Importance Of Corporate Social Responsibility And Creating Shared Value

Difference between Corporate Social Responsibility and Creating Shared Value

Discuss about the Alternative View and Opportunities for Future Research.

This aim of this essay is to know the importance of corporate social responsibility and understanding its difference with creating shared values. This terms have been discussed briefly in this essay along with the history and its impact on the growth of multinational companies.

It is a framework that focuses on improving the performance by dealing with the social challenges. There are various issues associated with the organisation like they focuses on short term goals for this perceptive shared value are created. They reshape the society by innovating new ideas and converging on the growth in the economy.  The reason behind creating shared value of an organisation helps in improving the communities’ productivity and increase the competitiveness of the company in the market (Porter and Kramer, 2018).. Organisations can CSV by redefining the products in the market that enables the local development. It was reached that CSV recognizes the trade-offs among short-term profitability and environmental or social goals. It majorly focuses on rising competition in the market by building corporate strategies.  For a business creating share value is beneficial as it combines various values to enhance the productivity of the company. It contributes in global growth as well as involves stakeholders to link the competitive advantage with the social responsibility.

CSR is an initiative taken to improve the company’s environmental and social wellbeing. They take various efforts to improve the conditions to achieve better growth. It is a business approach that helps in achieving the sustainability of the organisation by offering social, economic as well as environmental benefits to the stakeholders. Each organisation have different perception in dealing with CSR. It covers man fields from human rights to all the rules and regulations related to government (Wood and Logsdon, 2016). Corporate social responsibility takes various steps to make changes in the system so that sustainability is achieved. Various approaches used by CSR are corporate philanthropy that includes donations and aids to the communities who are suffering from loss. The areas in which monetary donations are made are welfare sections, education sector or environmental wellbeing. The other methodology is to directly incorporate social responsibility into the organisation.

Every organisation takes few initiates to fulfil social responsibility. Some of the initiatives are:

• Organisations donate for charity or for welfare of community. This could be done by corporate foundation groups.
• Company organises activities for employees so that productivity could be increased and also practises social responsibility by meeting the customers segment.
• They corporate with social marketing strategy by causing promotions related to funding activities.

Corporate philanthropy- The business should use this approach as it helps in raising the local and non-local profit of an organisation (Wood and Logsdon, 2016). It focuses on two attributes that is the investors and the employees who own the assets.

Approaches used by Corporate Social Responsibility

Process vs content approach- This approach is most commonly used to develop a business and it follows series of steps. It covers the entire basic step from selecting an approach to implementing the strategy. It selects the best business strategy for better productivity and getting distinctive capabilities

Internal VS external approach- Internal approach highlights the resource and capabilities of organization to develop strategy and the external approach involve establishing the mission of an organisation.

Economic approaches- For CSR and CSV it includes the scope of whole organisation with long term goals and direction of the industry. These approaches also involves the competitive environment.

3s approach- The success of a company depends on the ability of internal process thus this approach design all the plans to initial CSR and CSV for the company. This approach depends on the organisation by developing business strategy by incorporating technological innovation.

Adaptive approach- This approach is used to shape the condition of an organisation according to the situation. It applies various actions for growth of an organisation.

The evaluation of CSR is one of the oldest factors of every organisation and was originated in the twentieth century. The first company which implemented CSR was Shell. Initially it took initiative in NGO’S then in ethical trading department’s future involved multi stake holders in the team (Wójcik, 2016). From the last past years, CSR is now considered as an important part of an organisation, every company invest a particular amount in implanting CSR. Not only CSR has been considered as an important part other factors like CSV combines to increase the efficiency by improving customer satisfaction (Visser and Kymal, 2015). When CSR came into the market company organisation launched various social programs to emphasize the layout of society.

The approach of CSV was developed to create economic value to the society. It act like a link between the business and social issues. Implementation of CSV creates a shared value for certain areas that will depend critically on the company.

Apart from that the CSV approach differs from CSR in many ways and it can change the socio- economic as well as environmental challenges in an organisation (Carroll, 2015). As in the society there are various issues regarding discrimination or gender inequality, CSV focuses on removing such issues.

