Aiming to Become a Business that Creates Social Value
Dec. 18, 2020
Covid-19, which is said to be a once-in-a-century pandemic, has become a global issue and has completely changed the world. A declaration of state of emergency was also issued in Japan, and people practiced staying at home, disregarding economic efficiency. However, with the prolonging of the stay-at-home period, stagnation of the economy has become a serious problem. “Balancing social problems and economic activities” by resolving the social problem of virus infection and continuing economic activities has become an important issue.
Businesses are also beginning to strive for CSV (Creating Shared Value) as introduced by Michael Porter. CSV is specifically a framework for balancing social value and economic value. Circumstances demand a transformation to a management model that secures the sustainability of society while also making the resolution of social issues commercially viable. Among such “businesses that create social value”, it is particularly difficult to see the direct value to society of businesses that are based on B-to-B (transaction between businesses) because they do not have many opportunities to deal directly with ordinary citizens, but in this article, I would like to discuss examples of B-to-B businesses that have been able to realize CSV.
Factors that make CSV activities successful
I will first give some examples of Western businesses that use digital technology, which is one of the trends.
Intel Corporation has been facilitating learning through technology, and promoting educational projects to help students, ranging from preschoolers to university students, receive equal education regardless of their social or economic status. Salesforce.com is developing projects to simplify carbon accounting reports of Fortune 500 companies. SAS Institute is engaged in projects to support information analysis and testing of environmental protection organizations and various non-profit groups etc. that deal with social issues. For all of those companies, CSV-related sales constitute 5 to 10% of company-wide sales, and they have been able to balance social value and economic value.
We looked closely at this target group of companies that are engaged in CSV activities, and I will now discuss five factors of their success as reference.
First, management specifically pointed out, both internally and externally, the direction of social contribution as a CSV initiative, and created a foundation for organizational transformation. Second, to heighten employees’ awareness regarding social contribution, the companies created an environment to provide opportunities for social contribution. Third, even though management prepared a foundation for activities, the details were left to onsite employees, and an overall bottom-up approach was utilized to generate ideas and realize concepts. Fourth, the companies partnered with external organizations that handle social issues to make up for any lack of information and ability. Fifth, the companies envisioned activities for the medium and long term, and instead of using financial indicators such as ROI (Return of Investment) for decision-making and progress management, used indicators such as name recognition in new markets as a KPI (Key Performance Indicator).
Transformation to a business that creates social value
CVS activities mean development of new markets and creation of new services. In light of such characteristics, I will now discuss matters to note when promoting similar CSV activities in Japan.
First, the creation of social value requires time. Research has found that when a company utilizes its existing services or existing markets, it takes three to six years before any results can be seen, and when a business enters a new area where it has no track record, it takes five to ten years; thus, management needs to be prepared.
Second, because CSV activities are, as they say, efforts to create something out of nothing, it is necessary to intentionally bring together various talented persons with ideas and skills. In Japan, there are limits in the corporate world as well from the so-called pressure to conform and homogeneity that are unique to a vertical society, and people are reluctant to think freely or express ideas. Further, the status of employees who join the efforts midway may be low, or correct evaluation of practical ability by specialty may be difficult. In addition, the Japanese people are different from Westerners in that they do not normally build relationships with outside specialists etc. on their own responsibility, and they are not good at creating value by utilizing external sources. In order to make up for such shortcomings, a CSV team must start by clarifying the roles of each individual, and decide on rules that will enable logical discussions. Management must not push the team into an existing hierarchy, and even while making great effort to disseminate the philosophy that strengthens the unifying force of the team, management must respect the team’s decisions, and encourage horizontal consensus building.
Third, because such activities will have many trials and errors, failed attempts should never be perceived as something for which people are penalized, and small successes should be appreciated. Because it takes time to get results, an evaluation system that differs from the norm should be in place.
Transformation to a business that creates social value involves trial-and-error and patience, but by overcoming such trials, businesses can be said to be reborn. In the course of such transformation, there will be a synergetic effect whereby employees will begin to understand their roles to society and contribute to the future growth of the business, while their sense of belonging will be heightened. Employees with a mission to contribute to society will become the ultimate resources for management.
Businesses with the philosophy of “the earth is our shareholder” in mind and where everyone can participate as an entrepreneur dealing with social issues embody a world view that I admire.
At businesses that create social value, employees empathize with, and are proud of, the company’s corporate philosophy. Businesses will earn affinity from society. And businesses that contribute to society will be able to newly establish their brands and be respected as dignified entities.
Businesses that create social value will not be a temporary trend but will likely become the de facto style of business management.