The
capitalist system is under siege. In recent years business increasingly
has been viewed as a major cause of social,
environmental, and economic problems. Companies are widely perceived to
be prospering at the expense of the broader
community.
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Even worse, the more business has begun to embrace corporate responsibility, the more it has been blamed for societyʼs failures. The legitimacy of business has fallen to levels not seen in recent history. This diminished trust in business leads political leaders to set policies that undermine competitiveness and sap economic growth. Business is caught in a vicious circle.
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A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success. How else could companies overlook the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell? How else could companies think that simply shifting activities to locations with ever lower wages was a sustainable “solution” to competitive challenges? Government and civil society have often exacerbated the problem by attempting to address social weaknesses at the expense of business. The presumed trade-offs between economic efficiency and social progress have been institutionalized in decades of policy choices. Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.
-
Even worse, the more business has begun to embrace corporate responsibility, the more it has been blamed for societyʼs failures. The legitimacy of business has fallen to levels not seen in recent history. This diminished trust in business leads political leaders to set policies that undermine competitiveness and sap economic growth. Business is caught in a vicious circle.
-
A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success. How else could companies overlook the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell? How else could companies think that simply shifting activities to locations with ever lower wages was a sustainable “solution” to competitive challenges? Government and civil society have often exacerbated the problem by attempting to address social weaknesses at the expense of business. The presumed trade-offs between economic efficiency and social progress have been institutionalized in decades of policy choices. Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.
The
solution lies in the principle of shared value, which 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. It is not on
the margin of what companies do but at the center. We believe that it
can give rise to the next major transformation of business
thinking.
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What Is “Shared Value”? (Located at the end of this article)
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A growing number of companies known for their hard-nosed approach to business—such as GE, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Wal-Mart—have already embarked on important efforts to create shared value by reconceiving the intersection between society and corporate performance. Yet our recognition of the transformative power of shared value is still in its genesis. Realizing it will require leaders and managers to develop new skills and knowledge—such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries. And government must learn how to regulate in ways that enable shared value rather than work against it. Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs, and building wealth. But a narrow conception of capitalism has prevented business from harnessing its full potential to meet societyʼs broader challenges. The opportunities have been there all along but have been overlooked. Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face. The moment for a new conception of capitalism is now; societyʼs needs are large and growing, while customers, employees, and a new generation of young people are asking business to step up.
The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy. It will also reshape capitalism and its relationship to society. Perhaps most important of all, learning how to create shared value is our best chance to legitimize business again.
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Moving Beyond Trade-Offs
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Business and society have been pitted against each other for too long. That is in part because economists have legitimized the idea that to provide societal benefits, companies must temper their economic success. In neoclassical thinking, a requirement for social improvement—such as safety or hiring the disabled—imposes a constraint on the corporation. Adding a constraint to a firm that is already maximizing profits, says the theory, will inevitably raise costs and reduce those profits. A related concept, with the same conclusion, is the notion of externalities. Externalities arise when firms create social costs that they do not have to bear, such as pollution. Thus, society must impose taxes, regulations, and penalties so that firms “internalize” these externalities—a belief influencing many government policy decisions. This perspective has also shaped the strategies of firms themselves, which have largely excluded social and environmental considerations from their economic thinking. Firms have taken the broader context in which they do business as a given and resisted regulatory standards as invariably contrary to their interests. Solving social problems has been ceded to governments and to NGOs. Corporate responsibility programs—a reaction to external pressure—have emerged largely to improve firmsʼ reputations and are treated as a necessary expense. Anything more is seen by many as an irresponsible use of shareholdersʼ money. Governments, for their part, have often regulated in a way that makes shared value more difficult to achieve. Implicitly, each side has assumed that the other is an obstacle to pursuing its goals and acted accordingly. Blurring the Profit/Nonprofit Boundary (Located at the end of this article) The concept of shared value, in contrast, recognizes that societal needs, not just conventional economic needs, define markets. It also recognizes that social harms or weaknesses frequently create internal costs for firms—such as wasted energy or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education. And addressing societal harms and constraints does not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches—and as a result, increase their productivity and expand their markets.
Shared value, then, is not about personal values. Nor is it about “sharing” the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value. A good example of this difference in perspective is the fair trade movement in purchasing. Fair trade aims to increase the proportion of revenue that goes to poor farmers by paying them higher prices for the same crops.
-
What Is “Shared Value”? (Located at the end of this article)
-
A growing number of companies known for their hard-nosed approach to business—such as GE, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Wal-Mart—have already embarked on important efforts to create shared value by reconceiving the intersection between society and corporate performance. Yet our recognition of the transformative power of shared value is still in its genesis. Realizing it will require leaders and managers to develop new skills and knowledge—such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries. And government must learn how to regulate in ways that enable shared value rather than work against it. Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs, and building wealth. But a narrow conception of capitalism has prevented business from harnessing its full potential to meet societyʼs broader challenges. The opportunities have been there all along but have been overlooked. Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face. The moment for a new conception of capitalism is now; societyʼs needs are large and growing, while customers, employees, and a new generation of young people are asking business to step up.
The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy. It will also reshape capitalism and its relationship to society. Perhaps most important of all, learning how to create shared value is our best chance to legitimize business again.
-
Moving Beyond Trade-Offs
-
Business and society have been pitted against each other for too long. That is in part because economists have legitimized the idea that to provide societal benefits, companies must temper their economic success. In neoclassical thinking, a requirement for social improvement—such as safety or hiring the disabled—imposes a constraint on the corporation. Adding a constraint to a firm that is already maximizing profits, says the theory, will inevitably raise costs and reduce those profits. A related concept, with the same conclusion, is the notion of externalities. Externalities arise when firms create social costs that they do not have to bear, such as pollution. Thus, society must impose taxes, regulations, and penalties so that firms “internalize” these externalities—a belief influencing many government policy decisions. This perspective has also shaped the strategies of firms themselves, which have largely excluded social and environmental considerations from their economic thinking. Firms have taken the broader context in which they do business as a given and resisted regulatory standards as invariably contrary to their interests. Solving social problems has been ceded to governments and to NGOs. Corporate responsibility programs—a reaction to external pressure—have emerged largely to improve firmsʼ reputations and are treated as a necessary expense. Anything more is seen by many as an irresponsible use of shareholdersʼ money. Governments, for their part, have often regulated in a way that makes shared value more difficult to achieve. Implicitly, each side has assumed that the other is an obstacle to pursuing its goals and acted accordingly. Blurring the Profit/Nonprofit Boundary (Located at the end of this article) The concept of shared value, in contrast, recognizes that societal needs, not just conventional economic needs, define markets. It also recognizes that social harms or weaknesses frequently create internal costs for firms—such as wasted energy or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education. And addressing societal harms and constraints does not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches—and as a result, increase their productivity and expand their markets.
Shared value, then, is not about personal values. Nor is it about “sharing” the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value. A good example of this difference in perspective is the fair trade movement in purchasing. Fair trade aims to increase the proportion of revenue that goes to poor farmers by paying them higher prices for the same crops.
Though
this may be a noble sentiment, fair trade is mostly about
redistribution rather than expanding the overall amount of value
created. A shared value perspective, instead, focuses on
improving growing techniques and strengthening the local cluster of
supporting suppliers and other institutions in order to
increase farmersʼ efficiency, yields, product quality, and
sustainability.
This leads to a bigger pie of revenue and profits that benefits both farmers and the companies that buy fro These transformations drove major progress in economic efficiency. However, something profoundly important was lost in the process, as more-fundamental opportunities for value creation were missed.
This leads to a bigger pie of revenue and profits that benefits both farmers and the companies that buy fro These transformations drove major progress in economic efficiency. However, something profoundly important was lost in the process, as more-fundamental opportunities for value creation were missed.
The scope of strategic
thinking contracted.
Strategy theory holds that to be successful, a company must create a
distinctive value proposition that meets the needs of a
chosen set of customers.
The firm gains competitive advantage from how it configures the value chain, or the set of activities involved in creating, producing, selling, delivering, and supporting its products or services. For decades businesspeople have studied positioning and the best ways to design activities and integrate them. However, companies have overlooked opportunities to meet fundamental societal needs and misunderstood how societal harms and weaknesses affect value chains. Our field of vision has simply been too narrow. In understanding the business environment, managers have focused most of their attention on the industry, or the particular business in which the firm competes. This is because industry structure has a decisive impact on a firmʼs profitability. What has been missed, however, is the profound effect that location can have on productivity and innovation. Companies have failed to grasp the importance of the broader business environment surrounding their major operations.
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How Shared Value Is Created
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Companies can create economic value by creating societal value. There are three distinct ways to do this: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the companyʼs locations. Each of these is part of the virtuous circle of shared value; improving value in one area gives rise to opportunities in the others. The concept of shared value resets the boundaries of capitalism. By better connecting companiesʼ success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets. The ability to create shared value applies equally to advanced economies and developing countries, though the specific opportunities will differ. The opportunities will also differ markedly across industries and companies—but every company has them. And their range and scope is far broader than has been recognized. [The idea of shared value was initially explored in a December 2006 HBR article by Michael E. Porter and Mark R. Kramer, “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.”]
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Reconceiving Products and Markets
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Societyʼs needs are huge—health, better housing, improved nutrition, help for the aging, greater financial security, less environmental damage. Arguably, they are the greatest unmet needs in the global economy. In business we have spent decades learning how to parse and manufacture demand while missing the most important demand of all. Too many companies have lost sight of that most basic of questions: Is our product good for our customers? Or for our customersʼ customers? In advanced economies, demand for products and services that meet societal needs is rapidly growing. Food companies that traditionally concentrated on taste and quantity to drive more and more consumption are refocusing on the fundamental need for better nutrition. Intel and IBM are both devising ways to help utilities harness digital intelligence in order to economize on power usage. Wells Fargo has developed a line of products and tools that help customers budget, manage credit, and pay down debt. Sales of GEʼs Ecomagination products reached $18 billion in 2009—the size of a Fortune 150 company. GE now predicts that revenues of Ecomagination products will grow at twice the rate of total company revenues over the next five years. In these and many other ways, whole new avenues for innovation open up, and shared value is created. Societyʼs gains are even greater, because businesses will often be far more effective than governments and nonprofits are at marketing that motivates customers to embrace products and services that create societal benefits, like healthier food or environmentally friendly products. Equal or greater opportunities arise from serving disadvantaged communities and developing countries. Though societal needs are even more pressing there, these communities have not been recognized as viable markets. Today attention is riveted on India, China, and increasingly, Brazil, which offer firms the prospect of reaching billions of new customers at the bottom of the pyramid—a notion persuasively articulated by C.K. Prahalad. Yet these countries have always had huge needs, as do many developing countries. Similar opportunities await in nontraditional communities in advanced countries. We have learned, for example, that poor urban areas are Americaʼs most underserved market; their substantial concentrated purchasing power has often been overlooked. (See the research of the Initiative for a Competitive Inner City, at icic.org.) The societal benefits of providing appropriate products to lower-income and disadvantaged consumers can be profound, while the profits for companies can be substantial. For example, low-priced cell phones that provide mobile banking services are helping the poor save money securely and transforming the ability of small farmers to produce and market their crops. In Kenya, Vodafoneʼs M-PESA mobile banking service signed up 10 million customers in three years; the funds it handles now represent 11% of that countryʼs GDP. In India, Thomson Reuters has developed a promising monthly service for farmers who earn an average of $2,000 a year. For a fee of $5 a quarter, it provides weather and crop-pricing information and agricultural advice. The service reaches an estimated 2 million farmers, and early research indicates that it has helped increase the incomes of more than 60% of them—in some cases even tripling incomes. As capitalism begins to work in poorer communities, new opportunities for economic development and social progress increase exponentially. For a company, the starting point for creating this kind of shared value is to identify all the societal needs, benefits, and harms that are or could be embodied in the firmʼs products. The opportunities are not static; they change constantly as technology evolves, economies develop, and societal priorities shift. An ongoing exploration of societal needs will lead companies to discover new opportunities for differentiation and repositioning in traditional markets, and to recognize the potential of new markets they previously overlooked. Meeting needs in underserved markets often requires redesigned products or different distribution methods. These requirements can trigger fundamental innovations that also have application in traditional markets. Microfinance, for example, was invented to serve unmet financing needs in developing countries. Now it is growing rapidly in the United States, where it is filling an important gap that was unrecognized. Redefining Productivity in the Value Chain A companyʼs value chain inevitably affects—and is affected by—numerous societal issues, such as natural resource and water use, health and safety, working conditions, and equal treatment in the workplace. Opportunities to create shared value arise because societal problems can create economic costs in the firmʼs value chain. Many so-called externalities actually inflict internal costs on the firm, even in the absence of regulation or resource taxes. Excess packaging of products and greenhouse gases are not just costly to the environment but costly to the business. Wal-Mart, for example, was able to address both issues by reducing its packaging and rerouting its trucks to cut 100 million miles from its delivery routes in 2009, saving $200 million even as it shipped more products. Innovation in disposing of plastic used in stores has saved millions in lower disposal costs to landfills. The new thinking reveals that the congruence between societal progress and productivity in the value chain is far greater than traditionally believed (see the exhibit “The Connection Between Competitive Advantage and Social Issues”).
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The synergy increases when firms approach societal issues from a shared value perspective and invent new ways of operating to address them. So far, however, few companies have reaped the full productivity benefits in areas such as health, safety, environmental performance, and employee retention and capability. The Connection Between Competitive Advantage and Social Issues (Located at the end of this article) But there are unmistakable signs of change. Efforts to minimize pollution were once thought to inevitably increase business costs—and to occur only because of regulation and taxes. Today there is a growing consensus that major improvements in environmental performance can often be achieved with better technology at nominal incremental cost and can even yield net cost savings through enhanced resource utilization, process efficiency, and quality. In each of the areas in the exhibit, a deeper understanding of productivity and a growing awareness of the fallacy of short-term cost reductions (which often actually lower productivity or make it unsustainable) are giving rise to new approaches. The following are some of the most important ways in which shared value thinking is transforming the value chain, which are not independent but often mutually reinforcing. Efforts in these and other areas are still works in process, whose implications will be felt for years to come. Energy use and logistics. The use of energy throughout the value chain is being reexamined, whether it be in processes, transportation, buildings, supply chains, distribution channels, or support services. Triggered by energy price spikes and a new awareness of opportunities for energy efficiency, this reexamination was under way even before carbon emissions became a global focus. The result has been striking improvements in energy utilization through better technology, recycling, cogeneration, and numerous other practices— all of which create shared value. We are learning that shipping is expensive, not just because of energy costs and emissions but because it adds time, complexity, inventory costs, and management costs. Logistical systems are beginning to be redesigned to reduce shipping distances, streamline handling, improve vehicle routing, and the like. All of these steps create shared value. The British retailer Marks & Spencerʼs ambitious overhaul of its supply chain, for example, which involves steps as simple as stopping the purchase of supplies from one hemisphere to ship to another, is expected to save the retailer £175 million annually by fiscal 2016, while hugely reducing carbon emissions. In the process of reexamining logistics, thinking about outsourcing and location will also be revised (as we will discuss below). Resource use. Heightened environmental awareness and advances in technology are catalyzing new approaches in areas such as utilization of water, raw materials, and packaging, as well as expanding recycling and reuse. The opportunities apply to all resources, not just those that have been identified by environmentalists. Better resource utilization—enabled by improving technology—will permeate all parts of the value chain and will spread to suppliers and channels. Landfills will fill more slowly. For example, Coca-Cola has already reduced its worldwide water consumption by 9% from a 2004 baseline—nearly halfway to its goal of a 20% reduction by 2012. Dow Chemical managed to reduce consumption of fresh water at its largest production site by one billion gallons—enough water to supply nearly 40,000 people in the U.S. for a year—resulting in savings of $4 million. The demand for water-saving technology has allowed Indiaʼs Jain Irrigation, a leading global manufacturer of complete drip irrigation systems for water conservation, to achieve a 41% compound annual growth rate in revenue over the past five years.
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Procurement.
