Follow Us:

FSG Blogs

see all

Social Impact Blog RSS

See more posts from the Social Impact blog

CSV vs. Sustainability: The Debate Continues

Posted by: FSG on 6/10/2011

By Michael Sadowski, Vice President, SustainAbility

“…it has always been our intention to be more than a corporation that makes mortgage loans; we wanted to be a force in making positive differences in people’s lives. Our goal was – and still is – to demonstrate that there is a unique role for the private sector in public service."
--Angelo Mozilo, CEO of Countrywide Financial Corporation
February 4, 2003 speech to The Joint Center for
Housing Studies of Harvard University

 

 

I am pleased to make my first contribution to FSG’s Knowledge Exchange on a topic which is of great interest to SustainAbility, FSG and our respective networks – the percolating debate over the distinctions between “creating shared value” and other terms, including sustainability. FSG asked me to adapt a piece I wrote in April for SustainAbility’s blog (What’s New About Creating Shared Value?) which generated considerable reaction on our website and beyond. In writing this, I am cognizant that others have more thoughtfully contributed their perspectives, including our founder John Elkington for The Guardian (Don’t abandon CSR for creating shared value just yet).

Summary of “What’s New…?

To recap the main elements of my blog:

  • CSV isn’t anything new, but rather fresh terminology for a concept which many in the sustainability field have espoused for a long time (see The Economist’s critique which cites Jed Emerson’s concept of blended value and Stuart Hart’s “Capitalism at the Crossroads”). For these authors and others, regardless of the term used (e.g. sustainability, CSR, CSV), the underlying meaning is the same: companies thrive over the long term when they actively consider the environmental, social and economic contexts in which they operate and adapt accordingly.
  • Porter and Kramer attempt to distinguish CSV by highlighting its proactive emphasis on companies developing new products and markets that help solve social problems, such as GE developing ultrasound machines for use in rural African villages. Yet, we and others have long advocated the need to rethink products, markets and business models to address the world’s intractable social and environmental challenges (see an illustration of SustainAbility’s model of sustainable innovation on page 26 of The Social Intrapreneur).
  • This said, we welcome the authors’ intellectual heft behind the sustainability (or CSV) agenda, and think good can come from it, particularly if they get additional attention from senior executives.
  • We also welcome their call for focus – “the most fertile opportunities for creating shared value will be closely related to a company’s particular business...” Many companies today try to address a multitude of sustainability issues, which can distract them from investing in the areas in which they can most add business and societal value.
The Tempting yet Risky Simplicity of CSV

CSV is an appealing framework because of its apparent simplicity (“society wins when we win”), yet this may lure us into believing that companies won’t have to make value judgments in addressing thorny issues. As SustainAbility’s Board member Peter Zollinger pointed out, “the risk: we fool ourselves into believing that long-term business success and global sustainability outcomes are natural twins which we can both maximize without having to confront tough choices.” For example, there is certainly shared value in GE’s developing an ultrasound market in rural African villages. Yet, GE and other manufacturers have been held to account for the use of their products for selective sex abortions in India. It’s not easy to see the shared value for GE and others trying to solve this sad situation in India, yet their values compel them to engage and look for solutions.

CSV also cedes too much discretion to corporations in determining society’s end of the value equation. As the lead-in quote suggests, there were many mortgage bankers who believed they were creating shared value by pushing sub-prime loans. We see the same assertion of shared value in other sectors: biotechnology (food security and nutrition), fossil-based power generation (socio-economic development) and so forth.

CSV does not pose the critical question: is the company’s fundamental business model or activity in the best interest of the planet and society? “Modern” agricultural practices might hold advantages over fair trade in the short term, but what happens over the longer-term when these modern practices strip ecosystems of biodiversity or pollute water tables? A growing fast food company may contribute societal value via job creation, yet at what cost to human health? These are the sorts of difficult but vital questions that “sustainability” compels us to ask.

CSV: One Arrow in the Sustainability Quiver

We welcome CSV as another arrow in the sustainability quiver – a framework that nicely describes one way in which addressing societal needs creates business value. Yet we will keep that arrow alongside the others in our quiver – the “traditional” tools of the sustainability or CSR trade: stakeholder engagement, horizon scanning, issues management, communications, etc. And of course the most important tool from our perspective: the persistent questioning of whether a company’s business model adds value to society, the planet and the economy over the long term.

About Michael Sadowski: Based in New York, Michael leads SustainAbility’s work in the finance and consumer goods sectors and is a member of SustainAbility’s Management Team. Over his career, Michael has advised a variety of global companies on sustainability issues, focusing on strategy development, business case articulation, communications and stakeholder engagement. Michael’s past and current clients include Brown-Forman, Gap, Inc., Goldman Sachs, Holcim, HP, Nike and Standard Chartered. Michael plays a key role in SustainAbility’s research and advocacy work, and has researched and written on topics including the business case for sustainability in emerging markets (Market Movers), globalization (Raising Our Game), stakeholder engagement through web 2.0, engaging mainstream investors and retail sustainability (European Retail Digest, Winter 07-08).  

