As the name suggests, the most important purpose of a company is the pursuit of profit — that is, the act of obtaining economic gain. But companies are being asked to go one step further and actively engage in solving social issues. This is not simply to enhance corporate image, but because the very process of solving social issues leads to a structure that strengthens corporate competitiveness.
When one thinks of ‘social contribution activities,’ ‘profit distribution’ — returning a portion of profits to society — is likely what first comes to mind. However, Creating Shared Value (CSV) differs in character from profit distribution. It is not about earning and then sharing, but a strategy of creating economic value through the very act of creating social value. First proposed by Harvard Business School Professor Michael Porter and American journalist Mark Kramer in a 2011 Harvard Business Review article, CSV starts from the perspective that companies should view solving social issues as a business opportunity.
[Creating Shared Value (CSV) Ⓟ ESG.ONL/ESG Today]
CSV and CSR (Corporate Social Responsibility) are concepts that are easily confused. The most crucial difference between the two lies in the ‘order.’ CSR is a structure in which a company earns profits and then returns a portion to society, with activities such as donations, volunteerism, and environmental campaigns being representative. In contrast, CSV makes solving social issues the business model itself. It is not a cost but an investment, not an obligation but a strategy.
A representative example of CSV is the food company Nestlé’s ‘Nespresso AAA Sustainable Quality Program.’ Nestlé simultaneously addressed the business need to ‘secure high-quality coffee beans’ and the social challenge of ‘supporting farmers in developing countries.’ It created a structure in which it supports farmers in 18 countries with agricultural technology and funding, and in return receives a stable supply of high-quality beans. Farmers’ incomes rose, and Nestlé stabilized its supply chain.
Another example is Vodafone’s mobile phone-based money service ‘M-Pesa.’ Vodafone developed a mobile money transfer service using mobile phones in Kenya, where communication infrastructure was poor. Local residents, who could now send and receive money without a bank account, gained access to financial services for the first time, and Vodafone pioneered a new market that previously did not exist. Today, three out of four Kenyan adults use M-Pesa to such an extent that it has become the very fabric of local daily finance. This is a case in which the social problem of financial exclusion became a business opportunity.
CSV, in the end, is not a story about ‘good companies.’ It is a story about how only companies that can re-read social issues in the language of business possess sustainable competitiveness. What social issue can become an opportunity for our business? CSV begins from that question.
by Editor O