Page 271 - Social Enterprise A New Business Paradigm for Thailand

Since 2001, public interest in corporate social responsibility (CSR) has grown steadily. This rising
awareness prompted the International Organization for Standardization (ISO) to develop ISO
26000, a set of guidelines specifically focused on social responsibility. Notably, this standard

was developed with active participation from civil society, making it a socially driven initiative
aimed at encouraging businesses to operate responsibly. From this momentum emerged the
concept of the “License to Operate,” the idea that businesses are granted informal permission
by society to function, provided they act in ways that align with societal expectations.

A decade later, in 2011, Harvard Business Review published a landmark article by Michael E.
Porter and Mark R. Kramer titled Creating Shared Value. This piece sparked a global movement
to redefine the role of business in society around a compelling premise: “Business growth and
social progress are deeply interconnected.” (See Box 9.2.) As a result, the focus of responsible
business shifted, from merely reducing harm to actively creating positive societal and

environmental impact. This model, known as Creating Shared Value (CSV), positions business
growth and social progress as mutually reinforcing, driven by market mechanisms. It introduced
the notion of a “License to Grow,” the idea that businesses can only expand sustainably when
they generate shared value for both the company and society.

Box 9.2: Creating Shared Value

The capitalist system is under siege. In recent years business has been criticized as a major cause of
social, environmental, and economic problems. Companies are widely thought to be prospering at
the expense of their communities. Trust in business has fallen to new lows, leading government
officials to set policies that undermine competitiveness and sap economic growth. Business is caught
in a vicious circle.

A big part of the problem lies with companies themselves, which remain trapped in an outdated,
narrow approach to value creation. Focused on optimizing short-term financial performance, they
overlook the greatest unmet needs in the market as well as broader influences on their long-term
success. Why else would companies ignore the well-being of their customers, the depletion of
natural resources vital to their businesses, the viability of suppliers, and the economic distress of the
communities in which they produce and sell?

It doesn’t have to be this way, say Porter, of Harvard Business School, and Kramer, the managing
director of the social impact advisory firm FSG. Companies could bring business and society back
together if they redefined their purpose as creating “shared value,” generating economic value in a
way that also produces value for society by addressing its challenges. A shared value approach
reconnects company success with social progress.

Firms can do this in three distinct ways: by reconceiving products and markets, redefining
productivity in the value chain, and building supportive industry clusters as the company’s locations.
A number of companies known for their hard-nosed approach to business, including GE, Wal-Mart,
Nestlé, Johnson & Johnson, and Unilever, have already embarked on important initiatives in these
areas. Nestlé, for example, redesigned its coffee procurement processes, working intensively with
small farmers in impoverished areas who were trapped in a cycle of low productivity, poor quality,
and environmental degradation. Nestlé provided advice on farming practices; helped growers secure
plant stock, fertilizers, and pesticides; and began directly paying them a premium for better beans.

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