Listen to this article
For a business school professor who teaches corporate social responsibility and corporate sustainability, an article in the Harvard Business Review such as Porter and Kramer’s piece on creating shared value (CSV) is a gift from heaven. It gives you plenty of legitimacy to talk to your MBA students about topics such as climate change, poverty or even biodiversity without making them frown on you. CSV comes from a world-famous author, is published in a world-class journal and promises to help with what most MBA students care for, making money.
Looking at the ideas behind CSV there is nothing substantial to add to Andrew Crane’s conclusion that CSV is based on the business case for sustainability and hence, something we have known for decades. No one will really question that there are cases where making profits and solving social problems are in sync. The popularity of business case ideas suggests that there might even be untapped potential for CSV in many businesses. What we also all know is that the business case has opened the doors of MBA classrooms and of boardrooms to many social issues. But we equally well know that many social problems cannot be easily solved by business solutions. Social goals and business goals do not always align. If this was the case, where are the legions of smart business people who have come up with business solutions to the vast social problems that confront us and made a fortune out of them?
The interesting questions come up once we take a closer look at these trade-offs and tensions between many social issues and business goals. The way we teach social problems in MBA programmes plays an important role since we form MBA students’ mindset on how to think about social problems. Porter and Kramer’s CSV is all about business case thinking. Trade-offs and conflicts are either resolved and turned into business solutions – or they are ignored. In other words, teaching social issues based on the concept of CSV is taking the easy option. No one has to depart from established concepts and theories, be it in finance, marketing or strategy. The message is that the standard MBA toolkit fits social issues – we just have to turn social issues into business issues and ‘enlighten’ our business thinking. But what about those social issues that cannot be made to fit?
A key part of the answer lies in how managers think about social issues – and how we teach them to think. An article I recently published in the Academy of Management Review together with Lutz Preuss, Jonatan Pinkse and Frank Figge, explores how managers with different mindsets come up with different interpretations of and responses to social problems. Managers with a business case mindset will follow the route of Porter and Kramer. They interpret social issues in a black-and-white pattern as either good or bad for business and cherry pick those that fit with profitmaking. With their business case mindset, they will not think out of the box. Rather they are pragmatic and use existing business routines to address social issues. In this way they try to gain control over complex issues such as climate change. Consider the example of Volkswagen’s bluemotion line. The company sells slightly more fuel-efficient, but otherwise conventional cars for higher prices. The not-so-new product line is a commercial success but does not lead us towards sustainable mobility. Admittedly, business case thinking helps to get workable solutions going, but does it measure up to the challenge of most social problems? With a business case mindset managers will not even think about any response to social issues that might go against profitmaking.
Managers who use paradoxical thinking acknowledge that many social issues are complex and therefore create tensions and trade-offs for businesses. Rather than denying these tensions, paradoxical thinkers embrace them. Embracing tensions is exactly the opposite of Porter and Kramer’s argument that we need to simply “move beyond” tensions between private profits and social problems. Paradoxical thinkers do not interpret social issues in a simple black-and-white, good-for-business v bad-for-business way. They are much more aware that some aspects of a social problem might be compatible with business objectives while others are not. They take tensions and trade-offs as a starting point to question existing routines and solutions. Take Toyota’s development of hybrid technology as an example. For all we know the Prius has been lossmaking for years and it was highly uncertain if hybrid technology would be accepted by consumers. Obviously, Toyota’s management was ready to accept trade-offs to come up with a more radical solution to the challenge that climate change poses to individual mobility.
Paradoxical thinking does not mean that we need to say goodbye to profitmaking. Today, Toyota is a leader in hybrid technology and has deployed it in almost all of its product range. But paradoxically, to come up with more radical answers to social issues, companies might need to set aside their profit-orientation at least for a while. Does this mean we should only breed paradoxical thinkers at our business schools? No, we need business case thinkers to translate radical responses to social issues into marketable solutions. But if we want future business leaders to make a meaningful contribution to sustainability, we also need to train them to think beyond profit making and business success as defined by standard finance and strategy to come up with more radical solutions in the first place. This is why it is so important that we teach more than the business case and CSV to our MBA students. We should stop pretending that most social issues can easily be addressed by standard business tools. MBA students should learn to understand the tensions and trade-offs that many social problems create – not to solve or dismiss them.
The author is professor of corporate sustainability at Kedge Business School, Marseille, France.