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What is Shared Value and Why Does it Matter?

The range of social and environmental issues continue to evolve which will not just impact our lives, but also the course of business growth. Government and charities have long been seen as the entities who were best placed to solve social and environmental issues. However, the pace of this change means that Government and charities are no longer equipped to solve for these.
Business has a role to play, beyond just Corporate Social Responsibility. There is a way to solve these social and environmental issues that also unleashes a new wave of business growth.

Shared value is a management theory originally launched by Michael Porter and Mark Kramer in 2011 who contended that the next wave of capitalist growth and innovation will come when social issues are connected to core business strategy.

This is important as it identifies the role that business plays in society (both positive and negative) and creates a tangible framework to drive new forms of value that benefit the business, customers, employees, society and the environment.

Realising value has long been purely a financial equation of profit equalling revenue minus costs. The value created is profit. However, this is such a narrow view of value. It is clearly incredibly important, although if it is at the expense of communities and the environment, then the profit has limited long term use. By increasing the scope of value to include social and environmental, new ways of unlocking value that contribute to both social and economic outcomes can be achieved.

For example, when Walmart understood the environmental impact their transportation and packaging had, they were able to address their supply chain issues to minimise the impact and streamline their operations. In the process, they saved over $200 million dollars and actually increased the amount they could ship. Their ability to explore new value metrics actually led them to increased profit.

Shared value is a tangible and business led approach to unlocking a company’s purpose.
This can be done in 3 key ways:

  • By reconceiving products and services: Developing new products and services that meet unmet needs of underserved markets (Example: New financial products with tools and low cost credit for consumers who cannot access mainstream credit)
  • By redefining productivity in the value chain: Understand impacts of a company’s value chain and creating new strategies or operations to drive new growth. These could include examining procurement, energy and resource use, employee productivity and distribution (Example: Walmart packaging above).
  • By enabling local cluster development: Placed based approach to working with a range of partners in a specific geographic location to drive business and societal outcomes. (Example: A travel company investing in local community infrastructure, environment and education in the Pacific Islands which becomes a stop on a travel route.

To read more, here is a link to the Shared Value Project Australia’s Harvard Business Review article by Michael Porter and Mark Kramer introducing shared value.

Planet B’s shared value initiative mapping tool can help to identify existing initiatives that could become shared value opportunities. See the post here.

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