Public reactions to creating shared value in the U.S., Germany and China

By Yi-Ru Regina Chen, HKBU; Ben Boyd, president of practices, sectors and offerings at Edelman Public Relations; Don Stacks, professor at the University of Miami; Ansgar Zerfass, professor at the University of Leipzig; Chun-Ju Flora Hung-Baesecke, senior lecturer at Massey University; and Shannon Bowen, professor at the University of South Carolina

Coined by Porter and Kramer at Harvard University, “creating shared value” (CSV) has garnered buzz among business professionals, especially in North America. These professionals are concerned about how to adapt to the competitive business environment, full of public expectations toward corporations to (partially) combat economic, environmental and social challenges.

There is already a range of CSV working groups (e.g., the Shared Value Initiative and the Shared Value Leadership Summit). Multinational companies, (e.g., Nestlé, Bayer, Barclays and Adidas) as well as small and medium-sized enterprises (e.g., Mazars), have already implemented and advocated for CSV strategies.

For example, Nestlé annually publishes a detailed CSV report, holds a shared value forum and organizes the Nestlé Shared Value Prize. Fortune also launched its annual Fortune’s Change the World list in 2015. Unfortunately, CSV has not been widely discussed in public relations or other communications industries.

CSV is defined as “policies or practices that enhance the competitiveness of a company while simultaneously advancing social and economic conditions in a community where it operates.” The basic idea of CSV is that the competitiveness of a company and the prosperity of society interact with each other and companies therefore have an interest in creating shared value for themselves and society.

In contrast to traditional corporate social responsibility (CSR), CSV has been seen as a key competitive factor that is fixed as an integral part of the corporate strategy. It is the core of entrepreneurial innovation through stakeholder engagement or collaboration.

CSV has received two criticisms by public relations. One lies in its similarity to strategic CSR, leading to concerns about corporations treating social needs as a means for business success rather than as an ethical end for business to achieve. CSV might therefore be viewed as being self-interested and thus lead to negative reactions from the public. The other is a lack of empirical evidence for CSV’s impact on positive corporate outcomes and its affecting factors.

Our study, funded by the Arthur W. Page Center studied the public’s reaction to CSV as opposed to CSR and the role of leadership in CSV implementation by surveying 1,784 people in the United States, Germany and China. The findings enable public relations to contribute to the debate and development of CSV from both the public’s and the organization’s viewpoints.

Public preference for CSV across countries

The data suggested that the participants in all three countries significantly prefer companies with a CSV approach over those with an intrinsic CSR approach as a separate pursuit from its business interests.

Public Perceived CEO Competencies and Characteristics for Effective CSV by Countries

Some differences emerged in the five most important CEO characteristics for implementing effective CSV by country:

• The U.S. participants rated integrity as the top characteristic of the CEO, followed by caring for people, accountability, deep sense of purpose and being trusted. Among the German participants, being trusted was the top characteristic, followed by accountability, determination, caring for people, and a long-term perspective, respectively.
• The Chinese rated accountability a strong number one CEO characteristic at 81.5 percent, followed by being trusted, integrity, a long-term perspective and being true to his or her core values. Accountability was rated highly across all three countries: first in China, second in Germany, and third by U.S. respondents.
• Being trusted was the only other top-five rated CEO characteristic across all three samples.
• Integrity was in the top five list of the US and China. Among the top five characteristics, having a deep sense of purpose was unique in the US, while determination was unique to Germany and being true to his or her core values unique to China.

In summary, leaders’ moral characters were perceived to play a more important and core role in facilitating effective CSV than their altruistic and behavioral attributes across countries.

Implications

The public preference of CSV over intrinsic CSR implies that CSV is an important and promising corporate responsible strategy in the U.S., Germany, and China. Even though CSV takes a complex and dynamic process because successful CSV asks the corporation to innovate its core business for the creation of profit-making and social benefits in a local context, it is in line with the public expectation.

Corporations, especially those in a competitive market, should commit to a CSV initiative along with other CSR activities. The finding also suggests that profit-making as an extrinsic motive does not necessarily lead to a negative reaction to a CSR initiative. The sincere motive (i.e., whether the motive is honestly reported) may neutralize the negative effect of the extrinsic motive.

A leader who is perceived to drive effective CSV in the three countries is expected to demonstrate strong moral characteristics, exercise multiple leadership styles and form constructive dialogue, especially in China. Public relations can contribute to the CSV practice by advising how organizations can strive for the “shared” aspect of CSV through dialogue, effective CSV communication, ethical decision making and stakeholder engagement.

This project was funded by a 2016 Legacy Scholar Grant that grouped researchers with practitioners to address topics facing the communications industry.