Shared value: Is there a there there?

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.

They write:

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.

Michael Porter

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.

Mark Kramer

“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.

Comments

  1. Great post Mark. CSV is a very positive positioning for aspects of sustainability. Like social entrpreneurship and socially responsible investing, CSV leverage the critical role of for-profit business in creating financial value, innovation and scalability, and enhance it with component of mission driven motivation. But as currently articulated it doesn’t seem to me that CSV speaks to those issues where doing good and delivering profit conflict. We need to ensure that the SV is measured holistically across projects and across whole organizations.

  2. Joe Starinchak says:

    Need to check out the concept of Blended Value. Jed Emerson was promoting this new way thinking well before Porter & Kramer got on the bandwagon. Here’s a link to his website…

    http://blendedvalue.org/

  3. Marc:
    I myself had two reactions to the “seminal ” Porter/Kramer HBR article –one visceral, the other more strategic.
    First, the visceral. Your blog rekindled memories of the time I actually read the article; I was at the World Economic Forum in Davos this past January, and the article was being heavily promoted at the event. I can recall no other occasion on which I became so physically outraged and angry over the printed page. As you point out (much more politely), the article was banal, jejeune, unoriginal, and vacuous beyond belief ….. as far as I could discern, there was not a single “insight” in the piece which hadn’t been articulated (better) by others at least a decade earlier –in some cases long before that. I kept wondering how the article would have been received by the HBR editors had it been submitted under the names Joe Btfsplk and Fred Redelep instead …….. in my long-ago days as a part-time grad school professor, the article would have flirted with a failing grade —- and a stern lecture on unacknowledged intellectual theft. A long way from being honored with cover story status in what is arguably the most prestigious business journal in the world. I recall wrestling internally at the time, trying to decide who had the greater culpability: the authors for presuming to write what they billed as a breakthrough concept, or HBR for publishing it. I remain undecided …..

    But then, a less petty, more strategic view emerged. Even if Porter and Kramer were arriving at these transformational insights several decades late (and seemingly unaware of it), the proper response from people like me should really be: “better late than never; welcome aboard !” The fact is that Dr. Porter IS an extraordinarily accomplished and revered business thinker and writer, and his words are inevitably seized on as the revelation of Sacred Truths. So, predictably, the article has already attracted enormous attention and approbation, particularly from folks who had not previously given the nexus between business and its societal context a whole lot of thought. This is , think, an unalloyed GOOD thing, and so we should all actually THANK the authors and HBR for a positive contribution.
    One is also reminded of Dr. Porter’s now-legendary and oft-cited co-authorship of a 1 page article in Scientific American magazine years ago, where he first propounded the breathtaking thesis that companies’ environmental performance might actually be linked to its competitive and financial performance. Who could have guessed ?
    I think the bottom line is this: it really doesn’t matter who actually came up with an original insight or idea that counts; it’s who does the best job of PROMOTING it. After all, Steve Jobs invented neither the graphic user interface nor the computer mouse — his genius lay instead in recognizing their potential and then popularizing and commercializing them. May Dr. Porter and Mr. Kramer’s work have a similar outcome.

  4. Companies still respond much quicker to risks than they do opportunities. Great that they seek the opportunities but better they improve how they pre-emptatively manage risk. Both the Shell and Nestle examples prove companies need to take a battering before they respond. It would be much better if they had prevented their problems in the first place.

    In addition, clearly both companies’ purposes need to be redefined in the next decade-and seriously redefined, not just a few new products refined or operations improved but their entire purpose should focus on creating shared value. That is a very long way off for both companies. In the meantime they and others will happily give examples that make up a tiny proportion of their business or continue ignoring the wider context that they operate in until the risks increase.

    Nothing against shared vale or csr but ultimately regulators, consumers, civil society and employees need to up the pressure on companies before the companies will get around to finally redefining themselves properly.

    I await an example from Porter of a large company who changes its message to its shareholders to create shared value instead of just creating value for shareholders. And then revises its ENTIRE corporate strategy, purpose etc accordingly.

  5. Thank you Marc!

    This was more or less my response when I first read about Kramer and Porter’s CSV concept in the Economist back in March (http://www.economist.com/node/18330445). I twitted about it as such: “Not really a novel idea, have to agree with @TheEconomist: http://j.mp/f4ky4Y #csr #sharedvalue #socent @BlendedValue @MichaelEPorter”

  6. Hello Mark, I enjoyed your post. Yes, I agree that the CSV concept is risking great devaluation as it starts to become sustainability shorthand for what companies are doing anyway. I agree with Kevin that the higher meaning of CSV refers to programs in which there is a potential “profit conflict” (or even “strategy conflict”). Delivering a new product which has societal value is not CSV per se. Doing so in a way which FIRST addresses a societal need and then delivers a practical, affordable product solution to meet that need while generating (reasonably) profitable revenue fits the CSV model. However, this boundary is blurry and you are right to caution uncontrolled use of the CSV concept as a way to mask the lack of true sustainability progress.

    elaine, The CSR Reporting Blog

  7. Jeff Kutash says:

    Thanks for this post and for the debate and dialogue it has generated. My take is that over the past decades, many companies have “lost their way” – focusing on short term earnings and their stock price at the expense of long term sustainability and forgetting about the human needs or social needs that they were originally created to meet. At the same time, companies relegated much or most of their focus on meeting social needs to CSR or philanthropy groups that were often siloed away from the core business functions. This limited their ability to use the assets of the company for social good. So even if you believe that the concepts of shared value are not original, the article still hopefully serves as an important reminder to companies to include the lens of social impact in their business decision making and to focus on the human/social needs that the company was created to deliver against. And by doing so in appropriate ways, they can gain a competitive advantage.

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