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Creating shared value
Corporations will need to leap frog to the strategy of creating shared value if they are serious about their sustainability. It’s not just about corporate profits.
According to Michael Porter and Mark Kramer of Harvard Business School, corporations are prospering at the expense of their communities and urgently need to rethink their strategy by exploring new ways of creating shared value; not just their profits.
Corporations are so caught up in meeting financial targets that they lose sight of market opportunities that can generate new areas of competitive advantage.
Should corporations continue to ignore the social distress of the communities of their customers or suppliers which they depend on for buying and selling?
Porter and Kramer advocates that their needs to be a redefinition of corporate purpose on creating shared value that generates economic value for the corporation and the society by addressing its urgent social issues.
In this way, corporations prosper as well as communities. The concept of creating shared value holds the key to transforming commercial entrepreneurs into social entrepreneurs and invigorating more corporate entities to adopt the “social mission.”
For instance, Goddard Enterprises Ltd (GEL), Barbados, redesigned its coffee procurement processes, working intensively with small farmers who were plagued with low productivity, poor quality, and environmental degradation. GEL provided advice on farming practices; helped growers secure plant stock, fertilisers, and pesticides; and began directly paying them a premium for better beans.
Higher yields and quality increased the growers’ incomes, the environmental impact of farms shrank, and GEL’s reliable supply of good coffee grew significantly. Shared value was created.
Corporations need to re-connect with society by closely examining unmet human needs—not just unmet market needs. This is more than corporate social responsibility that looks at the after effect strategies of bringing “goodwill” to the corporation balance sheet. It’s more than a charitable call of a corporation.
This is strategy that creates the sustainable value by tacking the unmet human needs in partnership with their stakeholders.
By recognising unmet human needs, corporations can tap into large new markets. According to Porter and Kramer, for the concept of creating shared value to realise its benefits, we need:
• Leaders of organisations to develop new skills and knowledge about creating shared value as a corporate strategy; and
• Governments to learn how to regulate in ways that enable shared value, rather than work against it.
Come on corporate T&T, pay close attention to creating shared value not just the profits for shareholders.
Nirmala Maharaj is a doctoral candidate at the UWI-Arthur Lok Jack Global School of Business. Her research is in social entrepreneurship. Mobile: 689-6539 / E-mail: [email protected]
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