There exist a difference between CSR and CSV, cooperate social responsibility focuses on cost margin not on profit margin. In case of CSR it deals with creating new opportunities in the market so that profit gets improved. Both CSR and CSV deals with the challenges of the society but CSR treat this as externality (Crane, et. al, 2014). CSR find the solution to cope up with all the requirements of the society by performing extra actions to improve the social wellbeing. On the other hand CSV works for the business model in addition to surroundings. In case of CSR the organisation motive is to maximise profit by allocating new shares whereas CSR have fixed budgets assigned to them. It can be stated that CSV only focuses on the issues that are related to its business (Day, 2014). This thinking has been modified like the companies following CSV approach take a holistic view of the sustainability problem inside and outside the company.  They are able to produce greater economic value that is possible due to contribution in society as well as the company rather than performing philanthropy to add additional part (Serafeim, 2017).

Initiatives taken by Organisations to fulfil their Social Responsibility

These two approaches can be seen as the growth in MNC’s as they have contributed in expanding the business by making efficient use of resources. Business world can be seen as a result of globalization where economics is interdependent.  These approaches have increased the global power of the society. It was researched that most of the country’s economy is dependent on the growth of multi-national companies. It has influenced the organisation by improving the economic growth of the businesses, as businesses have turn out to be a main driver of the society.

According to the study, the use of CSR has impacted the growth of an MNC as it affects the relation between the society and business.  In case of Africa were hunger, poverty, discrimination, climatic changes and unemployment has increasing day by day has led to economic loss due to low oil prices and weak financial plans. CSR can be seen as a win to win situation in this case as it resolves the entire social issues by analysing the business and impacting the society by improving the economic value (Heifer, 2017).

Recently, the incident of BP oil spill makes use of CSR. The role of this business is to interact with wide group of audience and removing the ethical obligations from the society. This can be achieved by providing customers what they are demanding, ensuring reasonable values by making true efforts to deal with environmental practices. The oil spill event has made CSR important to remove negative externalities so that it doesn’t affect the company operations (Droppert  and Bennett, 2015). The oil spill act has given a reason to use CSR to minimize the risk. It checks the accuracy of the problem by identifying the relationship and providing the opinion to deal with the situation (Hovring, 2017). Hence, many corporations rely on universal reporting frameworks to define the list of social and environmental issues that can be considered significant for the business and its stakeholders. It was stated that for a business corporate Social Responsibility is important as it take various steps to bring the situation to normal condition.

 Stakeholder like enterprises, Government authorities, NGO’s or certain community groups plays an important role in implementing cooperating social responsibility in an organisation. Stakeholders play a successful role in the growth of an organisation by looking at the reliability and consistency factors of the company (Jeroen, 2014). All the stakeholders possess three attributes that is power, legitimacy and urgency to perceive in case of issue. Based on the theory it can be stated that stakeholder’s gets involved in an organisation by taking part in the decision making process of a CSR project and would be beneficial for the company. These stakeholders analyses each and every situation and defines rules and regulations to deal with the problem (Porter and Kramer, 2018). They are important part that helps in overcoming the situation by taking appropriate actions. Government have some predefines norms that need to be obeyed. NGOs and other charity firms focus on providing monetary donations.

Impact on Multinational Companies

In 2014, Nestle was recognized as the largest Food and Beverage Company having revenue of $90 billion and profits of $15 billion. In the same year, 8500 brands were been sold in 197 countries. The Nestle has enjoyed high growth and profitability in most of 20^th century. The company had established factories in many developing countries utilize locally raw materials and work with the farmers to increase the productivity. However, by the end of 1990s the Food and Beverage sector has faced several challenges. In order to cope up with this situation, Nestle started repositioning itself in 2000 as nutrition, wellness and health Company, developing nutritional supplements for the specific diseases and promoting the skin health (Mirvis, et. al, 2016). In 2005, the company adopted an approach named as Creating Shared value for meeting many requirements such as improving the nutrition value, conserving the water conservation system and enhancing the value of its many smallholder farmers and community (Lapi?a,  Borkus and Stari?eca, 2018). Although, there was a positive result of this approach after a decade, but Nestle is still using CSV to communicate with external stakeholders, shareholders and public.

