Shared value and corporate social responsibility

Shared value is considered a high-impact business strategy, Professor Michael Porter (Porter, 2011) said: “The classic responsibility of entrepreneurs and philanthropy are not enough to respond effectively to social needs. The purpose of companies must be redefined because their progress and existence depend on that.

Currently companies are caring about their workers, the community in which they coexist, health, financial services and the environment that surrounds them, so that in this way, national and transnational companies must comply not only with the needs of society in general but to create new opportunities in an innovative way allowing the same company to obtain profits.

The creation of the concept of shared value is developed by Harvard University professor, Michael Porter, an expert in strategy and development of nations, he ensures that companies must be redefined to generate not only wealth for their shareholders, but also for the society as a whole.

In this article, the importance of shared value in today's world will be shown both for organizations and for society in general, its definition and the main companies that have already implemented it.

SHARED VALUE

Definition

Porter and Kramer introduced the concept of shared value in 2006 with Strategy and Society, where they raise the link between competitive advantage and corporate social responsibility.

According to (Porter & Kramer, 2011) “The competitiveness of a company and the health of the communities where it operates are strongly intertwined. A business needs a successful community, not only to create demand for its products, but also to provide critical public assets and an environment that supports the business. A community needs successful businesses that provide jobs and wealth creation opportunities for its citizens. "

For these authors, companies today can be seen as problems for society and not as solutions, although business must reconnect the success of the company with social progress. For what is necessary, create economic value that generates social benefits beyond the obvious and natural for the organization.

They define the concept of shared value as: "These are business practices that increase the competitiveness of the business while improving the social, environmental and economic conditions of the communities in which it operates." (Porter & Kramer, 2011)

Porter's main contribution is his Business Strategy concept, the strategy links all the potentialities of the company so that the coordinated and complementary action of all its components contributes to the achievement of defined and achievable objectives.

Professor Porter never tires of saying: “The companies that have the creation of shared value as a strategy are the ones that are going to be successful in the next 20 years. Shared value is the greatest opportunity for growth and innovation in the global economy, and the next chapter in the mindset of managers. ” (Porter M., 2011)

Shared value vs. corporate social responsibility

Shared value (CVC) should replace corporate social responsibility (CSR) as a guide for companies' investments in their communities. While CVC leverages a company's unique resources to create economic value by creating social value (and is an integral part of a company's profitability and positioning), CSR focuses on reputation and has a limited connection to the business. This makes it difficult to justify and maintain in the long run. (Exit)

This box was published in the Harvard Business Review magazine in 2011, where Michael Porter first illustrated his concept of shared value.

In the article (Porter & Mark, Strategy and Society, 2006) the authors argue that the strategy of companies must go beyond best practices, do things differently from the competition; always articulated under the concept of "Business Strategy".

For Porter, the concept of shared value means going beyond social responsibility and immediate short-term profits, to apply a long-range strategy that combines the profit of the company with the well-being of society. For this author, social responsibility places environmental and societal problems on the periphery and not at the very center of business management.

While social responsibility suggests spending resources to do things well, shared value establishes the way to have a better economic performance by positively impacting society. (Exit)

Porter invites us to abandon the mentality of demanding immediate profits and understand that there are opportunities if you think broadly about the benefit of society, it is ultimately to be more aware that you have to change in the way you see profitability and management of companies.

How to create shared value?

Policies and operational practices that improve the productivity of a company, at the same time help to improve the economic and social conditions of the communities where it operates. Creating shared value focuses on identifying and expanding the connections between economic and social progress. The concept of shared value recognizes that social needs, and not just conventional economic needs, are what define markets. (Porter & Kramer, 2011)

These authors point out that there are three ways of simultaneously providing value for the company and for the society that complements it, thus building a positive circle, these three ways are:

1. Recognize products and markets Redefine productivity in the value chain Development of local clusters

Each of the three ways will be explained in detail below:

1. Recognize products and markets: The needs of the community are so broad and diverse that the government itself is often unable to meet these needs, including housing, health, improved financial security, nutrition, less environmental impact, etc. Therefore (Porter & Kramer, 2011) invite those responsible for organizations to be continuously innovating, to redesign their products or even their distribution methods.

A continuous exploration of the needs of the community will allow companies to discover new development opportunities and a repositioning in traditional markets, as well as allow them to discover new potential market where they had previously ignored it.

In a way, companies have a greater capacity to satisfy the needs of the people than the government itself, so this represents an advantage and an opportunity to obtain profits in the long term.

(Porter M., Creation of Shared Value, 2011) encouraged companies to take the path of creating shared values: “If the businessman understands that he has in his power the possibility of solving those social problems that NGOs or the Government itself cannot solve, you have found a successful way to boost your business. It is only about having a more comprehensive look ”.

1. Redefining productivity in the value chain: For this, it is necessary to include social, environmental and economic impacts.

Porter's value chain approach takes an internal perspective, focusing on the company.

This concept of value is a theoretical model described and popularized by Porter in 1985 in his book Competitive Advantage, this term quickly became a powerful instrument of strategic planning analysis.

