How might addressing social needs create economic value for businesses?
Social values and economic values are not mutually exclusive. Traditionally, corporates focus on maximising their profits without taking into account sustainability of the community they are operating in. With the concept of “corporate social responsibility” (CSR) becoming more prevalent, corporates started giving back to society by investing a portion of their profits into activities that benefit the community. However, the emerging idea of “creating shared value” (CSV) is bringing businesses beyond philanthropy or CSR.
Creating Shared Value (CSV)
CSV is a new business model to enable corporates to create economic value while resolving social problems and contributing to the common good at the same time. Instead of being an initiative to do good apart from the core business model of the companies, CSV puts societal challenges and problems at the core of the business model. By adopting the CSV framework, businesses help create a healthier population and a more sustainable society which in turns enable businesses to prosper and enhance their profitability.
The Cost of “Doing Nothing”
The traditional business model ignores the cost of “doing nothing”. While business solutions fail to address the harmful effects brought by their business practices to achieve profit maximisation, long-term and implicit economic costs due to social deficits and environmental challenges create tremendous potential loss and increase unforeseen risks for companies operating in the communities, especially in this era of rapid change.
Businesses’ Competitive Edge by Adopting CSV
Wellbeing of the community contributes largely to the continuous and sustainable growth and productivity of companies. As societies are becoming more socially conscious, CSV also creates mutual trust between corporates and its stakeholders. Societal needs such as clean and efficient use of energy and water, environmental conservation, education, health and wellbeing of the population, affordable housing, opportunities for decent jobs, workers’ skills development and workplace safety, and community economic development, etc, also represent huge untapped market potentials.
More and more corporates are switching their business models into the CSV model nowadays to strive for long-term and sustainable success, for themselves and the communities alike.