By: SIMRAN KAUR ANUBHAV RASHMI DARSHAN MUKUL ARORA

Overview of the Case Study

What is Capitalism
Why is Capitalism under Siege Corporate Social Responsibility

Creating Shared Value (CSV)

o What is Shared Value o How CSV is Created and in how many ways it can be created o How we can Implement CSV o Importance of CSV

o Role of Social Entrepreneurs

CSV Implications for Govt. and NGOs

o Govt. Regulation and CSV

Creative CSV in Practice How CSV differs from CSR Next Evolution in Capitalism

What is Capitalism?
An economic system in which the means of production are privately owned and operated for profit.

CAPITALISM
Unparalleled vehicle for meeting human needs
Creates job and builds wealth Capacity to produce goods and services are owned and

controlled by individuals or groups Profit Motive The profit motives provides powerful incentives for the steady expansion and improvement of production Produces higher standard of living. ensures the most rational & efficient allocation of capital
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CSR(corporate social responsibility)

The term "corporate social responsibility" came in to

existence late 1960s Process in which Companys voluntarily do something for the well being of Society Emerged largely to improve companies reputation Treated as necessary expense In response to external pressure More the companies embrace it, more they are blamed for societys failure
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Introduction of CSR in a Capitalist Economy

Present view of Capitalist system & PROBLEM NOWADAYS

Business is seen as the major cause of social,

environmental and economic problem

Companies make profit on the expense of society

Civil Society addresses social weaknesses at the

expense of business
Tradeoff between economic progress & social progress

institutionalized
Leading to diminished trust in business

Cont
Companies remain struck in Social Responsibility

mind set Struck in Outdated approach to value creation

o Optimizing short term performance rather than long

term success o Ignoring Customer needs

Narrow conception of capitalism Business and Society pitted against each other Societal benefits is inversely proportional to Economic

growth

Saving Capitalism
Companies must take lead in bringing business and

society back together

Businesses must reconnect company success and social

progress
Solution to all this lies in Principle of shared values A Concept called CSV: Creating shared values

A SOLUTION TO THE CURRENT PROBLEMS

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What is shared value?

Policies & operating practices that enhance

competitiveness simultaneously advancing economic & social conditions in communities in it operates Focuses on connections between societal & economic progress Has power to unleash the wave of global growth both economic and social progress must be addressed using value principles
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The concept-shared value

Recognizes societal needs, social harm or weakness

frequently create internal costs for firms Addresses societal harms & constraints doesnt raise costs as they can innovate through new technologies operating methods & management approaches increase productivity & expand their market Focuses on growing technology & strengthening local cluster

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How shared value is created?

1.

There are 3 distinct ways to create it:

reconceiving products & market 2. Redefining productivity in the value chain 3. Enabling local cluster development
Each of these is part of the virtuous circle of shared

value improving value in one area gives rise to opportunities in the others.
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Reconceiving products & market

Many companies have lost sight of basics: Is our product good for our customers? Or for our customers customers? Can our products incorporate greater social benefits? Demand for products & services that meet social needs is

rapidly growing. Companies like Intel & IBM are devising ways to help utilities harness digital intelligence to economize on power usage By this whole new avenues for innovation open up & creates shared value
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Addressing the societal concerns and issues

Great opportunities in disadvantaged communities

and developing countries. Example. Low price cell phone that provide mobile banking and weather and crop updates

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Environmental Impact

Energy Use

Supplier Access and Viability

COMPANY PRODUCTIVITY IN VALUE CHAIN

Water Use Employee Skills

Employee Health

Worker Safety

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Ways to transform shared value into value chain

energy use is reexamined. Resulted improvements through better technology, recycling, etc. Energy use & logistics redesigning to reduce shipping distances, improving vehicle routing. logistics

enabled by improving technology Utilization of water, raw materials, packaging, expanding recycling & reuse WALMART saved $200 million by reducing its packaging & cutting delivery Resource use routes

with increasing access to input, technology, companies improve suppliers quality, productivity & efficiency. Capable local suppliers avoids costs & reduces cycle time, increase flexibility, Procurement enable innovation.

