Can businesses solve social problems? Creating Shared Value Part of the Business Strategy and Sustainability module.

1. Unit 2: Business in Society
Can Businesses Solve Social Problems?
Creating Shared Value
Dr. Miles Weaver,
Lecturer, Edinburgh Napier University
m.weaver@napier.ac.uk @DrMilesWeaver
#BSSD17

2. "Increasingly, the world around us
looks as if we hated it.”
- Alan Watts

3. #BSSD17

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… or more time at Portobello?

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Session Outline
Learning Objectives
2.1
Discuss the role of business in society based on the different ‘responsibilities’ of
corporate social performance
2.2
Examine the key catalysts for change in the development of ‘business
sustainability’ and its influence on responsible business behaviour from different
stakeholder perspectives
2.3
Describe the key “grand challenges” facing society today and tomorrow, and
argue whether there is a role for business in addressing them
2.4
Explain the concept of ‘shared value’ (SV), clearly distinguishing SV from a
traditional view of CSR
2.5
Critically evaluate the strengths and weaknesses of SV as an academic concept
and its potential to bring about business growth, and more resources into
communities
By the end of this unit, students should be able to:-

8. ROLE OF BUSINESS IN
SOCIETY
LO 2.1: Discuss the role of business in society based on the
different ‘responsibilities’ of corporate social
performance

9. #BSSD17
What is the role of business in
society? See Ferrell et al., (2011, pg. 367 - 8)
1. “the business of business is business”
– Ought to be little consideration beyond profit and
shareholder return
Or
2. Prospects for social responsibility and for
business to play a critical and positive role in society
Constrained by:
Reality of the funds, time and ideas that business
contributes to a host of charitable, social, and quasi-
governmental platforms

10. #BSSD17
Conventional wisdom
• “The social responsibility of business is
to increase its profits” (Friedman, 1970)
– as long as it stays within the rules of the game
(no deception or fraud)
– Business people are experts at making money not
social policy
– Should be left to government & social service
agencies
• “Don’t worry about social issues, that this
was sort of something on the side, that
somebody else was doing it” (Porter,
2013)

11. Role of business in society:
the emergence of ‘CSR’
• Corporate responsibility
– Business and society depend on each other, and
have mutual obligations
– Pressure groups and advocates help ensure that
public expectations of business change
– Expectations vary between countries
• CSR: Create value by
doing good through
citizenship,
philanthropy,
sustainability (Porter,
2011)
Caroll (1999)

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Recap: Defining sustainability
• “meeting present needs without compromising the ability
of future generations to meet their own needs”
(Sanders, 2012)
OrganisationInputs Outputs
All issues involved in
resource consumption
All issues involved with
pollutant emissions

13. #BSSD17
The ‘Responsible Business’ (RB)
emerging agenda
“Responsibilities of organisations to their actions are
under intense scrutiny”
(Cannon, 2012, pg. 1)
The UN Global Compact (2000) makes this explicit:
“Never before has there been a greater alignment between the
objectives of the international community and those of the business
world. Common goals, such as building markets, combating corruption,
safeguarding the environment and ensuring social inclusion, have
resulted in unprecedented partnerships and openness between
business, governments, civil society, labour and the United Nations”.

14. CATALYSTS FOR CHANGE
LO 2.2 Examine the key catalysts for change in the
development of ‘business sustainability’ and its
influence on responsible business behaviour from
different stakeholder perspectives

15. #BSSD17
Catalysts for change
Under the spot light: influence of corporate actions and their
potential impact on issues which extend beyond the
traditional mind-set of the firm.
• New technologies
• Developments in markets
• New ideas
• Rolling back of the state, particularly 70s – present
Cannon (2012)

