of their lives with products that provide Nutrition, Health and Wellness. “Maggi Masala-ae-Magic which is an affordable taste enhancer and fortified with iron, vitamin A and iodine is one example. Another is the Nutrition Awareness programme that was rolled out last year to help students in village schools understand the role of food in our bodies, how we can improve the balance of nutrients in our diets. The modules specifically focus on how cooking practices can improve nutrition as well as the need for food hygiene, sanitation and physical exercise to improve health and wellness,” asserts Khajuria.
The ambition also aims at producing tasty and nutritious food and beverages that also have the lowest environmental footprint, striving to continuously improve their operational efficiency and environmental performance. “Within our factories and in areas under our control there is a continuous effort to minimise consumption of natural resources and reduce waste and emission, while maximising production. Our carbon footprint has been significantly reducing as a result of our focus on technologies to improve combustion, while utilising renewable fuels such as coconut shells and process waste to replace non-renewable fuels. We are currently working with the International Water Management Institute to develop local initiatives for better water management in agriculture,” adds Khajuria.
Nestle India encourages sustainable practices and is constantly transferring technology, knowledge and training suppliers. “Our work with the communities around our factories in the milk district provides better yields, better quality milk and crops, increased income, employment and opportunities for economic development,” sums up Khajuria.
The British retailer, Marks and Spencer, intends to revamp its supply chain model, for instance, which involves steps as basic as stopping the practice of purchasing supplies from one hemisphere and to ship to another, and this is expected to contribute £175 million annually (by fiscal 2016) to the saving of the retailer, while hugely reducing carbon emissions.
Marks and Spencer’s India initiatives include sustainable raw materials and Marks and Start programme among others. Marks and Spencer spokesperson comments, “ We have a pilot project in Warangal in collaboration with Better Cotton Org, WWF-UK, WWF-India and Marks and Spencer to address the socio and agronomic issues of cotton farming. Over 4000 farmers are involved in the project in Warangal and the results from 2010 harvest shows 69 per cent reduction in usage of water, 58 per cent reduction in usage of pesticides and 53 per cent reduction in usage of fertilizers. Because of better management practices and social empowerment, the gross margin improvement of the farmer has improved by
28 per cent.”
Apart from the initiatives discussed above, Marks and Spencer also takes initiatives to reduce usage of paper; recycling paper, educating employees to consume electricity more efficiently and avoid wastage of water. “We continue to support various NGOs like Goonj, V-Care, Association for People with Disability, Dumb and Deaf Society, etc,” reveals the spokesperson of Marks and Spencer.
Yet another instance can be Coca-Cola which has managed to already reduce its worldwide water consumption by 9 per cent (year 2004), taking the company half way to its goal of a 20 per cent reduction by 2012.
As we learn
CSV is a fundamentally sound philosophy and it is the logical evolution from CSR. It will certainly help to expose more and more people and companies to the concept. CSV is definitely a powerful way to motivate companies into taking and sustaining action that can actually contribute in changing the world for good. It’s time that we shift our perspective from responsibility to opportunity, while we bring in change underlined by true innovation.
Creating Shared Value at Nestle
At Nestle, CSV goes beyond compliance and sustainability for any business, and thinks long term and follows sound business principles, creating value for shareholders as well as for the society via its activities. For instance, it could be jobs for workers, taxes to support public services and other economic activities in general.
Source: Official website of Nestle India
How shared value differs from corporate social responsibility
Creating Shared Value (CSV) should supersede Corporate Social Responsibility (CSR) in guiding the investments of companies in their communities. CSR programs focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain over the long run. In contrast, CSV is integral to a company’s profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value.
| CSR | CSV |
| Value: doing good | Value: economic and societal benefits relative to cost |
| Citizenship, philanthropy, sustainability | Joint company and community value creation |
| Discretionary or in response to external pressure | Integral to competing |
| Separate from profit maximization | Integral to profit maximization |
| Agenda is determined by external reporting and personal preferences | Agenda is company specific and internally generated |
| Impact limited by corporate footprint and CSR budget | Realigns the entire company budget |
| Example: Fair trade purchasing quality and yield | Example: Transforming procurement to increase |
| In both cases, compliance with laws and ethical standards and reducing harm from corporate activities are assumed. Source: Harvard Business Review South Asia, January-February 2011 | |
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