The traditional playbook calls for companies to commoditize and exert maximum bargaining power on suppliers to drive down prices—even when purchasing from small businesses or subsistence-level farmers. More recently, firms have been rapidly outsourcing to suppliers in lower-wage locations. Today some companies are beginning to understand that marginalized suppliers cannot remain productive or sustain, much less improve, their quality. By increasing access to inputs, sharing technology, and providing financing, companies can improve supplier quality and productivity while ensuring access to growing volume. Improving productivity will often trump lower prices. As suppliers get stronger, their environmental impact often falls dramatically, which further improves their efficiency. Shared value is created. A good example of such new procurement thinking can be found at Nespresso, one of Nestléʼs fastest-growing divisions, which has enjoyed annual growth of 30% since 2000. Nespresso combines a sophisticated espresso machine with single-cup aluminum capsules containing ground coffees from around the world. Offering quality and convenience, Nespresso has expanded the market for premium coffee. Obtaining a reliable supply of specialized coffees is extremely challenging, however. Most coffees are grown by small farmers in impoverished rural areas of Africa and Latin America, who are trapped in a cycle of low productivity, poor quality, and environmental degradation that limits production volume. To address these issues, Nestlé redesigned procurement. It worked intensively with its growers, providing advice on farming practices, guaranteeing bank loans, and helping secure inputs such as plant stock, pesticides, and fertilizers. Nestlé established local facilities to measure the quality of the coffee at the point of purchase, which allowed it to pay a premium for better beans directly to the growers and thus improve their incentives. Greater yield per hectare and higher production quality increased growersʼ incomes, and the environmental impact of farms shrank. Meanwhile, Nestléʼs reliable supply of good coffee grew significantly. Shared value was created. Embedded in the Nestlé example is a far broader insight, which is the advantage of buying from capable local suppliers. Outsourcing to other locations and countries creates transaction costs and inefficiencies that can offset lower wage and input costs. Capable local suppliers help firms avoid these costs and can reduce cycle time, increase flexibility, foster faster learning, and enable innovation. Buying local includes not only local companies but also local units of national or international companies. When firms buy locally, their suppliers can get stronger, increase their profits, hire more people, and pay better wages—all of which will benefit other businesses in the community. Shared value is created. Distribution. Companies are beginning to reexamine distribution practices from a shared value perspective. As iTunes, Kindle, and Google Scholar (which offers texts of scholarly literature online) demonstrate, profitable new distribution models can also dramatically reduce paper and plastic usage. Similarly, microfinance has created a cost-efficient new model of distributing financial services to small businesses. Opportunities for new distribution models can be even greater in nontraditional markets. For example, Hindustan Unilever is creating a new direct-to-home distribution system, run by underprivileged female entrepreneurs, in Indian villages of fewer than 2,000 people. Unilever provides microcredit and training and now has more than 45,000 entrepreneurs covering some 100,000 villages across 15 Indian states. Project Shakti, as this distribution system is called, benefits communities not only by giving women skills that often double their household income but also by reducing the spread of communicable diseases through increased access to hygiene products. This is a good example of how the unique ability of business to market to hard-to-reach consumers can benefit society by getting life-altering products into the hands of people that need them. Project Shakti now accounts for 5% of Unileverʼs total revenues in India and has extended the companyʼs reach into rural areas and built its brand in media-dark regions, creating major economic value for the company.
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Employee productivity.
The focus on holding down wage levels, reducing benefits, and offshoring is beginning to give way to an awareness of the positive effects that a living wage, safety, wellness, training, and opportunities for advancement for employees have on productivity. Many companies, for example, traditionally sought to minimize the cost of “expensive” employee health care coverage or even eliminate health coverage altogether. Today leading companies have learned that because of lost workdays and diminished employee productivity, poor health costs them more than health benefits do. Take Johnson & Johnson. By helping employees stop smoking (a two-thirds reduction in the past 15 years) and implementing numerous other wellness programs, the company has saved $250 million on health care costs, a return of $2.71 for every dollar spent on wellness from 2002 to 2008. Moreover, Johnson & Johnson has benefited from a more present and productive workforce. If labor unions focused more on shared value, too, these kinds of employee approaches would spread even faster. Location. Business thinking has embraced the myth that location no longer matters, because logistics are inexpensive, information flows rapidly, and markets are global. The cheaper the location, then, the better. Concern about the local communities in which a company operates has faded. That oversimplified thinking is now being challenged, partly by the rising costs of energy and carbon emissions but also by a greater recognition of the productivity cost of highly dispersed production systems and the hidden costs of distant procurement discussed earlier. Wal-Mart, for example, is increasingly sourcing produce for its food sections from local farms near its warehouses. It has discovered that the savings on transportation costs and the ability to restock in smaller quantities more than offset the lower prices of industrial farms farther away. Nestlé is establishing smaller plants closer to its markets and stepping up efforts to maximize the use of locally available materials. The calculus of locating activities in developing countries is also changing. Olam International, a leading cashew producer, traditionally shipped its nuts from Africa to Asia for processing at facilities staffed by productive Asian workers. But by opening local processing plants and training workers in Tanzania, Mozambique, Nigeria, and Côte dʼIvoire, Olam has cut processing and shipping costs by as much as 25%—not to mention, greatly reduced carbon emissions. In making this move, Olam also built preferred relationships with local farmers. And it has provided direct employment to 17,000 people—95% of whom are women—and indirect employment to an equal number of people, in rural areas where jobs otherwise were not available. These trends may well lead companies to remake their value chains by moving some activities closer to home and having fewer major production locations. Until now, many companies have thought that being global meant moving production to locations with the lowest labor costs and designing their supply chains to achieve the most immediate impact on expenses. In reality, the strongest international competitors will often be those that can establish deeper roots in important communities. Companies that can embrace this new locational thinking will create shared value. As these examples illustrate, reimagining value chains from the perspective of shared value will offer significant new ways to innovate and unlock new economic value that most businesses have missed. Enabling Local Cluster Development No company is self-contained. The success of every company is affected by the supporting companies and infrastructure around it. Productivity and innovation are strongly influenced by “clusters,” or geographic concentrations of firms, related businesses, suppliers, service providers, and logistical infrastructure in a particular field—such as IT in Silicon Valley, cut flowers in Kenya, and diamond cutting in Surat, India. Clusters include not only businesses but institutions such as academic programs, trade associations, and standards organizations. They also draw on the broader public assets in the surrounding community, such as schools and universities, clean water, fair-competition laws, quality standards, and market transparency. Clusters are prominent in all successful and growing regional economies and play a crucial role in driving productivity, innovation, and competitiveness. Capable local suppliers foster greater logistical efficiency and ease of collaboration, as we have discussed. Stronger local capabilities in such areas as training, transportation services, and related industries also boost productivity. Without a supporting cluster, conversely, productivity suffers. Deficiencies in the framework conditions surrounding the cluster also create internal costs for firms. Poor public education imposes productivity and remedial-training costs. Poor transportation infrastructure drives up the costs of logistics. Gender or racial discrimination reduces the pool of capable employees. Poverty limits the demand for products and leads to environmental degradation, unhealthy workers, and high security costs. As companies have increasingly become disconnected from their communities, however, their influence in solving these problems has waned even as their costs have grown. Firms create shared value by building clusters to improve company productivity while addressing gaps or failures in the framework conditions surrounding the cluster. Efforts to develop or attract capable suppliers, for example, enable the procurement benefits we discussed earlier. A focus on clusters and location has been all but absent in management thinking. Cluster thinking has also been missing in many economic development initiatives, which have failed because they involved isolated interventions and overlooked critical complementary investments. A key aspect of cluster building in developing and developed countries alike is the formation of open and transparent markets. In inefficient or monopolized markets where workers are exploited, where suppliers do not receive fair prices, and where price transparency is lacking, productivity suffers. Enabling fair and open markets, which is often best done in conjunction with partners, can allow a company to secure reliable supplies and give suppliers better incentives for quality and efficiency while also substantially improving the incomes and purchasing power of local citizens. A positive cycle of economic and social development results. When a firm builds clusters in its key locations, it also amplifies the connection between its success and its communitiesʼ success. A firmʼs growth has multiplier effects, as jobs are created in supporting industries, new companies are seeded, and demand for ancillary services rises. A companyʼs efforts to improve framework conditions for the cluster spill over to other participants and the local economy. Workforce development initiatives, for example, increase the supply of skilled employees for many other firms as well. At Nespresso, Nestlé also worked to build clusters, which made its new procurement practices far more effective. It set out to build agricultural, technical, financial, and logistical firms and capabilities in each coffee region, to further support efficiency and high-quality local production. Nestlé led efforts to increase access to essential agricultural inputs such as plant stock, fertilizers, and irrigation equipment; strengthen regional farmer co-ops by helping them finance shared wet-milling facilities for producing higher-quality beans; and support an extension program to advise all farmers on growing techniques. It also worked in partnership with the Rainforest Alliance, a leading international NGO, to teach farmers more-sustainable practices that make production volumes more reliable. In the process, Nestléʼs productivity improved. A good example of a company working to improve framework conditions in its cluster is Yara, the worldʼs largest mineral fertilizer company. Yara realized that the lack of logistical infrastructure in many parts of Africa was preventing farmers from gaining efficient access to fertilizers and other essential agricultural inputs, and from transporting their crops efficiently to market. Yara is tackling this problem through a $60 million investment in a program to improve ports and roads, which is designed to create agricultural growth corridors in Mozambique and Tanzania. The company is working on this initiative with local governments and support from the Norwegian government. In Mozambique alone, the corridor is expected to benefit more than 200,000 small farmers and create 350,000 new jobs. The improvements will help Yara grow its business but will support the whole agricultural cluster, creating huge multiplier effects. The benefits of cluster building apply not only in emerging economies but also in advanced countries. North Carolinaʼs Research Triangle is a notable example of public and private collaboration that has created shared value by developing clusters in such areas as information technology and life sciences. That region, which has benefited from continued investment from both the private sector and local government, has experienced huge growth in employment, incomes, and company performance, and has fared better than most during the downturn. To support cluster development in the communities in which they operate, companies need to identify gaps and deficiencies in areas such as logistics, suppliers, distribution channels, training, market organization, and educational institutions. Then the task is to focus on the weaknesses that represent the greatest constraints to the companyʼs own productivity and growth, and distinguish those areas that the company is best equipped to influence directly from those in which collaboration is more costeffective. Here is where the shared value opportunities will be greatest. Initiatives that address cluster weaknesses that constrain companies will be much more effective than community-focused corporate social responsibility programs, which often have limited impact because they take on too many areas without focusing on value. But efforts to enhance infrastructure and institutions in a region often require collective action, as the Nestlé, Yara, and Research Triangle examples show. Companies should try to enlist partners to share the cost, win support, and assemble the right skills. The most successful cluster development programs are ones that involve collaboration within the private sector, as well as trade associations, government agencies, and NGOs. Creating Shared Value in Practice Not all profit is equal—an idea that has been lost in the narrow, short-term focus of financial markets and in much management thinking. Profits involving a social purpose represent a higher form of capitalism—one that will enable society to advance more rapidly while allowing companies to grow even more. The result is a positive cycle of company and community prosperity, which leads to profits that endure.
Creating shared value presumes compliance with the law and ethical standards, as well as mitigating any harm caused by the business, but goes far beyond that. The opportunity to create economic value through creating societal value will be one of the most powerful forces driving growth in the global economy. This thinking represents a new way of understanding customers, productivity, and the external influences on corporate success. It highlights the immense human needs to be met, the large new markets to serve, and the internal costs of social and community deficits—as well as the competitive advantages available from addressing them. Until recently, companies have simply not approached their businesses this way. Creating shared value will be more effective and far more sustainable than the majority of todayʼs corporate efforts in the social arena. Companies will make real strides on the environment, for example, when they treat it as a productivity driver rather than a feel-good response to external pressure. Or consider access to housing. A shared value approach would have led financial services companies to create innovative products that prudently increased access to home ownership. This was recognized by the Mexican construction company Urbi, which pioneered a mortgage-financing “rent-to-own” plan. Major U.S. banks, in contrast, promoted unsustainable financing vehicles that turned out to be socially and economically devastating, while claiming they were socially responsible because they had charitable contribution programs. Inevitably, the most fertile opportunities for creating shared value will be closely related to a companyʼs particular business, and in areas most important to the business. Here a company can benefit the most economically and hence sustain its commitment over time. Here is also where a company brings the most resources to bear, and where its scale and market presence equip it to have a meaningful impact on a societal problem. Ironically, many of the shared value pioneers have been those with more-limited resources—social entrepreneurs and companies in developing countries. These outsiders have been able to see the opportunities more clearly. In the process, the distinction between for-profits and nonprofits is blurring. The Role of Social Entrepreneurs (Located at the end of this article) Shared value is defining a whole new set of best practices that all companies must embrace. It will also become an integral part of strategy. The essence of strategy is choosing a unique positioning and a distinctive value chain to deliver on it. Shared value opens up many new needs to meet, new products to offer, new customers to serve, and new ways to configure the value chain. And the competitive advantages that arise from creating shared value will often be more sustainable than conventional cost and quality improvements. The cycle of imitation and zero-sum competition can be broken. Creating Shared Value: Implications for Government and Civil Society (Located at the end of this article) The opportunities to create shared value are widespread and growing. Not every company will have them in every area, but our experience has been that companies discover more and more opportunities over time as their line operating units grasp this concept. It has taken a decade, but GEʼs Ecomagination initiative, for example, is now producing a stream of fast-growing products and services across the company. A shared value lens can be applied to every major company decision. Could our product design incorporate greater social benefits? Are we serving all the communities that would benefit from our products? Do our processes and logistical approaches maximize efficiencies in energy and water use? Could our new plant be constructed in a way that achieves greater community impact? How are gaps in our cluster holding back our efficiency and speed of innovation? How could we enhance our community as a business location? If sites are comparable economically, at which one will the local community benefit the most? If a company can improve societal conditions, it will often improve business conditions and thereby trigger positive feedback loops. The three avenues for creating shared value are mutually reinforcing. Enhancing the cluster, for example, will enable more local procurement and less dispersed supply chains. New products and services that meet social needs or serve overlooked markets will require new value chain choices in areas such as production, marketing, and distribution. And new value chain configurations will create demand for equipment and technology that save energy, conserve resources, and support employees. Creating shared value will require concrete and tailored metrics for each business unit in each of the three areas. While some companies have begun to track various social impacts, few have yet tied them to their economic interests at the business level. Shared value creation will involve new and heightened forms of collaboration. While some shared value opportunities are possible for a company to seize on its own, others will benefit from insights, skills, and resources that cut across profit/nonprofit and private/public boundaries. Here, companies will be less successful if they attempt to tackle societal problems on their own, especially those involving cluster development. Major competitors may also need to work together on precompetitive framework conditions, something that has not been common in reputation-driven CSR initiatives. Successful collaboration will be data driven, clearly linked to defined outcomes, well connected to the goals of all stakeholders, and tracked with clear metrics. Governments and NGOs can enable and reinforce shared value or work against it. (For more on this topic, see the sidebar “Government Regulation and Shared Value.”) Government Regulation and Shared Value (Located at the end of this article) The Next Evolution in Capitalism Shared value holds the key to unlocking the next wave of business innovation and growth. It will also reconnect company success and community success in ways that have been lost in an age of narrow management approaches, short-term thinking, and deepening divides among societyʼs institutions. Shared value focuses companies on the right kind of profits—profits that create societal benefits rather than diminish them. Capital markets will undoubtedly continue to pressure companies to generate short-term profits, and some companies will surely continue to reap profits at the expense of societal needs. But such profits will often prove to be short-lived, and far greater opportunities will be missed. The moment for an expanded view of value creation has come. A host of factors, such as the growing social awareness of employees and citizens and the increased scarcity of natural resources, will drive unprecedented opportunities to create shared value. We need a more sophisticated form of capitalism, one imbued with a social purpose. But that purpose should arise not out of charity but out of a deeper understanding of competition and economic value creation. This next evolution in the capitalist model recognizes new and better ways to develop products, serve markets, and build productive enterprises. Creating shared value represents a broader conception of Adam Smithʼs invisible hand. It opens the doors of the pin factory to a wider set of influences. It is not philanthropy but self-interested behavior to create economic value by creating societal value. If all companies individually pursued shared value connected to their particular businesses, societyʼs overall interests would be served. And companies would acquire legitimacy in the eyes of the communities in which they operated, which would allow democracy to work as governments set policies that fostered and supported business. Survival of the fittest would still prevail, but market competition would benefit society in ways we have lost. Creating shared value represents a new approach to managing that cuts across disciplines. Because of the traditional divide between economic concerns and social ones, people in the public and private sectors have often followed very different educational and career paths. As a result, few managers have the understanding of social and environmental issues required to move beyond todayʼs CSR approaches, and few social sector leaders have the managerial training and entrepreneurial mindset needed to design and implement shared value models. Most business schools still teach the narrow view of capitalism, even though more and more of their graduates hunger for a greater sense of purpose and a growing number are drawn to social entrepreneurship. The results have been missed opportunity and public cynicism. How Shared Value Differs from Corporate Social Responsibility (Located at the end of this article) Business school curricula will need to broaden in a number of areas. For example, the efficient use and stewardship of all forms of resources will define the next-generation thinking on value chains. Customer behavior and marketing courses will have to move beyond persuasion and demand creation to the study of deeper human needs and how to serve nontraditional customer groups. Clusters, and the broader locational influences on company productivity and innovation, will form a new core discipline in business schools; economic development will no longer be left only to public policy and economics departments. Business and government courses will examine the economic impact of societal factors on enterprises, moving beyond the effects of regulation and macroeconomics. And finance will need to rethink how capital markets can actually support true value creation in companies—their fundamental purpose—not just benefit financial market participants. There is nothing soft about the concept of shared value. These proposed changes in business school curricula are not qualitative and do not depart from economic value creation. Instead, they represent the next stage in our understanding of markets, competition, and business management. Not all societal problems can be solved through shared value solutions. But shared value offers corporations the opportunity to utilize their skills, resources, and management capability to lead social progress in ways that even the best-intentioned governmental and social sector organizations can rarely match. In the process, businesses can earn the respect of society again. What Is “Shared Value”? The concept of shared value can be 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. Shared value creation focuses on identifying and expanding the connections between societal and economic progress. The concept rests on the premise that both economic and social progress must be addressed using value principles. Value is defined as benefits relative to costs, not just benefits value terms, their interest in collaborating with business will inevitably grow. Blurring the Profit/Nonprofit Boundary The concept of shared value blurs the line between for-profit and nonprofit organizations. New kinds of hybrid enterprises are rapidly appearing. For example, WaterHealth International, a fast-growing for-profit, uses innovative water purification techniques to distribute clean water at minimal cost to more than one million people in rural India, Ghana, and the Philippines. Its investors include not only the socially focused Acumen Fund and the International Finance Corporation of the World Bank but also Dow Chemicalʼs venture fund. Revolution Foods, a four-year-old venture-capital-backed U.S. start-up, provides 60,000 fresh, healthful, and nutritious meals to students daily—and does so at a higher gross margin than traditional competitors. Waste Concern, a hybrid profit/nonprofit enterprise started in Bangladesh 15 years ago, has built the capacity to convert 700 tons of trash, collected daily from neighborhood slums, into organic fertilizer, thereby increasing crop yields and reducing CO2 emissions. Seeded with capital from the Lions Club and the United Nations Development Programme, the company improves health conditions while earning a substantial gross margin through fertilizer sales and carbon credits. The blurring of the boundary between successful for-profits and nonprofits is one of the strong signs that creating shared value is possible.
