If you pay attention to business, strategy and global issues, you’ve surely heard about “shared value.” The idea has been put forth by business guru Michael Porter and consultant Mark Kramer, both Harvard faculty members, most prominently in a January 2011 article in the Harvard Business Review.
The principle of shared value…involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.
The purpose of the corporation must be redefined as creating shared value, not just profit per se.
Yes, shared value is being promoted as a big idea, as a way to augment outmoded thinking about corporate social responsibility (CSR), sustainability, corporate citizenship, the triple bottom line, and EHS, even as a way to “reinvent capitalism.” Yikes.
I wish Michael Porter and Mark Kramer much success. Really. They have access to the most powerful CEOs in the world, and the fact that Porter, an enormously influential business thinker, wants to focus on business’s social and environmental impact has to be good. Why not try to re-frame social and environmental problems as business opportunities?
But I don’t see much, if anything, that’s new here. And I see some danger in substituting the language of “shared value” for the goal of “sustainability” – a corporate pursuit that is more powerful, more radical and easier to define.
I learned a bit more about shared value today (Nov. 7) at a conference sponsored by the World Environment Center where Kramer spoke. It was hard to argue with anything he said.
“Business, if it wants to redeem itself, if it wants to earn society’s trust, has to demonstrate the positive impact that it’s having,” he told the gathering of corporate execs and NGO leaders. Well, sure. But how?
That “shared value” isn’t new is evident from Porter and Kramer’s own work. The examples they cite of companies that create shared value–GE with Ecomagination, Walmart’s with its sustainability campaign, Mars’ work decoding the cocoa genome–all predate the “shared value” construct. So did the work of management theorist Peter Drucker, who told business school prof David Cooperrider in 2003: “Every single social and global issue of our day is a business opportunity in disguise.” A Notre Dame business school professor (and Catholic priest) named Oliver Williams put it even more simply to me about a decade ago, saying that the purpose of business is to “enable human flourishing.” Yes.
Notwithstanding what Porter and Kramer wrote in HBR, I don’t know of any company that defines its purpose as generating “profit per se.”
An idea like shared value is best understood by seeing what it means in practice. Two companies — Nestle and Royal Dutch Shell — sent executives to the event to talk how about shared value aligns with their strategies.
Nestle’s John Bee talked about how the company has added essential vitamins and minerals to its products, like fortified milk, to address nutrition problems in poor countries. “We’re delivering a social benefit, and we’re delivering double digit growth in markets where we are selling these fortified milk products, for example,” he said.
Shell’s Allard Castelein described the company’s commitment to hiring and training local workers at its oil and gas facilities in Nigeria, about promoting energy efficiency, about its auto-safety programs, and about its support for carbon limits to deal with the climate crisis. Nothing wrong with any of that, but those efforts all sound like conventional CSR.
What’s more, Nestle this year brought Kit Kat bars to Brazil along with fortified milk and Shell’s core business is selling fossil fuels that drive climate change. Nothing wrong with that either–I like chocolate and drive a car–but are those products creating shared value? Who gets to define which social and environmental problems are worth solving? Facebook, iPads, blue jeans, bottled water, candy bars, the dry cleaner, a gas station–don’t these all solve problems and thus create shared value?
After all, any company that is not solving a problem that matters to people won’t survive for long. That’s what markets are all about.
During a break at today’s event, Mark Kramer told me shared value depends, in part, on intention. Nestle, for example, saw nutrition problems and designed products to solve them. “There’s a difference between solving problems by default and doing it by design,” he said.
Shared value, he went on, means “going above and beyond business as usual, and setting specific objectives.” His nonprofit consulting firm, FSG, is working with Nestle, Intel and Intercontinental Hotels on measuring shared value.
What’s more, it may turn out that companies would prefer to talk about shared value, which emphasizes opportunity, than to talk about CSR, which is more about risk and reputation.
If Porter and Kramer bring more companies into the conversation about solving big global problems, great. Goodness knows we’ve got plenty of problems to solve.