Creating Shared Value
The growth of the capitalist system has brought about companies that race to make a profit at the expense of the greater society and environment. Companies have recently been facing criticism due to the creation of several social problems in the process of doing their day-to-day activities. The prosperity of various companies has been associated with their reluctance to incorporate the environment and society around them in their planning. The public outcry has necessitated the move by several governments to set regulations on the operation of companies due to the misconduct of several companies. The policy of shared value can be defined as the responsibility of a company to improve the social and environmental conditions in the areas of operation while enhancing competitiveness. Although shared value can be created from corporate social responsibility, the basic idea of shared value is that the problems of the society are placed at the core of the business plan unlike CSR, which aims to fulfill some agreed responsibilities.
The concept of shared value comes in as a strategy to create new opportunities for both the company and society. The definition “Creating Shared Value” that was coined by Porter and Cramer (2011) was an attempt aimed at improving an initial global idea to practical business practice. The events that followed the Global Financial Crisis of 2008 saw capitalism being left under siege with several companies going under receivership due to poor planning. The concept of shared value was keen to incorporate important ideas that ensured that a business should use its capital, scale, and innovation access, as well as market access to create a meaningful impact towards solving the problems affecting the society. The basic idea behind shared value is the relationship that a company’s internal stakeholders have with the external stakeholders such as the general public, suppliers, customers, and even regulators. The internal stakeholders are not limited to the employees since the assets and liabilities of the company could also form relationships with external stakeholders. The creation of shared value involves all the activities that the business engages in from production and invention to the community engagement practices and sales. Generally, shared value is a centralized practice, and therefore, the business has to consider the roles of employees and specific teams tasked with interacting with the external stakeholders. However, shared value is different from corporate social responsibility.
Corporate social responsibility involves the company’s acceptance of honoring the responsibilities agreed between the company and the community before the start of the company’s activities in the region. Corporate social responsibility is always an obligation that the company has to give back to society after a certain period of successful business period (Strand, Freeman, & Hockerts, 2015). Also, corporate social responsibility is focused on making the company to show responsible corporate citizenship while protecting the existing public relations. The investment in social programs is also a crucial feature of corporate social responsibility. Additionally, the requirement of corporate social responsibility that a company should operate according to the laws and ethical standards of the community leaves the company with freedom to make progress without considering the neighboring community. On the other side, shared value puts the problems of the community before any plans of the business. Shared value can, therefore, be seen as a way of appreciating a company for helping the community to solve problems although the original idea starts with the company.
Creating Shared Value involves creating a new market, or improving an existing market by collaborating with the community to ensure that the problems of the community are solved first. For example, an insurance company could start a health coverage program for a given community at low premiums or in exchange for providing education on healthy lifestyles to reduce the number of claims while helping the community. The shared value should, therefore, consider a community that needs help and utilize the gap as an opportunity for both the company and the community. The creation of shared value may also be extended across borders. A company may directly decide to invest in a foreign country in a bid to help citizens of the foreign country while making a profit from the same venture. Alternatively, a company may partner with a foreign company to reach citizens of the other country. The creation of shared value has the advantage that the company still makes a profit while helping the community. The concept of shared value gives a company the freedom to choose profitable ventures but the needs of the community have to be considered.
In sum, Creating Shared Value is different from corporate social responsibility. The concept of shared value requires that a company invest in a profit-generating venture while improving the social and environmental conditions of the region of operation. In shared value, the needs of the community form the core part of the business plan. Also, shared value is not limited to a specific country and therefore, companies may decide to create shared value from foreign countries. Generally, shared value is an improvement of the corporate social responsibility since all the parties involved are left satisfied.
References
Kramer, M. R., & Porter, M. (2011). Creating shared value. Harvard business review, 89(1/2), 62-77.
Strand, R., Freeman, R. E., & Hockerts, K. (2015). Corporate social responsibility and sustainability in Scandinavia: An overview. Journal of Business Ethics, 127(1), 1-15.