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The Connection Between Competitive Advantage and Social Issues
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There are numerous ways in which addressing societal concerns can yield productivity benefits to a firm. Consider, for example, what happens when a firm invests in a wellness program. Society benefits because employees and their families become healthier, and the firm minimizes employee absences and lost productivity. The graphic below depicts some areas where the connections are strongest. The Role of Social Entrepreneurs Businesses are not the only players in finding profitable solutions to social problems. A whole generation of social entrepreneurs is pioneering new product concepts that meet social needs using viable business models. Because they are not locked into narrow traditional business thinking, social entrepreneurs are often well ahead of established corporations in discovering these opportunities. Social enterprises that create shared value can scale up far more rapidly than purely social programs, which often suffer from an inability to grow and become self-sustaining. Real social entrepreneurship should be measured by its ability to create shared value, not just social benefit. Creating Shared Value: Implications for Government and Civil Society While our focus here is primarily on companies, the principles of shared value apply equally to governments and nonprofit organizations. Governments and NGOs will be most effective if they think in value terms—considering benefits relative to costs —and focus on the results achieved rather than the funds and effort expended. Activists have tended to approach social improvement from an ideological or absolutist perspective, as if social benefits should be pursued at any cost. Governments and NGOs often assume that trade-offs between economic and social benefits are inevitable, exacerbating these trade-offs through their approaches. For example, much environmental regulation still takes the form of command-and-control mandates and enforcement actions designed to embarrass and punish companies. Regulators would accomplish much more by focusing on measuring environmental performance and introducing standards, phase-in periods, and support for technology that would promote innovation, improve the environment, and increase competitiveness simultaneously. The principle of shared value creation cuts across the traditional divide between the responsibilities of business and those of government or civil society. From societyʼs perspective, it does not matter what types of organizations created the value. What matters is that benefits are delivered by those organizations—or combinations of organizations—that are best positioned to achieve the most impact for the least cost. Finding ways to boost productivity is equally valuable whether in the service of commercial or societal objectives. In short, the principle of value creation should guide the use of resources across all areas of societal concern.
Fortunately, a new type of NGO has emerged that understands the importance of productivity and value creation. Such organizations have often had a remarkable impact. One example is TechnoServe, which has partnered with both regional and global corporations to promote the development of competitive agricultural clusters in more than 30 countries. Root Capital accomplishes a similar objective by providing financing to farmers and businesses that are too large for microfinance but too small for normal bank financing. Since 2000, Root Capital has lent more than $200 million to 282 businesses, through which it has reached 400,000 farmers and artisans. It has financed the cultivation of 1.4 million acres of organic agriculture in Latin America and Africa. Root Capital regularly works with corporations, utilizing future purchase orders as collateral for its loans to farmers and helping to strengthen corporate supply chains and improve the quality of purchased inputs. Some private foundations have begun to see the power of working with businesses to create shared value. The Bill & Melinda Gates Foundation, for example, has formed partnerships with leading global corporations to foster agricultural clusters in developing countries.
The firm gains competitive advantage from how it configures the value chain, or the set of activities involved in creating, producing, selling, delivering, and supporting its products or services. For decades businesspeople have studied positioning and the best ways to design activities and integrate them. However, companies have overlooked opportunities to meet fundamental societal needs and misunderstood how societal harms and weaknesses affect value chains. Our field of vision has simply been too narrow. In understanding the business environment, managers have focused most of their attention on the industry, or the particular business in which the firm competes. This is because industry structure has a decisive impact on a firmʼs profitability. What has been missed, however, is the profound effect that location can have on productivity and innovation. Companies have failed to grasp the importance of the broader business environment surrounding their major operations.
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How Shared Value Is Created
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Companies can create economic value by creating societal value. There are three distinct ways to do this: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the companyʼs locations. Each of these is part of the virtuous circle of shared value; improving value in one area gives rise to opportunities in the others. The concept of shared value resets the boundaries of capitalism. By better connecting companiesʼ success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets. The ability to create shared value applies equally to advanced economies and developing countries, though the specific opportunities will differ. The opportunities will also differ markedly across industries and companies—but every company has them. And their range and scope is far broader than has been recognized. [The idea of shared value was initially explored in a December 2006 HBR article by Michael E. Porter and Mark R. Kramer, “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.”]
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Reconceiving Products and Markets
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Societyʼs needs are huge—health, better housing, improved nutrition, help for the aging, greater financial security, less environmental damage. Arguably, they are the greatest unmet needs in the global economy. In business we have spent decades learning how to parse and manufacture demand while missing the most important demand of all. Too many companies have lost sight of that most basic of questions: Is our product good for our customers? Or for our customersʼ customers? In advanced economies, demand for products and services that meet societal needs is rapidly growing. Food companies that traditionally concentrated on taste and quantity to drive more and more consumption are refocusing on the fundamental need for better nutrition. Intel and IBM are both devising ways to help utilities harness digital intelligence in order to economize on power usage. Wells Fargo has developed a line of products and tools that help customers budget, manage credit, and pay down debt. Sales of GEʼs Ecomagination products reached $18 billion in 2009—the size of a Fortune 150 company. GE now predicts that revenues of Ecomagination products will grow at twice the rate of total company revenues over the next five years. In these and many other ways, whole new avenues for innovation open up, and shared value is created. Societyʼs gains are even greater, because businesses will often be far more effective than governments and nonprofits are at marketing that motivates customers to embrace products and services that create societal benefits, like healthier food or environmentally friendly products. Equal or greater opportunities arise from serving disadvantaged communities and developing countries. Though societal needs are even more pressing there, these communities have not been recognized as viable markets. Today attention is riveted on India, China, and increasingly, Brazil, which offer firms the prospect of reaching billions of new customers at the bottom of the pyramid—a notion persuasively articulated by C.K. Prahalad. Yet these countries have always had huge needs, as do many developing countries. Similar opportunities await in nontraditional communities in advanced countries. We have learned, for example, that poor urban areas are Americaʼs most underserved market; their substantial concentrated purchasing power has often been overlooked. (See the research of the Initiative for a Competitive Inner City, at icic.org.) The societal benefits of providing appropriate products to lower-income and disadvantaged consumers can be profound, while the profits for companies can be substantial. For example, low-priced cell phones that provide mobile banking services are helping the poor save money securely and transforming the ability of small farmers to produce and market their crops. In Kenya, Vodafoneʼs M-PESA mobile banking service signed up 10 million customers in three years; the funds it handles now represent 11% of that countryʼs GDP. In India, Thomson Reuters has developed a promising monthly service for farmers who earn an average of $2,000 a year. For a fee of $5 a quarter, it provides weather and crop-pricing information and agricultural advice. The service reaches an estimated 2 million farmers, and early research indicates that it has helped increase the incomes of more than 60% of them—in some cases even tripling incomes. As capitalism begins to work in poorer communities, new opportunities for economic development and social progress increase exponentially. For a company, the starting point for creating this kind of shared value is to identify all the societal needs, benefits, and harms that are or could be embodied in the firmʼs products. The opportunities are not static; they change constantly as technology evolves, economies develop, and societal priorities shift. An ongoing exploration of societal needs will lead companies to discover new opportunities for differentiation and repositioning in traditional markets, and to recognize the potential of new markets they previously overlooked. Meeting needs in underserved markets often requires redesigned products or different distribution methods. These requirements can trigger fundamental innovations that also have application in traditional markets. Microfinance, for example, was invented to serve unmet financing needs in developing countries. Now it is growing rapidly in the United States, where it is filling an important gap that was unrecognized. Redefining Productivity in the Value Chain A companyʼs value chain inevitably affects—and is affected by—numerous societal issues, such as natural resource and water use, health and safety, working conditions, and equal treatment in the workplace. Opportunities to create shared value arise because societal problems can create economic costs in the firmʼs value chain. Many so-called externalities actually inflict internal costs on the firm, even in the absence of regulation or resource taxes. Excess packaging of products and greenhouse gases are not just costly to the environment but costly to the business. Wal-Mart, for example, was able to address both issues by reducing its packaging and rerouting its trucks to cut 100 million miles from its delivery routes in 2009, saving $200 million even as it shipped more products. Innovation in disposing of plastic used in stores has saved millions in lower disposal costs to landfills. The new thinking reveals that the congruence between societal progress and productivity in the value chain is far greater than traditionally believed (see the exhibit “The Connection Between Competitive Advantage and Social Issues”).
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The synergy increases when firms approach societal issues from a shared value perspective and invent new ways of operating to address them. So far, however, few companies have reaped the full productivity benefits in areas such as health, safety, environmental performance, and employee retention and capability. The Connection Between Competitive Advantage and Social Issues (Located at the end of this article) But there are unmistakable signs of change. Efforts to minimize pollution were once thought to inevitably increase business costs—and to occur only because of regulation and taxes. Today there is a growing consensus that major improvements in environmental performance can often be achieved with better technology at nominal incremental cost and can even yield net cost savings through enhanced resource utilization, process efficiency, and quality. In each of the areas in the exhibit, a deeper understanding of productivity and a growing awareness of the fallacy of short-term cost reductions (which often actually lower productivity or make it unsustainable) are giving rise to new approaches. The following are some of the most important ways in which shared value thinking is transforming the value chain, which are not independent but often mutually reinforcing. Efforts in these and other areas are still works in process, whose implications will be felt for years to come. Energy use and logistics. The use of energy throughout the value chain is being reexamined, whether it be in processes, transportation, buildings, supply chains, distribution channels, or support services. Triggered by energy price spikes and a new awareness of opportunities for energy efficiency, this reexamination was under way even before carbon emissions became a global focus. The result has been striking improvements in energy utilization through better technology, recycling, cogeneration, and numerous other practices— all of which create shared value. We are learning that shipping is expensive, not just because of energy costs and emissions but because it adds time, complexity, inventory costs, and management costs. Logistical systems are beginning to be redesigned to reduce shipping distances, streamline handling, improve vehicle routing, and the like. All of these steps create shared value. The British retailer Marks & Spencerʼs ambitious overhaul of its supply chain, for example, which involves steps as simple as stopping the purchase of supplies from one hemisphere to ship to another, is expected to save the retailer £175 million annually by fiscal 2016, while hugely reducing carbon emissions. In the process of reexamining logistics, thinking about outsourcing and location will also be revised (as we will discuss below). Resource use. Heightened environmental awareness and advances in technology are catalyzing new approaches in areas such as utilization of water, raw materials, and packaging, as well as expanding recycling and reuse. The opportunities apply to all resources, not just those that have been identified by environmentalists. Better resource utilization—enabled by improving technology—will permeate all parts of the value chain and will spread to suppliers and channels. Landfills will fill more slowly. For example, Coca-Cola has already reduced its worldwide water consumption by 9% from a 2004 baseline—nearly halfway to its goal of a 20% reduction by 2012. Dow Chemical managed to reduce consumption of fresh water at its largest production site by one billion gallons—enough water to supply nearly 40,000 people in the U.S. for a year—resulting in savings of $4 million. The demand for water-saving technology has allowed Indiaʼs Jain Irrigation, a leading global manufacturer of complete drip irrigation systems for water conservation, to achieve a 41% compound annual growth rate in revenue over the past five years.
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Procurement.
The traditional playbook calls for companies to commoditize and exert maximum bargaining power on suppliers to drive down prices—even when purchasing from small businesses or subsistence-level farmers. More recently, firms have been rapidly outsourcing to suppliers in lower-wage locations. Today some companies are beginning to understand that marginalized suppliers cannot remain productive or sustain, much less improve, their quality. By increasing access to inputs, sharing technology, and providing financing, companies can improve supplier quality and productivity while ensuring access to growing volume. Improving productivity will often trump lower prices. As suppliers get stronger, their environmental impact often falls dramatically, which further improves their efficiency. Shared value is created. A good example of such new procurement thinking can be found at Nespresso, one of Nestléʼs fastest-growing divisions, which has enjoyed annual growth of 30% since 2000. Nespresso combines a sophisticated espresso machine with single-cup aluminum capsules containing ground coffees from around the world. Offering quality and convenience, Nespresso has expanded the market for premium coffee. Obtaining a reliable supply of specialized coffees is extremely challenging, however. Most coffees are grown by small farmers in impoverished rural areas of Africa and Latin America, who are trapped in a cycle of low productivity, poor quality, and environmental degradation that limits production volume. To address these issues, Nestlé redesigned procurement. It worked intensively with its growers, providing advice on farming practices, guaranteeing bank loans, and helping secure inputs such as plant stock, pesticides, and fertilizers. Nestlé established local facilities to measure the quality of the coffee at the point of purchase, which allowed it to pay a premium for better beans directly to the growers and thus improve their incentives. Greater yield per hectare and higher production quality increased growersʼ incomes, and the environmental impact of farms shrank. Meanwhile, Nestléʼs reliable supply of good coffee grew significantly. Shared value was created. Embedded in the Nestlé example is a far broader insight, which is the advantage of buying from capable local suppliers. Outsourcing to other locations and countries creates transaction costs and inefficiencies that can offset lower wage and input costs. Capable local suppliers help firms avoid these costs and can reduce cycle time, increase flexibility, foster faster learning, and enable innovation. Buying local includes not only local companies but also local units of national or international companies. When firms buy locally, their suppliers can get stronger, increase their profits, hire more people, and pay better wages—all of which will benefit other businesses in the community. Shared value is created. Distribution. Companies are beginning to reexamine distribution practices from a shared value perspective. As iTunes, Kindle, and Google Scholar (which offers texts of scholarly literature online) demonstrate, profitable new distribution models can also dramatically reduce paper and plastic usage. Similarly, microfinance has created a cost-efficient new model of distributing financial services to small businesses. Opportunities for new distribution models can be even greater in nontraditional markets. For example, Hindustan Unilever is creating a new direct-to-home distribution system, run by underprivileged female entrepreneurs, in Indian villages of fewer than 2,000 people. Unilever provides microcredit and training and now has more than 45,000 entrepreneurs covering some 100,000 villages across 15 Indian states. Project Shakti, as this distribution system is called, benefits communities not only by giving women skills that often double their household income but also by reducing the spread of communicable diseases through increased access to hygiene products. This is a good example of how the unique ability of business to market to hard-to-reach consumers can benefit society by getting life-altering products into the hands of people that need them. Project Shakti now accounts for 5% of Unileverʼs total revenues in India and has extended the companyʼs reach into rural areas and built its brand in media-dark regions, creating major economic value for the company.
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Employee productivity.