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Distribution

Can drastically reduce paper & plastic usage as shown by iTunes, kindles. HUL empowered underprivileged female entrepreneurs by creating door to door service in Project SAKTI. This project accounts for 5% of HULs revenue

Employee productivity

Awareness about positive effects that living wages, safety, wellness, training of employees have on productivity By investing in employee wellness programs JOHNSON & JOHNSON saved $250 million on health care costs.

Location

By opening local processing plants processing & shipping costs have been reduced. Capable local suppliers reduces cycle time, increases flexibility & enable innovation When firms buy locally, suppliers get stronger, increase their profit, hire more people & pay better wages-benefiting the community

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Local cluster development

It forms open & transparent markets Amplifies connection between its success & its

community success Local clusters boots productivity Poor public education imposes productivity & remedial-training costs Poverty limits demand for products & leads to environmental degradation, high security cost & unhealthy workers. Often done in partnership like partnership with NGOs
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 Local clusters enables fair markets which allows company to

secure reliable supplies & give suppliers better incentives for quality & efficiency Helps in developing positive cycle of economic & social development To support these clusters companies need to identify gaps & deficiencies in areas then to focus on the weakness that represents the greatest constraints to companys productivity & growth Most successful ones are those which involve collaboration within private sector, govt, trade associations & NGOs
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Example-Nestles Nespresso
Nestle established local facilities to measure the quality of

coffee at point of purchase This allowed to pay a premium for better quality directly to growers & thus improve incentives. Greater yield per hectare & higher production quality increased growers income. It built agricultural, technical, financial & logistical firms Its efforts led to increase access to essential agricultural inputs. It worked in partnership with Rainforest alliance, an NGO, to teach farmers more sustainable practices that makes production reliable.
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Implications for government & civil society

Regulators would accomplish much more by focusing on

measuring environmental performance Introducing standards, support technology that promotes innovation, improve environment & increase competition CSV cuts across traditional divide b/w responsibility of business & those of govt or civil society. From societys perspective: what matters is the benefits delivered by companies that are best positioned to achieve most impact for least cost rather than which company is creating it. CSV guides the use of resources across all areas of societal concern. Partnership brings in NGOs & govt to improve local cluster & upgrade value chain
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Government regulation & shared value

Regulation is necessary for well functioning markets. Regulations that enhance CSV set goals & simulate innovation Such regulations characteristics are: 1. Set clear measurable social goals; where appropriate set prices 2. 3. 4. 5.

for resources that reflects true costs Set performance standards but doesnt prescribe the methods to achieve them Define phase-in-period for meeting standards which reflects investment or new product cycle Universal measurement & performance reporting systems Efficient & timely reporting of results, which can be audited by govt.
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Shared value in practice

Not all profits are equal.
Profits involving social purpose represents higher form of

capitalism Creating shared value presumes compliance with law & ethical standards Highlights human needs to be met, large new market to be served, internal costs of social & community deficits Opens many new products to be offered, new ways to configure value chain More sustainable, quality improvements
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CSR v/s CSV

CSR CSV Value: doing good Citizenship, philanthropy, sustainability Discretionary or in response to external pressure Separate from profit maximization Agenda is determined by external reporting and personal preferences Impact limited by corporate footprint and CSR budget Value: economic and societal benefits relative to cost Joint company and community value creation Integral to competing Integral to profit maximization Agenda is company specific and internally generated Realigns the entire company budget

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Ways of implementing
There are 3 avenues for creating shared value: 1. Enhancing the cluster 2. New products & services that meet social needs or serve overlooked market 3. New value chain configurations will create demand for equipment & technology

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Next evolution in capitalism

Focuses companies on right kind of profit- profit that

creates societal benefits More sophisticated form of capitalism, one imbued with a social purpose Recognition of new and better ways to develop products, serve markets & build productive enterprises Societys overall interest would be served New approach to managing that cuts across disciplines B- schools curricula will need to be broaden in no. of areas
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Conclusion
Not all societal problems can be solved by Shared

Value solutions but it offers the opportunity to utilize the skills, resources & management capability to lead social progress in better ways. In the process, business can earn the respect of society again.

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