Understanding Shared Value

Creating shared value is a framework for creating economic value while simultaneously addressing societal needs and challenges. FSG co-founders Michael Porter, professor at the Harvard Business School, and Mark Kramer, senior fellow at the Harvard Kennedy School, first introduced the concept of “creating shared value“ (CSV) in “Strategy and Society,” their 2006 Harvard Business Review article. The authors expanded this idea in a January 2011 follow-up piece entitled “Creating Shared Value.” In simple terms, the concept is about building a business model that addresses societal needs at a profit.

The idea of shared value, across the globe, has gained momentum in the past few years with businesses becoming more responsible in the communities where they operate. Businesses have started to realize that long-lasting economic value cannot be created without creating social value. Creating shared value is filling a social gap often overlooked by others and deriving economic value out of it. The adoption of the shared value concept brings forward the realization of an ideal business environment where social and economic development goes hand in hand. Increasingly, businesses have started to realize that positive societal impact and business success do not need to be at odds and companies are connecting the two in their strategies for economic success and sustainable growth.

However, the concept of creating shared value is totally different from corporate philanthropy and Corporate Social Responsibility (CSR) that a company undertakes, as they are just an ‘add-on’ whereas shared value is inherent in a company’s core business strategies. Arun Maira, a prominent member of India’s erstwhile planning commission, in his speech at the Global economic symposium in the year 2012 linked the prevalent approach of CSR to “rearranging the deck chairs on the Titanic”, and suggested instead that it was “the course of the Titanic itself that must change”, shared value is an alternative path to traditional CSR that can help change the course of Titanic. Business models integrating shared value at the core of their business strategy identifies the challenges of the society and drives growth for innovations and productivity to address those immense human needs

Shared value initiatives can be easily implemented in developing countries like India, that are more open to socio-economic contributions for their swift economic growth. Issues like poverty, poor healthcare facilities, pollution, inadequate infrastructure, and education can be identified as core business concerns that can have a significant impact on the growth of business and the nation. Supporting inclusive growth that benefits the society, as well as advances business, is the key to creating shared value. It will enable businesses to find new opportunities for growth at the bottom of the pyramid and drive innovation to differentiate themselves from the competitors. When businesses address social problems as a part of their business strategy, they achieve long-term sustainable growth for themselves and large-scale changes in the society. Creating shared value will lead to development that jointly promotes social, environmental and economic growth.