The focus on holding down wage levels, reducing benefits, and offshoring is beginning to give way to an awareness of the positive effects that a living wage, safety, wellness, training, and opportunities for advancement for employees have on productivity. Many companies, for example, traditionally sought to minimize the cost of “expensive” employee health care coverage or even eliminate health coverage altogether. Today leading companies have learned that because of lost workdays and diminished employee productivity, poor health costs them more than health benefits do. Take Johnson & Johnson. By helping employees stop smoking (a two-thirds reduction in the past 15 years) and implementing numerous other wellness programs, the company has saved $250 million on health care costs, a return of $2.71 for every dollar spent on wellness from 2002 to 2008. Moreover, Johnson & Johnson has benefited from a more present and productive workforce. If labor unions focused more on shared value, too, these kinds of employee approaches would spread even faster. Location. Business thinking has embraced the myth that location no longer matters, because logistics are inexpensive, information flows rapidly, and markets are global. The cheaper the location, then, the better. Concern about the local communities in which a company operates has faded. That oversimplified thinking is now being challenged, partly by the rising costs of energy and carbon emissions but also by a greater recognition of the productivity cost of highly dispersed production systems and the hidden costs of distant procurement discussed earlier. Wal-Mart, for example, is increasingly sourcing produce for its food sections from local farms near its warehouses. It has discovered that the savings on transportation costs and the ability to restock in smaller quantities more than offset the lower prices of industrial farms farther away. Nestlé is establishing smaller plants closer to its markets and stepping up efforts to maximize the use of locally available materials. The calculus of locating activities in developing countries is also changing. Olam International, a leading cashew producer, traditionally shipped its nuts from Africa to Asia for processing at facilities staffed by productive Asian workers. But by opening local processing plants and training workers in Tanzania, Mozambique, Nigeria, and Côte dʼIvoire, Olam has cut processing and shipping costs by as much as 25%—not to mention, greatly reduced carbon emissions. In making this move, Olam also built preferred relationships with local farmers. And it has provided direct employment to 17,000 people—95% of whom are women—and indirect employment to an equal number of people, in rural areas where jobs otherwise were not available. These trends may well lead companies to remake their value chains by moving some activities closer to home and having fewer major production locations. Until now, many companies have thought that being global meant moving production to locations with the lowest labor costs and designing their supply chains to achieve the most immediate impact on expenses. In reality, the strongest international competitors will often be those that can establish deeper roots in important communities. Companies that can embrace this new locational thinking will create shared value. As these examples illustrate, reimagining value chains from the perspective of shared value will offer significant new ways to innovate and unlock new economic value that most businesses have missed. Enabling Local Cluster Development No company is self-contained. The success of every company is affected by the supporting companies and infrastructure around it. Productivity and innovation are strongly influenced by “clusters,” or geographic concentrations of firms, related businesses, suppliers, service providers, and logistical infrastructure in a particular field—such as IT in Silicon Valley, cut flowers in Kenya, and diamond cutting in Surat, India. Clusters include not only businesses but institutions such as academic programs, trade associations, and standards organizations. They also draw on the broader public assets in the surrounding community, such as schools and universities, clean water, fair-competition laws, quality standards, and market transparency. Clusters are prominent in all successful and growing regional economies and play a crucial role in driving productivity, innovation, and competitiveness. Capable local suppliers foster greater logistical efficiency and ease of collaboration, as we have discussed. Stronger local capabilities in such areas as training, transportation services, and related industries also boost productivity. Without a supporting cluster, conversely, productivity suffers. Deficiencies in the framework conditions surrounding the cluster also create internal costs for firms. Poor public education imposes productivity and remedial-training costs. Poor transportation infrastructure drives up the costs of logistics. Gender or racial discrimination reduces the pool of capable employees. Poverty limits the demand for products and leads to environmental degradation, unhealthy workers, and high security costs. As companies have increasingly become disconnected from their communities, however, their influence in solving these problems has waned even as their costs have grown. Firms create shared value by building clusters to improve company productivity while addressing gaps or failures in the framework conditions surrounding the cluster. Efforts to develop or attract capable suppliers, for example, enable the procurement benefits we discussed earlier. A focus on clusters and location has been all but absent in management thinking. Cluster thinking has also been missing in many economic development initiatives, which have failed because they involved isolated interventions and overlooked critical complementary investments. A key aspect of cluster building in developing and developed countries alike is the formation of open and transparent markets. In inefficient or monopolized markets where workers are exploited, where suppliers do not receive fair prices, and where price transparency is lacking, productivity suffers. Enabling fair and open markets, which is often best done in conjunction with partners, can allow a company to secure reliable supplies and give suppliers better incentives for quality and efficiency while also substantially improving the incomes and purchasing power of local citizens. A positive cycle of economic and social development results. When a firm builds clusters in its key locations, it also amplifies the connection between its success and its communitiesʼ success. A firmʼs growth has multiplier effects, as jobs are created in supporting industries, new companies are seeded, and demand for ancillary services rises. A companyʼs efforts to improve framework conditions for the cluster spill over to other participants and the local economy. Workforce development initiatives, for example, increase the supply of skilled employees for many other firms as well. At Nespresso, Nestlé also worked to build clusters, which made its new procurement practices far more effective. It set out to build agricultural, technical, financial, and logistical firms and capabilities in each coffee region, to further support efficiency and high-quality local production. Nestlé led efforts to increase access to essential agricultural inputs such as plant stock, fertilizers, and irrigation equipment; strengthen regional farmer co-ops by helping them finance shared wet-milling facilities for producing higher-quality beans; and support an extension program to advise all farmers on growing techniques. It also worked in partnership with the Rainforest Alliance, a leading international NGO, to teach farmers more-sustainable practices that make production volumes more reliable. In the process, Nestléʼs productivity improved. A good example of a company working to improve framework conditions in its cluster is Yara, the worldʼs largest mineral fertilizer company. Yara realized that the lack of logistical infrastructure in many parts of Africa was preventing farmers from gaining efficient access to fertilizers and other essential agricultural inputs, and from transporting their crops efficiently to market. Yara is tackling this problem through a $60 million investment in a program to improve ports and roads, which is designed to create agricultural growth corridors in Mozambique and Tanzania. The company is working on this initiative with local governments and support from the Norwegian government. In Mozambique alone, the corridor is expected to benefit more than 200,000 small farmers and create 350,000 new jobs. The improvements will help Yara grow its business but will support the whole agricultural cluster, creating huge multiplier effects. The benefits of cluster building apply not only in emerging economies but also in advanced countries. North Carolinaʼs Research Triangle is a notable example of public and private collaboration that has created shared value by developing clusters in such areas as information technology and life sciences. That region, which has benefited from continued investment from both the private sector and local government, has experienced huge growth in employment, incomes, and company performance, and has fared better than most during the downturn. To support cluster development in the communities in which they operate, companies need to identify gaps and deficiencies in areas such as logistics, suppliers, distribution channels, training, market organization, and educational institutions. Then the task is to focus on the weaknesses that represent the greatest constraints to the companyʼs own productivity and growth, and distinguish those areas that the company is best equipped to influence directly from those in which collaboration is more costeffective. Here is where the shared value opportunities will be greatest. Initiatives that address cluster weaknesses that constrain companies will be much more effective than community-focused corporate social responsibility programs, which often have limited impact because they take on too many areas without focusing on value. But efforts to enhance infrastructure and institutions in a region often require collective action, as the Nestlé, Yara, and Research Triangle examples show. Companies should try to enlist partners to share the cost, win support, and assemble the right skills. The most successful cluster development programs are ones that involve collaboration within the private sector, as well as trade associations, government agencies, and NGOs. Creating Shared Value in Practice Not all profit is equal—an idea that has been lost in the narrow, short-term focus of financial markets and in much management thinking. Profits involving a social purpose represent a higher form of capitalism—one that will enable society to advance more rapidly while allowing companies to grow even more. The result is a positive cycle of company and community prosperity, which leads to profits that endure.
Creating shared value presumes compliance with the law and ethical standards, as well as mitigating any harm caused by the business, but goes far beyond that. The opportunity to create economic value through creating societal value will be one of the most powerful forces driving growth in the global economy. This thinking represents a new way of understanding customers, productivity, and the external influences on corporate success. It highlights the immense human needs to be met, the large new markets to serve, and the internal costs of social and community deficits—as well as the competitive advantages available from addressing them. Until recently, companies have simply not approached their businesses this way. Creating shared value will be more effective and far more sustainable than the majority of todayʼs corporate efforts in the social arena. Companies will make real strides on the environment, for example, when they treat it as a productivity driver rather than a feel-good response to external pressure. Or consider access to housing. A shared value approach would have led financial services companies to create innovative products that prudently increased access to home ownership. This was recognized by the Mexican construction company Urbi, which pioneered a mortgage-financing “rent-to-own” plan. Major U.S. banks, in contrast, promoted unsustainable financing vehicles that turned out to be socially and economically devastating, while claiming they were socially responsible because they had charitable contribution programs. Inevitably, the most fertile opportunities for creating shared value will be closely related to a companyʼs particular business, and in areas most important to the business. Here a company can benefit the most economically and hence sustain its commitment over time. Here is also where a company brings the most resources to bear, and where its scale and market presence equip it to have a meaningful impact on a societal problem. Ironically, many of the shared value pioneers have been those with more-limited resources—social entrepreneurs and companies in developing countries. These outsiders have been able to see the opportunities more clearly. In the process, the distinction between for-profits and nonprofits is blurring. The Role of Social Entrepreneurs (Located at the end of this article) Shared value is defining a whole new set of best practices that all companies must embrace. It will also become an integral part of strategy. The essence of strategy is choosing a unique positioning and a distinctive value chain to deliver on it. Shared value opens up many new needs to meet, new products to offer, new customers to serve, and new ways to configure the value chain. And the competitive advantages that arise from creating shared value will often be more sustainable than conventional cost and quality improvements. The cycle of imitation and zero-sum competition can be broken. Creating Shared Value: Implications for Government and Civil Society (Located at the end of this article) The opportunities to create shared value are widespread and growing. Not every company will have them in every area, but our experience has been that companies discover more and more opportunities over time as their line operating units grasp this concept. It has taken a decade, but GEʼs Ecomagination initiative, for example, is now producing a stream of fast-growing products and services across the company. A shared value lens can be applied to every major company decision. Could our product design incorporate greater social benefits? Are we serving all the communities that would benefit from our products? Do our processes and logistical approaches maximize efficiencies in energy and water use? Could our new plant be constructed in a way that achieves greater community impact? How are gaps in our cluster holding back our efficiency and speed of innovation? How could we enhance our community as a business location? If sites are comparable economically, at which one will the local community benefit the most? If a company can improve societal conditions, it will often improve business conditions and thereby trigger positive feedback loops. The three avenues for creating shared value are mutually reinforcing. Enhancing the cluster, for example, will enable more local procurement and less dispersed supply chains. New products and services that meet social needs or serve overlooked markets will require new value chain choices in areas such as production, marketing, and distribution. And new value chain configurations will create demand for equipment and technology that save energy, conserve resources, and support employees. Creating shared value will require concrete and tailored metrics for each business unit in each of the three areas. While some companies have begun to track various social impacts, few have yet tied them to their economic interests at the business level. Shared value creation will involve new and heightened forms of collaboration. While some shared value opportunities are possible for a company to seize on its own, others will benefit from insights, skills, and resources that cut across profit/nonprofit and private/public boundaries. Here, companies will be less successful if they attempt to tackle societal problems on their own, especially those involving cluster development. Major competitors may also need to work together on precompetitive framework conditions, something that has not been common in reputation-driven CSR initiatives. Successful collaboration will be data driven, clearly linked to defined outcomes, well connected to the goals of all stakeholders, and tracked with clear metrics. Governments and NGOs can enable and reinforce shared value or work against it. (For more on this topic, see the sidebar “Government Regulation and Shared Value.”) Government Regulation and Shared Value (Located at the end of this article) The Next Evolution in Capitalism Shared value holds the key to unlocking the next wave of business innovation and growth. It will also reconnect company success and community success in ways that have been lost in an age of narrow management approaches, short-term thinking, and deepening divides among societyʼs institutions. Shared value focuses companies on the right kind of profits—profits that create societal benefits rather than diminish them. Capital markets will undoubtedly continue to pressure companies to generate short-term profits, and some companies will surely continue to reap profits at the expense of societal needs. But such profits will often prove to be short-lived, and far greater opportunities will be missed. The moment for an expanded view of value creation has come. A host of factors, such as the growing social awareness of employees and citizens and the increased scarcity of natural resources, will drive unprecedented opportunities to create shared value. We need a more sophisticated form of capitalism, one imbued with a social purpose. But that purpose should arise not out of charity but out of a deeper understanding of competition and economic value creation. This next evolution in the capitalist model recognizes new and better ways to develop products, serve markets, and build productive enterprises. Creating shared value represents a broader conception of Adam Smithʼs invisible hand. It opens the doors of the pin factory to a wider set of influences. It is not philanthropy but self-interested behavior to create economic value by creating societal value. If all companies individually pursued shared value connected to their particular businesses, societyʼs overall interests would be served. And companies would acquire legitimacy in the eyes of the communities in which they operated, which would allow democracy to work as governments set policies that fostered and supported business. Survival of the fittest would still prevail, but market competition would benefit society in ways we have lost. Creating shared value represents a new approach to managing that cuts across disciplines. Because of the traditional divide between economic concerns and social ones, people in the public and private sectors have often followed very different educational and career paths. As a result, few managers have the understanding of social and environmental issues required to move beyond todayʼs CSR approaches, and few social sector leaders have the managerial training and entrepreneurial mindset needed to design and implement shared value models. Most business schools still teach the narrow view of capitalism, even though more and more of their graduates hunger for a greater sense of purpose and a growing number are drawn to social entrepreneurship. The results have been missed opportunity and public cynicism. How Shared Value Differs from Corporate Social Responsibility (Located at the end of this article) Business school curricula will need to broaden in a number of areas. For example, the efficient use and stewardship of all forms of resources will define the next-generation thinking on value chains. Customer behavior and marketing courses will have to move beyond persuasion and demand creation to the study of deeper human needs and how to serve nontraditional customer groups. Clusters, and the broader locational influences on company productivity and innovation, will form a new core discipline in business schools; economic development will no longer be left only to public policy and economics departments. Business and government courses will examine the economic impact of societal factors on enterprises, moving beyond the effects of regulation and macroeconomics. And finance will need to rethink how capital markets can actually support true value creation in companies—their fundamental purpose—not just benefit financial market participants. There is nothing soft about the concept of shared value. These proposed changes in business school curricula are not qualitative and do not depart from economic value creation. Instead, they represent the next stage in our understanding of markets, competition, and business management. Not all societal problems can be solved through shared value solutions. But shared value offers corporations the opportunity to utilize their skills, resources, and management capability to lead social progress in ways that even the best-intentioned governmental and social sector organizations can rarely match. In the process, businesses can earn the respect of society again. What Is “Shared Value”? The concept of shared value can be 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. Shared value creation focuses on identifying and expanding the connections between societal and economic progress. The concept rests on the premise that both economic and social progress must be addressed using value principles. Value is defined as benefits relative to costs, not just benefits value terms, their interest in collaborating with business will inevitably grow. Blurring the Profit/Nonprofit Boundary The concept of shared value blurs the line between for-profit and nonprofit organizations. New kinds of hybrid enterprises are rapidly appearing. For example, WaterHealth International, a fast-growing for-profit, uses innovative water purification techniques to distribute clean water at minimal cost to more than one million people in rural India, Ghana, and the Philippines. Its investors include not only the socially focused Acumen Fund and the International Finance Corporation of the World Bank but also Dow Chemicalʼs venture fund. Revolution Foods, a four-year-old venture-capital-backed U.S. start-up, provides 60,000 fresh, healthful, and nutritious meals to students daily—and does so at a higher gross margin than traditional competitors. Waste Concern, a hybrid profit/nonprofit enterprise started in Bangladesh 15 years ago, has built the capacity to convert 700 tons of trash, collected daily from neighborhood slums, into organic fertilizer, thereby increasing crop yields and reducing CO2 emissions. Seeded with capital from the Lions Club and the United Nations Development Programme, the company improves health conditions while earning a substantial gross margin through fertilizer sales and carbon credits. The blurring of the boundary between successful for-profits and nonprofits is one of the strong signs that creating shared value is possible.
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The Connection Between Competitive Advantage and Social Issues
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There are numerous ways in which addressing societal concerns can yield productivity benefits to a firm. Consider, for example, what happens when a firm invests in a wellness program. Society benefits because employees and their families become healthier, and the firm minimizes employee absences and lost productivity. The graphic below depicts some areas where the connections are strongest. The Role of Social Entrepreneurs Businesses are not the only players in finding profitable solutions to social problems. A whole generation of social entrepreneurs is pioneering new product concepts that meet social needs using viable business models. Because they are not locked into narrow traditional business thinking, social entrepreneurs are often well ahead of established corporations in discovering these opportunities. Social enterprises that create shared value can scale up far more rapidly than purely social programs, which often suffer from an inability to grow and become self-sustaining. Real social entrepreneurship should be measured by its ability to create shared value, not just social benefit. Creating Shared Value: Implications for Government and Civil Society While our focus here is primarily on companies, the principles of shared value apply equally to governments and nonprofit organizations. Governments and NGOs will be most effective if they think in value terms—considering benefits relative to costs —and focus on the results achieved rather than the funds and effort expended. Activists have tended to approach social improvement from an ideological or absolutist perspective, as if social benefits should be pursued at any cost. Governments and NGOs often assume that trade-offs between economic and social benefits are inevitable, exacerbating these trade-offs through their approaches. For example, much environmental regulation still takes the form of command-and-control mandates and enforcement actions designed to embarrass and punish companies. Regulators would accomplish much more by focusing on measuring environmental performance and introducing standards, phase-in periods, and support for technology that would promote innovation, improve the environment, and increase competitiveness simultaneously. The principle of shared value creation cuts across the traditional divide between the responsibilities of business and those of government or civil society. From societyʼs perspective, it does not matter what types of organizations created the value. What matters is that benefits are delivered by those organizations—or combinations of organizations—that are best positioned to achieve the most impact for the least cost. Finding ways to boost productivity is equally valuable whether in the service of commercial or societal objectives. In short, the principle of value creation should guide the use of resources across all areas of societal concern.
Fortunately, a new type of NGO has emerged that understands the importance of productivity and value creation. Such organizations have often had a remarkable impact. One example is TechnoServe, which has partnered with both regional and global corporations to promote the development of competitive agricultural clusters in more than 30 countries. Root Capital accomplishes a similar objective by providing financing to farmers and businesses that are too large for microfinance but too small for normal bank financing. Since 2000, Root Capital has lent more than $200 million to 282 businesses, through which it has reached 400,000 farmers and artisans. It has financed the cultivation of 1.4 million acres of organic agriculture in Latin America and Africa. Root Capital regularly works with corporations, utilizing future purchase orders as collateral for its loans to farmers and helping to strengthen corporate supply chains and improve the quality of purchased inputs. Some private foundations have begun to see the power of working with businesses to create shared value. The Bill & Melinda Gates Foundation, for example, has formed partnerships with leading global corporations to foster agricultural clusters in developing countries.
The foundation
carefully focuses on commodities where climate and soil conditions give
a particular
region a true competitive advantage. The partnerships bring in NGOs like
TechnoServe and Root Capital, as well as
government officials, to work on precompetitive issues that improve the
cluster and upgrade the value chain for all participants.
This approach recognizes that helping small farmers increase their
yields will not create any lasting benefits unless there are
ready buyers for their crops, other enterprises that can process the
crops once they are harvested, and a local cluster that
includes efficient logistical infrastructure, input availability, and
the like. The active engagement of corporations is essential to
mobilizing these elements.
Forward-thinking foundations can also serve as honest brokers and allay fears by mitigating power imbalances between small local enterprises, NGOs, governments, and companies. Such efforts will require a new assumption that shared value can come only as a result of effective collaboration among all parties.
