Towards Shared Value

At the beginning of 2011 “Creating Sharing Value”, an HBR article by Michael Porter, highlights the vicious circle in which the business community has fallen into. Many companies, says Porter, have been stuck in an exceeded approach which is focused on optimizing the short-term financial performance. An approach which is not capable of seizing the main unmet market needs and all that can positively affect the company’s long term success.

Companies could then reconcile business and Civil Society only by redefining their goal in terms of creating a “Shared Value”, which means creating economic value while generating also a value for society (or at least avoiding the production of disvalue). An approach based on shared value is the one that reconnects a company’s success with social progress.

For us consultants, this means a simple fact: a company that keeps into account all stakeholders’ needs when it comes to the definition of its business strategy (and not merely shareholders’ needs), by quantifying their impact and making choices that maximize the “shared value”, is able to build a more stable competitive position than a company aiming exclusively at maximizing the short-term financial return.
In other words, it is all about going beyond the “two-timed” CSR approach (ex ante by maximizing the financial interest of shareholders and ex post by re-investing part of the profit in social programme), integrating a multi-stakeholder approach in all business decisions.

Nowadays, companies that create their three-year plans qualifying and quantifying ex ante their business behaviors based on their own stakeholder system are still quite a few. Still rare are those organizations that evaluate their managers according to social/environmental impact indexes; very few cases of corporate restructuring are implemented with the goal of minimizing the negative impact on people and community of reference (for more info on the subject, please refer to European Social Fund – “Toolkits for restructuring”). At the same time, today, most managements lack of clear understanding on how multi-stakeholder choices are able to contain reputation risks and can contribute in building a long term competitive advantage for the Company.

In the future we believe that the concept of “shared value” together with a multi-stakeholder business approach could radically change the relationship between capitalism and society, addressing future economic innovations towards new and unmet human needs and towards global markets already waiting to be served.