A long side profits, a shared value

By June 27, 2016Feature

By Lynn Sygiel, editor, Charitable Advisors |

When Dora Lutz started her consulting company three years ago after working for a national trucking company, she planned to focus on nonprofit marketing.

One year into her venture, Lutz changed her focus after learning about the concept of corporate social responsibility (CSR) and how it has evolved over the years. For her, it became no longer only about marketing messages or brand goodwill, but also about sharing value and using innovative business practices to make the world a better place.

With that shift, Lutz started a sister company, Giving-Spring.com, to help nonprofits plan for this changing environment and help businesses create giving programs.

“Corporate social responsibility has kind of segmented out in a couple of different areas. You have corporate philanthropy, corporate social responsibility and now you have this third thing emerging called shared values,” said Lutz. “Its principles eliminate the notion that social responsibility is a trade-off and instead provide a framework for collaboration, innovation and mutual benefit.

“You can kind of think about the segments as a continuum and have a bit of all three areas. In theory, a corporate partner is trying to say, ‘How can we engage meaningfully in the community?’”

The idea of corporate shared value (CSV) originated from an article by Harvard Professor Michael Porter and Harvard Kennedy School of Government Senior Fellow Mark Kramer.  The authors presented the concept of CSV in a 2006 Harvard Business Review article, and detailed it further in a January 2011 article.

In essence, companies try to address major social problems as a core part of their business strategies.

Last October, Lutz’s company was certified by the Shared Value Institute to be one of three trained in the methodology and process. Lutz harkens back to Milt Friedman, an American economist who received the 1976 Nobel Prize in Economic Sciences. He believed that businesses exist to maximum shareholder value.

“What I see happening is that we’re correcting that and moving from that philosophy of an ‘either-or’ trade-off. It’s too black and white, and that’s not the reality of how our business systems operate. That’s why I think shared value is so fascinating. All the nuance of how this can change the world and how this can benefit our businesses.”

This conversation, in Lutz’s opinion, is becoming more widespread and more a part of corporate culture.

“I think businesses are recognizing that they need to do something for a few reasons. It started with millennials. HR staff think, ‘Oh, we need to do this to attract millennials. Then you’ve got the marketers who say, ‘We need to do something because this is how we’re going to create customer loyalty.’ Now, CFOs are putting out data around the value of goodwill, and use the term, fallow assets, to recognize brand goodwill as it relates to social responsibility.”

Lutz has also seen CEOs becoming more active.

“I think it has been moving up steadily through organizations and CEOs are saying, ‘We need to be paying attention to this.’ The conversation is evolving from branding, to, in order to be effective, shared value has to be part of your organizational strategy. With elevation to the C-suite, that ensures it happens more quickly.”

Some major companies, like Nestle, have begun approaching business explicitly using the CSV framework based on the United Nations Global Compact Principles. The company made 39 commitments in 2014 that it aims to meet by 2020.

Lutz sees Eli Lilly, for example, as a company that could have all three giving concepts. The company’s early learning initiative would be a philanthropic or CSR initiative that helps solve a compelling community problem, while working to solve diabetes in China would be a shared value initiative.

And that is where nonprofits fit in.

Right now, according to Lutz, nonprofits think about the philanthropic arm of a corporate partner and just asking for money to support the nonprofit’s mission.

“Both need to think broader because corporations are not thinking about nonprofits and their ability to solve challenges. So instead of a company saying, ‘We’re going to solve this.’ They’re going to say, ‘Who are our partners who already understand the mission, who can help support us in this initiative?’

“What you see happening is the conversation in the nonprofit sector isn’t changing from philanthropy to shared values. So nonprofits aren’t prepared to say, ‘Here’s how we align to help drive your business.’

“This is very much an emerging field. How do we do this? The primary thought is coming from the corporate side because technically nonprofits cannot do shared value, you have to be profitability focused in order to do shared value. But nonprofits can apply these theories into how they’re approaching their corporate sponsors. The opportunity to apply it to your corporate-giving programs exists, but no body’s really doing that yet.”

She sees FFA (Future Farmers of America) as a great example. Currently a client, FFA has agricultural partners who are starting to talk about shared value. Lutz is helping FFA think about how it think about supporting a company’s shared value initiatives.

While Lutz doesn’t have statistics about the reach, she has seen the conversation shifting. She noted that the Indiana Chamber’s Biz Voice magazine recently wrote about it, and last year Fortune spotlighted 50 companies in its Change the World list.

It ranked companies that have made a sizable impact on major global social or environmental problems as part of their competitive strategy. The goal is to spotlight instances where companies are doing good as part of their profit-making strategy. Nominations are now open for this year’s list.

Locally, there are other ways to get involved. The U.S. Chamber of Commerce has offering events called Health Means Business, and offering them in different states. In February, one was offered in Indiana. There were initially 120 seats, but 240 people signed up.

“I think that says something about our culture and the interest here,” said Lutz.

It was well received, and now the Indiana Philanthropy Alliance, together with the Indiana Chamber Foundation, is putting on a second event.

The July 13 event, Healthy Businesses Fuel Healthy Communities, is more focused on foundations and the nonprofit sector and ways to leverage resources collectively. For more information, click here.

This learning and networking event is designed for business owners and leaders with an interest in finding ways to combine their corporate service, giving, and wellness efforts to benefit staff and the greater community. The content is also designed to link executives and program officers at corporate foundations with individuals involved with social responsibility and wellness programs.

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