Apart from Nestle case, there are several companies such as Dow, Wal-Mart and Discovery Limited which has used CSV approaches to cope with their socio-economic and environment challenges.

Various theories related to these approaches are:

Political theory- It focuses on the connections and interactions of the business by keeping an eye on the social power along with business partnership (Riordan and Fairbrass, 2017).

Integrative theory- This theory depends on the demand of the society by scanning the social demand and working for its continuity.

Ethical theories- It focuses on the ethical issues along with the principals that express the relation between business and its society.

Normative stakeholder theory- this is just a path way to integrate social demands.

Thus it can be concluded that CSR and cooperate shared responsibility are somewhere related to each other. It is fundamental part of every business by making use of available resource and resolving the issue. They take care of social and environmental issue by taking take of economic value. The main difference between CSR and CSV is that CSR corporate values whereas CSV design new values by accessing the new market. On the other hand CSR corporate suitability and CSR improve the capabilities of suppliers. It can be concluded that  CSV approach helps a business to solve major socio-economic and environmental challenges such as Climate Change, Obesity, and Gender Inequality by creating local clusters that strength the economic benefits of the company.

References

Carroll, A.B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), pp.87-96.

Crane, A., Palazzo, G., Spence, L.J. and Matten, D. (2014). Contesting the value of “creating shared value”. California management review, 56(2), pp.130-153.

Day, C. (2014). The rhetoric of corporate identity: Corporate social responsibility, creating shared value, and globalization.

Droppert, H. and Bennett, S (2015). Corporate social responsibility in global health: an exploratory study of multinational pharmaceutical firms. Globalization and health, 11(1), p.15.

Heifer, (2017). Corporate Social Responsibility and Creating Shared Value. Available from https://www.sharedvalue.org/sites/default/files/resource-files/CFR-047%20Corporate%20Social%20Responsibility%20White%20Paper_FINAL.pdf Accessed on 19 APRIL 2018.

Hovring, C.M. (2017). Corporate social responsibility as shared value creation: toward a communicative approach. Corporate Communications: An International Journal, 22(2), pp.239-256.

Jeroen, F. (2014). CSV vs CSR I Creating Shared Value vs CSR explained. Available from https://jeroen-de-flander.com/csv-csr-shared-value/ Accessed on 19 APRIL 2018.

Lapi?a, I., Borkus, I. and Stari?eca, O. (2018). Corporate Social Responsibility and Creating Shared Value: [online]. Available from : https://pdfs.semanticscholar.org/7298/cda5c584622060498334890161817bb7a62d.pdf  [Accessed on 18 April 2018].

Mirvis, P., Herrera, M.E.B., Googins, B. and Albareda, L. (2016). Corporate social innovation: How firms learn to innovate for the greater good. Journal of Business Research, 69(11), pp.5014-5021.

Porter, M.E. and Kramer, M.R. (2018). 16 Creating Shared Value. Managing Sustainable Business: An Executive Education Case and Textbook, p.327.

Riordan, L. and Fairbrass, J. (2017). Corporate Social Responsibility (CSR) Models and Theories in Stakeholder Dialogue. [online]. Available from : https://pdfs.semanticscholar.org/b4fa/d78430c5052282dc739e466faf2c48f6cf75.pdf  [Accessed on 19 April 2018].

Serafeim, G. (2017). The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research. [online]. Available from : https://www.hbs.edu/faculty/Publication%20Files/14-110_e7a7f1b3-be0d-4992-93cc-7a4834daebf1.pdf [Accessed on 18 April 2018].

Visser, W. and Kymal, C. (2015). Integrated value creation (IVC): beyond corporate social responsibility (CSR) and creating shared value (CSV). Journal of International Business Ethics, 8(1), p.29.

Wójcik, P. (2016). How Creating Shared Value Differs From Corporate Social Responsibility. Journal of Management and Business Administration, 24(2), pp.32-55.

Wood, D.J. and Logsdon, J.M. (2016). Social issues in management as a distinct field: Corporate social responsibility and performance. Business & Society, p. 41.