Shared Value: A New Name for Creative Problem-Solving
It was reported in 2016 that Fortune 500 companies saved $3.7 billion by switching from conventional to renewable energy.
Let’s set aside, for a moment, the debate on whether corporations should play a greater role in solving complex environmental and social issues in the communities in which they operate. Business executives want to know the pros, cons, and ROI of taking on specific social and environmental causes.
The Fortune 500 companies and their employees noted above have solved a pressing social issue – climate change – collaboratively. They’ve not given up on the profit motive but utilized it creatively. They’ve monetized the reduction of CO2 emissions by switching to renewable energy sources, and taken advantage of economic incentives to lock in price certainty well into the future.
Those are some numbers that business executives can get behind. It’s something they can take to their bank, board, and shareholders. They’ve resolved the needs of various stakeholders…
- customer demands,
- NGO and consumer activism,
- employee morale,
- investor and shareholder confidence,
- and executive performance,
…as well as reduce CO2 emissions by 155.7 million metric tons annually in the process. Further, it opens a wealth of brand advertising and marketing possibilities to a variety of stakeholders.
This is what shared value looks like in practice.
Winning Battles, But Losing the War
“Shared value is not social responsibility, philanthropy, or sustainability, but a new way for companies to achieve economic success,” according to Michael E. Porter and Mark Kramer, “Creating Shared Value – Harvard Business Review”
The creation of “shared value” is, simply put, collaborative problem-solving that is monetized in creative ways. It promotes innovation within the company, “how can we help solve these serious problems while realizing an acceptable return from the result?” Monetization may come in the form of new products and services, cost-savings, and/or marketing and branding opportunities. Ben & Jerry’s is a good example of the shared-value concept.
Michael E. Porter and Mark R. Kramer are developing the Shared-Value concept where companies choose social and environmental causes based on their exclusive business model. The duo claim that Creating Shared Value (CSV) “should supersede” corporate responsibility (CR) because it is “integral to the company’s profitability and competitive position.”
In Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility
Porter and Kramer describe the Shared-Value Concept:
“Successful corporations need a healthy society. Education, healthcare, and equal opportunity are essential to a productive workforce. Safe products and working conditions not only attract customers but lower the internal cost of accidents. Efficient utilization of land, water, energy, and other natural resources makes business more productive. Ultimately, a healthy society creates expanding demand for business, as more human needs are met and aspirations grow.”
“At the same time, a healthy society needs successful companies. No social program can rival the business sector when it comes to creating the jobs, wealth, and innovation that improve standards of living and social conditions over time. If governments, NGOs, and other participants in civil society weaken the ability of business to operate productively, he may win battles but will lose the war.”
Why Shared Value?
An increasing number of companies are insisting that their suppliers support their CSR/CSV initiatives. For many, it has become a critical component of their supply chain strategy.
Furthermore, social media has given consumers and activists a seat at the corporate table unlike any time in history.
Companies that are not proactive in solving issues important to their value chain risk consumer alienation and boycotts. A company’s reputation can become seriously damaged in our socially networked world. Major media often pick up the story and air it nationwide, or even globally.
Porter and Kramer explain, “Heightened corporate attention to CSR has not been entirely voluntary. Many companies awoke to it only after being surprised by public responses to issues they had not previously thought were part of their business responsibilities. Activist organizations of all kinds, both on the right and the left, have grown much more aggressive and effective in bringing public pressure to bear on corporations.”
Accepting Responsibility by Creating Shared Value
CSR and CSV concepts could be phrased as accepting responsibility strategically by creating shared value. Win-win. Just be sure to monetize it. This isn’t to say that corporate philanthropy is not needed…it is. It’s that CSV is an integral component of your core business and needs to be monetized for the company to remain in operation.
For example,
In “Strategy & Society Porter and Kramer describe how Marriot “provides 180 hours of paid classroom and on-the-job training to chronically unemployed job candidates. The company has combined this with support for local community service organizations, which identify, screen, and refer the candidates to Marriott. 90% of those in the training program take jobs with Marriott. One year later, more than 65% are still in their jobs, a substantially higher retention rate.”
That is sustainable development; it’s an ongoing process – solve problems and monetize them.
From the Information Age to the Conceptual Age
The premise of Shared Value is “that the resources of government and philanthropy alone are insufficient to address the world’s biggest challenges.”
The Business for Social Responsibility Association calls for its members to “achieve commercial success in ways that honor ethical values and respect people, communities, and the natural environment.”
Daniel H. Pink describes the phenomenon as a “seismic shift” in how business is conducted. In his book, “A Whole New Mind,” he forecasts that,
“We are moving from an economy and a society built on the logical, linear, computerlike capabilities of the Information Age to an economy and a society built on the inventive, empathic, big-picture capabilities of what’s rising in its place, the Conceptual Age…It is an age animated by a different form of thinking and a new approach to life…the “right-brain” qualities of inventiveness, empathy, joyfulness, and meaning—increasingly will determine who flourishes and who flounders.”
Porter and Kramer agree in theory and warn that in the near future, “Any business that pursues its ends at the expense of the society in which it operates will find its success to be illusory and ultimately temporary.”
Like the Fortune 500 companies that saved $3.7 billion annually in energy costs, there are opportunities available to businesses of all sizes. All it takes is for someone to lead the way.
Author Bio
Russell Richer has 15 years of experience as a B2B copywriter. A former 17-year corporate accountant, I specialize in promoting B2B products, software, SaaS, and services related to sustainable manufacturing, industrial contracting, supply chain, environmental health & safety, and business process automation. Contact Russ @ richer-communications.com.