Shared value – a business imperative

Global business faces unprecedented challenges from rising global competition, technological change, shortage of resources, environmentally-conscious consumers and the most serious economic downturn in a generation.

Businesses will be increasingly expected to focus not just on their financial impact but also on their social and environmental impact. Successful organizations will need to create value not just for their shareholders, but also for their employees and for the wider communities in which they operate.

Various terms have been coined to characterise this new environment – “Connected capitalism”, “sustainable capitalism”, “responsible capitalism” etc.

In essence, it is a share value agenda which was first proposed by Michael Porter and Mark Kramer, which is the concept 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.

As the authors say: “Shared value is not about redistributing value created through philanthropy or about including stakeholders’ values in corporate decisions. Rather, shared value focuses on the creation of meaningful economic and social value – new benefits that exceed the costs for the business and society.” (see http://sharedvalue.org )

This transformation demands a different kind of leader and a new type of leadership that benefits both business and society. Tomorrow’s leaders will have to be collaborators and innovators, adept at working across multiple boundaries to uncover and create shared and sustainable value.

An Accenture report of 2010 “A new era of sustainability” surveyed nearly 1000 CEO’s and found:

  • 93% of CEOs believe that sustainability issues will be critical to the future success of their business.
  • 72% of CEOs cite “brand, trust and reputation” as one of the top three factors driving them to take action on sustainability issues. Revenue growth and cost reduction is second with 44%.
  • 96% of CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company (up from 72% in 2007).

So share value and “connected capitalism” need to be taken out of the CSR narrative from within an organisation and embedded into business strategy and how the leadership thinks, acts and reviews progress.

The key issue for most organisations will be how to develop the leadership capabilities needed to support a “shared value” agenda –the idea that companies can be guided by an ethical purpose, to make a positive contribution to society AND make a sustainable profit in the process.

In many companies, CSR is trying to move from “doing the right thing” (altruism) to “Doing things right” (business effectiveness) but this requires culture change from the top down – this is a new way of doing business.

In that context, “Sustainability” may be too limiting a concept – looking more broadly at “shared value” resonates better as a broad-based business approach and enables a more commercial approach to measurement in terms of ROI, business development and reputation.