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Government Regulation and Shared Value
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The right kind of government regulation can encourage companies to pursue shared value; the wrong kind works against it and even makes trade-offs between economic and social goals inevitable. Regulation is necessary for well-functioning markets, something that became abundantly clear during the recent financial crisis. However, the ways in which regulations are designed and implemented determine whether they benefit society or work against it. Regulations that enhance shared value set goals and stimulate innovation. They highlight a societal objective and create a level playing field to encourage companies to invest in shared value rather than maximize short-term profit. Such regulations have a number of characteristics: First, they set clear and measurable social goals, whether they involve energy use, health matters, or safety. Where appropriate, they set prices for resources (such as water) that reflect true costs. Second, they set performance standards but do not prescribe the methods to achieve them—those are left to companies. Third, they define phase-in periods for meeting standards, which reflect the investment or new-product cycle in the industry. Phase-in periods give companies time to develop and introduce new products and processes in a way consistent with the economics of their business. Fourth, they put in place universal measurement and performance-reporting systems, with government investing in infrastructure for collecting reliable benchmarking data (such as nutritional deficiencies in each community). This motivates and enables continual improvement beyond current targets. Finally, appropriate regulations require efficient and timely reporting of results, which can then be audited by the government as necessary, rather than impose detailed and expensive compliance processes on everyone. Regulation that discourages shared value looks very different. It forces compliance with particular practices, rather than focusing on measurable social improvement. It mandates a particular approach to meeting a standard—blocking innovation and almost always inflicting cost on companies. When governments fall into the trap of this sort of regulation, they undermine the very progress that they seek while triggering fierce resistance from business that slows progress further and blocks shared value that would improve competitiveness. To be sure, companies locked into the old mind-set will resist even well-constructed regulation. As shared value principles become more widely accepted, however, business and government will become more aligned on regulation in many areas. Companies will come to understand that the right kind of regulation can actually foster economic value creation. Finally, regulation will be needed to limit the pursuit of exploitative, unfair, or deceptive practices in which companies benefit at the expense of society. Strict antitrust policy, for example, is essential to ensure that the benefits of company success flow to customers, suppliers, and workers.
How Shared Value Differs from Corporate Social Responsibility
-
Creating shared value (CSV) should supersede corporate social responsibility (CSR) in guiding the investments of companies in their communities. CSR programs focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain over the long run. In contrast, CSV is integral to a companyʼs profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value. In both cases, compliance with laws and ethical standards and reducing harm from corporate activities are assumed.
Forward-thinking foundations can also serve as honest brokers and allay fears by mitigating power imbalances between small local enterprises, NGOs, governments, and companies. Such efforts will require a new assumption that shared value can come only as a result of effective collaboration among all parties.
-
Government Regulation and Shared Value
-
The right kind of government regulation can encourage companies to pursue shared value; the wrong kind works against it and even makes trade-offs between economic and social goals inevitable. Regulation is necessary for well-functioning markets, something that became abundantly clear during the recent financial crisis. However, the ways in which regulations are designed and implemented determine whether they benefit society or work against it. Regulations that enhance shared value set goals and stimulate innovation. They highlight a societal objective and create a level playing field to encourage companies to invest in shared value rather than maximize short-term profit. Such regulations have a number of characteristics: First, they set clear and measurable social goals, whether they involve energy use, health matters, or safety. Where appropriate, they set prices for resources (such as water) that reflect true costs. Second, they set performance standards but do not prescribe the methods to achieve them—those are left to companies. Third, they define phase-in periods for meeting standards, which reflect the investment or new-product cycle in the industry. Phase-in periods give companies time to develop and introduce new products and processes in a way consistent with the economics of their business. Fourth, they put in place universal measurement and performance-reporting systems, with government investing in infrastructure for collecting reliable benchmarking data (such as nutritional deficiencies in each community). This motivates and enables continual improvement beyond current targets. Finally, appropriate regulations require efficient and timely reporting of results, which can then be audited by the government as necessary, rather than impose detailed and expensive compliance processes on everyone. Regulation that discourages shared value looks very different. It forces compliance with particular practices, rather than focusing on measurable social improvement. It mandates a particular approach to meeting a standard—blocking innovation and almost always inflicting cost on companies. When governments fall into the trap of this sort of regulation, they undermine the very progress that they seek while triggering fierce resistance from business that slows progress further and blocks shared value that would improve competitiveness. To be sure, companies locked into the old mind-set will resist even well-constructed regulation. As shared value principles become more widely accepted, however, business and government will become more aligned on regulation in many areas. Companies will come to understand that the right kind of regulation can actually foster economic value creation. Finally, regulation will be needed to limit the pursuit of exploitative, unfair, or deceptive practices in which companies benefit at the expense of society. Strict antitrust policy, for example, is essential to ensure that the benefits of company success flow to customers, suppliers, and workers.
How Shared Value Differs from Corporate Social Responsibility
-
Creating shared value (CSV) should supersede corporate social responsibility (CSR) in guiding the investments of companies in their communities. CSR programs focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain over the long run. In contrast, CSV is integral to a companyʼs profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value. In both cases, compliance with laws and ethical standards and reducing harm from corporate activities are assumed.
Michael E. Porter is the Bishop William Lawrence University Professor at Harvard University. He is a frequent contributor to Harvard Business Review and a six-time McKinsey Award winner.
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Mark R. Kramer cofounded FSG, a global social impact consulting firm, with Professor Porter and is its managing director. He is also a senior fellow of the CSR initiative at Harvardʼs Kennedy School of Government.
https://pdfs.semanticscholar.org/e9aa/2361d3e3fe7f9cd741248f41928cf822c94e.pdf
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Trad automatica sin corregir
El sistema capitalista está bajo asedio. En
los últimos años, los negocios se han visto cada vez más como una causa
importante de problemas sociales, ambientales y económicos. Se percibe ampliamente que las empresas prosperan a expensas de la comunidad en general.
Peor aún, cuanto más empresas han comenzado abrazar la responsabilidad corporativa, más se la culpa de los fracasos de la sociedad. La legitimidad de los negocios ha caído a niveles no vistos en la historia reciente. Esta menor confianza en las empresas lleva a los líderes políticos a establecer políticas que socaven la competitividad y reduzcan el crecimiento económico. Los negocios están atrapados en un círculo vicioso.
Peor aún, cuanto más empresas han comenzado abrazar la responsabilidad corporativa, más se la culpa de los fracasos de la sociedad. La legitimidad de los negocios ha caído a niveles no vistos en la historia reciente. Esta menor confianza en las empresas lleva a los líderes políticos a establecer políticas que socaven la competitividad y reduzcan el crecimiento económico. Los negocios están atrapados en un círculo vicioso.
Una
gran parte del problema radica en las propias empresas, que siguen
atrapadas en un enfoque obsoleto a la creación de valor que ha surgido
en las últimas décadas. Siguen
observando la creación de valor de manera restrictiva, optimizando el
desempeño financiero a corto plazo en una burbuja sin tener en cuenta
las necesidades más importantes de los clientes e ignorando las
influencias más amplias que determinan su éxito a largo plazo. ¿De
qué otra manera podrían las empresas pasar por alto el bienestar de sus
clientes, el agotamiento de los recursos naturales vitales para sus
negocios, la viabilidad de proveedores clave o la angustia económica de
las comunidades en las que producen y venden? ¿De
qué otra manera podrían las empresas pensar que simplemente cambiando
las actividades a lugares con salarios cada vez más bajos era una
"solución" sostenible a los desafíos competitivos? El
gobierno y la sociedad civil a menudo han exacerbado el problema
tratando de abordar las debilidades sociales a expensas de las empresas.
Las
presuntas concesiones entre la eficiencia económica y el progreso
social se han institucionalizado en décadas de elecciones políticas. Las empresas deben tomar la iniciativa para unir a las empresas y la sociedad. El
reconocimiento existe entre los líderes empresariales y de pensamiento
sofisticados, y están surgiendo elementos prometedores de un nuevo
modelo. Sin embargo, todavía nos falta un marco general para guiar estos
esfuerzos, y la mayoría de las empresas permanecen atrapadas en una
mentalidad de "responsabilidad social" en la que los problemas sociales
están en la periferia, no en el núcleo.La
solución radica en el principio del valor compartido, que implica la
creación de valor económico de una manera que también crea valor para la
sociedad al abordar sus necesidades y desafíos. Las empresas deben volver a conectar el éxito de la empresa con el progreso social. El
valor compartido no es responsabilidad social, filantropía o incluso
sostenibilidad, sino una nueva forma de lograr el éxito económico. No está al margen de lo que hacen las empresas sino en el centro. Creemos que puede dar lugar a la próxima gran transformación del pensamiento empresarial.
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Moving Beyond Trade-Offs
Más allá de los trade-offs
Los negocios y la sociedad se han enfrentado unos a otros durante demasiado tiempo. Eso es en parte porque los economistas han legitimado el idea de que para proporcionar beneficios sociales, las empresas deben moderar su éxito económico. En el pensamiento neoclásico, un requisito
para la mejora social, como la seguridad o la contratación de discapacitados, impone una restricción a la corporación. Agregar una restricción a un una empresa que ya está maximizando las ganancias, dice la teoría, inevitablemente aumentará los costos y reducirá esas ganancias." "......
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The Roots of Shared Value
Las raíces del valor compartido
En un nivel muy básico, la competitividad de una empresa y la salud de las comunidades que la rodean están estrechamente entrelazadas. UN el negocio necesita una comunidad exitosa, no solo para crear demanda para sus productos sino también para proporcionar activos públicos críticos y
un ambiente de apoyo. Una comunidad necesita empresas exitosas para proporcionar empleos y oportunidades de creación de riqueza para su los ciudadanos. Esta interdependencia significa que las políticas públicas que socavan la productividad y la competitividad de las empresas son contraproducentes, especialmente en una economía global donde las instalaciones y los empleos pueden trasladarse fácilmente a otros lugares. ONG y los gobiernos no siempre han apreciado esta conexión." ".....
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How Shared Value Is Created
Cómo se crea el valor compartido
Las empresas pueden crear valor económico creando valor social. Hay tres formas distintas de hacerlo: reconfigurando productos y mercados, redefiniendo la productividad en la cadena de valor y creando clusters industriales de apoyo en la compañía.
ubicaciones. Cada uno de estos es parte del círculo virtuoso del valor compartido; mejorar el valor en un área da lugar a oportunidades en los demás.
El concepto de valor compartido restablece los límites del capitalismo. Al conectar mejor el éxito de las empresas con la mejora social, se abren muchas formas de atender nuevas necesidades, obtener eficiencia, crear diferenciación y expandir los mercados.
La capacidad de crear valor compartido se aplica por igual a las economías avanzadas y los países en desarrollo, aunque las oportunidades específicas serán diferentes. Las oportunidades también diferirán notablemente entre industrias y empresas, pero todas las empresas las tienen. Y su alcance y alcance es mucho más amplio de lo que se ha reconocido. [La idea del valor compartido se exploró inicialmente en un artículo HBR de diciembre de 2006 por Michael E. Porter y Mark R. Kramer, "Estrategia y sociedad: el vínculo entre Ventaja competitiva y responsabilidad social corporativa. "]
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Reconceiving Products and Markets
Reconocimiento de productos y mercados
Las necesidades de la sociedad son enormes: salud, mejor vivienda, nutrición mejorada, ayuda para el envejecimiento, mayor seguridad financiera, menos daño ambiental. Podría decirse que son las mayores necesidades insatisfechas en la economía global. En los negocios, llevamos décadas aprendiendo cómo analizar y fabricar la demanda sin tener en cuenta la demanda más importante de todas. Demasiadas compañías
han perdido de vista la pregunta más básica: ¿nuestro producto es bueno para nuestros clientes? ¿O para los clientes de nuestros clientes?
En las economías avanzadas, la demanda de productos y servicios que satisfagan las necesidades sociales está creciendo rápidamente. Las empresas de alimentos que tradicionalmente se concentraban en el sabor y la cantidad para impulsar un consumo cada vez mayor están reenfocando la necesidad fundamental de una mejor nutrición. Intel e IBM están ideando formas de ayudar a las empresas de servicios públicos a aprovechar la inteligencia digital para economizar en el uso de la energía. Wells Fargo ha desarrollado una línea de productos y herramientas que ayudan a los clientes a presupuestar, administrar crédito y pagar deudas.
Las ventas de los productos Ecomagination de GE alcanzaron los $ 18 mil millones en 2009, el tamaño de una compañía Fortune 150. GE ahora predice que los ingresos de los productos de Ecomagination crecerán al doble de la tasa de ingresos totales de la compañía durante los próximos cinco años.
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Redefining Productivity in the Value Chain
Redefinir la productividad en la cadena de valorLa cadena de valor de una empresa inevitablemente afecta, y se ve afectada por, numerosos problemas sociales, como los recursos naturales y el agua. uso, salud y seguridad, condiciones de trabajo e igualdad de trato en el lugar de trabajo. Oportunidades para crear valor compartido surgen porque los problemas sociales pueden crear costos económicos en la cadena de valor de la empresa. Muchas de las llamadas externalidades realmente infligen costos internos en la empresa, incluso en ausencia de regulación o impuestos a los recursos. Exceso de embalaje de productos e invernadero los gases no solo son costosos para el medioambiente sino también costosos para el negocio. Wal-Mart, por ejemplo, pudo abordar ambos problemas
al reducir su embalaje y redirigir sus camiones para cortar 100 millones de millas de sus rutas de entrega en 2009, ahorrando $ 200 millones incluso cuando envió más productos. La innovación en la eliminación del plástico utilizado en las tiendas ha ahorrado millones de dólares en costos de eliminación más bajos. vertederos.
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Energy use and logistics.
Uso de energía y logística.
El uso de la energía a lo largo de la cadena de valor está siendo reexaminado, ya sea en procesos, transporte, edificios, suministro cadenas, canales de distribución o servicios de soporte. Desencadenados por los picos del precio de la energía y una nueva conciencia de las oportunidades para eficiencia energética, este reexamen estaba en marcha incluso antes de que las emisiones de carbono se convirtieran en un enfoque global. El resultado ha sido sorprendentes mejoras en la utilización de la energía a través de una mejor tecnología, reciclaje, cogeneración y muchas otras prácticas- todo lo cual crea valor compartido.
Estamos aprendiendo que el envío es costoso, no solo por los costos de energía y las emisiones sino porque agrega tiempo, complejidad, costos de inventario y costos de administración. Los sistemas logísticos comienzan a rediseñarse para reducir el envío distancias, agilizar el manejo, mejorar el enrutamiento del vehículo, y similares. Todos estos pasos crean un valor compartido. El minorista británico
La ambiciosa revisión de Marks & Spencer de su cadena de suministro, por ejemplo, que implica pasos tan simples como detener el compra de suministros de un hemisferio para enviar a otro, se espera que ahorre al minorista £ 175 millones anuales por fiscal 2016, mientras que reduce enormemente las emisiones de carbono. En el proceso de volver a examinar la logística, pensando en la externalización y la ubicación también será revisado (como veremos más adelante).
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Resource use.
Uso de recursos.
La mayor conciencia ambiental y los avances en tecnología están catalizando nuevos enfoques en áreas tales como la utilización de agua, materias primas y envases, así como la expansión del reciclaje y la reutilización. Las oportunidades se aplican a todos los recursos, no solo aquellos que han sido identificados por los ambientalistas. Una mejor utilización de los recursos, habilitada mejorando la tecnología, penetrar todas las partes de la cadena de valor y se extenderá a proveedores y canales. Los vertederos se llenarán más lentamente.
Por ejemplo, Coca-Cola ya ha reducido su consumo de agua en todo el mundo en un 9% desde una base de 2004, casi a la mitad de su objetivo de una reducción del 20% para 2012. Dow Chemical logró reducir el consumo de agua dulce en su mayor sitio de producción en mil millones de galones, suficiente agua para abastecer a casi 40,000 personas en los EE. UU. durante un año, lo que resulta en un ahorro de $ 4 millones.
La demanda de tecnología de ahorro de agua ha permitido a la India Jain Irrigation, un fabricante líder mundial de goteo completo sistemas de riego para la conservación del agua, para lograr una tasa de crecimiento anual compuesta del 41% en los ingresos en los últimos cinco años.
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Procurement.
Obtención.
El libro de jugadas tradicional exige que las empresas se mercantilicen y ejerzan un poder de negociación máximo sobre los proveedores para reducir precios, incluso cuando compran en pequeñas empresas o agricultores de subsistencia. Más recientemente, las empresas han sido rápidamente subcontratación a proveedores en ubicaciones con salarios más bajos.
Hoy en día, algunas empresas están empezando a comprender que los proveedores marginados no pueden seguir siendo productivos o sostenerse, menos mejora, su calidad. Al aumentar el acceso a los insumos, compartir tecnología y proporcionar financiamiento, las empresas pueden mejorar calidad y productividad del proveedor al tiempo que garantiza el acceso a un volumen creciente. Mejorar la productividad a menudo prevalecerá sobre precios más bajos.
A medida que los proveedores se fortalecen, su impacto ambiental a menudo disminuye drásticamente, lo que mejora aún más su eficiencia. Compartido el valor es creado
--
Distribución.
Las empresas están empezando a reexaminar las prácticas de distribución desde una perspectiva de valor compartido. Como iTunes, Kindle y Google
Scholar (que ofrece textos de literatura académica en línea) demuestra que los nuevos modelos de distribución rentables también pueden reducir el uso de papel y plástico. Del mismo modo, las microfinanzas han creado un nuevo modelo rentable de distribución de servicios financieros a las pequeñas empresas.
