The Role of Business in Society
In the west, there is a growing realisation that the role of corporations in society is not just to focus on shareholder wealth maximisation. Academics like Roger Martin, from the University of Toronto, have argued post the financial meltdown of 2008 that shareholder wealth maximisation may be an end product of actions of a corporation, but the real role of business in society is serving the needs of people in a community. It is done by providing them with superior goods and services, which in turn maximises the wealth of their shareholders.
Taking this a step further Harvard Scholar Prof. Michael Porter and Mark Kramer have put forth the idea of ‘creating shared value’. Put simply it can be best understood as an amalgamation of the best practices and scale of corporate strategy to solve the problems that people in communities face. Thus, when corporate strategy is used as a tool for enabling economic development a lot of problems that Non-profit sector ‘sees’ and ‘hears’ can be solved by building partnerships with business.
Philanthropy, CSR & CSV
The concept goes beyond Corporate Social Responsibility and Philanthropy as these to are thought to be acts of ‘charity’ which businesses do as a voluntary exercise based on their moral obligation towards society. However ‘creating shared value’ inverts the problem by saying that the role of businesses is to make goods and services that in turn have embedded social and environmental consciousness in the DNA of a business enterprise. The business model itself recognises the role of corporate strategy to solve problems that one sees in communities. This way people in the communities get better products and services, businesses earn profits which is conscious, non-profits see solutions for the challenges that they observe and employees experience the satisfaction of working in an enterprise that seeks to do better by doing good in society. Thus, a tectonic shift is being seen in the way businesses can help alleviate challenging social, environmental and technological problems that people face in their communities.
Relevance of CSV in Emerging Markets
It is particularly more relevant in emerging markets as the states are often inadequate to solve people’s problems. Productive economic activity at the business level is what is at the core of this next evolutionary form of capitalism. Education, healthcare, law and order, infrastructure are just some of the public challenges where the Indian state even after almost seven decades of independence has not been able to deliver entirely. It is because in a developing country context like India the resource allocation is often inadequate and even where it is adequate it is inefficient. The solution, therefore, does not seem to be a ‘bigger state’ but a more efficient and effective one which focusses on enabling solutions and outcomes. A rule based private sector development based on appropriate regulation can end up achieving the social and community goals that are essential to this more humane form of capitalism.
Shared Value or Inclusive Businesses?
The initiative recently mapped enterprises that have been engaged in the ideation and, more importantly, the practice of moving towards creating shared value and celebrated their achievements and ways and means to take the movement forward. This was done by the creation of an Inclusive Business list. Inclusive Businesses show businesses that are moving towards the practice of creating shared value but are yet not there. This list had enterprises which have contributed to enabling societal development through their business models and are moving towards the practice of creating shared value in India.
In 2015, quite a number of such enterprises were identified. These enterprises were committed to bringing a change in understanding the key societal challenges and addressing them through their business models. In a way, it was a unique initiative to identify, assess and recognise the organisations operating in India, which are creating a measurable socio-economic 