What is Shared Value?

Shared Value is the concept written about by Michael E. Porter and Mark R. Kramer (Harvard) in their seminal article called: Creating Shared Value: How to Reinvent Capitalism and Unleash a Wave of Innovation and Growth. In their article they define the concept as:

Shared Value involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy or even sustainability but a new way to achieve economic success(1).

It is a unique view and opinion that Mr. Porter and his writing partner Mr. Kramer are advocating. Which has, in my view, gained momentum as the business environment has changed and presented significant challenges over the past decade.

Given the damaged relationship between society and its industrial leaders due to events such as Enron’s financial governance issues, market collapse of the financial services industry, environmental catastrophes such as Exon Valdez and BP Oil rig spills these events coupled with the impact of job losses, personal bankruptcies and high unemployment have left many grasping for a new way. Porter points out that operating a business with a view to creating shared value is good for business in many ways.

These ideas accept that capitalism is an effective method for efficiently meeting human needs, creating jobs and wealth. The opportunity is to fully unleash the potential of capitalism by taking a wider view. In other words, the purpose of a corporation must be redefined to be the creation of shared value and not just profit. The hypothesis is if this path is taken it can create the next wave of innovation and productivity. Many real examples are starting emerge to validate this thinking. Companies which have embraced this type of long term wider community thinking put shared value not at the margin of what they do but at the center. You can find these examples and much more related to this concept at their website http://www.fsg.org.

For those of us practicing Industrial and Labour Relations it is an exciting concept to embrace. We are uniquely able to influence shared value goals as we are accountable for the creation of Labour Relations strategy and the execution of the strategy through negotiations, dealings with communities, employees and working relationships with unions.

(1)Creating Shared Value: How to Reinvent Capitalism and Unleash a Wave of Innovation and Growth", Michael E. Porter and Mark R. Kramer, Harvard Business Review, Feburary 2011