What is "Creating Shared Value"?
It is not unusual to think of businesses as entities against societal interests for the sake of profit. This kind of thinking has been supported by issues and scandals: corporations chopping down a whole forest to build a commercial centre, or shoe companies exploiting child labour for the sake of lower costs. Businesses are generally assumed to exhaust natural resources and exploit the marginalized sectors to improve profit margins, and it’s easy to see them as the main causes of social, environmental, and economic problems of society.
In response to this, businesses have adopted corporate social responsibility measures in an attempt to improve corporate image. While this seemed to work for a while, these efforts began to be seen as works of charity, attempts to make up for, rather than solving, their perceived part in social, environmental, and economic problems.
Furthermore, these CSR measures are still costs to the company. Tree planting initiatives, outreach programs, buying at higher prices; all of these take up resources of the company that could be invested in its growth. This leads to the notion that there is a trade-off between economic efficiency and the general welfare of society.
With this in mind, what actions must companies undergo to bring a good relationship between businesses and society? Where does the notion of good business and positive impact to the society intersect?
Shared value is defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. It moves beyond the simple trade-offs of business where organizations earn their profits in exchange of exhausting natural resources and produce waste that is harmful of society.
Shared value is created in three ways: reconceiving products and markets, redefining productivity in the value chain, and enabling local cluster development.
The intersection lies in the principle of Shared Value
"It is not unusual to think of businesses as entities against societal interests for the sake of profit."
