Are Shared Value and CSR Different?
After concluding a year-long research project on creating shared value in the extractives sectors, my firm has found several encouraging examples of companies moving toward shared value. Some are taking it even further and beginning to embed shared value into the business, across companies’ approaches to societal issues, their organizational dynamics, the ways in which societal outcomes are measured, and the ways in which companies collaborate, taking steps such as the ones illustrated in the chart below:
One nagging doubt still remained in many of our interviewees, though: How is shared value different than traditional corporate social responsibility (CSR)?
I was reminded of this question when reading a recently-published sustainability report from one of the companies we have been following for the research. The report is a great summary of the worthwhile activities the company has carried out to improve social and environmental outcomes in the communities where it operates, but it made me wonder: what would the sustainability report say instead if it was a shared value report? If companies could link improved conditions in the communities in which they operate with business success, what types of metrics would they report?
I don’t mean to suggest that companies should avoid philanthropy or CSR, but rather to emphasize how a CSR initiative is different from a shared value approach.
To show how shared value and CSR are different, I engaged in a thought experiment. Below are major performance highlights from a handful of CSR reports across the extractives sectors. Using FSG’s shared value in extractives research, we’ve tried to show how a company could link business and societal outcomes more deliberately:
Sustainability report highlight: “We spent over $300 million sourcing goods locally, bringing the total amount spent with local companies over the last five years to more than $1 billion.”
What a shared value approach might lead to: “By developing and integrating local suppliers into our supply chain, we have created savings for the company of $100 million over the last 5 years based on lowered costs, improved responsiveness, and reduced delays and supply chain interruptions. In addition, local suppliers now provide employment to over 1,000 members of our host community.”
Sustainability report highlight: “We donated $2 million to help fund the construction of a local clinic.”
What a shared value approach might lead to: “Working in partnership with a global NGO, we reduced malaria rates in our local community by 90%, while at the same time reducing man-hours lost to the disease from 90,000 at the inception of the program to 700 this year.”
Sustainability report highlight: “We reduced our greenhouse gas emissions by nearly a million tons using enhanced treatment techniques.”
What a shared value approach might lead to: “We are investing in reducing our greenhouse gas emissions through enhanced treatment techniques because we believe CO2 will be taxed in the future and want to gain a competitive advantage by reducing the impact of future regulation on our business.”
Sustainability report highlight: “We donated over $1 million in response to disaster relief efforts following flooding in the south of the country.”
What a shared value approach might lead to: “Investing in disaster and emergency preparedness, response capabilities, and rehabilitation activities creates stronger, more resilient communities and helps ensure business continuity in the event of a major incident. In addition to making donations in response to disasters, we restored shorelines around our facilities and pipelines to better protect our assets and the local communities from climate-related events.”
Sustainability report highlight: “We committed $1 million to school districts to support literacy and career development programs.”
What a shared value approach might lead to: “We believe that it is a business imperative to invest in developing a local workforce. Hiring expatriates to work in this country costs ten times more than hiring locals. Developing the local workforce not only helps the business, it also gives members of our host communities access to higher-paying jobs and greater opportunities for economic development.”
What do you think of these suggestions? Is the difference between CSR and shared value clear? Do you think companies would be better off taking a shared value approach? Share your comments below. And read more about FSG’s Shared Value in Extractives research in our latest report: Extracting with Purpose: Creating Shared Value in the Oil and Gas and Mining Sectors’ Companies and Communities.