Ideas
Regarding CSV

Four big problems with “Creating Shared Value”, by Andrew Crane and Dirk Matten

Burgess COMMENTARY

Peter Burgess Founder/CEO at TrueValueMetrics developing Multi Dimension Impact Accounting

I am delighted to see this critique of CSV. I have had problems with the CSV initiative of Michael Porter and Mark Kramer since it first became popular, in large part because I think that effective performance analytics for modern society require much more focus on the beneficial impact on people (society) while doing the least damage to planet (environment). The for profit business organization is a tool to accomplish a better society, but not the end itself!

In my view of the broader society and global economy, I see huge needs that cannot be met by the for profit business model that worked so well for the first 200 years of the industrial revolution. Investment that does good should be funded in the same way that investment that makes profit. But in order for this to happen, there has to be metrics that reflect the creation of good in just the same way that there are metrics about business profit.

In my view, CSV does little more than move the deckchairs on the deck of a dysfunctional society and global economy.

Peter Burgess - TrueValueMetrics Multi Dimension Impact Accounting

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Four big problems with “Creating Shared Value”, by Andrew Crane and Dirk Matten

[Originally pubilshed on Crane and Matten blog]

The idea of “Creating Shared Value” (CSV) popularized by Michael Porter and Mark Kramer in the Harvard Business Review has probably done more to get corporate responsibility issues into the boardroom than anything else written in the last few years. In many respects, that is a good thing. Or at least it is until you start to realize all the big problems that are hidden behind the big ideas of CSV.

We’ve just published (together with Guido Palazzo and Laura Spence) a comprehensive critique of CSV in the California Management Review. The published version features a response from Porter and Kramer and a counter response from us which we think makes for quite enlightening reading (you can also download a free, but slightly different, version of our article but without this dialogue over at SSRN).

Our article sets out four main problems with CSV:

1. It is unoriginal. Porter and Kramer simply don’t acknowledge that there is little new about CSV. People have been writing about much the same thing for decades. And the corporate initiatives they rebrand as CSV are just attempts to relabel practices that were already going ahead prior to them publishing their article. It’s just that some people call those practices “strategic CSR,” “social innovation,” or “stakeholder management.”

2. It ignores the tensions between social and economic goals.

CSV is presented as “moving beyond trade-offs” between social and economic goals. But that is only because Porter and Kramer ignore any such trade-offs that might need to be made. Sure, there are some great opportunities where business success can be aligned with social progress. But there are also a whole host of social problems,especially those caused by business, where social and economic goals inevitably conflict. CSV prompts managers to simply ignore them.

3. It is naive about business compliance

In a move very much reminiscent of Milton Friedman’s famous critique of CSR, CSV “presumes compliance with the law and ethical standards, as well as mitigating any harm caused by the business”. Of course, this is where all those messy “trade-offs” are hiding. But as long as you can presume them away, then you don’t have to deal with them. In fact there is only one sentence dedicated to social harms, ethical norms and legal compliance in their whole article. So, let’s just ignore all the occasions when firms harm people or the environment. Let’s ignore all all the times they fail to uphold some of the laws and ethical customs of the places in which they operate. Then we can talk about CSV. But let’s not pretend that this is a useful strategy for corporate responsibility or still less a sane way to re-legitimize business, as they claim in their article. Just getting firms to respect the spirit of the law – say in paying their fair share of taxes or respecting international labour standards across the globe – would be a much better way of re-legitimizing business.

4. It is based on a shallow conception of the corporation’s role in society

CSV is supposed to be about “reshaping capitalism” but in reality it is really just more of the same of all the stuff that has given capitalism such a bad name – a blind focus on individual corporate self-interest. It will help solve some social problems, and will make some firms, and some stakeholders better off … but who are they kidding that this is going to save capitalism? What we need is a perspective that acknowledges the systematic nature of many of the problems we face, and a willingness from firms to engage in collaborative responses with other stakeholders to solve the problems that need solving. Not just those that can be cherry-picked to make a fast buck.

The point is not that CSV contributes nothing to the debate on corporate responsibility – there are some very good reasons why it has met with so much success, as we discuss in the article. But in ignoring much of which is actually problematic in the field it gives a very unrealistic picture of the challenges ahead. Managers looking to combine social welfare with economic prosperity simply deserve more than the whitewash that CSV offers them.

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