Creating Shared Value

At the start of 2011, the Harvard Business Review published an article -under the heading ‘Big Idea’ – by two of the world’s leading corporate strategists, who called for the corporation to be redefined as ‘Creating Shared Value’ (CSV), which would “reinvent capitalism and unleash a wave of innovation and growth” (Porter and Kramer, 2011, p. 63). Their theory is remarkable by suggesting that Capitalism can be transformed and the core principle of creating shareholder value can now also work for the social good. Porter and Kramer (2011) argue that the systemic problem has been made worse by the assumption of government and civil society, that economic efficiency and social progress are mutually exclusive. The business world has been under attack, even though the capitalist system has been instrumental in lifting millions out of poverty throughout the world (The Economist, 2013). Even critics, such as Karl Marx, have marveled at its achievements and seemingly endless problem-solving capacity (Wood, 1987). Over the course of history, there have been many attempts to do away or reform Capitalism, because it is also inherently unstable, and has often been the source of crises and inequality.

Proponents of sustainability consistently call for Government, Business, and Civil Society to work together to develop a shared understanding and stimulate innovation (Hecht, et al., 2012). Porter and Kramer specifically refer to “blurring the profit/ non-profit boundary” (2011, p.67) and call for NGOs to think more in value terms, rather than just outcomes and money spent. We have seen that green NGOs have effectively engaged with Governments over the past decades, which has resulted in progress evident from the Convention on Biological Diversity CBD in 1992 and the designation of the current decade 2011-2020 as the ‘United Nations Decade on Biodiversity’ (United Nations, 2013).

For business, the effect of such engagement has been an enforcement model, where often one issue or species is singled out, rather than the systemic approach called for by CSV. It suggests that companies must be transformed as ‘Creating Shared Value’, “which involves creating economic value in a way that also creates value for society by addressing its needs and challenges” (Porter and Kramer, 2011, p.64).

The contention is that such a transformation will (re)-connect business success with social progress, provided there is a broader context, which includes deeper understanding of society’s needs and company productivity, collaboration across profit and non-profit boundaries and better government regulation (Porter and Kramer, 2011).

The appeal of CSV lies in its simplicity. Whereas the practice of CSR is indeed often inconsistent and makeshift, the basic principle of Creating Shared Value is clear and fundamental: it requires a given business activity to generate both economic and social value (Porter and Kramer, 2011; Preston, 2013). This principle can be applied without limitation in terms of industry or geography and accordingly, it has already been adopted by market leaders such as Unilever, Nestle and HP, as an idea that is easy to understand and digest by any type of organisation.