Workshop no. 2 Clusters and the aspects of sustainable and social innovation. First presentation: Input to the concept of Shared Value

Transcription

1 Workshop no. 2 Clusters and the aspects of sustainable and social innovation First presentation: Input to the concept of Shared Value by Prof. Dr. Peter Abplanalp

2 Workshop no. 2 Clusters and the aspects of sustainable and social innovation One of the reasons why companies link to clusters is their hope to benefit from innovation processes that are initiated in such way. However, the maximisation of profits is not anymore the only driver of these innovation efforts. The content of this workshop is therefore about responsible innovation. In particular, it addresses concepts such as shared value or barter between cluster members. Source: Program European Cluster Conference 2015

3 Workshop no. 2 Clusters and the aspects of sustainable and social innovation

4 Capitalist System under Siege Business is no longer seen as problem solver, but rather as major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community Porter/Kramer (2011)

5 Limited Model of Economic Value Production Problems of society => not part of business thinking CSR tries to reconnect business and society Business often overlooks fundamental needs of the society Profit increase mainly built on outsourcing, downsizing, relocation and globalization Companies disconnected with the site where they are located Short time horizons are at the root of all this Growth and innovation suffer

6 Is Corporate Shared Value a Concept of Sustainable and Social Innovation? or is CSV just one more of these popular business fads that will move from the current sudden prominence to obscurity within the next few months? Sourcer:

7 What is Corporate Shared Value (CSV)? A concept by Michael E. Porter and Mark Kramer

8 What is CSV? Policies and practices that enhance the competitiveness of a company while simultaneously advancing economic and social conditions in the communities in which it operates. Porter/Kramer (2011, p.66)

9 What is CSV? CSV means to create and share additional value. The point is not to merely share the already achieved value.

10 Some Misconceptions of CSV? CSV is not philanthropy or business ethics It s not giving something back to somebody or mere mitigation It is not (only) sustainability CSV does not comply with the «Triple Bottom Line» (three pillars of sustainability: economic, ecological, social) It is not only «balancing of stakeholder interests»

11 CSV is different from CSR CSR Reactive (answering to public pressure) Main motivation: charity and improving corporate image Maximizing profits is secondary Treated as separate from the core business agenda Hard to sustain in times of economic pressure Limited by budget restrictions CSV Proactive (increasing competitiveness) Main motivation: create value for the company and the society Maximizing profits is part of the concept Part of core business: drive the next wave of innovation, productivity, and growth Purpose of business is to create economic value and value for the society Few limiting factors

12 H 1: Inevitable links between business and society Diamond Environment Company Value Chain Company structure

13 H 2: Competitiveness Depends on Favorable Diamond The quality of the business environment (incl. social and community conditions) resp. Diamond conditions affect the competitiveness of any company. Source of illustration: Wikipedia

14 H 3: Value Chains of Companies Affect Diamond

15 H 4: Societal Needs Are Important Part of Markets Societal needs, not just conventional economic needs, define markets, and social harms can create internal costs for firms.

16 Ad H1: Links Business Society Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

17 Ad H 2: CSV and the Diamond Michael E. Porter, Harvard University

18 Ad H2: CSV => Compensate Weaknesses in the Diamond Qualified Human Resources Education/ Training Infrastructure Context of firm strategy and rivalry Rule of law Open competition Transparency Intellectual property protection Factor (Input) Conditions Demand Conditions Availability of suppliers and supporting industry Related and supporting industry Quantity/quality of local demand Regulatory standards (environment, safety) adapted from Poreter (2009)

19 Ad H 3: CSV and the Value Chain Source: Michael E. Porter, From CSR to creating Shared Value, November 2009

20 Ad H 4: Social problems => new markets Employee health Gender Equity Energy use Company Productivity Water use Environ mental Impact Work Safety Workforce Qualification Source: Michael E. Porter, From CSR to creating Shared Value, November 2009

21 Why Should Business Care About This? Social deficits create cost for the enterprise External conditions affect productivity of the enterprise Social needs provide many possibilities for the development of new markets There is a growing correspondence between economic value creation and goals of the society

22 Why Should Business Care About This? Calculations by Prof. M.E. Porter; Corporate revenue was estimated based on the 9.1% percent net profit margin for U.S. private companies. Slurce: Bureau of Economic Analysis, 2013, Sageworks Private Company Indicator

23 Why Should Business Care About This? Companies tend to be more effective in finding marketing solutions for social problems than governments and NGOs.

24 Levels of Shared Value Creation Needs of clients, new understanding of products and markets Redefine productivity in the value chain Facilitate and/or support local cluster development

25 Needs of Clients: New Products and Markets Design products and services that meet social needs (e.g. environment, safety, health etc.) Develop new markets by offering products and services that cover open needs in underserved communities Spot new opportunities for differentiation and for innovation and growth

26 Redefine Productivity in the Value Chain Procurement Use of resources (energy, raw material, recycling etc.) Efficiency of logistics Productivity of employees (safety, health etc.) Location of elements of the supply chain

27 Facilitate and/or Support Local Cluster Development A strong local cluster will improve productivity of companies (e.g. more efficient supply chain, less pollution, better access to trained employees) By cooperation, companies can generate significant improvements in the local environment The development of a local cluster reinforces the connection between business and community and enhances their mutual success

28 Conclusion CSV has the potential not to end as a fade, but as a template for the improvement of business society relations. CSV in order to succeed needs managers on the company side and officials on the government or NGO side that have a clear understanding of the concept. CSV cannot solve all the problems. But keep in mind: Even long and ambitious journeys start with small steps.

29 A Final Thought No society can surely be flourishing and happy of which by far the greater part of the numbers are poor and miserable. Adam Smith ( )

30 Sources and References Matthias Kiese (2011), Ruhr Universität Bochum, Presentation Expertenworkshop Cluster & Competitiveness, Leipzig, 30. September 2011 Luiz Leandro et al. (2012), Is the integration of Shared Value Creation (SVC) with strategy management of productive organizations an innovative approach to environmental challenges faced by companies today? International Journal of Business Management and Economic Research, Vol 3(2),2012, Laura Michelini, Daniela Fiorentino(2012), New business models for creating shared value, Social Responsibility Journal, Vol. 8, No. pp Michael E. Porter: Several presentations (Inner City Capital Connections ICCC, New York, November 19, 2009; Shared Value Leadership Summit New York, NY, May 13th, 2014; Microeconomics of Competitiveness Faculty Workshop, December 14, 2010) Michael E. Porter, Mark E. Kramer (2011) Creating Shared Value. Rethinking Capitalism, HBR January/February 2011 Heiko Spitzeck, Sonja Chapman (2012): Creating Shared Value as a Differentiation Strategy the example of BASF in Brazil, Corporate Governance, Vol. 12, No. 4, pp

31 Sources and References %20 %20Creating%20Shared%20Value%20in%20Action%20ppt : great examples of shared value in action/