Las oportunidades para nuevos modelos de distribución pueden ser aún mayores en mercados no tradicionales. Por ejemplo, Hindustan Unilever es creando un nuevo sistema de distribución directo al hogar, dirigido por empresarias desfavorecidas, en aldeas indias de menos de 2,000 personas. Unilever ofrece microcrédito y capacitación, y ahora cuenta con más de 45,000 empresarios que cubren alrededor de 100,000 aldeas en 15 estados de la India. El proyecto Shakti, como se llama este sistema de distribución, beneficia a las comunidades no solo al dar habilidades de mujeres que a menudo duplican los ingresos de su hogar pero también reducen la propagación de enfermedades contagiosas a través de mayor acceso a productos de higiene Este es un buen ejemplo de cómo la capacidad única de las empresas para comercializar es difícil de alcanzar los consumidores pueden beneficiar a la sociedad al poner los productos que alteran la vida en manos de las personas que los necesitan. Proyecto Shakti ahora representa el 5% de los ingresos totales de Unilever en India y ha extendido el alcance de la empresa a las áreas rurales y ha construido su marca en las regiones oscuras de los medios de comunicación, creando un gran valor económico para la empresa.
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Productividad del empleado.
El enfoque en mantener bajos los niveles salariales, reducir los beneficios y la deslocalización está comenzando a dar paso a una toma de conciencia del efectos positivos que un salario digno, seguridad, bienestar, capacitación y oportunidades de ascenso para los empleados tienen en productividad. Muchas compañías, por ejemplo, tradicionalmente buscaban minimizar el costo de la atención médica de los empleados "caros" cobertura o incluso eliminar la cobertura de salud por completo. Hoy las principales empresas han aprendido que debido a la pérdida de días de trabajo
y la productividad disminuida de los empleados, la mala salud les cuesta más que los beneficios para la salud. Tome Johnson & Johnson. Por ayudando a los empleados a dejar de fumar (una reducción de dos tercios en los últimos 15 años) e implementando muchos otros beneficios.
programas, la compañía ha ahorrado $ 250 millones en costos de atención médica, un retorno de $ 2.71 por cada dólar gastado en bienestar de 2002 a 2008. Además, Johnson & Johnson se ha beneficiado de una fuerza de trabajo más presente y productiva. Si los sindicatos se centró más en el valor compartido, también, este tipo de enfoques de los empleados se extendería aún más rápido.
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Location.
El pensamiento empresarial ha adoptado el mito de que la ubicación ya no importa, porque la logística es barata, la información fluye rápidamente y los mercados son globales. Cuanto más barata sea la ubicación, entonces, mejor. La preocupación por las comunidades locales en las que opera una compañía se ha desvanecido.
Ese pensamiento excesivamente simplificado ahora se ve desafiado, en parte por los crecientes costos de la energía y las emisiones de carbono, pero también por un mayor reconocimiento del costo de productividad de los sistemas de producción altamente dispersos y los costos ocultos de la adquisición a distancia discutidos anteriormente. Wal-Mart, por ejemplo, está comprando cada vez más productos para sus secciones de alimentos en granjas locales cercanas a sus depósitos. Ha descubierto que los ahorros en los costos de transporte y la capacidad de reabastecimiento en cantidades más pequeñas compensan con creces los precios más bajos de las granjas industriales más alejadas. Nestlé está estableciendo plantas más pequeñas más cerca de sus mercados e intensificando sus esfuerzos para maximizar el uso de materiales disponibles localmente
-.
Enabling Local Cluster Development
Habilitación del desarrollo de clúster local
Ninguna compañía es autónoma. El éxito de cada empresa se ve afectado por las empresas de apoyo y la infraestructura alrededor. La productividad y la innovación están fuertemente influenciadas por "clusters" o concentraciones geográficas de empresas relacionadas negocios, proveedores, proveedores de servicios e infraestructura logística en un campo particular, como TI en Silicon Valley, corte flores en Kenia, y corte de diamantes en Surat, India.
Los clusters incluyen no solo negocios sino instituciones tales como programas académicos, asociaciones comerciales y estándares organizaciones. También se basan en los activos públicos más amplios de la comunidad circundante, como escuelas y universidades, agua limpia, leyes de competencia justa, estándares de calidad y transparencia del mercado.
--
Creating Shared Value in Practice
No todos los beneficios son iguales, una idea que se ha perdido en el enfoque estrecho y de corto plazo de los mercados financieros y en gran parte del pensamiento de la administración. Las ganancias que implican un propósito social representan una forma más alta de capitalismo, una que permitirá a la sociedad avanzar más rápidamente a la vez que permite que las empresas crezcan aún más. El resultado es un ciclo positivo de prosperidad de la empresa y la comunidad, que conduce a ganancias que perduran.
La creación de valor compartido presupone el cumplimiento de la ley y los estándares éticos, así como la mitigación de cualquier daño causado por el negocio, pero va mucho más allá. La oportunidad de crear valor económico a través de la creación de valor social será una de las fuerzas más poderosas que impulsarán el crecimiento en la economía global. Este pensamiento representa una nueva forma de entender a los clientes, la productividad y las influencias externas sobre el éxito corporativo. Resalta las necesidades humanas inmensas que deben satisfacerse, los grandes mercados nuevos a los que atender y los costos internos de los déficits sociales y comunitarios, así como las ventajas competitivas disponibles al abordarlos. Hasta hace poco, las empresas simplemente no se habían acercado a sus negocios de esta manera.
--
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Moving Beyond Trade-Offs
Más allá de los trade-offs
Los negocios y la sociedad se han enfrentado unos a otros durante demasiado tiempo. Eso es en parte porque los economistas han legitimado el idea de que para proporcionar beneficios sociales, las empresas deben moderar su éxito económico. En el pensamiento neoclásico, un requisito
para la mejora social, como la seguridad o la contratación de discapacitados, impone una restricción a la corporación. Agregar una restricción a un una empresa que ya está maximizando las ganancias, dice la teoría, inevitablemente aumentará los costos y reducirá esas ganancias." "......
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The Roots of Shared Value
Las raíces del valor compartido
En un nivel muy básico, la competitividad de una empresa y la salud de las comunidades que la rodean están estrechamente entrelazadas. UN el negocio necesita una comunidad exitosa, no solo para crear demanda para sus productos sino también para proporcionar activos públicos críticos y
un ambiente de apoyo. Una comunidad necesita empresas exitosas para proporcionar empleos y oportunidades de creación de riqueza para su los ciudadanos. Esta interdependencia significa que las políticas públicas que socavan la productividad y la competitividad de las empresas son contraproducentes, especialmente en una economía global donde las instalaciones y los empleos pueden trasladarse fácilmente a otros lugares. ONG y los gobiernos no siempre han apreciado esta conexión." ".....
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How Shared Value Is Created
Cómo se crea el valor compartido
Las empresas pueden crear valor económico creando valor social. Hay tres formas distintas de hacerlo: reconfigurando productos y mercados, redefiniendo la productividad en la cadena de valor y creando clusters industriales de apoyo en la compañía.
ubicaciones. Cada uno de estos es parte del círculo virtuoso del valor compartido; mejorar el valor en un área da lugar a oportunidades en los demás.
El concepto de valor compartido restablece los límites del capitalismo. Al conectar mejor el éxito de las empresas con la mejora social, se abren muchas formas de atender nuevas necesidades, obtener eficiencia, crear diferenciación y expandir los mercados.
La capacidad de crear valor compartido se aplica por igual a las economías avanzadas y los países en desarrollo, aunque las oportunidades específicas serán diferentes. Las oportunidades también diferirán notablemente entre industrias y empresas, pero todas las empresas las tienen. Y su alcance y alcance es mucho más amplio de lo que se ha reconocido. [La idea del valor compartido se exploró inicialmente en un artículo HBR de diciembre de 2006 por Michael E. Porter y Mark R. Kramer, "Estrategia y sociedad: el vínculo entre Ventaja competitiva y responsabilidad social corporativa. "]
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Reconceiving Products and Markets
Reconocimiento de productos y mercados
Las necesidades de la sociedad son enormes: salud, mejor vivienda, nutrición mejorada, ayuda para el envejecimiento, mayor seguridad financiera, menos daño ambiental. Podría decirse que son las mayores necesidades insatisfechas en la economía global. En los negocios, llevamos décadas aprendiendo cómo analizar y fabricar la demanda sin tener en cuenta la demanda más importante de todas. Demasiadas compañías
han perdido de vista la pregunta más básica: ¿nuestro producto es bueno para nuestros clientes? ¿O para los clientes de nuestros clientes?
En las economías avanzadas, la demanda de productos y servicios que satisfagan las necesidades sociales está creciendo rápidamente. Las empresas de alimentos que tradicionalmente se concentraban en el sabor y la cantidad para impulsar un consumo cada vez mayor están reenfocando la necesidad fundamental de una mejor nutrición. Intel e IBM están ideando formas de ayudar a las empresas de servicios públicos a aprovechar la inteligencia digital para economizar en el uso de la energía. Wells Fargo ha desarrollado una línea de productos y herramientas que ayudan a los clientes a presupuestar, administrar crédito y pagar deudas.
Las ventas de los productos Ecomagination de GE alcanzaron los $ 18 mil millones en 2009, el tamaño de una compañía Fortune 150. GE ahora predice que los ingresos de los productos de Ecomagination crecerán al doble de la tasa de ingresos totales de la compañía durante los próximos cinco años.
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Redefining Productivity in the Value Chain
Redefinir la productividad en la cadena de valorLa cadena de valor de una empresa inevitablemente afecta, y se ve afectada por, numerosos problemas sociales, como los recursos naturales y el agua. uso, salud y seguridad, condiciones de trabajo e igualdad de trato en el lugar de trabajo. Oportunidades para crear valor compartido surgen porque los problemas sociales pueden crear costos económicos en la cadena de valor de la empresa. Muchas de las llamadas externalidades realmente infligen costos internos en la empresa, incluso en ausencia de regulación o impuestos a los recursos. Exceso de embalaje de productos e invernadero los gases no solo son costosos para el medioambiente sino también costosos para el negocio. Wal-Mart, por ejemplo, pudo abordar ambos problemas
al reducir su embalaje y redirigir sus camiones para cortar 100 millones de millas de sus rutas de entrega en 2009, ahorrando $ 200 millones incluso cuando envió más productos. La innovación en la eliminación del plástico utilizado en las tiendas ha ahorrado millones de dólares en costos de eliminación más bajos. vertederos.
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Energy use and logistics.
Uso de energía y logística.
El uso de la energía a lo largo de la cadena de valor está siendo reexaminado, ya sea en procesos, transporte, edificios, suministro cadenas, canales de distribución o servicios de soporte. Desencadenados por los picos del precio de la energía y una nueva conciencia de las oportunidades para eficiencia energética, este reexamen estaba en marcha incluso antes de que las emisiones de carbono se convirtieran en un enfoque global. El resultado ha sido sorprendentes mejoras en la utilización de la energía a través de una mejor tecnología, reciclaje, cogeneración y muchas otras prácticas- todo lo cual crea valor compartido.
Estamos aprendiendo que el envío es costoso, no solo por los costos de energía y las emisiones sino porque agrega tiempo, complejidad, costos de inventario y costos de administración. Los sistemas logísticos comienzan a rediseñarse para reducir el envío distancias, agilizar el manejo, mejorar el enrutamiento del vehículo, y similares. Todos estos pasos crean un valor compartido. El minorista británico
La ambiciosa revisión de Marks & Spencer de su cadena de suministro, por ejemplo, que implica pasos tan simples como detener el compra de suministros de un hemisferio para enviar a otro, se espera que ahorre al minorista £ 175 millones anuales por fiscal 2016, mientras que reduce enormemente las emisiones de carbono. En el proceso de volver a examinar la logística, pensando en la externalización y la ubicación también será revisado (como veremos más adelante).
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Resource use.
Uso de recursos.
La mayor conciencia ambiental y los avances en tecnología están catalizando nuevos enfoques en áreas tales como la utilización de agua, materias primas y envases, así como la expansión del reciclaje y la reutilización. Las oportunidades se aplican a todos los recursos, no solo aquellos que han sido identificados por los ambientalistas. Una mejor utilización de los recursos, habilitada mejorando la tecnología, penetrar todas las partes de la cadena de valor y se extenderá a proveedores y canales. Los vertederos se llenarán más lentamente.
Por ejemplo, Coca-Cola ya ha reducido su consumo de agua en todo el mundo en un 9% desde una base de 2004, casi a la mitad de su objetivo de una reducción del 20% para 2012. Dow Chemical logró reducir el consumo de agua dulce en su mayor sitio de producción en mil millones de galones, suficiente agua para abastecer a casi 40,000 personas en los EE. UU. durante un año, lo que resulta en un ahorro de $ 4 millones.
La demanda de tecnología de ahorro de agua ha permitido a la India Jain Irrigation, un fabricante líder mundial de goteo completo sistemas de riego para la conservación del agua, para lograr una tasa de crecimiento anual compuesta del 41% en los ingresos en los últimos cinco años.
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Procurement.
Obtención.
El libro de jugadas tradicional exige que las empresas se mercantilicen y ejerzan un poder de negociación máximo sobre los proveedores para reducir precios, incluso cuando compran en pequeñas empresas o agricultores de subsistencia. Más recientemente, las empresas han sido rápidamente subcontratación a proveedores en ubicaciones con salarios más bajos.
Hoy en día, algunas empresas están empezando a comprender que los proveedores marginados no pueden seguir siendo productivos o sostenerse, menos mejora, su calidad. Al aumentar el acceso a los insumos, compartir tecnología y proporcionar financiamiento, las empresas pueden mejorar calidad y productividad del proveedor al tiempo que garantiza el acceso a un volumen creciente. Mejorar la productividad a menudo prevalecerá sobre precios más bajos.
A medida que los proveedores se fortalecen, su impacto ambiental a menudo disminuye drásticamente, lo que mejora aún más su eficiencia. Compartido el valor es creado
--
Distribución.
Las empresas están empezando a reexaminar las prácticas de distribución desde una perspectiva de valor compartido. Como iTunes, Kindle y Google
Scholar (que ofrece textos de literatura académica en línea) demuestra que los nuevos modelos de distribución rentables también pueden reducir el uso de papel y plástico. Del mismo modo, las microfinanzas han creado un nuevo modelo rentable de distribución de servicios financieros a las pequeñas empresas.
Las oportunidades para nuevos modelos de distribución pueden ser aún mayores en mercados no tradicionales. Por ejemplo, Hindustan Unilever es creando un nuevo sistema de distribución directo al hogar, dirigido por empresarias desfavorecidas, en aldeas indias de menos de 2,000 personas. Unilever ofrece microcrédito y capacitación, y ahora cuenta con más de 45,000 empresarios que cubren alrededor de 100,000 aldeas en 15 estados de la India. El proyecto Shakti, como se llama este sistema de distribución, beneficia a las comunidades no solo al dar habilidades de mujeres que a menudo duplican los ingresos de su hogar pero también reducen la propagación de enfermedades contagiosas a través de mayor acceso a productos de higiene Este es un buen ejemplo de cómo la capacidad única de las empresas para comercializar es difícil de alcanzar los consumidores pueden beneficiar a la sociedad al poner los productos que alteran la vida en manos de las personas que los necesitan. Proyecto Shakti ahora representa el 5% de los ingresos totales de Unilever en India y ha extendido el alcance de la empresa a las áreas rurales y ha construido su marca en las regiones oscuras de los medios de comunicación, creando un gran valor económico para la empresa.
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Productividad del empleado.
El enfoque en mantener bajos los niveles salariales, reducir los beneficios y la deslocalización está comenzando a dar paso a una toma de conciencia del efectos positivos que un salario digno, seguridad, bienestar, capacitación y oportunidades de ascenso para los empleados tienen en productividad. Muchas compañías, por ejemplo, tradicionalmente buscaban minimizar el costo de la atención médica de los empleados "caros" cobertura o incluso eliminar la cobertura de salud por completo. Hoy las principales empresas han aprendido que debido a la pérdida de días de trabajo
y la productividad disminuida de los empleados, la mala salud les cuesta más que los beneficios para la salud. Tome Johnson & Johnson. Por ayudando a los empleados a dejar de fumar (una reducción de dos tercios en los últimos 15 años) e implementando muchos otros beneficios.
programas, la compañía ha ahorrado $ 250 millones en costos de atención médica, un retorno de $ 2.71 por cada dólar gastado en bienestar de 2002 a 2008. Además, Johnson & Johnson se ha beneficiado de una fuerza de trabajo más presente y productiva. Si los sindicatos se centró más en el valor compartido, también, este tipo de enfoques de los empleados se extendería aún más rápido.
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Location.
El pensamiento empresarial ha adoptado el mito de que la ubicación ya no importa, porque la logística es barata, la información fluye rápidamente y los mercados son globales. Cuanto más barata sea la ubicación, entonces, mejor. La preocupación por las comunidades locales en las que opera una compañía se ha desvanecido.
Ese pensamiento excesivamente simplificado ahora se ve desafiado, en parte por los crecientes costos de la energía y las emisiones de carbono, pero también por un mayor reconocimiento del costo de productividad de los sistemas de producción altamente dispersos y los costos ocultos de la adquisición a distancia discutidos anteriormente. Wal-Mart, por ejemplo, está comprando cada vez más productos para sus secciones de alimentos en granjas locales cercanas a sus depósitos. Ha descubierto que los ahorros en los costos de transporte y la capacidad de reabastecimiento en cantidades más pequeñas compensan con creces los precios más bajos de las granjas industriales más alejadas. Nestlé está estableciendo plantas más pequeñas más cerca de sus mercados e intensificando sus esfuerzos para maximizar el uso de materiales disponibles localmente
-.
