Trust in companies has been reduced to levels never seen before, and this decrease introduces companies to a vicious circle, since much of society's discontent lies in the actions of the companies themselves, which remain in an old approach based on in obtaining short-term financial benefits.
In recent years, business activity has been considered by many as one of the main causes of the social, environmental and economic problems that prevail in the world, with the impression that the sustainability of companies has been detrimental to the community.
Therefore, in such circumstances, organizations and society must unite their efforts to obtain a common benefit; what is called "shared value". Today, in such a changing world, companies begin to care more about their workers, the community, health, financial services and the environment, focusing on the enormous social, economic and environmental challenges that they face. (Business Commitment, 2011)
Meanwhile, the solution is in the principle of shared value, which implies the creation of economic value in a way that also provides value to society, so that it meets its needs and challenges. Thus, companies must reconnect organizational success with social progress. (Díaz & Castaño, Shared Value as a New Business Development Strategy, 2013)
However, it is not enough that companies strive to respond to the needs of society, but it is also essential that they focus their strategies to meet the needs of society in an innovative way, creating opportunities in transforming business models that, in addition, they reward profits to the company.
It is not social responsibility, philanthropy or even sustainability, but a new way to achieve success. (Business Commitment, 2011)
Origins of the concept of shared value
In 2002, Professors Porter and Kramer began a series of three articles published in 2002, 2006, and 2011, culminating in the development of the new concept of Creating Shared Value (CVC). (Díaz, Corporate Social Responsibility and Creation of Shared Value, Management Sustainability, 2014)
In their 2002 article, Porter and Kramer state that the social actions of philanthropy carried out by many companies are totally removed from the real activities of the company, becoming, at best, a primary advertising tool for try to improve their reputation and image.
The proposal was then to try to carry out an authentic "strategic philanthropy" that will be based on two main lines:
- Use philanthropy and social action activities to improve the competitive context of the company. Accept that, with this type of actions, companies generate both social and economic benefits.
From this perspective, organizations should focus their philanthropy activities on those that help improve their competitive context (improve factor conditions, improve demand conditions, contribute to the installation of auxiliary companies, etc.). So, whenever companies decide to contribute to projects that are not really focused on their context, they will only be carrying out public relations activities and missing the opportunity to create real social and economic value.
Based on this idea, in the second publication carried out in 2006, Porter and Kramer analyzed the relationships between strategy and society, proposing an alignment between Corporate Social Responsibility (CSR) and business strategies. Thus, after presenting different theoretical approaches for the explanation of CSR, the authors argued that the interests of society and the company coincide, especially, in social value and economic value. Therefore, companies must detect those activities in their value chain that have the most social impact, reinforce their strategy and generate possible competitive advantages. (Muñoz, 2013)
The foregoing, as a way of abandoning corporate social responsibility carried out reactively, limited to meeting the needs of stakeholders and mitigating the negative consequences of different businesses; towards a strategic CSR, where companies try to identify those initiatives where the creation of shared value can be more relevant and generate greater benefits for both parties. (Muñoz, 2013)
The co-authors of the “shared value” concept expanded the topic in January 2011, expressing that not all of society's problems can be solved under this scheme, however, it should be considered as a tool with which organizations can build a economic value that, of course, contributes both to the company and to society. Thus, Porter and Kramer suggest that companies can create shared value in the following primary ways, leading to a next wave of innovation and fostering growth in the global economy:
Reinventing Products and Markets: It's about addressing unmet needs to drive increased revenue and profitability. It is about increasing revenue growth, market share and profitability, through the environmental, social and economic benefits generated through a company's products or services, better quality existing markets, innovative products and services. that solve social needs.
Redefining productivity in the value chain: M by improving quality, quantity, cost, and reliability, production processes, and distribution systems, while simultaneously acting as stewards of natural resources.
Development of clusters of local companies: Companies that mutually nourish each other through vertical relationships (clients, technology and distribution channels), developing technological advances and consolidating themselves before their clients. From both concepts it follows that clusters generate competitiveness, being this a necessity for the development of a country. (Sunday, 2004)
It is about creating value by improving the external environment of the company through investments in the community, strengthening local suppliers and collaborating with various institutions, so as to increase business productivity and expand their markets.
Although organizations are not guilty of all social problems and do not have sufficient funds to solve a large part of the events presented in the environment, when they are in charge of a program that includes shared value, it can be visualized, then, what They are the most suitable entities to generate a successful movement based on knowledge of their market. (Díaz, The creation of shared value: sustainability strategies and business development, 2015)
However, although shared value is considered by its authors as an alternative solution to the results and distribution of a country's wealth; Unfortunately, governments have chosen to focus their efforts on systematizing an ambiguous capitalist structure, where the support and development of each industry becomes inequitable.
