“A New Paradigm for Corporate and Social Responsibility: Creating Shared Value”

 

Social Responsibility, Social Corporations presents the results of the “Corporate Social Responsibility” (CSR) research project jointly carried out by the East Asia Institute and the Research Institute for Social Enterprise. The main discussion focuses on the compatibility between corporate contributions to society and corporate pursuit of profits, and also on methods for society and the corporate world can create and share more value. This research moves beyond the traditional CSR model and argues for a shift to a “creating shared value” (CSV) paradigm.

 

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Introduction

 

Corporations, under the banner of Corporate Social Responsibility (CSR), have engaged in various efforts of unilateral social contributions such as more actively developing social welfare programs, designating days in which every worker participates in community service, or reserving a larger budget in order to contribute back to the community. But these efforts were not sufficient to give corporations a reputation as social contributors. Rather, sustainable Corporate Social Responsibility for capitalistic growth and innovation becomes a reality only when corporations simultaneously foster both social and corporate interests by the system of “Creating Shared Value” (CSV).

 

Can Corporations that Only Chase Profit, Actually Earn Profit?

 

Recently, news about asymmetric agreements and unfair practices between large, head corporations and their sub-businesses has sparked controversy and societal unrest in Korea. As the disputes grew, the Korean public began labeling and stigmatizing these corporations as bullies who only seek to enforce their will and denounce their CSR activities as mere disguises for their greed. Although eventually public apologies were released, the damage had been already done as the Korean public does not recognize these companies as responsible members of their society. These series of incidents exemplify how corporations and their ideologically profit driven tactics can face massive roadblocks that actually results in losing customers and sales.

 

Why Aren’t Korean Corporations’ Able to Earn the Trust of the Korean Public?

 

Korean corporations are leaders in allocating substantive budgets for improving the workplace community in East Asia. Many Korean corporations have even created special departments and assigned positions that solely focus on improving the communities in which their customers live. In addition, these corporations have made efforts to make sustainable businesses plans that are more in line with the UN’s ISO26000. Despite these efforts, however, the reputation of these corporations is at an all time low. A joint research project named “RADAR International Survey,” carried out by GlobeScan, EAI, and the Research Institute for Social Enterprise reveals that out of 23 countries, Korea ranks the lowest in public confidence in big business in Korean society. What is causing this public distrust? Is there, despite several attempts to improve corporations’ image as contributors to the community, no real solution for alleviating the skepticism and doubt of consumers?

 

The Limitations of Corporate Social Responsibility

 

There is a rough consensus that corporations that solely chase profit cannot be sustainable in the long run. For example, corporations that indulge in immoral conduct to exploit profits receive heavy criticism from consumers and often see a plummet in value. Thus corporations have realized the importance of working closely with their community to gain the confidence of consumers and to guarantee their own long-term economic growth. Past efforts of corporations to improve their social responsibility include social welfare programs, community service events, and pollution-free green zones within cities.

 

While these attempts to create corporate social responsibility are noble, they inevitably have fundamental limitations. Corporations have taken actions to show more responsibility within their communities in order to guarantee their own long-term economic well-being, but in practice the two are not necessarily correlated. These efforts based on corporate social responsibility – for example allocating budgets to improve local communities – are volatile and indefinite as they are programs that can be taken away at any time depending the corporation’s financial situation. Therefore it is important that for corporate social responsibility to be sustainable, a corporation’s foundational, profit-driven goal must be intertwined with societal interests and development.

 

Creating Shared Value, the Symbiotic Relationship between Businesses and Society

 

Creating Shared Value (CSV) is a theory stating that corporations should develop the community around them while continuing to expand and strengthen themselves economically. At the core, this theory argues that corporations should not only focus on profit making but also on creating societal value. And in the process of creating both profit and societal value, corporations should work with the community and enjoy the fruits of its labor with society.

 

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An Example of CSV

Nestle has historically helped fair trade farmers in African and Central America by guaranteeing fair and livable wages, but has more recently gone beyond this initiative and has established a system of financial support and a program for teaching practical and more efficient agricultural skills to farmers. Through its new program and improved human capital, Nestle not only saw a 30% rise in its sales after 2000, but also saw the income of farmers participating in the fair trade program double during this time.

CSV forces corporations to rethink their past efforts of unilateral social contribution. When the normal profit-driven actions of corporations are simultaneously able to develop and extend societal interests, both the corporations and the consumers benefit. Combing CSV with the profit driven goals of corporations is neither temporary nor unilateral, thus establishing sustainable and effective corporate social responsibility.

 

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Table of Contents

 

Preface

 

I CSR in Transition

Chapter 1 Unfolding the CSR Discussion / Jai-Kwan Jung
Chapter 2 International Comparative Analysis of Anti-business Sentiment and the Recognition of CSR: Characteristics of Diverse Types / Han Wool Jeong
Chapter 3   The Path towards a Responsible Society: Not Individuals, but Team Players / Han Wool Jeong and Wonchil Chung

 

II The Current State of Korea’s CSR: The Need for an Alternative Model

Chapter 4  Korean CSR’s Four Main Dilemmas according to Public Surveys / Han Wool Jeong
Chapter 5  What Causes Anti-Business Sentiment: Politics Matters / Han Wool Jeong
Chapter 6 The Limits on Practice of CSR in Korea: Focus on Environmental CSR / Kim Bomi

 

III Responsible Management, Finding an Alternative

Chapter 7  Add Value to Social Contributions: The Realization of Creating Shared Value (CSV) to Solve Social Problems / Hee-jin Jo
Chapter 8  Add Capacity to Social Responsibility / Yeong-dong Lee
Chapter 9  Add Ethics to Profit-seeking: A Strategy for Creating a Sustainable Ecosystem of Socially Responsible Management / Yong Suk Jang and Hee-jin Jo