Enabling Local Cluster Development
Habilitación del desarrollo de clúster local
Ninguna compañía es autónoma. El éxito de cada empresa se ve afectado por las empresas de apoyo y la infraestructura alrededor. La productividad y la innovación están fuertemente influenciadas por "clusters" o concentraciones geográficas de empresas relacionadas negocios, proveedores, proveedores de servicios e infraestructura logística en un campo particular, como TI en Silicon Valley, corte flores en Kenia, y corte de diamantes en Surat, India.
Los clusters incluyen no solo negocios sino instituciones tales como programas académicos, asociaciones comerciales y estándares organizaciones. También se basan en los activos públicos más amplios de la comunidad circundante, como escuelas y universidades, agua limpia, leyes de competencia justa, estándares de calidad y transparencia del mercado.
--
Creating Shared Value in Practice
No todos los beneficios son iguales, una idea que se ha perdido en el enfoque estrecho y de corto plazo de los mercados financieros y en gran parte del pensamiento de la administración. Las ganancias que implican un propósito social representan una forma más alta de capitalismo, una que permitirá a la sociedad avanzar más rápidamente a la vez que permite que las empresas crezcan aún más. El resultado es un ciclo positivo de prosperidad de la empresa y la comunidad, que conduce a ganancias que perduran.
La creación de valor compartido presupone el cumplimiento de la ley y los estándares éticos, así como la mitigación de cualquier daño causado por el negocio, pero va mucho más allá. La oportunidad de crear valor económico a través de la creación de valor social será una de las fuerzas más poderosas que impulsarán el crecimiento en la economía global. Este pensamiento representa una nueva forma de entender a los clientes, la productividad y las influencias externas sobre el éxito corporativo. Resalta las necesidades humanas inmensas que deben satisfacerse, los grandes mercados nuevos a los que atender y los costos internos de los déficits sociales y comunitarios, así como las ventajas competitivas disponibles al abordarlos. Hasta hace poco, las empresas simplemente no se habían acercado a sus negocios de esta manera.
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The Next Evolution in Capitalism
El valor compartido es la clave para desbloquear la próxima ola de innovación y crecimiento empresarial. También volverá a conectar la empresa el éxito y el éxito de la comunidad en formas que se han perdido en una era de enfoques de gestión estrechos, pensamiento a corto plazo, y profundizar las divisiones entre las instituciones de la sociedad.
El valor compartido enfoca a las compañías en el tipo correcto de ganancias, ganancias que crean beneficios sociales en lugar de disminuirlos.
Sin duda, los mercados de capitales continuarán presionando a las empresas para generar ganancias a corto plazo, y algunas compañías seguramente continuará cosechando ganancias a expensas de las necesidades sociales. Pero tales ganancias a menudo serán efímeras y mucho mayores las oportunidades se perderán
El valor compartido es la clave para desbloquear la próxima ola de innovación y crecimiento empresarial. También volverá a conectar la empresa el éxito y el éxito de la comunidad en formas que se han perdido en una era de enfoques de gestión estrechos, pensamiento a corto plazo, y profundizar las divisiones entre las instituciones de la sociedad.
El valor compartido enfoca a las compañías en el tipo correcto de ganancias, ganancias que crean beneficios sociales en lugar de disminuirlos.
Sin duda, los mercados de capitales continuarán presionando a las empresas para generar ganancias a corto plazo, y algunas compañías seguramente continuará cosechando ganancias a expensas de las necesidades sociales. Pero tales ganancias a menudo serán efímeras y mucho mayores las oportunidades se perderán
Ha
llegado el momento de una visión ampliada de la creación de valor. Una
serie de factores, como la creciente conciencia social de empleados y
ciudadanos y la creciente escasez de recursos naturales, generarán
oportunidades sin precedentes para crear valor compartido.
Necesitamos una forma más sofisticada de capitalismo, una impregnada de un propósito social. Pero ese propósito no debe surgir de la caridad, sino de una comprensión más profunda de la competencia y la creación de valor económico. Esta próxima evolución en el modelo capitalista reconoce nuevas y mejores formas de desarrollar productos, atender mercados y construir empresas productivas.
La creación de valor compartido representa una concepción más amplia de la mano invisible de Adam Smith. Abre las puertas de la fábrica de clavijas para un conjunto más amplio de influencias. No es la filantropía sino el comportamiento egoísta el crear valor económico creando valor social. Si todas las empresas buscaran individualmente el valor compartido conectado a sus negocios particulares, se atenderían los intereses generales de la sociedad. Y las empresas adquirirían legitimidad a los ojos de las comunidades en las que operaban, lo que les permitiría la democracia para que funcione mientras los gobiernos establecen políticas que fomentan y respaldan a las empresas. La supervivencia del más apto aún prevalecería, pero la competencia en el mercado beneficiaría a la sociedad de maneras que hemos perdido.
Necesitamos una forma más sofisticada de capitalismo, una impregnada de un propósito social. Pero ese propósito no debe surgir de la caridad, sino de una comprensión más profunda de la competencia y la creación de valor económico. Esta próxima evolución en el modelo capitalista reconoce nuevas y mejores formas de desarrollar productos, atender mercados y construir empresas productivas.
La creación de valor compartido representa una concepción más amplia de la mano invisible de Adam Smith. Abre las puertas de la fábrica de clavijas para un conjunto más amplio de influencias. No es la filantropía sino el comportamiento egoísta el crear valor económico creando valor social. Si todas las empresas buscaran individualmente el valor compartido conectado a sus negocios particulares, se atenderían los intereses generales de la sociedad. Y las empresas adquirirían legitimidad a los ojos de las comunidades en las que operaban, lo que les permitiría la democracia para que funcione mientras los gobiernos establecen políticas que fomentan y respaldan a las empresas. La supervivencia del más apto aún prevalecería, pero la competencia en el mercado beneficiaría a la sociedad de maneras que hemos perdido.
La
creación de valor compartido representa un nuevo enfoque para gestionar
esos recortes en todas las disciplinas. Debido a la división
tradicional entre las preocupaciones económicas y sociales, las personas
en los sectores público y privado a menudo han seguido muy diferentes
caminos educativos y profesionales Como resultado, pocos gerentes tienen
la comprensión de los problemas sociales y ambientales necesarios para
ir más allá de los enfoques actuales de RSC, y pocos líderes del sector
social tienen la formación gerencial y la mentalidad empresarial
necesaria para diseñar e implementar modelos de valores compartidos. La
mayoría de las escuelas de negocios todavía enseñan la visión estrecha
del capitalismo, a pesar de que cada vez más de sus graduados tienen
hambre de un mayor sentido de propósito y cada vez más se sienten
atraídos por el emprendimiento social. Los resultados se han perdido la
oportunidad y el cinismo público.
El
currículo de la escuela de negocios deberá ampliarse en varias áreas.
Por ejemplo, el uso eficiente y la administración de todas las formas de
recursos definirá el pensamiento de próxima generación sobre las
cadenas de valor. El comportamiento del cliente y los cursos de
mercadotecnia deberán ir más allá de la persuasión y la creación de
demanda para estudiar las necesidades humanas más profundas y cómo
atender a grupos de clientes no tradicionales. Los clusters y las
influencias de ubicación más amplias en la productividad e innovación de
la compañía formarán una nueva disciplina central en escuelas de
negocios; el desarrollo económico ya no se dejará solo a los
departamentos de política pública y economía. Negocio y los cursos del
gobierno examinarán el impacto económico de los factores sociales en las
empresas, yendo más allá de los efectos de
regulación y macroeconomía. Y las finanzas tendrán que replantearse cómo los mercados de capital pueden realmente apoyar la creación de valor verdadero en las empresas -su propósito fundamental- no solo benefician a los participantes del mercado financiero.
No hay nada de suave en el concepto de valor compartido. Estos cambios propuestos en los currículos de las escuelas de negocios no son cualitativos y no se apartan de la creación de valor económico. En cambio, representan la siguiente etapa en nuestra comprensión de los mercados, la competencia y la gestión empresarial.
No todos los problemas sociales se pueden resolver a través de soluciones de valor compartido. Pero el valor compartido ofrece a las empresas la oportunidad de utilizar sus habilidades, recursos y capacidad de gestión para liderar el progreso social de manera que incluso las organizaciones gubernamentales y sociales con mejores intenciones rara vez pueden igualar. En el proceso, las empresas pueden ganarse el respeto de la sociedad nuevamente.
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regulación y macroeconomía. Y las finanzas tendrán que replantearse cómo los mercados de capital pueden realmente apoyar la creación de valor verdadero en las empresas -su propósito fundamental- no solo benefician a los participantes del mercado financiero.
No hay nada de suave en el concepto de valor compartido. Estos cambios propuestos en los currículos de las escuelas de negocios no son cualitativos y no se apartan de la creación de valor económico. En cambio, representan la siguiente etapa en nuestra comprensión de los mercados, la competencia y la gestión empresarial.
No todos los problemas sociales se pueden resolver a través de soluciones de valor compartido. Pero el valor compartido ofrece a las empresas la oportunidad de utilizar sus habilidades, recursos y capacidad de gestión para liderar el progreso social de manera que incluso las organizaciones gubernamentales y sociales con mejores intenciones rara vez pueden igualar. En el proceso, las empresas pueden ganarse el respeto de la sociedad nuevamente.
-
What Is “Shared Value”?
¿Qué es el "valor compartido"?
El concepto de valor compartido se puede definir como políticas y prácticas operativas que mejoran la competitividad de una empresa al mismo tiempo que avanza las condiciones económicas y sociales en las comunidades en las que opera. Valor compartido la creación se enfoca en identificar y expandir las conexiones entre el progreso social y económico.
El concepto se basa en la premisa de que tanto el progreso económico como el social deben abordarse utilizando principios de valor. El valor es definidos como beneficios relativos a los costos, no solo a los beneficios solos. La creación de valor es una idea que ha sido reconocida durante mucho tiempo
negocios, donde los beneficios son los ingresos obtenidos de los clientes menos los costos incurridos. Sin embargo, las empresas rara vez abordaron cuestiones sociales desde una perspectiva de valor pero las han tratado como cuestiones periféricas. Esto ha oscurecido el conexiones entre preocupaciones económicas y sociales.
En el sector social, pensar en términos de valor es aún menos común. Las organizaciones sociales y las entidades gubernamentales a menudo ven éxito únicamente en términos de los beneficios logrados o el dinero gastado. A medida que los gobiernos y las ONG empiezan a pensar más en términos de valor, su interés en colaborar con las empresas crecerá inevitablemente.
-
Blurring the Profit/Nonprofit Boundary
Borrando el límite beneficio / sin fines de lucro
El concepto de valor compartido difumina la línea entre las organizaciones con y sin fines de lucro. Nuevos tipos de empresas híbridas son apareciendo rápidamente. Por ejemplo, WaterHealth International, una empresa de rápido crecimiento con fines de lucro, utiliza una innovadora purificación de agua técnicas para distribuir agua limpia a un costo mínimo a más de un millón de personas en las zonas rurales de India, Ghana y Filipinas.
Sus inversores incluyen no solo el Fondo Acumen con enfoque social y la Corporación Financiera Internacional del Banco Mundial sino también el fondo de riesgo de Dow Chemical. Revolution Foods, una start-up estadounidense de cuatro años respaldada por capital de riesgo, ofrece 60,000
Comidas frescas, saludables y nutritivas para los estudiantes a diario, y lo hacen a un margen bruto más alto que los competidores tradicionales. Residuos Concern, una empresa híbrida con fines de lucro / sin fines de lucro que comenzó en Bangladesh hace 15 años, ha construido la capacidad de convertir 700 toneladas de basura, recolectada diariamente de barrios marginales del vecindario, en fertilizante orgánico, lo que aumenta el rendimiento de los cultivos y reduce el CO2 emisiones. Sembrado con capital del Club de Leones y el Programa de Desarrollo de las Naciones Unidas, la empresa mejora condiciones de salud al tiempo que gana un margen bruto sustancial a través de las ventas de fertilizantes y créditos de carbono.
La difuminación del límite entre las organizaciones con y sin fines de lucro exitosas es uno de los signos más fuertes de la creación de valor compartido es posible.
-
-The Connection Between Competitive Advantage and Social Issues
- La conexión entre la ventaja competitiva y las cuestiones sociales
Existen numerosas formas en que abordar las preocupaciones sociales puede generar beneficios de productividad para una empresa. Considera, por ejemplo, qué sucede cuando una empresa invierte en un programa de bienestar. La sociedad se beneficia porque los empleados y sus familias se vuelven
más saludable, y la empresa minimiza las ausencias de los empleados y la productividad perdida. El siguiente gráfico muestra algunas áreas donde las conexiones son más fuertes
-
-The Role of Social Entrepreneurs
El papel de los emprendedores sociales
Las empresas no son los únicos actores en encontrar soluciones rentables a problemas sociales. Toda una generación de sociales los empresarios son pioneros en nuevos conceptos de productos que satisfacen las necesidades sociales utilizando modelos comerciales viables. Porque ellos no son
encerrados en el estrecho pensamiento empresarial tradicional, los emprendedores sociales a menudo están muy por delante de las empresas establecidas en descubriendo estas oportunidades Las empresas sociales que crean valor compartido pueden escalar mucho más rápido que lo puramente social programas, que a menudo sufren de una incapacidad para crecer y ser autosuficientes.
El emprendimiento social real debe medirse por su capacidad de crear valor compartido, no solo beneficio social. El rol de los emprendedores sociales Las empresas no son los únicos actores en encontrar soluciones rentables a problemas sociales. Toda una generación de sociales,los empresarios son pioneros en nuevos conceptos de productos que satisfacen las necesidades sociales utilizando modelos comerciales viables. Porque ellos no son encerrados en el estrecho pensamiento empresarial tradicional, los emprendedores sociales a menudo están muy por delante de las empresas establecidas en descubriendo estas oportunidades Las empresas sociales que crean valor compartido pueden escalar mucho más rápido que lo puramente social programas, que a menudo sufren de una incapacidad para crecer y ser autosuficientes.
El emprendimiento social real debe medirse por su capacidad de crear valor compartido, no solo beneficio social.
-
Creating Shared Value: Implications for Government and Civil Society
Crear valor compartido: implicaciones para el gobierno y la sociedad civil
Si bien nuestro enfoque aquí se centra principalmente en las empresas, los principios de valor compartido se aplican por igual a los gobiernos y las organizaciones sin fines de lucro.
organizaciones. Los gobiernos y las ONG serán más efectivos si piensan en términos de valor, considerando los beneficios relativos a los costos Y centrarse en los resultados logrados en lugar de los fondos y el esfuerzo invertido. Los activistas han tendido a acercarse a las redes sociales mejora desde una perspectiva ideológica o absolutista, como si los beneficios sociales se persiguieran a cualquier costo. Gobiernos y Las ONG suelen suponer que las compensaciones entre los beneficios económicos y sociales son inevitables, lo que exacerba estas concesiones a través de sus enfoques. Por ejemplo, mucha regulación ambiental todavía toma la forma de mandatos de comando y control y acciones de cumplimiento diseñadas para avergonzar y castigar a las empresas. Los reguladores lograrían mucho más al enfocarse en midiendo el desempeño ambiental e introduciendo estándares, períodos de incorporación gradual y apoyo para la tecnología que promover la innovación, mejorar el medioambiente y aumentar la competitividad de forma simultánea.
El principio de la creación de valor compartido cruza la división tradicional entre las responsabilidades de los negocios y los del gobierno o la sociedad civil. Desde la perspectiva de la sociedad, no importa qué tipo de organizaciones se creen el valor. Lo que importa es que los beneficios sean entregados por esas organizaciones, o combinaciones de organizaciones, que
están mejor posicionados para lograr el mayor impacto al menor costo. Encontrar formas de aumentar la productividad es igualmente valioso ya sea al servicio de objetivos comerciales o sociales. En resumen, el principio de la creación de valor debe guiar el uso de recursos en todas las áreas de interés social.
Afortunadamente, ha surgido un nuevo tipo de ONG que comprende la importancia de la productividad y la creación de valor. Tal las organizaciones a menudo han tenido un impacto notable. Un ejemplo es TechnoServe, que se ha asociado tanto con corporaciones globales para promover el desarrollo de clusters agrícolas competitivos en más de 30 países. Root Capital logra un objetivo similar al proporcionar financiamiento a los agricultores y las empresas que son demasiado grandes para las microfinanzas, pero también pequeño para el financiamiento bancario normal. Desde 2000, Root Capital ha prestado más de $ 200 millones a 282 empresas, a través de las cuales ha llegado a 400,000 agricultores y artesanos. Ha financiado el cultivo de 1.4 millones de acres de agricultura orgánica en América América y África. Root Capital trabaja regularmente con corporaciones, utilizando futuras órdenes de compra como garantía para sus préstamos a agricultores y ayudar a fortalecer las cadenas de suministro corporativas y mejorar la calidad de los insumos comprados.