It's about creating value for the customer, which translates into what they want to pay and the costs incurred for accepting the offer.

According to (Fernández, 2014) some of the advantages of implementing shared value in the value chain are the following:

• Improved energy use: This has meant a great improvement by opting for the use of alternative energies that represent a lower environmental impact Better logistics management: This has allowed to redesign routes and reduce shipping times, also taking advantage of the best infrastructures. Improvement in the use of resources: It focuses on the best use of resources such as water, raw materials and packaging; since all these will permeate the value chain.Supply: Every time companies are choosing to have a higher quality at a lower price since the stronger their suppliers become, their environmental impact is reduced, increasing their efficiency so that Long-term prices fall Distribution: Reducing in a certain way resources such as paper and plastic Employee productivity:Cheap labor is being left behind, thanks to awareness of the positive effects that a living wage, safety, well-being, training and development opportunities brings to productivity for employees within the same organization. Location: The better it is. the location the better.

1. Development of local clusters: The introduction of the cluster concept dates back to Porter's reflections in 1990, it gained popularity when Porter proposed in his book "The competitive advantage of nations", the so-called competitiveness diamond where he argued that… "The competitiveness of a region is based on the competitiveness of its industries, which in turn is improved if an industry is immersed in a deep network." (Porter M., The Competitive Advantage of Nations, 1990)

"Cluster, refers to the geographic concentrations of several companies that interact with each other, which would allow an increase in productivity, learning and the dissemination of knowledge in each and every one of the productive units that make up the group." (Porter M., The Competitive Advantage of Nations, 1990)

No company is self-sufficient, the success of companies is affected by the companies around it, productivity and innovation are highly influenced by clusters.

(Porter & Kramer, 2011) conclude that the company is creating shared value when it helps to build a cluster, by reducing social, educational and institutional deficiencies, but the company also benefits since a good local cluster is a source of productivity and reduction of internal costs.

Shared value today

(Díaz Cáceres & Castaño, 2013) "Taking into account what has been said above, it is important to mention that creating shared value requires companies to intentionally and directly link business success to social impact."

Conducting business integrating shared value in the strategy allows the possibility of innovating in markets, products and in the configuration of the companies' value chain, thus ensuring long-term economic profits and creating benefits for society.

“Shared value holds the key to unlocking the next wave of innovation and growth for companies. It will also recognize the success of the company with that of the community in ways not perceived during the era of narrow management approaches, short-term thinking and the growing separations between the various layers of society. (Porter & Kramer, 2011)

Michael Porter's 10 Quotes About Shared Value

The strategy guru was presented on November 16, 2011 at ExpoManagement, the top business forum in Mexico, to discuss competitive advantages and promote the concept of shared value.

The following are Michael Porter's phrases about shared value that the guru shared at that event:

1. Companies today are no longer seen as solutions for society, but as problems.

1. The relationship of the profitability of business and society has profound implications.

1. We went from philanthropy to CSR and sustainability and now we have to move on to creating shared value.

1. Today, Capitalism is almost a dirty word. We have to use capitalism to create social impact.

1. To be honest, CSR has not brought the benefits of capitalism to society.

1. Efficiency in the economy and the social process are not opposites. Businesses must reconnect the success of the company with social progress.

1. It is necessary to create economic value that generates social benefits beyond the natural ones of the company.

1. Shared value is not social responsibility, philanthropy, or sustainability. It is a new way to achieve financial success.

1. Shared value is to create economic value from the generation of social benefits.

1. Shared value is not theory, it is already a reality. Companies that don't embrace it will be left behind.

Shared value initiatives in companies

The Bogotá Chamber of Commerce has documented the projects and initiatives of companies aimed at generating Shared Value, so that these cases contribute to the appropriation of the concept and the implementation of their business models.

Success story: Nestlé

Due to its high level of development and because shared value is part of the essence of its business strategy, not only locally but also globally, the jury of the First Shared Value Prize considered the company Nestlé de Colombia SA out of competition, which presented its strategy focused on the three pillars of nutrition, rural development and water. (Chamber of Commerce of Bogotá, 2015)

Social value created

• Nestlé has reduced direct greenhouse gas emissions per ton of product by 25.4% since 2005 In 2013 it conducted 2,507 audits of responsible sourcing from first-tier suppliers The company has reduced water waste per ton of product by 48.5% since 200561 Nestlé factories (12%) achieved zero waste, and 66,594 tons of packaging material were saved. The company launched “Nestlé Healthy Kids” in 68 countries, with more than 280 partners to increase children's basic knowledge on the importance of nutrition and exercise. In total, 6.9 million children benefited in 2013 Through Nestlé Nutrition Institute (NNI), an independent non-profit organization, which is the world's largest publisher of nutrition information,provided nutrition education to teachers. The program is in nearly 200 countries, with more than 210,000 professional members.At the end of 2013, 96% of the company's products met all the Nestlé Foundation criteria for children, based on international recommendations such as those of the who

