COMMENTARY

Peter Burgess

Shared Value

Published on Jul 18, 2012 by FSGImpact\

On May 31, 2012, FSG convened the 2nd Shared Value Leadership Summit. At the event, FSG -- with leaders from supporting organizations -- introduced the formation of the Shared Value Initiative. Watch the video to learn how the Shared Value Initiative will engage leading companies and organizations to advance the practice of shared value. Learn more at www.fsg.org.

Shared Value: how corporations profit from solving social problems

Shared Value is a corporate strategy, to fulfill it's systemic mandate sustainability needs more than business on side, argues Mark Kramer

• Mark Kramer is responding to John Elkington's blog

IMAGE Creating Shared Value: solving social problems and increasing profitability by aligning its commercial and social interests. Photograph: Bon Appetit / Alamy/Alamy

We were delighted that John Elkington attended our second annual Shared Value Summit, held last week in Cambridge Massachusetts, and I was pleased to read his blogpost highlighting some of the synergies between shared value and sustainability. It is high praise indeed for John to say that sustainability might be the ultimate form of Shared Value.

John agrees with the central message of Shared Value about the power of business to solve social problems and increase profitability by aligning its commercial and social interests, but he raises several concerns. First, he claims that we do not acknowledge the values implicit within capitalism or its destructive force in the world, and second, that we overlook the much larger systemic issues that are at the root of the social problems that Shared Value would treat separately. He points out the risks of sweeping aside sustainability in favour of Shared Value.

But our intent is not to sweep aside sustainability. Rather, we see Shared Value and sustainability as complementary and overlapping concepts that give rise to mutually reinforcing but different agendas for action. Sister concepts, perhaps, more than one as a subset of the other. There are aspects of sustainability that do not serve a company's economic interest which would not be Shared Value, and aspects of Shared Value which would not address a sustainability agenda.

In particular, I found John's observation that Michael and I came to Shared Value by looking at the way corporations could profit from solving social problems as both insightful and accurate. We focus on the scale of impact and degree of innovation that companies can bring to society's needs that traditional NGOs and governments have often lacked. And so our framework is rooted in identifying the specific issues that a given company can and should tackle to improve its own performance and create large-scale social benefits. Our view is not inconsistent with the much broader and more systemic mandate of sustainability but Shared Value is rooted in a company-specific agenda.

We agree that capitalism as practiced today does not adequately value the natural and human resources from which it derives profit. Michael Porter would argue that undervaluing these resources is inherently self-defeating as it undermines a company's own future profitability and therefore that such actions are capitalism misapplied and inefficiently managed. Sustainability's efforts to engage companies in reporting on and valuing the resources they consume and the harms they cause is therefore in the longterm interests of capitalism – a point Michael made nearly 20 years ago in a much debated Harvard Business Review article, entitled 'Green and Competitive: Ending the Stalemate.'

The values that lead capitalism to wreak destruction, however, are not inherent in capitalism itself: the ground rules are shaped by governments and public opinion. Wise businesses with a long term view will embrace sustainability's mandate, but whether the global sustainability agenda ultimately prevails will depend on world governments as well as business.

Shared Value, on the other hand, is fundamentally about corporate strategy and the decisions individual companies make in pursuit of profit. And Shared Value's unapologetic embrace of capitalism is one reason why it has resonated so strongly with corporate leaders who are less willing to embrace the sustainability agenda. Although less visionary, it is perhaps easier to put into practice – a limitation that has its virtues.

Ultimately, it will take sound government and an informed, empowered citizenry to fulfill sustainability's mandate, but along the way, corporations that pursue a Shared Value strategy can create a huge positive impact – for themselves and for the world.

Mark Kramer is founder and managing director at FSG and a senior fellow of the CSR Initiative, at Harvard Kennedy School of Government

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