That is why, for this task, a unique value proposal must be created, which manages to locate the social dimension in the general proposal of the organization, overcoming the prejudices with which the directors do not face social issues and those for which, entities Non-governmental organizations do not incorporate profitability in social improvement issues.
Meanwhile, although it is increasingly common for companies to include a section on corporate social responsibility in their annual reports, they do not have the approach they should, since philanthropic initiatives are typically described financially or in hours invested, but almost never in terms of the impact of such actions. (Díaz & Castaño, Shared Value as a New Business Development Strategy, 2013)
Fundamental pillars of shared value
Concept and Pillars of Shared Value
Companies or organizations: According to the conception of some classical liberals such as Adam Smith, it is thought that only through the indefatigable pursuit of private interest, entrepreneurs can contribute to promoting the general interest. They consider that companies are only accountable to their shareholders for their economic performance, which is essentially their raison d'être. And that, in addition, its contribution to the well-being of the community is carried out through the payment of taxes, the generation of employment and the supply of quality products and services.
Government or State: Acts as an intermediary between business and civil society, which, first of all, must avoid exploitative, unfair or deceptive practices. For example, a strict antitrust policy is essential to ensure that the benefits of business success reach customers, suppliers, and employees.
On the other hand, it must collect taxes and impose taxes on business externalities, for example, social costs that corporations do not bear, such as pollution. And, finally, to adequately redistribute the resource obtained among society; issue that so far has been too much, inefficient. (Fernández, 2014)
Civil society: It is the main recipient of the redistribution of the wealth of the states. However, at present the communities where the companies operate glimpse that the benefits of these are produced at their expense; An impression that has been strengthened during the current economic situation where little has been done to mitigate high unemployment, the lack of collaboration with local small and medium-sized companies and the severe pressures on community services such as education, social security, among others.
Thus, this loss of confidence only induces political leaders driven by social leaders to make decisions that harm companies, undermining their economic growth, impoverishing society, and engaging in a vicious circle. (Fernández, 2014)
Such a situation in the worst case, causes companies to relocate, taking wealth to other countries in the world, before promoting the development of the national economy.
Roots of shared value
Strategic theory agrees that, to be successful, a company must create a distinctive value proposition that meets the needs of a given set of customers. It seeks to obtain competitive advantages with an adequate configuration of its value chain or through the set of activities involved in the creation, production, sale, delivery and support of its products or services.
The thing is, companies are only focused on attracting consumers, and in the face of mounting competition and short-term shareholder pressure, executives resorted to successive restructuring, downsizing, and relocation in lower-cost regions. Thus, the most frequent results were price competition, little real innovation, slow organic growth, and no clear competitive advantage. (Fernández, 2014)
Likewise, with the current globalization and in the search for vertical integration, the organizations that have opted for this model have resorted to external providers or relocation, which has weakened their connection with local, regional and national communities, losing important opportunities. for value creation.
Today, the concept of shared value is defined as the operational policies and practices that improve the competitiveness of a company, while helping to improve economic and social conditions in the communities where it operates. With this, the limits of capitalism are redefined by better connecting the success of companies with the advances of society. (Barco, 2015)
The future of CSR: Shared value
Corporate social responsibility (CSR), as a way to open a cordial relationship between the company and its stakeholders in a systematic and orderly manner, has come a long way.
During the decade of the 90's, when the term corporate social responsibility had not yet been coined, there was talk of the benefit of sharing values, with which the company opened up to society and the environment, through the social action. Thus, the creation of corporate foundations arose with the intention of separating social action from the main activities of the company or core business. Therefore, concepts that went beyond the business were introduced, and were understood as a separate action, even being managed by its own legal figure.
In the early 2000s, CSR was used for "risk management", as it was seen as a way to protect the company's reputation against risks, pressure or criticism from the company's stakeholders. By then, the company was endowed with sporadic actions and not with a CSR policy. (Guard, 2010)
At that time, the road was started and specific actions were structured in CSR policies, which began to occupy a position in most large companies, finding a boom in the business world. Proof of this are the associations, foundations and clubs, both nationally and internationally, that were formed at that time to enhance CSR.
Towards the year 2005, corporate social responsibility was established as a department within organizations and with it, the possibility of definitive consolidation. However, a new challenge appeared: how to integrate CSR into corporate strategy? Its integration by then allowed identifying opportunities and responding to the expectations of the various interest groups. (Guard, 2010)
Today, CSR has multiple fields of action: social action, environmental action, reconciliation of work and family life, work integration of people with disabilities, traceability of products from other countries to ensure compliance of human rights in its manufacture, the involvement of employees in corporate volunteer actions, among many others.
Likewise, progress has been made in the CSR report through sustainability reports, in the measurement of the impact of the actions or in the design of our own relationship programs.
