After preparing the last issue of Inside Internal Control, I came across the concept of “shared value” in the Harvard Business Review (subscription), which seems like another expression of Natural Step Canada’s rethinking of corporate social responsibility.
Harvard professors Michael Porter and Mark Kramer write:
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.
A business needs a successful community, not only to create demand for its products but also to provide critical public assets and a supportive environment.
Harvard researcher David Weinberger responds that shared value is great—”when it works.” But in reality, shared value will require great sacrifice from business.
Suppose doing the right Shared Value thing requires closing plants, raising prices, becoming less competitive, reducing profits? Should an automobile manufacturer abruptly exit a lucrative market for high-performance gas guzzlers, luxury gas guzzlers, and cheap gas guzzlers on the grounds that expensive fuel-efficient cars are better for us all?
Porter and Kramer add:
We are suggesting that social and environmental factors carry genuine economic implications for business strategy—both costs and benefits—and that these considerations, long resisted by businesses, must be included in corporate decision-making. … It is possible for businesses to help solve social and environmental problems in ways that increase profitability or accentuate competitive advantage. … there is much more business opportunity in solving social problems than in causing them.
It seems hopeful that a serious debate over the greater role of business in society is underway, and I’m going to look more closely at shared value in the near future. In the meantime, I’d be happy to hear your thoughts on the topic. Has short-term business thinking harmed communities, the economy and the environment? Is it time for business owners of all sizes to recognize the value and necessity of supporting the communities in which they operate? Are there really vast opportunities for businesses in previously ignored markets or to meet previously unmet needs?
First Reference Internal Controls, Human Resources and Compliance Editor