Literature Review: Creating Social Values

Creating Social Values, CSV, is a concept that is adopted by companies and organizations to improve their sustainability, while at the same time improving the state of the marketplaces in which they operate, the communities that surround them, the economies as well as the corporate coffers (Epstein-Reeves, 2012). Nestle Report (2015) defines it as the approach where a company ensures that they create value for society as in order to prosper over long periods while in continuous value creation for their shareholders (Nestle, 1). The recent years have seen capitalism face criticism and opposition form many quotas. Porter & Cramer (2011) argued that capitalism is the main cause for most problems, be they social, economic or oriented to the environment. In this case, they observe that businesses have suffered in the process, as has economic growth (Porter & Cramer, 2011). The main criticism for capitalism is the focus on short term goals that mainly entail profit-making at the expense of all the factors that surround them. Porter and Cramer (2011) challenge businesses to create value that benefits the societies surrounding it, as they try to achieve their profitability goals. By creating shared values, businesses will not only benefit themselves but would also redefine capitalism and its relation to the societies around capitalistic ventures. The concept is however difficult to achieve in practice than it is theoretically (Brest, Gilson & Wolfson, 2016) because corporates are built and run with the main aim of profit-making. Any other approach would deviate them from their objectives. It is nearly impossible for investors to let social gains to precede their financial returns (Brest, Gilson & Wolfson, 2016). Some of the investors who work to ensure maximum returns try to invest in stocks whose companies are socially inclined.

The concept of Creating Shared Value has been adopted in several companies successfully. Nestle Report (2015) has elaborated on how opening manufacturing plants in their source countries (instead of shipping raw material to Asia) reduced their shipping costs and carbon emissions, as well as creating employment for locals. Coca Cola, too, has successfully adopted the concept, alongside others such as GE, IBM, Google, Intel, Wal-Mart, Unilever and Johnson & Johnson (Porter & Kramer, 2011). With adopting from the big companies, it can be assumed that CSV has gained popularity and would possibly attract more companies. The course might be helped further by governments through the proposal and adoption of society oriented laws and regulations that would be beneficial to society (Teece, 2007). However, Crane et. al (2014) notes the importance of the private sector, acknowledging the need to ensure little interference from the government on the private sector.

While most business enterprises are created with the aim of making a profit, government agencies are created to create public goods and enhancing living for the citizens. International Labor Organization tried to ensure the best for all employees at their respective workplaces (International Labor Organization, 10). They advocate for tripartism, where employees and other stakeholders are included in the management of their organization (International Labor Organization, 12). Through tripartism, the welfare of most stakeholders is put into consideration and consequently, the process of creating shared values made easier. Ultimately, the best approach to ensuring that value amongst stakeholders is upheld at all times is through the adoption of tripartism.

Hong Kong is renowned as a business hub. However, it has a big number of social issues that need redress. The private sector makes a significant contribution to better the society, although they are often seen as actual destroyers of society. The government has put in place laws that regulate emissions as well as the interaction between organizations and societies through corporate social responsibility. The concept of CSV was only introduced in 2015, by a group called Social Innovation and Entrepreneurship Development Fund. However, shared value has not been received in the country as evidenced by low wages, and profit-driven businesses (Yip, 2016). As a country with a high GDP per capita, the salary of HK $32.50 per hour is not enough for a decent life in the country.

The adoption of CSV in Hong Kong would benefit a number of stakeholders. By applying tripartism, the first beneficiaries would be the employees, especially the lowly employees who earn HK $32.50 per hour. A comparison with such a worker in Australia, which has a similar GDP, shows a big disparity with an equivalent of HK $102 (Yip, 2016). The other beneficiaries of this aspect would be the general residents. The relatively poor standards of living would be improved by better pay, thus a general uplift in standards of living. At the same time, residents would benefit from a cleaner environment.