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Traditional political context
• Traditional expectations in relation to RB: pay taxes,
obey laws, provide economic opportunities (Boddy, 2011)
• Mañana: “let’s meet again?”
David Cameron promised to lead: “the greenest government ever”.
David Cameron, (2009)
“If the federal government had been around when the creator was putting his
hand to this state, Indiana wouldn't be here. It'd still be waiting for an
environmental impact statement.”
Ronald Reagan, 40th President of the United States, (1981-89)

17. #BSSD17
Paris Climate agreement
(Into force on 4 November 2016)
• The Paris Agreement builds upon the Convention and – for the first
time – brings all nations into a common cause to undertake ambitious
efforts to combat climate change and adapt to its effects, with
enhanced support to assist developing countries to do so. As such, it
charts a new course in the global climate effort.
• Central aim is to strengthen the global response to the threat of
climate change by:-
– keeping a global temperature rise this century well below 2 degrees
Celsius above pre-industrial levels and to pursue efforts to limit the
temperature increase even further to 1.5 degrees Celsius
– to strengthen the ability of countries to deal with the impacts of climate
change

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To reach these ambitious goals the following will be put in
place:
• Appropriate financial flows
• New technology framework
• Enhanced capacity building framework
• Supporting action by developing countries and the most
vulnerable countries, in line with their own national
objectives
• Provide for enhanced transparency of action and
support through a more robust transparency framework
Further information on key aspects of the Agreement can be found here
Paris Climate agreement (II)
(See UNFCCC, 2016)

19. #BSSD17
Donald Trump and climate change
The election of Mr. Trump
has left many environmental
campaigners fearful for the
future. He’s called global
warming a hoax and said
he’d cancel the historic
Paris Climate Agreement
within 100 days of taking
office.
13 NOV 2016, Channel 4 News
Q: What might the implications of a
Trump Presidency be for the Paris
Agreement & CC in general?

20. The business context …
Expectations from different
stakeholders:
• Employee’s
• Shareholder (financial and
ethically centred)
• Suppliers
• Customers
• Communities
• Competitors
• Environmental campaigners
• Charities and causes
Name as many
companies as
you can in one
minute that:
Name as many companies as you
can in one minute that:
1) Have a weak perceived CR
stance
2) Have a strong perceived CR
stance

21. #BSSD17
• Robert Owen – campaigned against the employment of children in
the mines and mills of the nineteenth-century Britain.
• From the start of the industrial revolution: some entrepreneurs acted
philanthropically:
The “good”
Long tradition of ethical behaviour
o Jeremiah Coleman (1830 – 1898,
mustard) – charities; Salvation Army;
YMCA
o George Cadbury (1839 – 1922, chocolate)
– employee welfare; Bourneville village
o Joseph Rowntree (1836 – 1925,
chocolate) – employee welfare; New
Earswick village
o William Lever (1851 – 1925, soap) -
employee welfare; Port Sunlight village

22. #BSSD17
People take note when things go wrong!
Most people are aware of corporate responsibility (or lack of) when there is a controversy about (say)
food safety or the use of child labour (Boddy, 2011, pg. 136).
• Collapse of Enron (See Swartz and Watkins, 2002)
• Arthur Anderson (See Toffler and Renegold, 2003)
• Fred “the shred” Godwin at RBS (in 2008)
• BP oil spill – poor safety record and/or recognising ‘climate change’ (in 2010)
• Olympus accounting fraud (in 2011)
• Libor rigging scandal: Barclays etc., manipulating interest rates (in 2012)
• Horsemeat scandal: Findus etc., (in 2013)
• Google, Amazon & Apple etc., evading corporation tax (in 2015 …)
• Volkswagan’s emission crisis (in 2015)
• Panama Papers (in 2016), Mossack Fonseca, hacking led to resignation of Icelandic Prime Minister
Sigmundur Gunnlaugsson for not disclosing an interest in an offshore company that was a creditor to
failed Icelandic banks
The “bad”
Recently in the news …

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• Used short-term borrowing to fund
high-risk investments. The
investment failed, and the company
almost collapsed.
• Outcome: UK government buys
major stake. Fred Godwin, Chief
Executive, retires with £800,000
annual pension.
The RBS financial scandal (2008)

