From Philanthropy to CSR to Creating Shared Value...

There is an ever growing awareness about social challenges for which governments and NGO's lack sufficient capabilities to fully meet them. At the same time, Companies or Businesses are perceived to be prospering at the expense of the broader communities despite increasing CSR activities.

Harvard Professor Michael E. Porter and Mark Kramer came up, in the 2011 McKinsey award winner HBR article, with the concept of Creating Shared Value. Let's have a close look what this is all about. What is the role of companies in communities and how is it evolving?

Prof. Michael Porter's evolution model

It started with Philanthropy

It's harder and harder to do pro-public business activities because supporting business is viewed as a questionable activity. Business has been trying to address these issues with philanthropy. In fact, the first response to business to these societal issues is philanthropy.

Twenty years ago was the question to corporate/companies of "what percentage of your profit do you give to support society? In India they have even passed a law on this with a strong recommendation that businesses should give 2% of their profit to philanthropy, if they don't, they have to say why.
Philanthropy is good. A place to start but philanthropy is not enough... simply because there is not enough money!

The next step is Corporate Social Responsibility (CSR)
CSR is more than just philanthropy, but it includes philanthropy; compliance, understanding the communities standards, citizenship, being a good corporate citizen, and "sustainability" which means a lot of different things that it's hard to define sometimes. It's clear about environmental sustainability but less clear about a broader sustainability. Many corporates have many CSR activities but they do it to be considered a good corporate citizen only.

The next step is Creating Shared Value (CSV)
The more we learn about poverty, healthcare, water, nutrition, about societal issues, the more we see opportunities to use economics or new business models to address these societal issues. Shared value is about creating new markets, new opportunities for growth, and new ways to improve productivity. With CSV, opportunities for disruptive innovations will proliferate. Capturing  these opportunities will require new thinking about market segmentation, customer segmentation,  supply chain management, human resource management, and other management disciplines. Some companies are already redefining strategic positioning around a shared value mindset.

Aligning strategic positioning with shared value opens up fundamentally new ways of thinking  about the business. Shared value opens up a new and far broader opportunity set for companies. Companies that create shared value will gain competitive advantages and superior performance. Finally, it's important to mention here that Shared Value is not about triple bottom line.