Meeting society's needs while being profitable at the same time

In a recent article "Innovating for Shared Value", Pfizer, Bockstette and Stamp recently argued there are 5 reinforcing elements to create what Michael Porter calls "Shared Value", achieving the goal of meeting society's needs while being profitable at the same time.

In short they are:
1. Embed a Social Mission
2. Define the Social Need
3. Calculate Shared Value
4. Structure Inititiaves.
5. Co-Creation

These 5 steps reinforce each other and are critical in the creation of shared value. According to the authors, even if organizations differ in their strategies, technologies and in their particular paths, using the above five key elements is advisable. Besides the obvious advantage of creating shared value, other advantages include: stronger, more profitable and more social organizations.

For further detail, I recommend the excellent summary of Anneke Zwart of these Five Components to Create Shared Value in the shared value forum on 12manage.

Innovation Needed for Corporate Sustainability Success

Many companies have sustainability programs nowadays. But often with limited success, both for their sustainability targets and also for their financial performance. Investors can be really harsh towards companies taking nice initiatives, but fail to realize shareholder value with them. According to Robert G. Eccles and George Serafeim in their article "Innovating for a Sustainable Strategy" (HBR May 2013), companies need to address the interests of all stakeholders while creating a sustainable strategy. Such a strategy goes beyond just cutting emissions, reducing waste etc. and requires a strategic focus on the Environmental, Social and Governance (ESG) issues that are most relevant to creating shareholder value. In this way firms can boost both their ESG and financial performance at the same time. Eccles and Serafeim provide 4 steps for corporations to achieve this: 1. Identify the most critical ESG issues in your type of business. 2. Quantify the financial impact of ESG improvements (one can use the SASB Materiality Maps for this, which distinguishes 43 potential impact issues in 5 main categories: Environment, Social Capital, Human Capital, Business Model and Innovation, Leadership and Governance). 3. Undertake MAJOR innovation in products, processes and business models to achieve the improvements under 2. 4. Communicate with stakeholders about these innovations. For example by integrating ERG information in the annual report. Pitfalls to avoid are: - Short term-oriented incentive systems - Short-term investor pressure - Shortage of strategic ESG know-how - Failing to account in the proper way for environmental and social value in the capital budgeting process.

What is the full mission for responsible corporations?

Is the only mission of the corporate world to make money for shareholders?

Corporations are human endeavors, and all human endeavors should benefit our society and reflect our morals. They should provide more than just investor return.

There are many ways that corporations do benefit society:

1. They provide jobs
2. They produce goods and services that people want
3. They provide a return to investors

But corporations must in addition meet a higher moral standard:

1. To minimize activities that harm life or the environment
2. To be truthful
3. To bring joy to life and reduce suffering, even if in very small and mundane ways
4. To stop encouraging people's craving or addiction

The World Moral Movement has a collaborative effort to define corporate responsibility based on morals shared by all religions and secular philosophies. The above views are based on the World Moral Movement Corporate Responsibility Wiki page, which is open for further discussion and debate.

Corporate Responsibility and Competitiveness

The business case for Corporate Social Responsibility has been debated for many years. In a survey of the subject, Roger Cowe from Royal Dutch/Shell Group finds that while links to national and regional competitiveness are less clear, governments and think tanks are enthusiastic about the idea.

It looks like a no-brainer: if there is a business case for corporate social responsibility and enough companies take it up, that will make whole economies more competitive – so governments should be encouraging corporate social responsibility in pursuit of national economic strategies. But brains are needed.

Quite apart from the “ifs” in this argument, there are plenty of uncertainties:

1. Does the case for corporate social responsibility apply to all kinds of company?
2. Can benefits aggregate across an economy or is it a zero-sum game?
3. Does it introduce inefficiencies when scaled up to the level of the economy as a whole, as classical economics would argue?

It is increasingly common to talk about the triple bottom line at the level of the economy rather than the firm. Read on...