24. #BSSD17
Scottish Business Pledge

25. ADDRESSING GRAND
CHALLENGES
LO 2.3 Describe the key “grand challenges” facing society today and
tomorrow, and argue whether there is a role for business in
addressing them

26. #BSSD17
New challenges in 21st century
• Royal Society & British Academy
– discussed new opportunities/need for collaboration
– set great challenge areas of food, energy, health
– discussed inequality, population growth/ageing,
energy use, health, sustainability, carbon
emissions
• UK government concerned about future challenges
– highlighted response to Ebola epidemic as example
What are the “Grand Challenges” facing society today?
UK, Scotland, you’re community, you?

27. #BSSD17
Some Grand Challenges:
third sector perspective
Source: Weaver & Paxton (2016)
Embedding a Social Capital
Approach
Funding cycles
Partnership Development
Environment/Social
Sustainability
Resources and Resource
Optimisation
Doing more with less
Monitoring and Reporting
Demand and Demand
Failure

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… But is there a role for business in
addressing these grand challenges?

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Example Grand Challenge (I):
The riddle of the Clyde …
Sources: The Economist, BBC News Scotland,
Glasgow Centre for Population Health
Slide sourced from: Weaver, M., Parkin, J., Paxton, S., Wimbles, K., (2015). A call to
address grand challenges: a conversation between the OR community and the
Voluntary Action Fund (Scotland). In Making An Impact. Glasgow, Scotland: 27th
European Conference on Operational Research.

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Example Grand Challenge (II):
Take a train journey in Glasgow …
Slide sourced from: Weaver et al., (2015)

31. #BSSD17
Example Grand Challenge:
Inequality is bad for all …?
Slide sourced from: Weaver et al., (2015)

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Jane Wood, CEO
Scottish Business in the Community:
"No single agency or sector in Scottish
political, economic or civic society has all the
answers – it’s only through working together
that we can effectively transform our collective
future. We must collaborate with renewed
energy and clarity of purpose to bring
business benefit, social cohesion and
environmental protection.”
“ This is a critical time for Scotland as we shape our nation’s future. There
is an increased role for business in addressing social, environmental and
economic issues, and this is fundamental to Scotland’s success. ”
See more at: http://www.bitc.org.uk/news-events/news/scottish-business-community-launches-call-action-responsible-
businesses-scotland#sthash.qIuAFwaD.dpuf (Accessed: 11/01/16)

33. CREATING SHARED VALUE
LO 2.4 Explain the concept of ‘shared value’ (SV), clearly
distinguishing SV from a traditional view of CSR

34. #BSSD17
“I think if we can get
business seeing
itself differently, and
if we can get others
seeing business
differently, we can
change the world”
(Porter, 2013)
Michael Porter asks: “Is there a case for letting business
solve societal problem?”
https://www.ted.com/talks/michael_porter_why_business_can_be_good_at_solving_social_problems/
(Accessed: 09/01/16)

35. #BSSD17“Is there a case for letting business solve societal problem?”

36. #BSSD17
Addressing grand challenges:
the opportunity …
The question being addressed by our KTP with VAF (Weaver et al., 2015; 2016):
How can ‘we’ bring about more resources (people, skills and
money) into communities?
But … Where is this resource pool? How can it be tapped?
What are the challenges and opportunities facing each sector?
– Third sector (partnership with VAF – the focal firm)
– Business
– Government(s)
– Public

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(Porter, TEDGlobal, 2013)
• In a Scottish context, the third sector attracts £4.9 billion in funding from various
sources, using SCVO statistics 34% (£1,686m) comes in from the public sector
(includes local, devolved and national governments) when only 1.5% (73m)
comes from the private sector (Weaver, Crossan, Tan & Paxton, forthcoming).
• Median donation by FTSE 100 companies have trebled from £1m in 2007 to £3
million in 2012 (CAF Bank, 2014)