 



Rate:
Views: 13992
Your Rating: 0.0   Average Rating: 4.8   Ratings: 5
Kevin Moss
Reply | Report
0 Points
Michael, great observations.

I think that this is an important debate. CSV is valuable, but to some extent the easier part of corporate responsibility. When societal good and profitable growth align the case makes itself. The bigger challenge is when societal/environmental good conflicts with profitable growth. I see that as the most important component of corporate responsibility. The accompanying question perhaps is, were we to be able to fully benefit from every intersection between societal/environmental good and profitable growth, would we have done enough to solve society's biggest problems ? If the answer is yes, CSV would be sufficient.
    ►
FSG
Reply | Report
0 Points
please see Michael's reply below.
Lavinia Weissman
Reply | Report
0 Points
Hello Michael and Kevin,

I like the metaphor of "quiver and arrow." Kevin's points are well thought out.

But I think the power of the question you ask is more to the point now. Strategists tend to describe a methodology or approach in which they bring their clients and markets into engagement.

Like Jeb Emerson and Chris Laszlo, I tend to believe there is more power derived from

1. The question you ask?

2. And who comes to engage in the question asked and why?

I have been looking at this carefully with my recent question driving my research and writing:

"Can Sustainability Sustain?"

First I looked a this question here from the point of view of Accountability versus Sustainable Value

http://ht.ly/5j2fx

And then argued my case with some research I conducted over the last 2-3 years, here:

A New Wave and Format for Stakeholder Engagement

http://thestoryofmeaningfuluse.com/2011/06/14/can-sustainability-sustain/

Lavinia
    ►
FSG
Reply | Report
0 Points
please see Michael's reply below.
Michael Sadowski
Reply | Report
0 Points
Thanks for your comments Kevin and Lavinia.

And nicely put Kevin - the challenge is of course when companies find that societal needs don't mesh with their business objectives. This is when, as Lavinia put it, a company needs to be asking the right questions and engaging a range of stakeholders.

Looking forward to hearing FSG's reaction to this blog.

Best,

Michael
Mark Kramer
Reply | Report
0 Points
Michael-

Thanks so much for your thoughtful contribution as a guest blogger on our site. The relationship between CSR and CSV has generated a vigorous and constructive debate that we welcome, as it further highlights the complex interdependence between business and society.

We believe that CSV is a new and different framework, although it does indeed overlap with elements of CSR and sustainability as well as newer thinking around blended value, bottom of the pyramid marketing, inclusive business, and impact investing. In fact, many of the examples in our article were likely adopted under one of those other rubrics -- although no single one of those rubrics encompasses all of the dimensions of CSV.

CSV is driven by the creation of economic value and competitive advantage. It is measured by the economic and social value created, not by the profits or social benefits alone. It is at the core of the company’s strategy rather than a peripheral modification of operations or a tangential initiative. And unlike CSR, it includes a proactive emphasis on innovations that enable companies to help solve social problems that they neither create nor contribute to.

CSV does not replace CSR or sustainability, nor does it replace a company’s obligation to comply with all laws and regulations. Companies will still need to report and improve their environmental, social and governance performance as part of their license to operate. A company that follows a CSV approach will do many of the things that a company following a CSR or sustainability approach would do, but over time, those two companies will look less and less alike as a strategy to pursue shared value leads to an increasingly distinctive competitive positioning.

We are not suggesting that all profit-making efforts are good for society. Rather, we are trying to get away from the question of whether companies are good or evil and focus on the creation of economic and social value.

It is easy to point out the bad consequences of business activities, but the reality is not so simple. For example, the quote from Countrywide’s CEO would have sounded much more sincere from a nonprofit microfinance institution. Yet some people no doubt benefitted from by purchasing a home on easy credit from Countrywide, while the recent microfinance crisis in India has allegedly led to suicides by those too deeply mired in multiple microfinance loans. The fact is, access to credit helps some people improve their lives while others are destroyed by it. GE’s low-cost ultrasound device may have enabled gender-based abortions, but has also saved lives by avoiding premature births. Agricultural advances have depleted natural resources but fed millions of people.

In reality, most products can be used for good or ill and our moral judgments are strongly flavored by our personal values and cultural biases. And there lies a key distinction. CSR, as you describe it, is about trying to make companies behave themselves and be good in some moral sense. And we are all for companies “behaving well,” whether measured by environmental impacts, legal requirements, consumer preferences, or our own personal values. CSV, on the other hand, is about maximizing the synergy between successful business strategy and solving social problems. Neither concept is fully subsumed under the other, but both together would go far in contributing to the welfare of the world.
       1       
Post Your Comment  
Comments are moderated and will be displayed after
approval.
 
* Name  
 (Your name will appear with your post.)
* Email  
 (Your email is required, but it will not be posted.)
* Comments:
CAPTCHA image
* Enter the code shown above:

Follow Us:

Facebook Twitter YouTube LinkedIn RSS