At the Creating Shared Value Symposium on December 8, 2011, Mark R. Kramer highly appreciated the crucial role of business in society by creating shared value. Following is part of his speech in the conference.

 Companies are increasingly perceived to be prospering at the expense of the broader community and seen as a major cause of social, environmental, and economic problems.

The often attempt of government and civil society to address societal issues at the expense of business despite growing corporate citizenship activities, the legitimacy of business has fallen.

Societal and corporate success are inextricably linked

The inseparable connection of societal and corporate success is showed in two categories. Firstly, the long-term competitiveness of companies depends on social conditions, including improving education and skills; safe working conditions; sustainable use of natural resources.

And another category is that business has an essential role in solving social problems because of many reasons namely: Only companies can create prosperity that funds government and civil society; companies can create sustainable and scalable solutions to many social problems in ways that governments and NGOs can not; competitions fuels innovation and efficiency; for-profit models are the most scalable and sustainable; businesses can overcome constraints that limit their growth.

Business and society: Why the disconnection?

The disconnection of business and society leads to huge societal needs go unmet while growth and innovation suffer. These are the consequences of companies that have adopted a narrow model of economic value creation. As a result, meeting conventional needs of conventional customers; Profit improvement through downsizing, outsourcing, relocating, and globalizing; Optimization within traditional company boundaries; Emphasis on capital structure instead of real value creation; Driving revenue through acquisitions instead of new business creation; Societal issues treated as outside the scope of business.

Shared Value is policies and 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 is not sharing the value already created; personal values or balancing stakeholder interests.

It goes beyond traditional CSR and Sustainability. CSR practices such as ethical behavior, transparency, sustainable use of natural resources, and fair labor conditions are essential requirements for any successful business. Shared Value adds additional opportunities to improve social and environmental conditions beyond the company’s own footprint – helping to solve problems to which the company does not contribute

Shifting Mindset: From ‘What’s Good for Business is Good for Society’ to ‘What’s Good for Society is Good for Business’

Let’s think about the two concepts of CSR and Creating Shared Value (CSV). It is easy to understand that CSR involves Compliance, transparency, volunteerism and philanthropy while CSV will create economic value by advancing social conditions.

For CSR, social benefit is created by redistributing some of the value created by business; well CSR implementation is integral to a successful risk management strategy. Also, businesses help solve social problems because it is their responsibility to ‘give back’. And all profit is equal.

Meanwhile, CSV will create social and business benefit by “increasing the size of the pie”. Doing good is integral to a successful innovation strategy. Businesses help solve social problems because they make it their purpose and a source of competitive advantage. And finally, all profit is not equal because profit that is good for society is more sustainable.

There are six key principles that support an effective shared value strategy: focused and determined leadership from the CEO and senior executives; A mindset of innovation and learning that is willing to take risks; Aligned financial and non-financial incentives and governance structures to translate a CSV mandate into practice; Dedicated implementation at the business unit level; New areas of expertise and partnerships that must supplement the traditional base of knowledge and relationships; New approaches to measurement that assess the business benefit of addressing targeted social and environmental objectives; CSV depends on selecting targeted social issues rooted in the core business strategy then setting explicit goals and tracking progress toward them.

Creating shared value can be broken out into ten key building blocks:

VISION: An explicit vision of the company as an engine for creating shared value.

1. Engagement is seen as integral to strategy by board & senior leadership

STRATEGY: A robust strategy that identifies a clear focus and articulates ambitions goals

2. Key issues of shared value are prioritized…

3. …for which ambitious shared value goals are set

DELIVERY: Effective delivery that leverages assets and expertise across functions and business units within the company as well as from external partners and stakeholders

4. An array of assets are leveraged, including cash, goods, expertise, and influence

5. Efforts are managed holistically across the company

6. Partners are mobilized for information and action

PERFORMANCE: Management for performance that seeks to measure and learn from results, bring successful efforts to scale and communicate progress

7. Relevant results are actively measured

8. Learnings from engagement are used

9. Successful efforts are brought to scale

10. Progress is communicated internally and externally

Shared value strategies require buy-in from every part of the company – making the case to internal decision-makers is critical

Implications for government and civil society

Government and NGOs often assume that trade-offs between economic and social benefits are inevitable. Government and NGOs will be most effective if they enable shared value by business. NGOs bring unique expertise, implementation capacity, and relationships of trust with communities. Governments should make platform investments in public assets and infrastructure to enable shared value by business. Government should regulate in a way that reinforces and rewards shared value in business, rather than working against it.