Shared Value: Finding Opportunity in Societal Challenges

The next installment of JFN’s webinar series on trends in corporate citizenship will examine Nov. 6 Shared Value, an emerging trend that is reconfiguring the intersection of society and business. It is a way for corporations to help solve major social problems and also make a profit. With shared value, a social mission becomes part of the corporate culture. Philanthropy can play a role in helping companies define and execute that mission.

The webinar will feature Mark Kramer, Founder and Managing Director of FSG, a consulting firm that oversees the Shared Value Initiative, and Sari Miller, a prominent impact investor who actively supports businesses that provide opportunities to millions of people at the bottom of the economic pyramid. This will be a rare opportunity to hear from two thought leaders at the forefront of a rapidly growing corporate practice.

Below are some frequently asked questions about Shared Value.

What is Shared Value?

It is a management principle that enables businesses to have an opportunity to solve social problems and also gain a competitive edge. This is typically accomplished in three ways: first, through products and services. Markets are defined in terms of unmet needs. Products are developed to change these conditions. Second, reconfiguring value chains, through better use of natural resources and enhancing the capability of suppliers. Finally, through making investments outside the company’s operations to solve problems most connected to the company’s growth. This can include investments in infrastructure, academic institutions, and public safety.

Why is Shared Value important to business?

The economic climate is such that companies must take the lead in uniting business and society. Companies must shed the mindset of relegating social responsibility issues to their periphery and instead embrace them as part of their core operations. Shared value enables that. Instead of focusing on how a company can mitigate harm, it instead emphasizes how the company can leverage its scale to advance social progress.

So how is this different from Corporate Social Responsibility?

Shared Value goes beyond how corporate social responsibility is traditionally defined by focusing on developing new products and markets to help solve social problems they neither created nor contributed to. Rather than merely mitigating harm from a company’s operations, shared value enables a company to provide societal benefits without limiting its economic success.

How Is Shared Value being applied in the real world?

Shared value is early in its adoption cycle, but some major companies have already reaped its rewards. For example, General Electric developed a line of high-quality, low-cost products for mothers in developing countries, filling a need while gaining market share. IHG, the hotel group that includes Holiday Inn, built an online tool to help its properties regulate energy consumption, while Nestle gave farmers in developing countries financial and technical assistance so as to better ensure its supply chain. With shared value, social and environmental benefits go hand-in-hand with increased profitability.

The phrase “redefining capitalism” has been used when talking about Shared Value. What does that mean?

While capitalism is a nonpareil vehicle to meet human needs, create jobs, and build wealth, it has more recently been under siege as the perceived culprit of many social, economic, and environmental ills. In turn, that has prompted governments to enact laws that undermine competitiveness and growth. Businesses can change that mindset by meeting societal challenges with more than charitable donations. Shared value helps companies foster a new wave of innovation and grow productivity in a way that benefits their bottom line as well as society.

Do Shared Value and philanthropy have anything in common?

Shared Value departs from the traditional philanthropic model in that it relies on a return on the investment from the social value created. At the same time, though, the path to profitability is often poorly marked. Support from philanthropists and nonprofits can not only help a company test the waters, but also provide businesses with technical expertise and experience in a field. This kind of “co-creation” with external stakeholders is increasingly common and obviates the need for companies to reinvent the wheel while accessing new markets.