In an interview on HBR.org, management expert, author, and Harvard professor Michael Porter said that CSR (corporate social responsibility) is a dead end. “For folks in the CSR world,” he added, “the real impact isn’t on charitable giving but mobilizing the business itself.” (video and article available here)
Porter and partner Mark Kramer argue for a principle they label “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.” As they see it, “shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success.”
It’s not exactly a catchy name, nor is it a new concept, but if Porter and Kramer can get more companies to focus on the needs and challenges of society—rather than creating a demand for something we don’t really need—they will help CSR move to the next phase.
I would call that next phase corporate social profitability (CSP), since both companies and society benefit.
If you want to know what CSP looks like, consider the case of Dannon yogurt in Bangladesh, which I wrote about here. Danone teamed up with Grameen Bank to develop a low-cost yogurt that provides 30% of a Bangladeshi child’s recommended daily nutrients. It created economic value by creating value for society.
Or how about Procter & Gamble, which now has nine manufacturing plants that are beneficially using 100% of their waste? As a result, P&G has recovered tens of millions of dollars in costs while diverting tens of thousands of tons of waste from landfills. It created economic value by creating value for society. You can read more about P&G here.
Porter and Kramer point out that several companies known for hard-nosed approaches to business are working to create shared value, among them GE, Google, Wal-Mart, IBM, and Johnson & Johnson. They acknowledge that this way of thinking is in its infancy. “The purpose of the corporation must be redefined as creating shared value, not just profit per se,” they write.
While a few enlightened companies may redefine themselves this way, it’s hard to imagine that this will catch on. If anything, the emphasis on profit as the sole measure of a company’s value has grown over the past decade.
It will take more success stories like those of P&G and Danone to convince executives that creating shared value is worth more than passing glance.