Thursday, March 27, 2014

A practitioner's reflections on the problems of shared value

After our article on shared value came out in the California Management Review, and we published our last blog piece summarizing our critique, we've had a lot of response from various academics and practitioners in the corporate responsibility field. In fact, we've probably had more emails, comments and calls on this one article than we've had on anything else we've ever published. It has clearly struck a nerve. In the main, these responses have been very positive, suggesting that a lot of people have just been waiting for an article like this to come out. Here's just a smattering of some of the responses we've received (you can also read the comments to our blog post for more):

"This is a long over due excellent and comprehensive critique on the overly optimistic and shallow CSV framework that doesn't really address the real trade offs required to get to sustainable development."

"Good on you for re-framing this topic in a manner that more fully reflects the spirit of corporate social responsibility."

"It is some of the most enjoyable reading I have done in a very long time."

"Just read you CMR paper on CSV - well done. It is about time that someone took this idea apart."

Of course, many commentators, even whilst being supportive of our critique, have also pointed out some of the pragmatic benefits of Porter and Kramer's approach, like this one:

"I can see how the win-win wonderland (in Mintzberg's words) could be a diversion, but I wonder how it might crack existing inertias, and/or if any positive momentum could be leveraged for fashioning a more complete framework."

Such considerations of the lifeworld of business is a theme that is addressed in the discussion we have with Porter and Kramer at the end of our article, but is not something that we fully elaborate on. With this in mind, we thought it worthwhile to post here one of the more thoughtful and extended responses we received from a corporate responsibility practitioner. This is from Rory Sullivan, a veteran of the responsible investment community, now working as an independent advisor as well as being a Senior Research Fellow at the University of Leeds. He explores some of our points with regard to how CSR and CSV might be seen from a practitioner perspective. We thought they deserved reproducing here as they help to frame an important element of the debate in a constructive way:

"A proper analysis of the concept and value of ‘Creating Shared Value’ has been needed for some time, and your article does an excellent job of setting out the strengths and weaknesses of CSV. I was disappointed that Porter and Kramer failed to engage with the substantive points that you raised; their bludgeon of a response seemed at odds with the nuanced and careful arguments you presented in your article. While I support the broad lines of argument and analysis in your article, I would like to offer some reflections from a practitioner’s perspective:

  • Your discussion of “CSR as a Straw Man” is fair in its treatment of the academic literature (which has argued that CSR should be a corporate strategic priority). However, CSR in practice is quite different. In far too many companies, CSR continues to have limited business relevance (in terms of its influence on strategy or capital allocation) and remains far closer to philanthropy than the theoretical literature suggests (or would like).
  • On the originality of CSV: Your review of the literature ignored the many important practitioner contributions (e.g. by John Elkington, Stuart Hart, CK Prahalad) which have influenced CSR in practice. I suspect that many practitioners see CSV as a glossy reformulation of ideas such as the triple bottom line, rather than as a new framing of the debates around the role of business in society.
  • On the evidence for CSV: One of the key challenges faced by companies in practice is that ideas that work at a local level and at a small scale, may or may not work [in fact, they often don’t] when they are scaled up to the corporate level or when other companies try to replicate the experience. There are various reasons – the generalizability of approaches, the transaction costs, etc of moving to scale, the problems of taking projects and processes from one corporate culture and trying to implement them in another.
  • I’m not convinced by your argument that CSV is based on a shallow conception of the corporation in society. My (personal) reading of the Porter and Kramer article was that it was best understood as an analysis of the corporation in society, where the corporation is taken as the central unit of analysis (perhaps akin to every western individual being at the centre of their own personal narrative). In that frame of reference (which, I accept may not be what they had in mind), the concept of CSV could be interpreted as simply an argument that there are things that companies can do to make them a little more useful to (or a little less harmful) to society."
Plenty of food for thought there. Any more practitioners out there want to throw their two cents in?

Photo by Ross. Reproduced under Creative Commons licence

Tuesday, March 4, 2014

Four big problems with "Creating Shared Value"

The idea of "Creating Shared Value" (CSV) popularized by Michael Porter and Mark Kramer in the Harvard Business Review has probably done more to get corporate responsibility issues into the boardroom than anything else written in the last few years. In many respects, that is a good thing. Or at least it is until you start to realize all the big problems that are hidden behind the big ideas of CSV.

We've just published (together with Guido Palazzo and Laura Spence) a comprehensive critique of CSV in the California Management Review. The published version features a response from Porter and Kramer and a counter response from us which we think makes for quite enlightening reading (you can also download a free, but slightly different, version of our article but without this dialogue over at SSRN).

Our article sets out four main problems with CSV:

1. It is unoriginal. 
Porter and Kramer simply don't acknowledge that there is little new about CSV. People have been writing about much the same thing for decades. And the corporate initiatives they rebrand as CSV are just attempts to relabel practices that were already going ahead prior to them publishing their article. It's just that some people call those practices "strategic CSR," "social innovation," or "stakeholder management."

2. It ignores the tensions between social and economic goals.
CSV is presented as "moving beyond trade-offs" between social and economic goals. But that is only because Porter and Kramer ignore any such trade-offs that might need to be made. Sure, there are some great opportunities where business success can be aligned with social progress. But there are also a whole host of social problems, especially those caused by business, where social and economic goals inevitably conflict. CSV prompts managers to simply ignore them.

3. It is naive about business compliance
In a move very much reminiscent of Milton Friedman's famous critique of CSR, CSV "presumes compliance with the law and ethical standards, as well as mitigating any harm caused by the business". Of course, this is where all those messy "trade-offs" are hiding. But as long as you can presume them away, then you don't have to deal with them. In fact there is only one sentence dedicated to social harms, ethical norms and legal compliance in their whole article. So, let's just ignore all the occasions when firms harm people or the environment. Let's ignore all all the times they fail to uphold some of the laws and ethical customs of the places in which they operate. Then we can talk about CSV. But let's not pretend that this is a useful strategy for corporate responsibility or still less a sane way to re-legitimize business, as they claim in their article. Just getting firms to respect the spirit of the law - say in paying their fair share of taxes or respecting international labour standards across the globe - would be a much better way of re-legitimizing business.

4. It is based on a shallow conception of the corporation's role in society
CSV is supposed to be about "reshaping capitalism" but in reality it is really just more of the same of all the stuff that has given capitalism such a bad name - a blind focus on individual corporate self-interest. It will help solve some social problems, and will make some firms, and some stakeholders better off … but who are they kidding that this is going to save capitalism? What we need is a perspective that acknowledges the systematic nature of many of the problems we face, and a willingness from firms to engage in collaborative responses with other stakeholders to solve the problems that need solving. Not just those that can be cherry-picked to make a fast buck.

The point is not that CSV contributes nothing to the debate on corporate responsibility - there are some very good reasons why it has met with so much success, as we discuss in the article. But in ignoring much of which is actually problematic in the field it gives a very unrealistic picture of the challenges ahead. Managers looking to combine social welfare with economic prosperity simply deserve more than the whitewash that CSV offers them.