Creating Shared Value Essay Example

by: reconceiving product and markets, redefining productivity in the value chain and enabling local cluster development. Essentially, business and society need to move away from the idea that there is a trade-off between these two entities; business and society.

“A business needs a successful community, not only to create demand for its products but also to provide critical public assets and a supportive environment. A community needs successful businesses to provide jobs and wealth creation opportunities for its citizens (Port & Kramer, 2011). ” Then it is emphasized that shared value is not about sharing value that already exists – it’s about expanding the current pool of value that benefits everyone.

Furthermore, social entrepreneurs are leading the way on creating shared value because they are not locked into traditional business thinking. Real social entrepreneurship should be measured by its ability to create shared value, not just social benefit. Porter & Kramer further explains the three-way concept in regards to creating shared value. By reconceiving products and markets, it is uncovered that societal needs are the greatest unmet needs in society and that when businesses build products around society, both business and society benefit.

Examples of this were food companies’ concentration of quality more so quantity of its nutritional products, Wells Fargo’s tools to help customers pay down debt, GE’s Ecomagination products, WaterHealth International’s innovative water techniques to distribute clean water at a minimal cost to more than a million people in rural India and Thompson Reuters’ cheap weather and crop-pricing information and agricultural advice to 2 million Indian farmers.

By redefining productivity in the value chain, productivity and societal progress heavily

linked – so called ‘externalities’ usually become internal costs to the firm. The authors’ examples of creating shared value along the supply chain included Coca-Cola reducing their worldwide consumption by 9%, Nestle’s assurance to their farmers regarding guaranteed loans and bank loads and Johnson & Johnson investing in employee wellness programs saving millions in health care costs to name a few.

By enabling local cluster development, clusters include not just businesses, but institutions such as academic programs, trade associations and standards organizations. They also require public assets in the community: education, utilities, competition policy, and a strong legal framework. Porter & Kramer used the example of Nestle providing substantial assistance in building agricultural, technical, financial and logistical firms and capabilities in its coffee regions, thereby developing its local clusters, and as a result Nestle’s productivity improved.

Not all profit is equal – profits involving a social purpose represent a higher form of capitalism. Shared Value creation can only exist with a change in mind set – particularly with regard to changing short-term investment mentalities towards longer-term investment with sustainability in mind. The three opportunities for creating shared value are mutually reinforcing, for example enhancing the cluster will enable more local procurement and less dispersed supply chains.

“The principle of shared value creation cuts across the traditional divide between the responsibilities of business and those of government or civil society (Porter & Kramer, 2011). ” Government should focus on cluster development and support technological innovation that promotes CSV. The authors conclude that although not all of society’s problems can be solved through CSV solutions, it presents a vastly better system than we currently

have and brings back the link between society and business.