Niels Christiansen, President, Creating Shared Value Advisors, LLC and former Global Head of Public Affairs at Nestlé – invented the term Creating Shared Value (CSV) while designing and implementing the first global corporate CSV strategy for Nestlé. In this exclusive interview with Nidhi Singh, Executive Editor, CSRlive.in he shares his views on India’s mandatory CSR law, and how companies can create and implement an effective, all-inclusive CSV strategy.
India is the first country in the world to introduce a legislation that made spending on CSR mandatory for a certain bracket of companies (with a turnover of about $160 million). How do you see this mandate from the perspective of global trends in CSR?
It is too early to judge the impact of the Indian legislation which makes spending on CSR mandatory. If it leads primarily to individual projects separate from or ancillary to the company’s core business interests, then it would go against the overall trend of integrating CSR into the core business strategy. If the actions resulting from the legislation are integrated into the overall business plan of the company, then it would support the current trend of making CSR part of the core company business.
Another raging debate here in India is whether the Government should also put strict mechanisms in place for monitoring the implementation of the mandatory CSR spending. Some say it would kill the spirit of CSR, while others see it as a necessity to avoid misuse of CSR funds. What’s your take?
I think that companies should be required to report on how the mandatory CSR spending benefits the shareholder and key segments of the population (customers, employees, suppliers) important to the company’s business. However, given the wide differences between businesses, I think that strict mechanisms would be very hard to establish and implement.
In your former avatar as the Global Head of Public Affairs at Nestlé, what were the key lessons learnt while designing and especially while implementing the first global corporate CSV strategy?
To have lasting effect, Creating Shared Value has to be defined as the basic way of doing business by everyone in the company, specifically included in stated company business objectives, and be the basis for the company’s business principles, policies, and key performance objectives. It also has to be reflected in company compensation structure, rewarding long term value creation while maintaining acceptable short term profit. All parts of the business have to view value creation for both the shareholder and the key segment they deal with (customers, consumers, employees, suppliers) as fundamental to the business. This has to be a basic belief of top management and driven by the Chairman, CEO, Executive Board, and Board of Directors, and experienced on the ground by managers around the world. For instance, in India, the very successful milk districts in the Punjab and elsewhere that greatly benefited both subsistance farmers and the company’s factories, gave managers the confidence in the benefits of this approach to business.
The term Creating Shared Value (CSV) is now being widely debated in the global Corporate landscape. However, many Experts believe the definition of CSV as expressed by Michael Porter and Mark Kramer to be incomplete. Would you agree?
As originally defined by Nestlé in 2009, CSV combines value creation, compliance with ethical business practice, and sustainability into an overall way of doing business and social proposition. It is a way of doing business to be be practiced by everyone in the company. The Porter/Cramer definition, of choosing a single social objective and attacking it in a way that improves competitiveness and profitability, is viewed by many as being limited and incomplete, not dealing adequately with ethical company behavior nor with sustainability. In this more limited approach, it is too easy for companies to cherry-pick the easy “win-win” opportunities and ignore those areas where business goals and social goals can conflict. Many experts feel that value creation, social responsibility, and sustainability have to be combined in an overall business approach and practiced by the whole company, whether or not the managers and employees are dealing with a specific social problem.
With terms like CSR, Sustainability, CSV, Corporate Citizenship floating around and one seeming incomplete without the other, how can Companies adopt an all-inclusive approach to accomplishing social and environmental goals without conflict with profitability?
First, long-term value creation has to be a stated business goal. Second, the compensation structure has to reward long term value creation, and not reward sacrificing long term value creation in order to artificially create short-term profits. Third, creating shared value, corporate responsibility, and sustainability have to be stated as a part of the company culture, and implemented through stated policies and procedures. In other words, compliance with standards of responsible business behavior and commitment to sustainability across the entire company need to be combined with a commitment to long term value creation (for segments key to the company’s success) into an overall company social proposition. And lastly, this must be the basis for key performance objectives included in decisions about individual pay and promotion.
The emergence of B Corp, a certification for companies that adhere to rigorous standards of social and environmental performance, accountability and transparency demonstrates a philosophical shift in running a business. What’s your perspective on this?
There are many companies, particularly newer ones, that fit the B Corp mold, and it is a development having a positive influence overall. However, the criteria set up in the B Corp standards do not fit all corporations, particularly those that are large and well established, and who have already developed structures built around sustainability and value creation. All these efforts are aimed at long-term value creation, which is a positive development in this time of continued focus on short term profitability and today’s share price.