What is Creating Shared Value (CSV)?
Creating shared value is the practice of profit in a way that also creates value for society.
There are 3 ways to create shared value:
1) Reconceiving products and markets
2)Redefining productivity in the value chain
3)Enabling local cluster development.
Since corporate social responsibility (CSR) failed to make a significant societal change, more and more corporates are inspired to move from CSR to Creating Shared Value (CSV). What is the difference? This image summarizes it well.
(Image credit: Profitable Good)
ESG vs Shared Measurement
This article is not designed for external reporting. Instead, the main focus is to provide business and social impact results to internal management.
Many public and private equity are rushing to rebrand their investment as ESG investments due to strong demand. The traditional approach of ESG assessment is done based on crowd-sourcing data from publicly available sources applied through a machine learning approach by leading sustainability data feeds like Sustainalytics (Morningstar), and TrueValue (aligned to SASB also), Refinitiv, etc. Sustainability data feeds often scrap companies' annual reports based on standards such as GRI, SASB, CDP, GRESB, etc. They are also aligned with the UN Global Compact.
While ESG is one marker to communicate sustainability, ESG scores cannot be equated to impact. Many asset managers are trying to build a proprietary framework to align ESG with the popular impact accounting frameworks such as sustainable development goals and impact management project.
These proprietary models rushing to align sustainability to social impact are likely to create a flawed model and mislead investors.
The real social impact requires an in-depth stakeholder-driven approach championed by impact management project. The figure below explains the impact ecosystem with relationships. For example for businesses stakeholders can be -
- Employees
- Beneficiaries
- Supply chain
- Volunteers
MEASURE THE SOCIAL IMPACT OF SHARED VALUE
If companies are not measuring the their shared value by connecting social and business results, they can miss important opportunities for innovation, growth, and social impact at scale. "Measuring Shared Value" is an integrated business strategy with social strategy.
An integrated shared value strategy and measurement process includes four steps.
Step 1: Identify the social issues to target.
The starting point for shared value is identifying and prioritizing specific social issues that represent opportunities to increase revenue or reduce costs. This requires a systematic screening of unmet social needs and gaps and an analysis of how they overlap with the business across the three levels of shared value. The result of this step is a list of prioritized social issues that a shared value strategy can target.
Step 2: Link Business and Social Results
The next step would be to align business results with social results. While there is traditional thinking is that businesses should measure internal business goals. Let's look at an example from the Shared Value Initiative.
Source: FSG Measuring Shared Value How to Unlock Value by Linking Social and Business Results
How to build strategy
Step 3: Track Program
Using the business case as a roadmap, companies then track progress against the desired targets, as with any performance improvement process. This step includes tracking inputs and business activities, outputs, and financial performance (revenues and costs) relative to projections.
Step 4: Measure results and use insights to unlock new value.
The final step focuses on validating the anticipated link between social and business results and determining whether the outlay of corporate resources and efforts produced a good joint return. Insights and lessons from this analysis will inform opportunities to unlock further value creation through refining the shared value strategy and execution.
