Strategic value creation: Asia's new CSR frontier

For many decades, charitable giving to social causes has been a mainstay of the global corporate social responsibility (CSR) movement. But more businesses are realising that traditional  philanthropy is no longer enough nor the best way for companies to demonstrate that they are good corporate citizens.

Quite simply, charitable giving does not get firms noticed because everyone does it, and the benefits to communities are often not as great as might be imagined, says Richard Welford, chairman of  sustainability consultancy CSR Asia, in a recent interview.

In fact, in today’s economic climate, simply donating money to charity may do more harm to a business than good. Companies may either draw flak for not donating enough, or giving away too much of shareholders’ money.

Instead, what business needs is a more strategic approach to CSR, where actions taken by companies not only benefit themselves, but also helps society, says Welford.

Simultaneously achieving these two outcomes is often referred to in CSR language as ‘shared value’, a phrase which has steadily gained traction in the business community since it was coined by Harvard University academics Michael Porter and Mark Kramer in 2006.

Finding ways to deliver this shared value requires a company to look for areas in which its core business overlaps with existing social or environmental challenges, and use this link to develop innovative strategies that benefit both business and society, says Welford.

“Whether it’s increasing profits or building brand’s reputation and winning stakeholder’s trust, a strategic approach to social responsibility creates value for business, communities, and the environment,” he adds.

The potential for business to deliver shared value is the central theme of CSR Asia’s ninth annual summit: Strategic Value Creation. This year, the conference will be held from 7 to 8 October in Kuala Lumpur, Malaysia, and will host up to 500 CSR leaders from the business, non-profit, and academic sectors.

The summit will over two days, explore what strategic value creation means, how companies can integrate it into their own business strategy , and what are some innovative business models that can tackle social and environmental challenges.

The idea of strategic value creation is relatively young in Asia, as most CSR efforts by Asian companies still reflect a ‘traditional philanthropy’ approach, with a rare few beginning to shift towards more creative modes of engagement, notes Welford.

But the top spots for companies which have gotten strategic value creation right are currently dominated by Western multinationals such as Anglo-Dutch consumer goods giant Unilever and Swiss food and beverage multinational Nestle, he says.

“Both those companies have thought a lot about their value chains, and how they can help small farmers be more productive,” he adds.

Indeed, Unilever, as part of its sustainability masterplan, has pledged to help millions of smallholder farmers and women by providing them with training on better agricultural and labour practices.

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Whether it’s increasing profits or building brand reputation and trust, a strategic approach to social responsibility creates value for business, communities, and the environment.

Richard Welford, chairman, CSR Asia

Nestle, which relies on 5 million farmers in rural areas to supply the cocoa, coffee, and other commodities that go into its products, has also spent 39 million Swiss francs (S$57.3 million) to date on providing financial services and assistance to farmers. Last year alone, the company trained 376,000 farmers through capacity-building programmes.

As a result of these efforts, Nestle and Unilever - both of which will be sharing insights from their CSR journeys at the summit – have gained a more secure supply chain, better quality products, and reduced delays in the delivery of raw materials, explains Welford.

  

Another example of how firms can address unmet needs in communities while building their business is financial inclusion, which refers to extend banking services to members of poor communities who do not have bank accounts, shares Welford.

“It is highly likely that whichever bank you sign up with, you will stick with it for most of your life,” says Welford. “If a bank provides financial services to poor communities today, it will also in the long run be able to accumulate more wealth as its clients prosper”.

Many banks already have extensive financial inclusion programmes in place. For example, India’s ICICI bank has to date brought 18.5 million unbanked people into the banking fold, according to its chief executive Chanda Kochhar.

Such initiatives by banks showcase how the finance industry can help alleviate poverty, but solutions like this exist in other sectors too, says Welford. The CSR Asia summit will feature a session which digs deeper into how companies in other sectors can use their value chains to create opportunities for poor people and communities, and how to overcome the challenges along the way.

In addition to aligning a company’s core business and social needs, strategic value creation also requires the development of out-of-the-box business models, says Welford.

Putting a creative twist on an old practice can make all the difference, he says. For instance, while corporate volunteering often involves company staff cleaning up litter in beaches and parks, British professional services giant PricewaterhouseCoopers (PwC) has instead adopted an approach known as ‘skills-based volunteering’.

In this programme, PwC staff share their skills in finance, accounting, marketing, and business expertise with groups such as charity organisations or social entrepreneurs on a voluntary basis.

The firm, which will be speaking on employee engagement at the summit, has tracked the business benefits of such initiatives, and found that participation in skills-based volunteering helped staff hone soft skills such as empathy, communication, and leadership, and helped them manage projects for their own company and apply their expertise more effectively too.

Citing another example of creative business solutions which also addressed social challenges, Welford points to the Peninsula Hotel chain in Hong Kong, which is turning to an unusual source of labour to ease its manpower shortages: immigrants from ethnic minority groups who do not possess formal educational qualifications.

Welford explains that the chain offers training to these immigrants and employs them as front-line staff - a strategy which keeps hotels adequately staffed while equipping people with marketable skills and providing incomes which lift them out of poverty.

This approach can be rolled out throughout the region, Welford suggests. Hotels across Asia face staffing challenges, and there is no shortage of immigration from rural areas into cities either.

These successful corporate efforts at shared value creation send a very clear message to the rest of the business community, he says.

“We need to think more creatively about solving the challenges that have been with us for decades, such as poverty, and find new ways of solving them.”

This is the key objective of the summit, he adds. Whether it is the hospitality, finance, or forestry sector, the summit should give every participant ideas for innovative business models which help shared value creation.

“I hope participants will gain new insights into what works and what doesn’t,” he shares. “And since social responsibility must be scaleable, I hope attendees will be inspired to explore how these strategies can be replicated in their own business.”

-Eco-Business