“Talent hits a target no one else can hit; genius hits a target no one else can see,” Schopenhauer noted. I adored target shooting when young and now hunt for breakthrough innovators, so when I first saw these words they struck home with the force of a crossbow bolt – embedding themselves deep within my brain.
And they resurfaced at the Nestlé Creating Shared Value 2011 event in Washington DC as I watched Professor Michael Porter shoot a stream of arrows into what I considered to be a straw man, his version of corporate social responsibility.
To be fair, there is huge merit in Porter’s concept of creating shared value (CSV), featured in the Harvard Business Review recently. We, too, have challenged CSR, increasingly seeing it as the “new compliance agenda,” with sustainability as the transformational change agenda.
And it is immensely heartening when such a towering figure puts his shoulder to the wheel. But – and there are several buts. Among them: Porter chose to tear into a version of the CSR agenda at the CSV 2011 event that some found hard to recognise. Interestingly, within a few minutes, several people following the debate online emailed through their concerns about the direction the discussion was taking.
So what did he say? “I think business has been thinking that its role in society is to do CSR,” he began. “CSR is fundamentally about philanthropy, it’s about giving back, its about compliance with rules and I think what I have concluded anyway is that CSR just hasn’t worked.”
I’ll come back to those charges in a moment.
He continued: “It’s not getting us there. It’s well meaning, it’s well intentioned, but ultimately it doesn’t have enough impact. It’s not focused on results, it’s not scalable, it’s not sustainable and therefore we actually have to see if we can move beyond that formulation of business’s role. In a sense that’s given business an easy role, it’s a cop out.”
Then he argued that when it comes to development, “the CSR solution is fair trade; let’s make sure the farmers get paid enough. And the CSV solution is transforming the productivity of the farmers and raising the quality so we can pay them a higher price because they have higher quality, and they can have higher incomes because they produce more. So that’s the distinction between CSR and CSV.” Then he switched to pharmaceuticals.
“In the drug industry, traditionally, CSR is giving free drugs to poor people. Now we’re starting to understand that hasn’t gotten us very far; we can’t afford to donate drugs to all the people that need them in the world so now some of the best companies – and I just use an example of Novartis, not to single them out, but Novartis has said, OK, let’s rethink how we distribute and package and market drugs to low income consumers.
“And by packaging them differently, by getting them to the marketplace differently, they actually created a business model. And now they can grow that and grow that and grow that, and it’s not a matter of how much they allocate of their profit to donating drugs, it’s how they rethink actually creating economic value at the same time as they’re addressing this important social need.”
It’s hard not to agree, but let’s do so on the basis of agreed definitions. So, first, there are strong differences between what Americans call corporate citizenship and what Europeans term corporate social responsibility – and there are very different strands within CSR.
And, second, as I argued the next day at a meeting of the Nestlé CSV advisory board, CSR pioneers were revolutionary precisely because they went way beyond compliance regimes – and their work in areas like stakeholder engagement and non-financial reporting pushed the envelope.
As to the novelty of CSV, and sticking to healthcare, think of Novo Nordisk co-evolving a global healthcare campaign with the World Health Organisation and Oxford and Yale universities to persuade consumers to improve their diets and exercise regimes – to avoid chronic diseases, including the diabetes wave from which the Danish company stood to profit from massively as the world’s leading insulin producer. Why? Because Novo also saw the risk of the accumulating costs collapsing public health care systems.
Or recall the initiative launched by GlaxoSmithKline‘s incoming chief executive Andrew Witty, where GSK slashed the cost of drugs to 49 of the world’s poorest countries. CSR? Yes, but equally a cool-headed strategic decision based on a concern that there was a growing risk of poor countries breaking patent protection on key drugs their people desperately needed – encouraging local manufacturers of generic substitutes to compete.
Perhaps, too, part of the calculus was that companies that broke industry ranks might get a better hearing with health authorities in tomorrow’s markets? Challenging the CSR straw man at the CSV meeting, I noted that one of America’s strengths – illustrated by paintings of prairie schooners crossing the “Great American Desert” – is that it celebrates its pioneers. Though I sympathise with the Native Americans, I take pride in the fact that one of my great-great-whatever grandmothers schoonered across the Prairies several times during the 1940s. (And one area where the sustainability agenda trumps both CSR and CSV is its focus on intergenerational timescales and equity.)
Michael Porter has made immense contributions in such fields as the five-forces and business-cluster theory, but we should honour – not diss – the work of the pioneers who opened up the new social and environmental horizons, even as we begin to build new, more opportunity-based approaches. Aiming for a target no-one else can yet see doesn’t mean that we have to kick over visible targets designed for those still trying to improve their aim. Recognise, too, that CSV is unlikely to pick up some of the really thorny CSR issues, including human rights or bribery and corruption, and – in that context – we should beware of kicking out the bottom rungs of the evolutionary ladder just as emerging market companies are waking up to CSR.