Creating Shared Value

Creating Shared Value (CSV) is a concept first introduced in Harvard Business Review article Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility ^[1] and further expanded in the January 2011 follow-up piece entitled Creating Shared Value: Redefining Capitalism and the Role of the Corporation in Society ^[2]. Michael E. Porter, a leading authority on competitive strategy and head of the Institute for Strategy and Competitiveness at Harvard Business School, and Mark R. Kramer, Kennedy School at Harvard University and co-founder of FSG ^[3]. The article provides insights and relevant examples of companies that have developed deep linkages between their business strategies and corporate social responsibility. Moreover the concept is remarkable in their last article "Creating Shared Value".^[4]

The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Recognizing and capitalizing on these connections between societal and economic progress has the power to unleash the next wave of global growth and to redefine capitalism.

Companies can create shared value opportunities in three ways:

• Reconceiving products and markets- Companies can meet social needs while better serving existing markets, accessing new ones, or lowering costs through innovation

• Redefining productivity in the value chain - Companies can improve the quality, quantity, cost, and reliability of inputs and distribution while they simultaneously act as a steward for essential natural resources and drive economic and social development

• Enabling local cluster development - Companies do not operate in isolation from their surroundings. To compete and thrive, for example, they need reliable local suppliers, a functioning infrastructure of roads and telecommunications, access to talent, and an effective and predictable legal system

Many approaches to CSR pit businesses against society, emphasizing the costs and limitations of compliance with externally imposed social and environmental standards. CSV acknowledges trade-offs between short-term profitability and social or environmental goals, but focuses more on the opportunities for competitive advantage from building a social value proposition into corporate strategy.

A significant challenge of CSV resides in accounting for ecological values/costs that are generated within the realm of agricultural production. Up to 90% of the ecological footprint in food processing can be attributed to land management activities outside the control of corporations. An eco commerce model that accounts for ecosystem services at the production unit (farm) level allows "shared value" to emanate from the production unit outward. Centering the shared value at the farm level allows for utilities, biomass processors, food processors, environmental liability insurers, landlords, and governments to participate in the shared value process.^[5] This ecocommerce shared value process accounts for and includes positive [environmental] externalities within the economic system.

Examples

GE’s Ecomagination ^[6] strategy is yielding environmental innovation is across its appliance to aviation business, reached $18 billion is sales in 2009 and is predicted to grow twice as fast as overall company revenues over the next five years. Dow AgroSciences has developed a line of Omega-9 rich canola and sunflower oils, with zero trans fats and the lowest levels of saturated fats. Since 2005 Omega-9 Oils have eliminated nearly a Billion pounds of trans fat and 250 million pounds of saturated fat from North American foods.

Companies can also improve the competitive context in which they operate by investing in their communities. Nestlé, for example, worked closely with the farmers of the Moga Milk District in India, investing in local infrastructure and transferring world-class technology to build a competitive milk supply chain that simultaneously generated social benefits through improved health care, better education, and economic development.

In conclusion, CSV encourages each company to create economic and social value simultaneously by focusing on the social issues that each is uniquely capable of addressing.

See also

• Competitive advantage
• Corporate Social Responsibility
• Sustainability
• Social responsibility
• eco commerce

References

1. ^ “Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility”[1]
2. ^ "Creating Shared Value". Harvard Business Review; Jan/Feb2011, Vol. 89 Issue 1/2, p62-77, 16p, 5 Illustrations, 1 Diagram [2]
3. ^ http:www.fsg.org
4. ^ "Creating Shared Value". Harvard Business Review; Jan/Feb2011, Vol. 89 Issue 1/2, p62-77, 16p, 5 Illustrations, 1 Diagram [3]
5. ^ Gieseke, Tim (2011). EcoCommerce 101: Adding an ecological dimension to the economy[www.ecocommerce101.com]
6. ^ http://www.ecomagination.com/

  1. ^ “Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility”|[1][4][1] 
  2. ^ "Creating Shared Value". Harvard Business Review; Jan/Feb2011, Vol. 89 Issue 1/2, p62-77, 16p, 5 Illustrations, 1 Diagram [2] Diagram[5]
  3. ^ Gieseke, Tim (2011). EcoCommerce 101: Adding an ecological dimension to the economy[www.ecocommerce101.com]

Resources/Links

• About Michael E. Porter, HBS
• About Mark Kramer, FSG
• About Marc Pfitzer, FSG
• FSG's website]
• Nestlé, on creating shared value
• Institute for Strategy and Competitiveness at Harvard Business School
• Nestlé Creating Shared Value blog
• http://www.ecocommerce101.com