Insight & Analysis
CSR and Value:
This was originally posted in Triple Pundit in Feb 2014. I am reposting it here as it is part of my collection of writings on Where business meets society.
At some point, likely soon, I will do more writing on CSR and Value and include some of the additional frameworks and tools beyond the value continuum.
What I think is important about the content below is that it presents a more nuanced and, I believe, useful model of how to think about value in the space where business meets society than does the more traditional Shared Value model.
Of course, I am far from objective on this! I hope you will read it and form your own opinion.
The CSR Value Continuum: From Value Distribution to Shared Value Creation
Originally posted in Triple Pundit | Tuesday February 11th, 2014 | 1 Comment
By Wayne Dunn
That is the reaction I received two weeks ago after sending a note about my value-centric approach to CSR and highlighting the economic sustainability inherent in CSR projects that have robust value propositions that can align the social, economic and developmental interests of companies, communities, shareholders and other stakeholders.
CSR is a complex, evolving and exciting area that is finding new ways to create and distribute value. Simultaneously, the language and frameworks around CSR are evolving rapidly and helping executives, practitioners and academics with practice and understanding. We are all learning and none of us is an “expert.” I want to share some of my thoughts on CSR, shared value and a framework that has helped me to be more effective in this space.
The concept of shared value has been eloquently described with powerful voices that have done well to help business and society understand what it is, to think about how to develop it and realize the compelling value propositions that it can create. Professor Michael Porter and his team, through their work, their writing and the gravitas they carry, have helped many to see and think about business differently. As they wrote, shared value “generates opportunity, innovation, and competitive advantage for corporations—while solving pressing social problems.” To my thinking, this makes shared value an important aspect of CSR and good business strategy.
I believe that we do a disservice to business and corporate social responsibility if we place shared value actions outside of the scope of CSR, and I don’t think this is what Professor Porter and others intended at all.
I’ve spent a couple of decades developing, analyzing, evaluating and supporting CSR-related projects and programs around the world and across industries and sectors. Working on more than 60 projects in that time, I’ve developed some frameworks and tools that I find very helpful to allow me to analyze and understand specific situations and strategies. One I nearly always use is the CSR Value Continuum. It helps to look at the various CSR programs, projects and initiatives that a company is doing and place them on a continuum ranging from value distribution through to value creation.
Clearly, shared value is at the value creation end of this continuum, focused on finding those opportunities where 1+1=3; identifying value propositions that can align corporate, stakeholder, community, environment and other interests — creating new value by making the pie larger. At the other end of the continuum are value distribution actions.
These too are important. They are where companies share or distribute value in a voluntary and strategic manner so that communities, stakeholders, environment and other interests receive new value,and some level of value is created for the company through goodwill, reputational capital, social license enhancement, etc. Notice that at both ends of the continuum the actions produce value for the company, that there is some alignment of shareholder and stakeholder interest. If there wasn’t, why on earth would the company do them?
The mistake that people sometimes make is to assume that those CSR projects and initiatives that are at or closer to the value creation end are necessarily more important, that companies should do more of these and less of other projects. The full range of CSR actions — grants, donations, scholarships, education, training, community development, environmental restoration, local institutional development, local infrastructure, employment and skills development, local procurement and business development — are all important tools.They can be important for the company and for local stakeholders.
Depending on the specifics of each one, they will situate differently on the continuum. But in general something like grants, donations and scholarships would fit more towards the value distribution end of the continuum, while local procurement and business development would tend to be closer to the value creation end. The value continuum is useful in revealing to companies how their actions fall on a distributive-to-creative scale, and this understanding can help both strategically and tactically to optimize value return from CSR investments.
Companies and projects stand to maximize benefit by consciously thinking of their CSR projects and activities in terms of the value continuum and have a spectrum of activities that span the continuum. This benefit includes discovering new strategies and opportunities for creating and capturing more value from existing activities — opportunities which risk being overlooked if focussing only on one end of the spectrum.
CSR is a complex and evolving field. There are some great projects and great innovations happening, and value is being created in exciting and innovative ways. I’ve found that practical tools and frameworks like the value continuum can help companies and practitioners to enhance their understanding of the value aspects of their CSR activities and to be more efficient at creating and distributing value.
Comment by Sebastien Mazzuri, FSG•
Dear Prof. Dunn,
Thank you for your insightful post. It is clear to me that successful social engagement from corporations requires a portfolio of initiatives, which will be positioned at different levels along the “CSR Value Continuum” you are describing. And I also agree that language and frameworks are helping stakeholders with practice and understanding.
For this latter reason, one of the potential challenges I see with using a continuum is that it does not make it easy to communicate some of the key differences between the examples of corporate social engagement you provide. In particular, the strength of the link between social and business value creation is very different at both ends of your spectrum. My experience and that of my colleagues at FSG, especially with a corporate audience, is that there is value in drawing a clear line somewhere to better spell out the characteristics of these different forms of corporate social engagement; in particular, why companies engage, what value is being created, how and at what cost for the business.
With shared value, it is possible to communicate information that is i) forward-looking (companies know what social outcomes they are after), ii) directly linked to business financial indicators (it is about increasing sales or market share or reducing costs, all of which will be showing in the P&L), and iii) data-driven (companies have usually invested a lot in quantifying the social opportunity as a market, and they should develop a measurement strategy to document value creation with hard facts). This is more difficult to do in the case of product donations for example, or compliance with a set of ESG standards. Companies are doing these for good reasons but the link to business value creation through such factors as increased employee engagement or brand recognition is more elusive and harder to quantify – as you implicitly point out.
