Business Case
CSR v CSV:
The Difference and Why It Matters

The trailblazing researchers and business strategists Michael Porter and Mark Kramer first introduced shared value in an article they wrote for Harvard Business Review in 2006; and later expanded upon the concept in 2011 with their article, “Creating Shared Value.” They defined the concept of shared value as “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.”

Building on the ambition to move from reducing negative impact to creating a positive one, the CSV model has become the business-driven model pervading sustainable global business and capital. The shared value model supports a positive impact for society, the environment, finance, and all parties involved. It is characterized by the principle: Doing well and doing good are not mutually exclusive. Financial success does not need to come at the expense of society or the environment; and creating a positive impact on society and the environment does not need to come at the expense of profit.

CSV shows that financial, societal and environmental benefits can be achieved simultaneously. In fact, at the core of the model are societal and environmental issues that serve as the drivers in propelling profitable shared-value business cases across a wide spectrum of companies and industries. In this regard, CSV is the ideal business model to support the realization of the UN’s Sustainable Development Goals (SDGs).

CSR v CSV

Porter and Kramer drew a distinction between the common activities related to the well-established model of Corporate Social Responsibility (CSR) and their new business concept of Creating Shared Value. They explained that “Shared Value is not social responsibility, philanthropy, or sustainability; but a new way for companies to achieve economic success.”

A global shift

Companies of all sizes throughout the world are embracing shared value. At the 2019 Shared Value Summit, hundreds of leaders from companies, nonprofits and governments came together to help shape strategies and discuss innovative ideas that will accelerate this model. These companies and many others are recognizing the benefits of shared value, and are ready to move forward away from negative impact avoidance and toward positive impact creation.

Companies can indeed contribute in meaningful ways. Porter and Kramer have assessed the impact of CSV in agricultural cases, saying, “while Fair Trade can increase farmers’ incomes by 10 percent to 20 percent, shared value investments can raise their incomes by more than 300 percent.” Lifting people from poverty is one way that CSV can help achieve the SDGs — in fact, shared-value business cases often touch many SDGs at the same time.

Case study: Nestlé

Nestlé’s ambitions are to create shared value by having a positive impact on society and the environment, improving farmer welfare, and driving environmental sustainability in coffee farming and consumption. They believe that in order for their business to prosper in the long term, so too must the communities with which they work. Nestlé describes itself as a “catalyst for change going beyond its own operations.”

Nestlé has set 42 commitments to creating shared value, which are linked to three overarching ambitions: “Enable healthier and happier lives; Help develop thriving, resilient communities; And steward resources for future generations.” The company’s ambitious goals are rolled into The Positive Cup initiative, which addresses these commitments. As part of this vision, its subsidiary, Nespresso, set new goals in the areas of coffee sourcing and social welfare. In this regard, they are concentrating efforts in a few key areas — aluminium sourcing, resource use, product disposal, and resilience to climate change — which have become important drivers in the company’s commitment to play its part in achieving the SDGs.

Nestlé puts these objectives into place with its 169 shared-value projects. One example is how it is working with coffee farmers to provide training to improve their practices. This leads to higher-quality beans, higher yields and higher revenues, with a smaller environmental footprint. This shared-value strategy helps these bean farmers improve growing techniques and farm management and become more resilient.

Nestlé’s strong stance on innovation has supported volume growth, with 30 percent of sales coming from products introduced or renovated in the last three years. By improving efficiencies and reducing waste while innovating for responsible production and consumption, Nestlé is working to create a positive impact for the regions where they get their coffee beans. For example, Nespresso is creating jobs and economic growth by pursuing innovative solutions to farmer welfare, including the expansion of its AAA Farmer Future Program through a retirement savings plan for farmers in Colombia, and the provision of training and engagement of 63,000 farmers across 11 countries. Nespresso also trained a team of over 300 highly skilled agronomists who created shared value for their value chain partners through an extensive agroforestry program, and land management training initiatives in the AAA regions.

Additionally, the Nespresso Sustainability Innovation Fund was launched to initiate and attract blended financing solutions — to find new financial mechanisms to interest investors in socio-environmental projects that result in positive impacts.

CSV is the business model that will accelerate the achievement of the SDGs. It represents a game-changing shift from Corporate Social Responsibility and the traditional mindset that business can either do good or make a profit, to a business model that has the power to change the planet.