Despite these potentially attractive outcomes, the adoption of the concept would be low due to the capitalistic approach to business in Hong Kong. As an economic tiger, Hong Kong provides a good market place and high-value trading systems. It is attractive to trade and investment, thus high competition is expected. In such a competitive marketplace, financial returns take the center stage before any other aspect of society. The adoption can only be actualized through government intervention and massive social strategies such as those undertaken by the Social Innovation and Entrepreneurship Development.

The concept of Creating Shared Values faces a number of challenges in its execution. First, it entails, in many aspects use of resources. Funding such courses may seem to harm the organization due to the erosion of capital in the short and medium run. (Brest, Gilson & Wolfson, 2016) argue that investors try to avoid situations where they lose their capital while trying to meet Environmental, Social and Governance standards even if they believed in the values created by society-focused company values. At the same time, (Crane et. al, 2014) argue that the model might face execution challenges because it undermines the tenets of entrepreneurship by assuming that every business venture can benefit from social growth. While it is true that some businesses develop with society, many do not and the financial trade-off in favor of social development would be unwelcome. There are fewer objectives of trade than there are for social conscience (Crane, 2014). At the same time, conflicts may arise because some of the values of CSV are subjective and might be attractive to some stakeholders within an organization and not to others (Brest, Gilson & Wolfson, 2016).

Secondly, the concept faces the challenge of execution due to lack of adequate manpower. Management training mainly focuses on financial and human management, as well as the resources within the organization (Crane, 2014). Organizations are managed and driven by goals and objectives, some of which are not visible to all. By applying tripartism as ILO, (2009) proposes, the management of the organization becomes harder and the goals of the organization might shift from rewarding the investors to rewarding the society. By adopting CSV, the manpower must change to ensure that the new values are added to the organizational goals. Not always does these aspects actualize.

Thirdly, CSV faces the problem of lack of identity and authenticity. Critiques such as Brest, Gilson, and Wolfson (2014) argue that the basics of the concept are weak and unrealistic. The relationships between social empowerment and the financial longevity of organizations have little in research. While Porter and Kramer (2011) argue that there would be an expected increase in the sustainability and financial performance for a social-conscious organization, they provide no analytical evidence to this, apart from assumptions based on assumed human behavior (Crane, 2014). The field of tripartism remain under-researched and little is known about the interactions. Although ILO, (2007) proposes the usage of this method to improve employee loyalty and workplace harmony, it fails to further provide information regarding any issue that is not obvious regarding tripartism.

Methodology

Three organizations were identified to be included in the study. They include the Hong Kong Broadband Network, iEnterprise, and Hong Kong Rehabilitation Power. The organizations were chosen based on their adoption of creating shared value, as well as their adopting of CSV through working together in a tripartite setting. First, they all deal with the masses. HKBN is an internet and communication services providing company, among the leading in Hong Kong. On the other hand, HKRP is a rehabilitation NGO that was formed in 1995 to help people with disabilities, aiming at the inclusivity of all members of society. It advocates for the employment of its members, most of whom live with various disabilities. iEnterprise pursues a similar course to HKRP and advocates for inclusivity for people living with disabilities in working opportunities Dudycz, Osbert-Pociecha & Brycz (2016) noted that through a tripartite collaborative model, HKBN, iEnterprise, and HKRP could create a good relationship that enriches the society. Their model aims at providing solutions to social problems, where HKBN takes corporate social responsibility from a business perspective, while iEnterprise provides equality in employment opportunities, thus high social inclusion (Dudycz, Osbert-Pociecha & Brycz, 2016). This would be done alongside HKRP, who would be instrumental in including people with disabilities.

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The three organizations operate with definite roles assigned to them in the tripartite setting, where HKBN follows an outsourcing partnership while iEnterprise provides a work integration with the society. HKRP provides a collaborative partnership. Through the tripartite model, HKBN created a better public image, iEnterprise created at least 13 jobs, and HKRP improved the culture of doing business and job opportunities for its members (Dudycz, Osbert-Pociecha & Brycz, 2016). The effects of the three organizations, from public and private sectors working together to achieve goals that target the society, make the three ideal for the study. Furthermore, the effects of their collaboration are well researched on and there is available data to evaluate the quality of value that they created through their tripartite association.