In business, it’s common to spend a lot of money on things that don’t seem to help the bottom line. They might clean up the neighborhood, fund a charity, or even build facilities that aren’t for the company itself.
Gestures that help society or the environment can be more than companies being nice. They can benefit the company in less visible ways. A 2020 roundup of CSR trends cited a survey in which 77% of consumers preferred to buy from companies committed to environmental, social, and economic issues, so the bottom line is also at play.
That’s the essence of corporate social responsibility (CSR) and creating shared value (CSV, not to be confused with comma-separated values). The two have ample similarities and some real differences. CSV goes beyond a single project by tying community needs to the company’s core business, and more companies are starting to work that way.
Takeaways
- CSR is a company’s responsibility to society, usually funded as a cost: philanthropy, environmental programs, fair labor and diversity practices, and volunteering.
- CSV, from Michael Porter and Mark Kramer (2011), ties social benefit to the business itself through products and markets, the value chain, and the local business environment.
- CSV still has to pay for itself. Adidas’s 2010 pilot with Grameen Bank lost money.
- Reporting is now routine: 96% of the world’s 250 largest companies report on sustainability or ESG.
- Whichever approach you choose, publish accurate reports and web content so your audience can see what you do.
CSR is everywhere, but CSV may be the future
You’ll find examples of corporate social responsibility all around you. Basically, CSR is when a business is socially accountable to itself and to society. This can be seen through programs that “give back” in some way.
Similarly, creating shared value (CSV) is a business concept in which a business’ needs align with the community’s needs. While CSR and CSV seem to have similar results, they’re different in what they mean and how they benefit the community.
A company may choose one over the other. CSV is less widely known than CSR, but it links community needs directly to how the business earns money. This article gives the basics for telling the two apart.
Comparison table of CSR and CSV
This table gives an outline and we’ll get into more specifics below.
| CSR | CSV |
| Value: doing good | Value: economic and societal benefits relative to cost |
| Separate from profit maximization | Integral to profit maximization |
| Citizenship, philanthropy, sustainability | Joint company and community value creation |
| Impact limited by corporate footprint and CSR budget | Realigns the entire company budget |
| External reporting and personal preferences determine the agenda | Agenda is company-specific and internally generated |
| Discretionary or in response to external pressure | Integral to competing |
| Example: fair trade purchasing | Example: transforming procurement to increase quality and yield |
What is corporate social responsibility (CSR)?
The base of CSR is that the business is part of the community, so it has a responsibility to be a good citizen of and within it.
The business will have a dedicated program with a goal of finding ways to improve something in the world.
The 4 main types of CSR
CSR can be broken up into four types:
| Definition | Example | |
| Philanthropy | Charitable giving of time or funds to help communities | Kraft Heinz gives meals to food banks |
| Environmental conservation | Being a green company; efforts to reduce pollution | Xerox runs a cartridge collection program that diverts printer supplies from landfills |
| Diversity/labor practices | Improvements in how employees are treated and making sure all types of people are hired | Mitsubishi Electric Workforce Diversity program to increase the number of women working with them |
| Volunteerism | Corporations encourage employees to volunteer their time | The National Football League (NFL) encouraging its players to help in their communities |
CSR programs bring people together around a common goal, and reporting on them is now routine for big companies. KPMG’s 2022 survey found that 96% of the world’s 250 largest companies report on sustainability or ESG.
CSR programs can give the communities they serve practical help, and they can bring employees and neighbors together around a simple goal.
What is creating shared value (CSV)?
CSV starts from the idea that business and society depend on each other.
Michael Porter and Mark Kramer of Harvard Business School raised the notion in their 2011 Harvard Business Review article, Creating Shared Value.
Basically, CSV asserts that the community’s needs and the business’ needs are connected.
This is because the business is a part of the community. So it’s in the company’s best interest to improve the community because that will then improve their business.
This is typically achieved by improving one of three things:
- Products and markets: This works by creating new products that serve a need in the community. Businesses can also improve services to reach those who are underserved.
- Value chain: A business can simplify how it’s run, such as time, money, effort, and employees.
- Local and regional business surroundings: A business can improve local guidelines and its operations. This can also include improvements to other parts of the community that interact with the business.
Adidas and Grameen Bank
In 2010, Adidas partnered with Grameen Bank, the Bangladeshi microfinance group, on a low-cost shoe for poor people in Bangladesh. The idea was a social business: sell inexpensive shoes that people needed and fund the effort from sales.
The pilot shows how hard shared value can be in practice. Adidas sold 5,000 pairs in a test phase and lost money. In a 2011 interview, CEO Herbert Hainer said each shoe cost about $3 to make and import duty added $3.50. Adidas then moved the next phase to India, under the Reebok brand.
CSV only works when the business model works. The goal of serving people who need shoes was real, but the numbers did not add up on that first attempt, and a company has to find a model that pays for itself to sustain it.
Porter and Kramer’s own examples are more settled: they describe Nestlé working with coffee farmers to improve quality and yields, and Walmart cutting packaging and rerouting trucks to save money and reduce emissions.
CSR loses money, and that’s basically the point
Under a CSR program, the spending usually has no direct return. Companies do it to be good citizens and to build a helping image in their community, and any return comes indirectly, through reputation and goodwill.
For example, when Kraft Heinz donates a meal to a food bank, that meal brings in zero dollars, but Kraft Heinz still has to pay for that meal. The company just lost money by donating to a good cause. Even though there are social benefits of giving meals to the poor, the practice does not earn revenue; quite the opposite.
This limits the amount of CSR programs a company chooses to have because of the money that will be lost. If a lot of these programs are being carried out, then a company will continually lose money since it cannot sustain itself.
CSV is not a simple cut against revenue
A CSV program is designed to pay for itself, so in principle it can grow as far as the business does. The major difference is that CSV is about value, while CSR is about responsibility.
A business practicing CSV aims to make money and improve conditions in the community at the same time.
Porter and Kramer describe CSV as a way to redefine capitalism. Critics, including Andrew Crane and colleagues in a 2014 California Management Review article, argue that CSV understates the conflicts between profit and social goals.
Ricoh’s sustainability site shows how it frames shared value:
Companies like Ricoh aim to tie their business results to improvements in society.
Aligning with the community
Businesses whose interests match those of their community can improve it while they grow. Supporters of this view point to market growth as a main reason extreme poverty has fallen worldwide. Others argue that markets leave gaps that companies alone will not fill. Either way, a company that depends on its community has a reason to look after it.
Many business leaders want their companies to improve society as well as turn a profit.
Many businesspeople want to start or continue programs that help those in need.
Companies that build such programs into their business model can add value for their whole community.
How to publicize your CSR and CSV
If you’re doing CSR or CSV, you should definitely be writing about it. MacroLingo content services can assist with reports and web content, making sure they’re accurate and that they reach and resonate with your intended audience.
Contact us if you’d like some ideas. We’d like to create shared value with you.