The evolution of CSR has shown that it is not only necessary to manage responsibly, it also presents an opportunity for the company to ensure that responsible behavior extends to all its stakeholders. (Fernández, 2014)
Difference between shared value and corporate social responsibility
Creating shared value replaces corporate social responsibility as a guide to the investments that companies make in favor of their communities. Indeed, CSR programs currently focus primarily on the reputation of the company and have only a limited connection to the business, making them difficult to justify and maintain in the long term, since they have a defined budget.
The creation of shared value, on the contrary, is an integral part of the profitability and competitive position of a company. It is focused as an important part of your profitability.
It focuses on improving techniques for growth and strengthening the local cluster of suppliers and other institutions to improve the efficiency, crop yield, product quality, and sustainability of the primary sector. Its aim is that both farmers and ranchers and the companies that buy from them obtain a greater portion of income and benefits. It is true that a greater initial investment and time are required to implement the new supply practices and develop the support cluster, but the return will be a greater economic value and greater benefits for all participants. (IRADE, 2011)
The application of social responsibility and its principles, allows large corporations to redeem themselves before their clients, carrying out charitable or patronage actions that public opinion will perceive as their best social and community image.
Shared value aims to integrate the improvement of local conditions where companies operate, generating progress and taking advantage of the entire virtuous circle created. This, in theory, will allow an innovative and advanced operation that will translate into greater benefits for shareholders. (Inter business, 2015)
Believing in the generation of shared value implies betting on change in the way business is conducted, which really contemplates a social and environmental purpose linked to economic success far from charity. (Pacific Rubiales Energy, 2013)
conclusion
It cannot be claimed that all of society's problems are solved with shared value strategies. However, given that traditionally this task had been exclusively assigned to governments and NGOs, creating shared value represents a real revolution by encouraging corporations to use their skills, resources and management capacity to lead progress.
Generating shared value should be treated not as an expense, but as a medium and long-term investment linked to business success. It is a change of mentality in the way of doing business, more than just the implementation of certain actions.
In the first instance, it is a requirement to generate a strong commitment from senior management and from all employees and collaborators of organizations. because the capacities, competences and activities required to generate shared value are not the traditional ones; interdependence and generative dialogue stand out, the entrepreneurial spirit and permanent observation of the environment with a broader framework, coexistence with uncertainty, innovation applied on a large scale and, above all, leadership development, understanding it not as an attribute individual but as the ability to mobilize a group of individuals to manage a high-impact transformational challenge. (Mutis, sf)
References
- Barco, JM (March 09, 2015). CSR blog. Obtained from http://www.responsabilidadsocialempresarial.com/ Compromiso Empresarial. (February 12, 2011). Obtained from: http://www.compromisoempresarial.com/otras/2011/02/creacion-de-valor-compartido/Díaz, N. (2014). Corporate Social Responsibility and Creation of Shared Value, Management Sustainability. International Journal of Good Conscience, 127-144 Díaz, N. (2015). T he creation of shared value: sustainability strategies and business development. Latin American culture. EAN University Díaz, N., & Castaño, C. (2013). Shared Value as a New Business Development Strategy. International Journal of Good Conscience, 82-100. Sunday, J. (2004). SISIBIB. Library System. Obtained from http://sisbib.unmsm.edu.pe / bibvirtual / publications / administracion / v07_n13 / a07.htmFernández, R. (January 09, 2014). Responsible newspaper. Obtained from: http://diarioresponsable.com/opinion/17011-el-valor-compartido-una-evolucion-de-la-rseGuardia, R. (December 22, 2010). CSR commitment. Obtained from: http://www.compromisorse.com/opinion/ Presidente/valores–marketing/ramon-guardia/el-futuro-de-la-rse-el-valor-compartido/2010-12-22/ Inter Negocios. (August 20, 2015). Obtained from: http://www.internegos.com/Main/Article/13/Diferencia-entre-valor-compartido-y-responsabilidad-social-empresarial IRADE. (November 23, 2011). Obtained from: http://irade.cl/articulos-de-interes/525/%E2%80%9Cla-creacion-de-valor-compartido%E2%80%9D/Muñoz, J. (2013). Business ethics, Corporate Social Responsibility (CSR) and Creation of Shared Value (CVC). GCG Magazine.Globalization, Competitiveness and Governance, 76 - 88.Mutis, G. (sf). Shared value, a high impact business strategy. T e ndencies Empresa, 114 - 118. Pacific Rubiales Energy. (June 17, 2013). Obtained from:
Thanks
Special thanks to the research professor Fernando Aguirre y Hernández, professor of the master's degree in administrative engineering attached to the Technological Institute of Orizaba, for the technical contribution to the construction of this article and its direction in the process of learning systemic thinking. Likewise, to the National Council of Science and Technology (Conacyt) dedicated to promoting and stimulating the development of science and technology in Mexico, for financial support for postgraduate studies.
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