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HOME NRI JOURNAL The New Trend in Corporate Management is CSV

NRI JOURNAL

Innovation magazine that generates hints for the future

The New Trend in Corporate Management is CSV

Eiko Ibuki, Management Consulting Department, Consulting Division

Mar. 15, 2017

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A new concept called CSV (Creating Shared Value) has appeared in response to CSR (Corporate Social Responsibility). How does CSV differ from CSR, and what does it mean for companies?

CSV: using a company's main business to solve society's problems

CSR (Corporate Social Responsibility), the idea that companies have a responsibility to uphold the law as a member of society, started to be promoted in Japanese companies from around 2003. Now most major companies have a CSR section and are involved in activities such as issuing periodic CSR reports. However, the new concept of CSV (Creating Shared Value) is now gaining attention as a new form of corporate social responsibility. So what is CSV, and how does it differ from CSR?

Eiko Ibuki of NRI, who supports corporate CSR activities from the perspective of management strategy, offers the following explanation.

"CSV is the concept of focusing on society's problems and solving them in the main business of the company to create business opportunities and transform them into corporate growth. It was advocated by Professor Michael E. Porter of Harvard Business School in 2011. On the other hand, CSR is a so-called defensive stance, which involves upholding the law and considering problems such as human rights violations and environmental concerns. The biggest difference is that CSV is a measure for actively maximizing profit, whereas CSR is a non-financial measure for strengthening the management infrastructure to ensure sustainable growth."

Ibuki points out that CSV is implemented by the business departments of the company, and that CSR is often implemented by the management department of the company's head office.

Four changes facing companies

Why has the concept of CSV started to gain traction? Ibuki gives the following environmental changes as factors.

One factor is the Sustainable Development Goals (SDGs) for 2030 defined by the United Nations in September 2015. Compared with the previous Millennium Development Goals (MDGs), the SDGs expect companies to contribute to help solving 17 social problems. The corporate impact of these goals is huge, and there is a global trend for companies to work towards solving these social problems.

Another factor is that investors now think that non-financial initiatives can raise sustained financial performance. In other words, initiatives that seem to not be directly related to profit actually improve profitability in the medium to long term, and investors have started to recognize this.

CSV is a new management strategy

Furthermore, companies have started to realize that in mature markets, it is necessary to confront social problems in order to open up new markets. Solving social problems can create an opportunity for opening up potential markets.

"I do not want people to misunderstand and think that CSV is a replacement for the existing idea of CSR. CSV is a new concept for how management and business itself can work," says Ibuki.

"If CSV becomes prevalent, company management itself will also change. CSV is a concept that encourages every employee working at the business departments of a company to think about how the company can confront social issues in the future and what can be done now, while ensuring that things are looked at from a long-term perspective. Currently, most Japanese companies tend to think about short-term profit and methods for evaluating performance tend to focus on the short term. In order to implement CSV, management methods themselves will need to change."

Everybody wants to contribute to society

A long time ago, Japanese companies were born from a desire to provide good for everyone, by thinking about management from a medium to long-term perspective and conducting business to solve social problems. CSV may become a movement for returning to this original form.

"In order to implement CSV, company employees must first think about what will happen in the future, what social problems exist, and what they can do to solve those issues. For example, what they can do to solve the problem of Japan's aging population. They can start to think about this from the perspective of 5 to 10 years in the future. I am currently supporting the CSV promotion of a certain manufacturer, and when I ask their employees these questions, they think carefully and tell me how they originally wanted to contribute to society via CSV. I think people naturally want to contribute to society. If CSV can change corporate management to enable such feelings to flourish, then social problems can also be solved."

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Contact

Nomura Research Institute, Ltd.
Corporate Communications Department
E-mail: kouhou@nri.co.jp

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