38. #BSSD17
Focus on more ‘responsible business’
Porter and Kramer (2011) proposes the concept of shared value: addressing a social
issue with a business model and argue:
“Capitalism is under siege ... Diminished trust in business is causing
political leaders to set policies that sap economic growth .... Business is
caught in a vicious circle ... The purpose of the corporation must be
redefined around SHARED VALUE”
• “There's a fundamental opportunity for business today to impact and address these
social problems, and this opportunity is the largest business opportunity we see in
business” (Porter, 2013)
Three opportunities for companies to CSV (Porter and Kramer, 2013):
1. By reconceiving products and markets
2. By redefining productivity in the value chain
3. By enabling local cluster development

39. #BSSD17
An emerging paradigm? (i)
• Recognition that business create resources
(most of them); they do this when they can
meet a need and make a profit (Porter, 2013)
• Business part of the solution
– myth: business part of the ‘problem’?
– NOT ALL societal problems can be solved
through shared value solutions (Porter,
2011)
• Growing consensus: “Doing well by doing
good”
– the ‘conscious’ capitalist? (more next week)

40. #BSSD17
An emerging paradigm? (ii)
• Business models are evolving:
– Identify, decode, tap: opportunities for joint business & community value
creation (Porter, 2011)
– Key Enablers: innovation, learning and partnerships (Lazlo, 2005;
Laszlo and Zhexembayeva, 2011; Zadek and Radovich, 2006; Porter,
2011)
– Shaped by ever changing customer perception and legal
requirements (Banerjee, 2001); growing expectation of
investors/funders (de facto standard positions/norms)
• Business are encouragingly integrating stakeholder views
into business processes
• Drivers: civil society, transparency
and connectivity (Hart, 2005; 2008)

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CSR Vs. Shared Value (Porter and Kramer, 2011)
CSR Shared Value
Value: doing good Value: economic and societal benefits
relative to cost
Citizenship, philanthropy, sustainability Joint company and community value creation
Discretionary or in response to external
pressure
Integral to competing
Separate from profit maximisation Integral to profit maximisation
Agenda is determined by external reporting
and personal preferences
Agenda is company specific and internally
generated
Impact limited by corporate footprint and CSR
budget
Realigns the entire company budget
Creating shared value CSV enhances social and economic conditions in the
community, which then simultaneously enhances the company’s competitiveness
= Businesses should reconnect business goals with societal goals, and go
beyond CSR efforts (Porter and Kramer, 2011; Scagnelli and Cisi, 2014)

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(Porter and Kramer, 2013,
pp. 8)

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The Strengths and Weaknesses of the
Shared Value Concept (Crane et al., 2014)
“ what about … people”?

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Summary
• Business plays a significant
role in society, this ‘role’ is
hotly contested
• Porter puts forward a case for
“letting” business solve
societal “problems”. Accept
business are part of the
“solution”.
• Porter and Kramer argue that
CSV can reinvent
capitalism – and unleash a
wave of innovation and
growth

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Some final thoughts …
• Opportunities exist when there is a match between business goals
and addressing societal challenges
• Leverage point 1: doing good based on company discretion / external
pressure (CSR)
• Leverage point 2: Joint value creation that is integral to profit
maximisation & competing (CSV)
• How to Scale? “well, no-one wants to be average”.
– Raise the de facto standard in each industry
– Understand the rules of engagement, including power dynamics (i.e.
anchor points, social capital)
– Develop the next business model: co-creation, collaborative, increased
connectivity, supply chain perspective (including recognising most
businesses are SMEs), unlocking the power of civil society, community-
driven
… not necessary technology?

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Next week: Dr. Tan on: ‘conscious capitalism’
Reading listed in unit guide
“O would some power the gift to give
us to see ourselves as others see us”
Robert Burns, Poem "To a Louse" - verse 8 Scottish National Poet (1759 - 1796)