Shared value: the real value proposition

December 15, 2020 | Posted By [dot]GOOD

In order to lead with new purpose, one needs to buy into, commit to and leverage “shared value”, an idea formulated by two of the world’s most influential strategists and thought leaders.

Business has always defined value as benefits relative to costs, but profit = revenue earned – costs incurred is an incredibly narrow definition. It entirely omits societal issues (and corporate social investment, except as a cosmetic cost in pursuit of that profit), which is, frankly, bad business.

“Every firm should look at decisions and opportunities through the lens of shared value,” Michael E Porter and Mark R Kramer wrote in their award-winning article for Harvard Business Review back in 2011. “This will lead to new approaches that generate greater innovation and growth for companies – and also greater benefits for society. In recent years business has increasingly been viewed as a major cause of social, environmental and economic problems.

“A big part of the problem lies with companies themselves; they continue to view value creation narrowly, optimising 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?” they ask.

Fortunately, Porter and Kramer’s message is finally being heard.

Every year, the meeting of the US Business Roundtable issues its Principles of Corporate Governance, and every year since 1997 the document has held to the principle that corporations exist principally to serve shareholders. In 2019 the group, consisting of 181 CEOs from America’s leading businesses, instead committed to a new standard of corporate responsibility: to lead their companies to the “benefit of all stakeholders – customers, employees, suppliers, communities and shareholders”.

The World Economic Forum’s Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution states that “a company serves not only its shareholders but all its stakeholders – employees, customers, suppliers, local communities and society at large. The best way to understand and harmonise the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.”

Over the years, Porter and Kramer have refined their theory and have arrived at the point where its application is most effective: “Shared value is a business discipline where companies use their core business to drive societal change and enhance their competitiveness. [It] is the most powerful practice to fulfil corporate purpose aspirations.”

It’s socially responsible examples, like one of South Africa’s best-known stationers teaming up with an NGO involved in whole-school education to support learners and teachers; it’s a sweetener brand partnering with local doctors and clinics to raise awareness about the dangers of high-sugar diets; it’s an activewear brand collaborating with local communities to establish an outdoor gym.

True corporate social responsibility is not just CSI or marketing. It’s “ambitious and authentic purpose-led business strategies that create meaningful social and business impact at scale”.

It’s about the true DNA of your company. It is true brand purpose that makes a difference. Importantly, it’s also about social marketing – marketing communication that highlights that purpose and the way your brand lives its values.

dotGOOD is a mission-driven brand activation and marketing agency. We have many years of experience in helping create partnerships between corporate, NGO and government entities that help them express their purpose and achieve shared value through business-aligned CSI initiatives. Cause marketing is the way we drive trust through communicating your lived purpose to your market.

Our ground-breaking activations and campaigns will help you create social impact through collaboration with change-makers and the community you serve.

Together, we believe we can change South Africa. We can help you improve profit and the society in which you operate.

Porter and Kramer’s NPO offers a playbook for those who want to implement shared value in their own corporations. Watch the 202 webinar Make the Pivot: Turn Purpose into Practice with Shared Value. (Watch from 05:00.)