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Issue Report

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Creating Shared Value:Profiteering and Assisting

Creating Shared Value:Profiteering and Assisting

Apr. 13, 2012

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Originally released in January 2012

Creating Shared Value (CSV), a corporate strategy introduced by Harvard Business School Professor Michael Porter in 2011, involves joint efforts by companies and local communities to increase economic and social value. It is based on Porter's 10-year study of corporate philanthropy and social responsibility activities

CSV has come to the fore with an increasing number of global companies entering so-called Bottom of the Pyramid (BOP) markets. These markets offer companies new sources of growth and profits as well as opportunities to improve quality of life of needy individuals and communities.

Advanced companies have conducted three different types of CSV activities, based on the nature and extent of their interaction with BOP customers and their cooperation with concerned institutions: consumption creation, self-help empowerment and multilateral cooperation.

Consumption creation keeps in mind the weak economic circumstances of BOP customers and creates goods and services that deliver greater value than the consumers' purchasing power. To cater to lower income consumers in Southeast Asia, Nestle developed highly nutritious food for daily consumption at lowered prices. Vodafone, in partnership with Kenya's national network operator, Safaricom, pioneered a remittance market for low income segments by inventing electronic money M-Pesa, a financial service that makes it cheaper and easier for people without bank accounts to send and receive small amounts of money via mobile phones. The service is used extensively.

Self-help empowerment involves corporate assistance to poor people who are trying to achieve economic self-sufficiency. They are invited to participate directly or indirectly in business operations such as procurement and distribution. Hindustan Unilever has built an innovative network of sales operations run by underprivileged Indian women through "Project Shakti." Coca-Cola depends on small fruit famers in Africa for its supply of juice ingredients and helps women start micro retail outlets to distribute its products in hard-to-reach areas.

Multilateral cooperation involves CSV activities that take root when BOP communities, companies and concerned institutions collaborate. Meiji Company and the Japan International Cooperation Agency entered Brazil together. There they teamed up with a regional agricultural cooperative to commercialize chocolate made from cacao beans grown in the Amazon while simultaneously conducting rainforest conservation activities. In Bangladesh, Grameen Bank, a local microfinance organization and community development institution, and Japanese casual clothes maker Uniqlo set up a joint venture that locally sources, produces and sells clothes, with prices capped at US$1 per item, to make the clothing affordable to the poor in Bangladesh.

These CSV cases teach that shared value creation becomes attainable only when a company focuses on a viable business model that can yield maximum economic benefits for both the company and society where it operates. Close cooperation with local governments and other concerned institutions is another imperative. It is now necessary for global corporate strategy to rise to a level in which mitigating income inequality in BOP locales is an integral part of business innovation and technology development goals.

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