Why companies should make 2018 the year of Creating Shared Value
Last year I spoke to edie about English Tea Shop's unique business model which is based on the premise of Creating Shared Value (CSV) and how it has propelled our business to rapid growth.
For those who don’t know, the concept of CSV was proposed by Michael E. Porter and Mark R. Kramer in the Harvard Business Review as a response to trust in big business collapsing, as they were widely perceived by consumers and National governments alike to be ‘prospering at the expense of their communities’.
The argument goes that brands can begin to bridge this divide by bringing business and society back together through the creation of ‘shared value’ – this is a commitment to generating economic value in a way that also produces value for society by addressing its challenges.
Today, I am returning to this issue and calling on companies to adopt sustained and ethical business growth and to make 2018 the year of CSV. And this is why…
Moving Beyond Corporate Social Responsibility
Since the 1990’s, we have seen companies all over the world rapidly increase their use of Corporate Social Responsibility (CSR) initiatives, a self-regulatory mechanism designed to take responsibility for the impact that their business activities are having on the environment.
We’ve seen CSR in action in the UK recently as brands seek to align themselves with a range of consumer hot topics, such as the Evening Standard’s important and timely The Last Straw campaign, securing a quick media hit and positive endorsement along the way.
It is my belief, however, that by focussing on their own CSR policies and by reacting to the latest media campaigns as they happen, brands are missing a brilliant opportunity to take stock of their own business activity, and to assess the social, economic and environmental impact they are having.
CSV: Unlocking the Door to Growth
The practice of unlocking growth by focussing on sustainable initiatives that simultaneously improve businesses can seem counter-intuitive. However, there is plenty of evidence emerging that is challenging this narrative.
According to a recent report in the Financial Times, collective renewable energy and energy efficient initiatives by 190 of the Fortune 500 companies together “saved close to $3.7bn” in 2016. These corporations have realised that cleaner, more efficient energy is not only good for the environment but has also impacted positively on the bottom line.
Furthermore, the potential of CSV as a viable business model has been highlighted in a 2017 report by the Business Commission entitled Better Business, Better World. The report suggested that “Greater sustainability can help businesses overcome global burdens to growth and deliver trillions in new market value”, while helping to tackle the most pressing social, economic and environmental issues.
Independent businesses can lead the way
While the larger corporations may be generating the headlines, it is increasingly the smaller, independent businesses who are at the forefront of the movement. Unlike larger businesses, independent producers tend to be more agile and this makes them more responsive to the world around us. It also permits the licence to try new things, to disrupt and to innovate.
Using smaller food and drink manufactures as an example, we have seen this manifest itself through the development of transparent supply chains, such as ‘direct trade’,which connects suppliers and buyers together without the use of intermediaries, simplifying the route to market for farmers.
In the case of English Tea Shop, we have put CSV in to practice through our Love Care Change philosophy that manifests in a wide variety of environmental, social, financial initiatives that have a huge effect on the environment, farmers and their communities and factory workers.
For example, we build incredibly closely relationships with our tea farmers in Sri Lanka, and offer them a huge amount of advice and support. This helps them to improve their farming practices, it helps reduce the strain on the environment, and crucially for us, it gives us access to exceptional quality tea.
We also encourage our employees to think like business people. One initiative we manage, called The Big Game, sees 400 individuals who work in our Sri Lankan based manufacturing facility engage in a profit sharing scheme every quarter. The programme educates workers on programmes such as open book management and has helped to increase productivity by over 30% per employee.
A Look Ahead
There is a commonly held view that sustainability is anathema to growth and that the best way for businesses to ‘do their bit’ in the world is through their own CSR initiatives.
I couldn’t disagree more. I believe we are approaching a new age of business where sustainability-minded companies, who focus on the communities that they work with and sell to, will be the fast growing, high achieving stars of the future.
This is why I am today calling on more companies to make 2018 the year of Creating Shared Value.
Suranga Herath is chief executive of English Tea ShopEnglish Tea Shop