The coveted shared value

It’s been a few years since Porter and Kramer published in the Harvard Business Review the concept of shared value. Since then, companies around the world have questioned their products and services, in order to create value for their stock holders, environment and society.

One of the most widely documented cases by Porter in his conferences is General Electric, a company that designed the Eco-Imagination extension brand, which generates representative revenue for the company, while reducing environmental impact. GE achieved, through these products, to reach a target market that is more socially aware and informed; it also improved its image, reputation and increased its revenue. In other words, it created a two-sided value.

In the 2011 article Porter and Kramer highlight the importance of fostering business while promoting general good; i.e., generating value to be shared among different social groups and/or to seek the lowering of environmental impact. Other authors explain this as capitalism’s need to reinvent itself due to a growing social and environmental upheaval, aside from a pending demand from organizations and stake holders.

Porter and Kramer also mention the fact that corporations are viewed as the main cause of most social, environmental and economic problems, which has become more frequent due to the stake holders interactions through the Internet and other forms of communication. However, even though they are disdained, corporations have the chance to create considerable inner and outer changes.

The document also points out that firms are now perceived in a negative light due to their corporate social accountability strategies. I’ll add that, in reality, these are poorly appreciated only when they limit themselves to philanthropic agendas without promoting respect of human rights, environmental due diligence, high job standards and anti-corruption mechanisms. Then they are poorly viewed because, as a principle, a company should start by enforcing inner change before moving on to other type of activities.

Although Porter and Kramer note that shared value differs from corporate social accountability, true CSA strategies consider the different stake holders’ opinions and, therefore, can create reciprocate value. This comes when we consider a company’s impact in the three sustainability’s core ideas: the environment, the economy and social issues.

In shared value there are ways in which businesses can create value: by coming up with products and markets, redefining productivity in the value chain and creating a local development cluster. This is something that is also considered from a real CSA when you analyze the value chain, as well as consumer delivery and promotion of the link between corporations and local producers.

Nonetheless, companies such as Nestlé and Johnson & Johnson choose to address shared value instead of CSA by making emphasis on issues such as: cost reduction, small businesses within the value chain or their employees’ welfare. The term is unimportant, what is pretty clear is the trend that firms are facing: dealing with social, environmental and economic issues.

Despite critics such as Milton Friedman, something that companies can’t shy away from is the fact that every day their different stakeholders (investors, consumers, vendors, business partners, etc.) require more and better information concerning their sustainable practices. As Alejandro Chafuen states, social accountability is the road to foster societies with more freedom, which require making better assessments and responses that prioritize the common good.