Study reveals CR importance growing in decision-making

After the accounting scandals, governments have introduced new legislation, new codes of conduct have been developed and corporate boards have been 're-balanced' to include more independent members.

The over-riding goal in every case has been to restore investor confidence. However, these changes have also brought with them the realisation that good governance is a key topic not only for shareholders but also for a much broader set of stakeholders, including customers, employees, suppliers and the wider community.

That in turn has made the term corporate responsibility (CR) much more familiar than ever before in boardrooms across the globe. The line is far from solid, but CR can be seen as the extension of governance beyond simple compliance to embrace broader social values.

A recent survey from the Economist Intelligence Unit, produced in cooperation with Oracle Corporation, reveals that more business executives and corporate investors are factoring corporate responsibility into their decision-making. Read on.

Prahalad and Corporate Responsibility

In his important new book: The Bottom of the Pyramid, management guru C.K. Prahalad recommends a private sector and market-based approach for fighting world poverty.
I wonder do we agree as Corporate Responsibility Forum that:

1. The poorest people should become an integral part of the work and of the core business of the Private Sector?
2. The Bottom of Pyramid markets cannot merely be regulated to the realm of CSR initiatives?

Bestselling Corporate Responsibility Books

Award for Excellence for Cause Related Marketing

"Businesses across the UK are being invited to enter the Business in the Community's Awards for Excellence 2005, in association with the Financial Times, sponsored by the Department of Trade and Industry, supported by Marks & Spencer, Company of the Year 2004. The categories include the Dollond & Aitchison Cause Related Marketing Award which recognizes, rewards and celebrates programmes when businesses have used the power of the brand in partnership with charities or causes to address key social issues.

Last year's Award was won by BT for its partnership with ChildLine. Blockbuster Entertainment was Highly Commended for its partnership with Starlight Children's Foundation.

Cause Related Marketing is defined by Business in the Community as “a commercial activity by which businesses and charities or causes form a partnership with each other to market an image, product or service for mutual benefits. It is an additional tool for addressing the social issues of the day through providing resources and funding whilst at the same time addressing business marketing objectives.

The Business in the Community Awards for Excellence are the most prestigious UK awards recognizing companies for integrating responsible business practice into their mainstream operations resulting in a positive impact in the workplace, the marketplace, the environment or the community. Now in their eighth year, they are the primary means by which Business in the Community identifies, celebrates and communicates good practice in corporate responsibility.

Further information about Business in the Community and the Award can be found at the website www.bitc.org.uk.

Five maturity stages of CR

Simon Zadek provides a useful best practice five-stage maturity model of how organizations deal with CR (HBR Dec04 - 'The Path to CR')

1. Defensive: deny practices, outcomes or responsibilites ("It's not our job to fix that")
2. Compliance: adopt a policy-based compliance approach as a cost of doing business ("We'll do just as much as we have to")
3. Managerial: embed the societal issue into core management processes ("It's the business, stupid")
4. Strategic: integrate the societal issue into core business processes ("It gives us a competetive edge")
5. Civil: promote broad industry participation in CR ("We need to make sure everybody does it")

Oil Companies ranked on CSR

Independent investment research firm Innovest Strategic Value Advisors (www.innovestgroup.com) has released the latest of its sector-based assessments of how companies perform on CSR. The report ranks 33 companies in the oil and gas industry.

Companies that received the highest ranking include Norsk Hydro, BP, Suncor, and Royal Dutch/Shell.

Companies that received the lowest rankings include Yukos, PetroChina, Marathon, and Surgutneftegas.

The report discussed escalating climate change risk, access to resources, C. governance scandals and the shift towards new, lower impact products.

Innovest used its proprietary EcoValue 21 environmental rating methodology to assess the relative environmental performance, or "eco-efficiency," of the 13 companies. The rating is based on more than 60 different aspects of environmental risk, opportunity, and management, including positions on climate change, renewable energy, fuel cells, natural gas, emissions, and social management in international operations.