How to go beyond CSR to the new value-sharing paradigm
By Christopher J Tipler
For some time now it has been clear to sensible business people that Corporate Social Responsibility (CSR) and the ‘triple bottom line’ are pretty dumb ideas. They are inconsistent with the moneymaking imperative, they don’t address the critical issue of sustainability seriously, and their disingenuous nature irritates many stakeholders rather than pleasing them. So, why have we persisted with this nonsense? The rather depressing answer, I think, is that most business leaders have lacked the imagination to reach for something better and the resulting vacuum has been filled by drones writing glossy reports and talking about incremental improvements, all framed in the dreary language of ‘governance’.
All the while, a few interesting companies have been profitably re-defining the boundaries of their moneymaking system to include factors long regarded as ‘externalities’. Ray Anderson of Interface, the global carpet tile company, calls it ‘doing well by doing good’. Ray has pioneered the right idea but he has given it the wrong label – it is, or should be, ‘doing good by doing well’.
Now, no less a figure than Michael Porter of Harvard University, has endorsed the new way, giving it the title of ‘shared value’ (see Harvard Business Review, Jan-Feb 2011). Porter sees a re-definition of business system boundaries as ‘the big idea’ – one that will reinvent capitalism and unleash a wave of innovation and growth. He is right. There is serious money to be made by internalising so many of the public costs that a business creates by viewing such costs as strategic constraints. Sustainability becomes an important part of the strategic equation instead of a burdensome responsibility.
Yet, the way that Michael Porter frames the solution is not particularly helpful. He talks about creating shared value by:
- Re-conceiving products and markets
- Redefining productivity in the value chain, and
- Enabling local cluster development
These are pretty generic ideas that will leave most business leaders thinking ‘OK, but so what? How do I actually go about this?’ I am confident that I have provided the answer to this question in chapter six of Corpus RIOS.
As readers of the book will know, the RIOS strategy model forces us to move into the field of effective intent by matching ambition with capability. It does this by requiring us to ask ‘what must we excel at to win?’ These ‘Arenas’ start the process of translating intent into action. When we decide that making money out of sustainability is one of our Arenas we can then move to the next level and ask ‘what does it mean to excel at this?’ The suggested answer is in four parts. It means:
- 1. Understanding what sustainability is, how to measure it, and how to measure our progress towards achieving it. Note here that incremental improvements in things such as water, waste, and energy do not necessarily create a sustainable business.
- 2. Being able to define and implement an effective model of stewardship
- 3. Developing insightful ways of working the interface between commerciality and stewardship that lead to innovation. This is the path of the Navigator.
- 4. Reconciling what we intend to do about sustainability with the external constraints that may be imposed on us by regulators and community groups.
Chapter six explores each of these and provides an overall framework for action that will enable any business to maximise the ratio of Value Creation to Impact, or V/I. Maximising this ratio is the practical way to generate the shared value that Michael Porter sees as the new big idea.