Nestlé Mexico

For the eighth time, Grupo Nestlé México received from the Mexican Center for Philanthropy (CEMEFI), the distinction of Socially Responsible Company 2011 for its actions in matters of philanthropy and Creation of Shared Value, which the company implements in this country and which comply with the standards proposed in the headings of "quality of life in the company", "business ethics", "linking the company with the community" and "care and preservation of the environment". (Communication of Responsibility and CSR, 2011)

These actions include:

1. The “Nescafé Plan” launched in 2010, and that with an investment of 500 million Swiss francs will bring tangible benefits for the field, the supply chain and the consumption of grain in Mexico Signing of the Agreement with CONAGUA to promote saving and use efficient water, through the use of new technologies and devices within its 14 production plants and 41 distribution centers. With this action, Nestlé México has managed to reduce water consumption per ton by 46% in the last 9 years.Nutrir, a nutritional education program endorsed by Funsalud and the Ministry of Health, through which Grupo Nestlé México will impact more than 2.5 million children between 5 and 14 years of age in more than 30 cities in the country in 2011.

For more than 80 years, Grupo Nestlé México, in line with its philosophy of Creation of Shared Value, has developed actions to benefit the environment, as well as the value chain, which includes producers, suppliers, collaborators, clients, consumers, members of civil society, among others. (Communication of Responsibility and CSR, 2011)

(Bogotá Chamber of Commerce, 2015) Among other success stories are:

Success story: Daviplata

The company has achieved great growth since the launch of Daviplata in April 2011. This initiative began with 5,000 national transfers per month and currently there are 55,000, proving to be a solution for communities seeking ease and security in handling money.

Social value created

• In 2013, more than 720 thousand payroll dispersions were carried out by more than 1,400 companies affiliated with the system. More than 5 million dispersions of subsidies from the National Government occurred in the last year. More than 3,000 people have benefited from the programs of financial education. DaviPlata now has 5,000 banking correspondents in 872 municipalities of the country, from which payments, transactions and money orders are made, benefiting the company and the communities.

Success story: Camporeal

"We generate a product that provides well-being by providing calcium to the people who consume it, generates income for the Amese Foundation and Campo Real, in addition to opening work spaces for women with cancer." (Godoy, 2015)

Social value created

The Amese Association receives part of the profits from the sale of Más Vida cheese, and with this it can continue to impact more than 95,000 women a year in early detection campaigns. With the resources provided by the business line, 886 women receive support for their treatment and fight against cancer. The product provides a higher percentage of calcium to women facing cancer, as this element is one of the most lost with this pathology. More Life Cheese helps reduce the risk of cancer in healthy women.

• Since 2011, the year the product was launched, more than 113,000 units have been sold. In a little over three years, almost 13 tons of More Life Cheese have been produced. More Life Cheese has registered more than 400 million pesos in sales During the first half of 2014 this brand registered a growth of 33%, compared to all of 2013.During the first half of 2014 this brand registered a growth of 33%, compared to all of 2013.

(Bogotá Chamber of Commerce, 2015) There are also other success stories such as:

• SeguritasCine ColombiaCafamColceramicsSikaMexichem

Conclusions

The creation of shared value is not by itself the solution to all the problems that exist in society, however, it is capable of offering extraordinary opportunities so that companies can change the scheme through which they are classified as simple units with ends profit.

It is important to recognize that the adaptation of shared value in companies is reflected in their economic progress but also in the society to which they belong.

Without a doubt, it is a reality that organizations must be implementing in order to survive and compete in a world as changing as the one we live in. Shared value has the power to drive companies to be better, to seek new opportunities for growth, positioning or continuous improvement, it is also the opportunity for society to find possible answers to the needs that the government is currently almost incapable of. to sustain.

References

• Chamber of Commerce of Bogotá. (2015). Retrieved 2016, from http://www.ccb.org.co/Fortalezca-su-empresa/Por-necesidad/Iniciativas-de-Valor-Compartido/Casos-de-exitoComunicación de Responsabilidad y RSE. (2011). ExpoKnews. Obtained from Grupo Nestlé continues to create shared value in Mexico: http://www.expoknews.com/grupo-nestle-mexico-continua-creando-valor-compartido-en-mexico/Díaz Cáceres, N., & Castaño, CA (2013). Shared value as a new business development strategy. International Journal. Fernández, R. (January 2014). Responsible Newspaper. Retrieved February 2016, from La RSE Global: http://diarioresponsable.com/opinion/17011-el-valor-compartido-una-evolucion-de-la-rseMutis, G. (sf). Shared value, a high impact business strategy. Company Trends, 114-118.Porter, M. (1990).The competitive advantage of the nations. Grupo Editorial Patria.Porter, M. (2011). Creation of Shared Value. Porter, M., & Kramer, M. (2011). Creating Shared Value. (HB Review, Interviewer) Porter, M., & Mark, K. (December 2006). Strategy and society. Harvard Business Review.

Non-governmental organizations

World Health Organization

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