There are many frameworks that can be used to categorize these different types of initiatives, and I am sure that the idea of a “CSR Value Continuum” resonates well with some audiences. What I simply want to emphasize here is that I feel it is important to also go one step further and clearly articulate, one way or another, the key differences between different forms of corporate social engagement. This can only help executives, practitioners and academics accelerate the adoption of these principles for the greater good.
Regards, Sebastien Mazzuri, FSG
Response by Author (Wayne Dunn)
Dear Mr. Mazzuri
Many thanks for your informative comment. My apologies for the delay in responding but I have been active on field work and CSR projects.
You raise some interesting points and I suspect that our models and frameworks may have much more in common than our discussion would suggest. I think I may not have communicated clearly in my article as I certainly didn’t intend for a reader such as yourself to interpret that I was referring to only product donations or ESG compliance. In fact, I believe that tools such as the continuum do exactly what you explain is necessary – they help to understand and communicate better – so please let me try to clarify this.
I agree totally on the importance of establishing metrics that are linked to corporate objectives and in effective management of progress towards those objectives. I’ve been around this space for a long time and recall too well the days when many firms measured their CSR in terms of dollars spent, rather than value created. Metrics and systematic management has been a consistent theme in my CSR field work, writings and lectures since the 1990s
I see CSR as being predominantly about value; value-distribution, value-creation, shared-value between company and community, value over time, etc and in my work I’ve found it useful to have a range of tools and frameworks (buckets, continuums, etc) that help to better understandand communicate various aspects of value and optimize value-creation for the company and other stakeholders. Relationships are also critical to realizing latent value but that is another discussion.
I’ve long been an advocate for more systematic and quantifiable approaches to CSR strategy and management. Beginning in the 1990s I was helping companies and communities to develop and implement systems that would make management of CSR more efficient and easier to communicate and manage. In 1999 I authored and delivered the first paper on CSR and management that was ever presented at the Canadian Institute of Mining, Metalurgy and Petroleum (CIM) http://www.slideshare.net/waynedunn/beyond-beads-n-trinkets-cim-conference-paper-1999 .
A core part of this paper illustrates my wholehearted agreement about the importance of being able to differentiate various actions and activities. In my experience (which stretches over 2+ decades, across all continents and includes corporate, community, government, NGO and indigenous audiences) continuums and other related frameworks are actually more effective at communicating differentiation than the more rigid ‘bucket’ systems.
I have found that, while bucket frameworks can undoubtedly be helpful, there can often be blurred or confusing lines between different buckets (where does philanthropy stop and CSR begin, or CSR stop and Shared Value begin? And why?) and that a single set of buckets can create an artificial hierarchy that can make whole system optimization more difficult to achieve.
For example, if a company were to create a scholarship fund to train engineers, a program to support science and math in schools, and give support for a University and college to improve their ability to educate and train indigenous peoples from remote areas, I am sure we would agree that this would fall into your Philanthropy bucket and be at the value distribution end of my CSR Value Continuum. However, by applying a second framework, one that looks at the ability of the CSR Investment to continue to produce value over time, a more nuanced and useful perspective can emerge.
Over time you have on ongoing increase in local workers who are capable of working at professional and managerial levels, and an overall improvement in the capacity of local and regional education to produce well-trained professional workers from the project area. So, while the CSR spending was initially philanthropic and more about value-distribution, over time the results seem to move down the CSR Value Continuum towards value creation.
And, unlike some CSR spending that is a pure expense in that the value created is used up and gone in short order, this type performs more like an asset, returning value over successive time periods. In this case the use of multiple frameworks enables proponents to communicate more clearly how what seems like an initial philanthropic, value-distribution act can actually produce longer term, sustainable value creation (shared-value bucket).
I’ve found that a uni-dimensional, hierarchical bucket type of system, or indeed almost any framework if used by itself, could easily lead to the rejection of strategic activities such as the example above and that a set of frameworks, that could include continuums, buckets and other tools, can be of much more practical and strategic use. A recent short lecture that I presented has some additional examples of the tools and frameworks http://www.slideshare.net/waynedunn/csr-its-all-about-value and the full set as well as many other aspects of CSR is covered in our Executive Program on CSR Strategy and Management (http://www.csrtraininginstitute.com)
[Incidentally, the above example is taken from the development of the Saskatchewan Uranium mining industry, one of the most successful examples of extractive sector CSR with Indigenous peoples that I have ever seen – see http://www.slideshare.net/waynedunn/cameco-community-relations-report-1998 for more information]
I hope I have been able to explain more clearly how the continuum is just one of a series of frameworks and tools that we teach and use. Developed over time and based on both practical field experience and theoretical modeling and analysis, they allow for a nuanced and practical view of CSR and value. We’ve found that some of them apply better in one situation than another, that some fit some companies and industries better than others but, in their totality, they provide a useful set of tools for companies, practitioners and stakeholders and can accommodate a multi-faceted view of value. And this helps immensely with managing and communicating value and strategy around social engagement and CSR
Thanks again for contributing to this discussion. I agree that there are many frameworks and tools and that some will resonate better with some audiences than with others. None of us have all the answers and we are all learning as we work to help improve the efficiency of value creation in the space where corporate and community interests meet.
All the very best, Wayne