Business should create better societies
AS 2022 begins, businesses and society start the journey for human development. Each financial year, businesses publish financial results disclosing economic value created for shareholders.
e Zimbabwe Stock Exchange (ZSE)All-Share Index (ASI) has been the best performing on the African continent having surged 226% on a year-to-date to September 30, 2021(Zimbabwe Independent Newspaper, 2021). At the same time, community challenges like joblessness, inequality, climate change and corruption have not been consistent with this performance. While these aspects seem unrelated, this article looks into how businesses can contribute to better societies in Zimbabwe in 2022.
Historically, the success of communities has been directly linked to business activities. As business activities grow, employment opportunities are created to enable economic value flows to society. As such, towns also grow from the economic activities.
For example, Zvishavane, Mashava, Hwange, Shurugwi, Kadoma and Kwekwe grew on mining activities while Chiredzi, Chinhoyi, Bindura and Triangle grew out of agricultural activities (Small Towns and Economic Development: Lessons from Zimbabwe). Businesses established around these sectors can improve the quality of life around nearby communities through tarred roads, infrastructure, and access to clean water. As some of the industries or businesses collapsed so did the communities around them.
Today, society encounters both negative and positive impacts of business. However, the positive impacts seem dimmer than the negative impacts.
In some cases, the progress made in the past seems to have been reversed. Locally, evidence has been pointing to some businesses being too focused on short-term profit at the expense of the society. In some cases, businesses have been camouflaging Corporate Social Responsibility (CSR) to deflect the legitimacy of what they should have contributed to the society.
Before we talk about the current CSR practices, what is the role of businesses in society? ere are many debates in literature about the purpose of business and who it is created to serve. However, the purpose of business has remained relatively constant over time: the delivery of goods and services through profitable management of activities. Being a responsible business that cares about the society and environment has become a business value system. e management of social, economic, and ecological challenges has evolved to become a responsibility of boards, management and investors through corporate governance practices. is cannot be achieved without responsibility towards the society and natural resources which companies rely on because a healthy business cannot thrive without a healthy community.
However, the traditional shareholdercentric role of business has not been good for society. CSR approaches have been associated with corporate philanthropy and are often a way to increase the visibility/ marketing of the organisation. e major interest is often assumed to be recognised in media and positive stakeholder perception. In some cases, donations are used to silence or bribe communities experiencing negative impacts.
Yet the same communities near a business remain in dire poverty — no tarred roads, no infrastructure development, limited employment opportunities. Some businesses have made great strides to make communities grow and reduce poverty, enhance access to education however more needs to be done. e Creating Shared Value (CSV) concept was introduced to re-conceptualise the role of business in society. It can be considered as a corporate framework to guide the thinking about the relationship between a firm and society (Porter and Kramer, 2011). Social activities are linked to a firm’s goals, meaning that social and environmental responsibility is considered an internal function rather than external obligations.
Shared value focuses on the right kind of profits — profits that create societal benefits rather than diminish them. It is a way to lower cost, grow revenues or differentiate your value proposition by addressing social problems, including social problems that are not directly aligned with the day-today operations of the business (Porter and Kramer, 2011).
According to Porter and Krammer (2011) in Harvard Business Review, there are three ways to create shared value which includes reconceiving products and markets, redefining productivity in the value chain and enabling local cluster development. ese can be illustrated in the following ways: ‘Identify the points of intersection between their business and society’.
Businesses should analyse their value chain to identify business activities that directly interlink or create positive and negative impacts in society. is can relate to a firm’s infrastructure, operations, logistics, and sales services.
By determining the social influence on a firm’s competitiveness, managers can gain a better understanding of the factors that affect a firm’s ability to compete in a market. is step requires the analysis of a company’s external environment and the identification of areas that may concern the quantity and the quality of available business inputs, the rules and incentives that govern competition, local demand characteristics, and the availability of supporting industries.
Based on the various identified social issues, subsequently, managers can: ‘Choose which social issues to address’.
Making a distinction between generic social issues, value chain social impacts, and social dimensions of the competitive context can help managers to select strategically important social issues. Generic social issues are important to society but are neither affected by the firm’s operations nor do they influence its long-term competitiveness.
Value chain social impacts are issues that are significantly affected by the company activities. Social dimensions of competitive context are the external environmental factors considerably affecting firms’ ability to compete in the market. Based on this prioritisation of issues, managers may subsequently: ‘Create a corporate social agenda by distinguishing between two types of CSR’.
Responsive CSR involves companies acting as good citizens and actively mitigating the potentially harmful effects of their value chain on society, whereas Strategic CSR, instead, insists in transforming businessrelated value chain activities in such a way that at the same time it benefits society and reinforces the firm’s strategy.
Such CSR activities are directly related to a company’s core business and may help companies to solve a social problem and gain a competitive advantage.
Several companies such as Nestle and Unilever are demonstrating Created Shared Value (CSV). According to Nestle’s CSV strategy, the long-term strategy of their business hinges on creating value for both shareholders and society. For example, it has committed to improving 30 million livelihoods in communities directly connected to its business activities by 2030. To achieve this the business developed local farmer support strategies that are unique to specific raw materials, such as coffee and dairy.
It invested in helping farmers create more resilient businesses through initiatives such as Farmer Connect, this includes providing basic training to farmers and developing future farm enterprises through their Agripreneurship Programme, which benefited more than 39 000 young farmers for Nestle and the community. Similarly, financial institutions such as banks can also create shared values by supporting client prosperity and financing solutions to global challenges.
In conclusion, CSV in itself is not perfect; it still retains profit-making at the root of the definition of a firm. us, it offers only a mildly amended version of profit maximisation. It is important to note that CSV is another strategy in the sustainability quiver hence should be combined with other aspects like materiality and inclusive business practices. Finally, adopting CSV can help build better societies for businesses to thrive.
Zhuwao is a sustainability consultant with the Institute for Sustainability Africa (INSAF), an Independent multi-disciplinary think-tank and research organisation. ese weekly New Perspectives articles published in the Zimbabwe. Independent are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society and past president of the Corporate Governance and Accountancy Institute in Zimbabwe (GZI Zimbabwe). — kadenge.zes@gmail.com or mobile: +263 772 382 852.