Nestle Embeds Sustainability into Strategy through CSV – Creating Shared Value 193.0
Michael Porter and Mark Kramer devised an anchor concept for social innovation.
The buzz I heard in January that Nestle had moved on to Creating Shared Value or CSV from corporate social responsibility (CSR) was correct but I did not get the right definition then.
Ms. Susan Steinhagen of the CSV team in Nestle, in a comment at SYNTHESiST post, Embedding Sustainability into New Enterprises on March 10, put me right that the proper term for the Nestle approach to embedding sustainability into their strategy is Creating Shared Value for CSV.
(NOTE: Find link to Nestle CSV below the fold at the bottom of this post.)
Scholarly Roots. It was a pleasant surprise to learn that CSV’s intellectuals roots were from the hallowed halls of Harvard. Profesors Michael Porter and Mark Kramer explained their idea well in an article in the Harvard Business Review of December 2006.
The good Professors Porter and Kramer have shared their article, Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility, FREE for one-time use at their website FSG Social Impact Advisors. For reprints, please buy a copy from Harvard Business School Press.
CSV Rationale. In the HBR article, Porter and Kramer claim, and I paraphrase, that firms’ efforts under the CSR approach to improve the social and environmental impact of their efforts have not been as productive as they could be because:
- The efforts pit business against society, when clearly they are dependent on each other; and,
- The efforts pressure companies to think of [social responsibility] in generic ways instead of in the way most appropriate to each firm’s strategy.
The good Professors developed deeper analysis based on the earlier work of Porter as out line below.
SYNTHESiST Rationale. In the previous post I linked above and that I wrote before Ms. Steinhagen pointed out the Harvard roots of CSV, I also give other good reasons for embedded sustainability based on the current zeitgeist:
- There is a universal acceptance that many natural resources are finite and flagrant use can lead to higher commodity costs;
- There is common agreement that pollution and climate change, for example, are costly – though as economic externality or on public goods – to the world community at-large or future generations; and,
- Agreement has been reached – that the USA as major player has not ratified – among the community of nations to define a formula for this high cost through such modes as ‘carbon credits’ determined through schemes like cap-and-trade or carbon taxes (and inversely, green incentives).
CSV Roots. Michael Porter especially dug deep into his previous studies to highlight CSV’s continuity with traditional management theory.
I. Integration with its Society Context. From his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance, Professor Porter mapped in detail the potential impact on society of each aspect of a firm’s value chain proving that firms, de facto, cannot completely separate themselves from their context. In fact, it is logical for them to engage.
SYNTHESiST’s Take. In the linked post, I proposed new metrics that return a company’s performance measurement to its organic purpose as its objective function in a triple-constrained model, say Simplex algorithm or better a Simplex Tetrahedron, instead of a triple bottom-lined one as is currently the direction of inquiry.
Triple bottom lines are unsolvable, mathematically, and monetizing the other bottom lines in an NPV-type model assumes too much.
2. Integration in Competitive Milieu. From a later book in 1990, The Competitive Advantage of Nations, Professor Porter embedded the firm further into his famous five forces, he further drew “the social dimensions of the company’s competitive context–the “outside-in” linkages that affect its ability to improve productivity and execute strategy.”
From the near impossibility of separating a firm from its social and environmental context, Porter and his collaborator Kramer drew and updated approach that embedded sustainability into a firms strategy and presented it to the world in December,m2006.
Implementing CSV. Such is the power of what is, at heart, the good Professors’ simple concept that Nestle was quick to turn around and implement.
In 2008, Nestle published its first Annual CSV report for the year 2007.
And we heard the buzz and reported about CSV here in SYNTHESiST in January 2010.
As of 2009, Nestle has reported her accomplishments in the three key areas of nutrition, water and rural development.
Please click the screenshot above for a link to the Nestle Creating Shared Value program and report.
(Note: I thank Ms. Susan Steinhagen of the Nestle CSV team for the Porter and Kramer link. Visiting the Nestle website above is the best instructional for embedding sustainability into corporate strategy via Creating Shared Value.)
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