Part 1 – Shared Value: Merging Purpose and Profit in Business
By Martyn Kingston, Founder and Principal,
New Logic Solutions
Shared Value is a dynamic concept that has reshaped the way businesses perceive their roles in society. Over the course of the following sequence of blogs, we'll explore the essence of Shared Value, its origins, key ideas, and how it has the potential to revolutionize business practices. We'll also delve into why Shared Value matters, its strengths, and how New Logic Solutions (NLS) can assist small and medium-sized businesses in harnessing this transformative power.
Defining Shared Value
Shared Value is not just another business buzzword. It's a strategic approach that seeks to simultaneously create economic value for the company while addressing societal challenges by identifying opportunities at the crossroads of profit and purpose. This innovative concept recognizes that businesses can play a pivotal role in driving positive change in society without compromising their economic viability and competitiveness.
Shared Value encompasses a set of policies and practices meticulously designed to bolster a company's competitiveness while concurrently advancing economic and social conditions in the communities where it operates. Shared Value is not about merely sharing the value that has already been created. It does not advocate for higher business taxes and their increased redistribution by government. It doesn't revolve around personal values, and nor is it solely aiming to balance stakeholder interests. Instead, Shared Value transcends the traditional boundaries of Corporate Social Responsibility (CSR), ESG and Sustainability.
While CSR and ESG emphasize ethical behavior, transparency, sustainable use of natural resources, and fair labor conditions, Shared Value goes further. It identifies opportunities for companies to enhance social and environmental conditions beyond their immediate sphere of influence, venturing into territories where their core business intersects with broader societal challenges. These challenges may or may not be directly attributable to the business itself, but Shared Value encourages proactive engagement to drive meaningful and lasting improvements.
The essence of Shared Value then lies in its ability to transform businesses into agents of positive change, weaving together profitability and social impact.
Merging Higher Purpose and Profit
The Origin: Pioneering a Paradigm Shift
Shared Value emerged in the early 21st century as a transformative concept, marking a departure from traditional corporate approaches like philanthropy and CSR. This shift was spearheaded by visionaries Michael E. Porter and Mark R. Kramer, who challenged businesses to redefine their societal roles and leverage their capabilities to address pressing social and environmental challenges. Porter and Kramer’s seminal Harvard Business Review article titled "Creating Shared Value" (2011) invites us to rethink the traditional view of the economic, governmental and civic/social realms of society being separate and made up of independently operating institutions.
Key Questions Raised:
Are businesses responsible for their social impacts?
Is there interdependence between business and society?
Are prevailing CSR and ESG approaches too generic?
Can a framework evaluate business effects on society?
Can Corporate Social Responsibility (CSR) be more than a cost, constraint or charity?
Porter and Kramer's groundbreaking questions exposed the limitations and generality of traditional CSR and Environmental, Social, and Governance (ESG) frameworks. They emphasize the responsibilities of businesses for the consequences of their actions, the inter-connectedness of business and society, and the need to reevaluate CSR and ESG approaches. Shared value is intended to ignite discussions on evaluating the societal impacts of businesses.
Their call was for Corporate Social Responsibility (CSR) and ESG (environmental, social and governance frameworks) to evolve beyond cost centers, constraints, regulatory compliance, or acts of charity. This marked the birth of Shared Value as an innovative strategy that uses profit motives to drive social progress and environmental sustainability.
In the subsequent blogs in this series, we will dive deeper into the origins, key ideas, strengths, and practical applications of Shared Value. We'll illustrate how this transformative concept has the potential to revolutionize the business landscape.
Appealing to Small and Medium-Sized Firms
At New Logic Solutions (NLS), we understand that Shared Value isn't just for large corporations. Small and medium-sized businesses can also harness its power to create a positive impact while strengthening their bottom lines. Our new logic solutions offering is designed to help businesses like yours identify Shared Value opportunities, develop strategies, and implement practices that drive sustainability and profitability hand in hand. Join us in the next blogs as we explore how Shared Value can benefit your business and how NLS can be your partner in this journey towards a more sustainable and prosperous future.