Algunas fundaciones privadas han comenzado a ver el poder de trabajar con las empresas para crear valor compartido. El Bill y Melinda La Fundación Gates, por ejemplo, ha formado alianzas con corporaciones globales líderes para fomentar agrupaciones agrícolas en países en desarrollo. La fundación se enfoca cuidadosamente en productos donde el clima y las condiciones del suelo dan un particular región una verdadera ventaja competitiva. Las asociaciones traen ONG como TechnoServe y Root Capital, así como funcionarios gubernamentales, para trabajar en cuestiones precompetitivas que mejoren el clúster y mejoren la cadena de valor para todos los participantes.
Este enfoque reconoce que ayudar a los pequeños agricultores a aumentar sus rendimientos no creará beneficios duraderos a menos que haya compradores listos para sus cultivos, otras empresas que pueden procesar los cultivos una vez que se han cosechado, y un grupo local que
incluye una infraestructura logística eficiente, disponibilidad de insumos y similares. El compromiso activo de las corporaciones es esencial para movilizando estos elementos.
Las fundaciones con visión de futuro también pueden servir como intermediarios honestos y disipar los temores al mitigar los desequilibrios de poder entre los pequeños empresas locales, ONG, gobiernos y empresas. Tales esfuerzos requerirán una nueva suposición de que el valor compartido puede venir solo como resultado de la colaboración efectiva entre todas las partes.
Government Regulation and Shared Value
Regulación gubernamental y valor compartido
El tipo correcto de regulación gubernamental puede alentar a las empresas a buscar el valor compartido; el tipo equivocado va en contra de eso y incluso hace inevitables las compensaciones entre los objetivos económicos y sociales. La regulación es necesaria para mercados que funcionan bien, algo que se hizo abundantemente claro durante la reciente crisis financiera. Sin embargo, las formas en que las regulaciones son diseñados e implementados que determinan si benefician a la sociedad o si van en contra de ella.
Las regulaciones que mejoran el valor compartido establecen metas y estimulan la innovación. Destacan un objetivo social y crean un igualdad de condiciones para alentar a las empresas a invertir en valor compartido en lugar de maximizar las ganancias a corto plazo. Tales regulaciones tiene una serie de características:
Primero, establecen metas sociales claras y mensurables, ya sea que involucren el uso de energía, asuntos de salud o seguridad. Donde corresponda, establecen precios para los recursos (como el agua) que reflejan los costos reales. En segundo lugar, establecen estándares de rendimiento pero no prescriben los métodos para lograrlos; esos se dejan en manos de las empresas. En tercer lugar, definen los períodos de incorporación gradual para cumplir con los estándares, que reflejar el ciclo de inversión o de nuevos productos en la industria. Los periodos de fase inicial les dan tiempo a las compañías para desarrollar e introducir nuevas productos y procesos de una manera consistente con la economía de su negocio. En cuarto lugar, ponen en su lugar universal sistemas de medición y rendimiento, con inversión del gobierno en infraestructura para recolectar información confiable
datos de referencia (como deficiencias nutricionales en cada comunidad). Esto motiva y permite la mejora continua más allá de los objetivos actuales. Finalmente, las regulaciones apropiadas requieren informes de resultados eficientes y oportunos, que luego pueden ser auditados por el gobierno según sea necesario, en lugar de imponer procesos de cumplimiento detallados y costosos a todos.
La regulación que desalienta el valor compartido se ve muy diferente. Obliga al cumplimiento de prácticas particulares, en lugar de enfocarse en la mejora social medible. Requiere un enfoque particular para cumplir con una innovación de bloqueo estándar y casi siempre infligiendo costos a las empresas. Cuando los gobiernos caen en la trampa de este tipo de regulación, socavan el
progreso que buscan mientras desencadenan una feroz resistencia de las empresas que ralentiza el progreso y bloquea el valor compartido que mejoraría la competitividad.
Sin duda, las empresas encerradas en la vieja mentalidad resistirán incluso una regulación bien construida. Como principios de valores compartidos
Sin embargo, cada vez más aceptado, las empresas y el gobierno estarán más alineados con la regulación en muchas áreas.
Las empresas llegarán a comprender que el tipo correcto de regulación puede fomentar la creación de valor económico.
Finalmente, será necesaria una regulación para limitar la búsqueda de prácticas explotadoras, injustas o engañosas en las que las empresas se beneficien a el gasto de la sociedad. La estricta política antimonopolio, por ejemplo, es esencial para garantizar que los beneficios del éxito de la empresa fluyan a clientes, proveedores y trabajadores.
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How Shared Value Differs from Corporate Social Responsibility
Cómo se diferencia el valor compartido de Respo Social Corporativo
La creación de valor compartido (CSV) debe reemplazar la responsabilidad social corporativa (CSR) en la orientación de las inversiones de las empresas en sus comunidades. Los programas de CSR se centran principalmente en la reputación y solo tienen una conexión limitada con el negocio, lo que hace son difíciles de justificar y mantener a largo plazo. Por el contrario, CSV es integral para la rentabilidad de una empresa y competitivo posición. Aprovecha los recursos únicos y la experiencia de la empresa para crear valor económico creando valor social.
¿Qué es el "valor compartido"?
El concepto de valor compartido se puede definir como políticas y prácticas operativas que mejoran la competitividad de una empresa al mismo tiempo que avanza las condiciones económicas y sociales en las comunidades en las que opera. Valor compartido la creación se enfoca en identificar y expandir las conexiones entre el progreso social y económico.
El concepto se basa en la premisa de que tanto el progreso económico como el social deben abordarse utilizando principios de valor. El valor es definidos como beneficios relativos a los costos, no solo a los beneficios solos. La creación de valor es una idea que ha sido reconocida durante mucho tiempo
negocios, donde los beneficios son los ingresos obtenidos de los clientes menos los costos incurridos. Sin embargo, las empresas rara vez abordaron cuestiones sociales desde una perspectiva de valor pero las han tratado como cuestiones periféricas. Esto ha oscurecido el conexiones entre preocupaciones económicas y sociales.
En el sector social, pensar en términos de valor es aún menos común. Las organizaciones sociales y las entidades gubernamentales a menudo ven éxito únicamente en términos de los beneficios logrados o el dinero gastado. A medida que los gobiernos y las ONG empiezan a pensar más en términos de valor, su interés en colaborar con las empresas crecerá inevitablemente.
-
Blurring the Profit/Nonprofit Boundary
Borrando el límite beneficio / sin fines de lucro
El concepto de valor compartido difumina la línea entre las organizaciones con y sin fines de lucro. Nuevos tipos de empresas híbridas son apareciendo rápidamente. Por ejemplo, WaterHealth International, una empresa de rápido crecimiento con fines de lucro, utiliza una innovadora purificación de agua técnicas para distribuir agua limpia a un costo mínimo a más de un millón de personas en las zonas rurales de India, Ghana y Filipinas.
Sus inversores incluyen no solo el Fondo Acumen con enfoque social y la Corporación Financiera Internacional del Banco Mundial sino también el fondo de riesgo de Dow Chemical. Revolution Foods, una start-up estadounidense de cuatro años respaldada por capital de riesgo, ofrece 60,000
Comidas frescas, saludables y nutritivas para los estudiantes a diario, y lo hacen a un margen bruto más alto que los competidores tradicionales. Residuos Concern, una empresa híbrida con fines de lucro / sin fines de lucro que comenzó en Bangladesh hace 15 años, ha construido la capacidad de convertir 700 toneladas de basura, recolectada diariamente de barrios marginales del vecindario, en fertilizante orgánico, lo que aumenta el rendimiento de los cultivos y reduce el CO2 emisiones. Sembrado con capital del Club de Leones y el Programa de Desarrollo de las Naciones Unidas, la empresa mejora condiciones de salud al tiempo que gana un margen bruto sustancial a través de las ventas de fertilizantes y créditos de carbono.
La difuminación del límite entre las organizaciones con y sin fines de lucro exitosas es uno de los signos más fuertes de la creación de valor compartido es posible.
-
-The Connection Between Competitive Advantage and Social Issues
- La conexión entre la ventaja competitiva y las cuestiones sociales
Existen numerosas formas en que abordar las preocupaciones sociales puede generar beneficios de productividad para una empresa. Considera, por ejemplo, qué sucede cuando una empresa invierte en un programa de bienestar. La sociedad se beneficia porque los empleados y sus familias se vuelven
más saludable, y la empresa minimiza las ausencias de los empleados y la productividad perdida. El siguiente gráfico muestra algunas áreas donde las conexiones son más fuertes
-
-The Role of Social Entrepreneurs
El papel de los emprendedores sociales
Las empresas no son los únicos actores en encontrar soluciones rentables a problemas sociales. Toda una generación de sociales los empresarios son pioneros en nuevos conceptos de productos que satisfacen las necesidades sociales utilizando modelos comerciales viables. Porque ellos no son
encerrados en el estrecho pensamiento empresarial tradicional, los emprendedores sociales a menudo están muy por delante de las empresas establecidas en descubriendo estas oportunidades Las empresas sociales que crean valor compartido pueden escalar mucho más rápido que lo puramente social programas, que a menudo sufren de una incapacidad para crecer y ser autosuficientes.
El emprendimiento social real debe medirse por su capacidad de crear valor compartido, no solo beneficio social. El rol de los emprendedores sociales Las empresas no son los únicos actores en encontrar soluciones rentables a problemas sociales. Toda una generación de sociales,los empresarios son pioneros en nuevos conceptos de productos que satisfacen las necesidades sociales utilizando modelos comerciales viables. Porque ellos no son encerrados en el estrecho pensamiento empresarial tradicional, los emprendedores sociales a menudo están muy por delante de las empresas establecidas en descubriendo estas oportunidades Las empresas sociales que crean valor compartido pueden escalar mucho más rápido que lo puramente social programas, que a menudo sufren de una incapacidad para crecer y ser autosuficientes.
El emprendimiento social real debe medirse por su capacidad de crear valor compartido, no solo beneficio social.
-
Creating Shared Value: Implications for Government and Civil Society
Crear valor compartido: implicaciones para el gobierno y la sociedad civil
Si bien nuestro enfoque aquí se centra principalmente en las empresas, los principios de valor compartido se aplican por igual a los gobiernos y las organizaciones sin fines de lucro.
organizaciones. Los gobiernos y las ONG serán más efectivos si piensan en términos de valor, considerando los beneficios relativos a los costos Y centrarse en los resultados logrados en lugar de los fondos y el esfuerzo invertido. Los activistas han tendido a acercarse a las redes sociales mejora desde una perspectiva ideológica o absolutista, como si los beneficios sociales se persiguieran a cualquier costo. Gobiernos y Las ONG suelen suponer que las compensaciones entre los beneficios económicos y sociales son inevitables, lo que exacerba estas concesiones a través de sus enfoques. Por ejemplo, mucha regulación ambiental todavía toma la forma de mandatos de comando y control y acciones de cumplimiento diseñadas para avergonzar y castigar a las empresas. Los reguladores lograrían mucho más al enfocarse en midiendo el desempeño ambiental e introduciendo estándares, períodos de incorporación gradual y apoyo para la tecnología que promover la innovación, mejorar el medioambiente y aumentar la competitividad de forma simultánea.
El principio de la creación de valor compartido cruza la división tradicional entre las responsabilidades de los negocios y los del gobierno o la sociedad civil. Desde la perspectiva de la sociedad, no importa qué tipo de organizaciones se creen el valor. Lo que importa es que los beneficios sean entregados por esas organizaciones, o combinaciones de organizaciones, que
están mejor posicionados para lograr el mayor impacto al menor costo. Encontrar formas de aumentar la productividad es igualmente valioso ya sea al servicio de objetivos comerciales o sociales. En resumen, el principio de la creación de valor debe guiar el uso de recursos en todas las áreas de interés social.
Afortunadamente, ha surgido un nuevo tipo de ONG que comprende la importancia de la productividad y la creación de valor. Tal las organizaciones a menudo han tenido un impacto notable. Un ejemplo es TechnoServe, que se ha asociado tanto con corporaciones globales para promover el desarrollo de clusters agrícolas competitivos en más de 30 países. Root Capital logra un objetivo similar al proporcionar financiamiento a los agricultores y las empresas que son demasiado grandes para las microfinanzas, pero también pequeño para el financiamiento bancario normal. Desde 2000, Root Capital ha prestado más de $ 200 millones a 282 empresas, a través de las cuales ha llegado a 400,000 agricultores y artesanos. Ha financiado el cultivo de 1.4 millones de acres de agricultura orgánica en América América y África. Root Capital trabaja regularmente con corporaciones, utilizando futuras órdenes de compra como garantía para sus préstamos a agricultores y ayudar a fortalecer las cadenas de suministro corporativas y mejorar la calidad de los insumos comprados.
Algunas fundaciones privadas han comenzado a ver el poder de trabajar con las empresas para crear valor compartido. El Bill y Melinda La Fundación Gates, por ejemplo, ha formado alianzas con corporaciones globales líderes para fomentar agrupaciones agrícolas en países en desarrollo. La fundación se enfoca cuidadosamente en productos donde el clima y las condiciones del suelo dan un particular región una verdadera ventaja competitiva. Las asociaciones traen ONG como TechnoServe y Root Capital, así como funcionarios gubernamentales, para trabajar en cuestiones precompetitivas que mejoren el clúster y mejoren la cadena de valor para todos los participantes.
Este enfoque reconoce que ayudar a los pequeños agricultores a aumentar sus rendimientos no creará beneficios duraderos a menos que haya compradores listos para sus cultivos, otras empresas que pueden procesar los cultivos una vez que se han cosechado, y un grupo local que
incluye una infraestructura logística eficiente, disponibilidad de insumos y similares. El compromiso activo de las corporaciones es esencial para movilizando estos elementos.
Las fundaciones con visión de futuro también pueden servir como intermediarios honestos y disipar los temores al mitigar los desequilibrios de poder entre los pequeños empresas locales, ONG, gobiernos y empresas. Tales esfuerzos requerirán una nueva suposición de que el valor compartido puede venir solo como resultado de la colaboración efectiva entre todas las partes.
Government Regulation and Shared Value
Regulación gubernamental y valor compartido
El tipo correcto de regulación gubernamental puede alentar a las empresas a buscar el valor compartido; el tipo equivocado va en contra de eso y incluso hace inevitables las compensaciones entre los objetivos económicos y sociales. La regulación es necesaria para mercados que funcionan bien, algo que se hizo abundantemente claro durante la reciente crisis financiera. Sin embargo, las formas en que las regulaciones son diseñados e implementados que determinan si benefician a la sociedad o si van en contra de ella.
Las regulaciones que mejoran el valor compartido establecen metas y estimulan la innovación. Destacan un objetivo social y crean un igualdad de condiciones para alentar a las empresas a invertir en valor compartido en lugar de maximizar las ganancias a corto plazo. Tales regulaciones tiene una serie de características:
Primero, establecen metas sociales claras y mensurables, ya sea que involucren el uso de energía, asuntos de salud o seguridad. Donde corresponda, establecen precios para los recursos (como el agua) que reflejan los costos reales. En segundo lugar, establecen estándares de rendimiento pero no prescriben los métodos para lograrlos; esos se dejan en manos de las empresas. En tercer lugar, definen los períodos de incorporación gradual para cumplir con los estándares, que reflejar el ciclo de inversión o de nuevos productos en la industria. Los periodos de fase inicial les dan tiempo a las compañías para desarrollar e introducir nuevas productos y procesos de una manera consistente con la economía de su negocio. En cuarto lugar, ponen en su lugar universal sistemas de medición y rendimiento, con inversión del gobierno en infraestructura para recolectar información confiable
datos de referencia (como deficiencias nutricionales en cada comunidad). Esto motiva y permite la mejora continua más allá de los objetivos actuales. Finalmente, las regulaciones apropiadas requieren informes de resultados eficientes y oportunos, que luego pueden ser auditados por el gobierno según sea necesario, en lugar de imponer procesos de cumplimiento detallados y costosos a todos.
La regulación que desalienta el valor compartido se ve muy diferente. Obliga al cumplimiento de prácticas particulares, en lugar de enfocarse en la mejora social medible. Requiere un enfoque particular para cumplir con una innovación de bloqueo estándar y casi siempre infligiendo costos a las empresas. Cuando los gobiernos caen en la trampa de este tipo de regulación, socavan el
progreso que buscan mientras desencadenan una feroz resistencia de las empresas que ralentiza el progreso y bloquea el valor compartido que mejoraría la competitividad.
Sin duda, las empresas encerradas en la vieja mentalidad resistirán incluso una regulación bien construida. Como principios de valores compartidos
Sin embargo, cada vez más aceptado, las empresas y el gobierno estarán más alineados con la regulación en muchas áreas.
Las empresas llegarán a comprender que el tipo correcto de regulación puede fomentar la creación de valor económico.
Finalmente, será necesaria una regulación para limitar la búsqueda de prácticas explotadoras, injustas o engañosas en las que las empresas se beneficien a el gasto de la sociedad. La estricta política antimonopolio, por ejemplo, es esencial para garantizar que los beneficios del éxito de la empresa fluyan a clientes, proveedores y trabajadores.
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How Shared Value Differs from Corporate Social Responsibility
Cómo se diferencia el valor compartido de Respo Social Corporativo
La creación de valor compartido (CSV) debe reemplazar la responsabilidad social corporativa (CSR) en la orientación de las inversiones de las empresas en sus comunidades. Los programas de CSR se centran principalmente en la reputación y solo tienen una conexión limitada con el negocio, lo que hace son difíciles de justificar y mantener a largo plazo. Por el contrario, CSV es integral para la rentabilidad de una empresa y competitivo posición. Aprovecha los recursos únicos y la experiencia de la empresa para crear valor económico creando valor social.
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