Creating Shared Value is the business model that allows corporations to become more successful by improving the welfare of their employees, customers, suppliers, community, and society.
It is a business model meant to accelerate the achievement of the Sustainable Development Goals (SDGs). Through Creating Shared Value, organizations can create economic value while simultaneously creating social value.
Creating Shared Value was first presented by Michael Porter and Mark Kramer in a 2006 article they wrote for Harvard Business Review. They later expanded this concept in 2011.
Porter and Kramer have defined Creating Shared Value as:
"policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates."
According to Forbes, Creating Shared Value is the future of business. It emphasizes societal needs and challenges with an innovative model for success, which will make positive changes in our society and economy.
Creating Shared Value (CSV) vs. Corporate Social Responsibility (CSR)
Corporate Social Responsibility (CSR) is a business approach that aims to address social and environmental problems. It is a strategy where an organization works towards balancing its economic, environmental, and social goals.
At its core, Creating Shared Value is about embedding societal concerns into our business models, which goes far beyond CSR.
Porter and Kramer clarified that:
“Shared Value is not social responsibility, philanthropy, or sustainability, but a new way for companies to achieve economic success.”
Below is a table that lists the specific differences between CSV and CSR:
Source: Sustainable Brands
Creating Shared Value requires more than just investing in the community and focusing on creating an integrated strategy that balances economic, environmental, and social factors. It also means creating a competitive advantage through the process, rather than just positioning your business to be seen as socially responsible.
Three Approaches to Creating Shared Value
According to Harvard Business School, Creating Shared Value opportunities centers around three levels:
- Reconceiving products and markets
- Redefining productivity in the value chain
- Improving the local and regional business environment.
1. Reconceiving Products and Markets
It is about creating new markets and designing new products needed by society. It means addressing the needs of unserved or underserved customers and focusing your business on developing products for those who need them most.
This is an opportunity to produce innovative services or technologies to solve some of the world's problems while growing your market.
2. Redefining Productivity in the Value Chain
This is about designing and restructuring your business model to add value on a more social scale. It is no longer just about providing the best products for the lowest price but offering more sustainable and efficient production of goods and services.
This is an opportunity to introduce more cooperative labor models, implement recycling programs, or reduce your business’ carbon footprint.
3. Improving the Local and Regional Business Environment
Creating Shared Value opportunities is often found at a local level where you can work towards building up the economy around you. It is about creating more jobs in your community, promoting regional growth, and strengthening your connection to those around you.
It is about finding new ways for your business to support local charities or nonprofits, rethinking power dynamics in the industry, or even partnering up with educational institutions.
Six Benefits of Creating Shared Value
There are six key benefits associated with this strategy:
1. Higher Productivity
Creating Shared Value aims to use business to promote sustainable growth, and it leads to higher productivity by identifying common goals between your business and society.
2. More Innovation
New opportunities for innovation are created by focusing your company on societal needs first and foremost. This will create an innovative mindset throughout all departments, leading to a more creative organization.
3. Faster and Better Decisions
A Creating Shared Value business model means collaborating with the community to make decisions about production, distribution, and even sales. This means that your final products or services will better support society in ways that ultimately improve your business’ efficiency.
4. Lower Costs
Creating Shared Value has the ability to lower costs while increasing productivity. Shared value opportunities foster a more productive workforce while reducing waste and unnecessary spending.
5. Higher Returns
Today's competitive business landscape makes it hard to innovate and grow organically. By creating shared value opportunities for your company, you can differentiate your organization from its rivals, promoting more substantial organic growth.
6. Better Relations
Creating Shared Value business models encourage trust and transparency between your business and society. This can strengthen your reputation, raise awareness about your company, and increase the likelihood of gaining the support of stakeholders for future efforts.
Example: How a Company Used Shared Value Principles to Transform Their Organization
Anheuser Busch InBev is a multinational beer and beverage company that used shared value to re-evaluate its organizational structure, positioning itself as a leader in Sustainable Development Goals. This process included:
- Shifting from a social business model to a shared value one where the profits and positive impact on the community were valued above everything else.
- Collaboration with key stakeholders across various levels to better understand where weaknesses and opportunities for change lay.
- Searching high and low for potential shared value opportunities that would benefit the community while also boosting the business.
- Developing partnerships with key organizations to influence critical social issues.
- Engaging employees in this important initiative by helping them understand why shared value is beneficial to the company and society at large, giving them a greater sense of purpose.
- Building a culture of shared value that encourages collaboration between workgroups, rewards innovative thinking, and promotes sustainability in the company.
To reduce the harms caused by alcoholic beverages, Anheuser Busch InBev launched the Global Smart Drinking Goals, focusing on marketing campaigns, creating guidance labels, and diversifying its products, highlighting no- and lower-alcohol beers.
As of 2022, it was producing more than 500 beer brands sold in nearly 50 countries and had made $57.8 billion USD revenue showing that CSV can benefit our society and profit the company choosing to implement this model.
Final Thoughts
Creating Shared Value is an innovative way of doing business that benefits both society and your company at the same time. It can be used to re-evaluate your organizational structure, creating new opportunities for innovation while increasing the productivity of all involved.
There are several ways to implement shared value into your business, whether through environmental sustainability or creating new jobs for the local community. The most important thing is to begin making changes today so that your business can be in a better position in the future.
FAQs
1. What does it mean to Create Shared Value?
Creating Shared Value means balancing the needs of society with business growth. It is a model of business that ensures everyone wins – the company, society, and even investors – creating a win-win situation. It involves thinking about how your business can improve society and looking at societal needs first and foremost to develop competitively viable products or services.
2. What is the difference between Creating Shared Value (CSV) and Corporate Social Responsibility (CSR)?
Though they are very similar, they are not the same. CSR is about doing good things for society that have no direct benefit to your company. Meanwhile, Shared Value focuses on creating innovative business models that will generate competitively viable products or services while also helping society. It is also about thinking bigger than just one product or service and your company's immediate surroundings.
3. How are shared value opportunities created?
According to Harvard Business School, there are three ways you can create shared value opportunities in an organization: reconceiving products and markets, redefining productivity in the value chain, and improving the local and regional business environment.
4. What are the benefits of creating shared value?
There are six key benefits to creating shared value opportunities: higher productivity, more innovation, faster and better decisions, lower costs, higher returns, and better relations.
5. Is CSV better than CSR?
Both CSV and CSR are valuable ways of doing business, and they both aim to make your company more competitive while also doing some good for society at the same time. However, Creating Shared Value is more concrete in that it is about trying to solve an issue in a way that benefits everyone involved.
