In a previous newsletter, we introduced the concept of “Authentic Engagement”. One of the guiding principles for authentic, social engagement is to create shared value by focusing on social issues that affect corporate competitiveness. Pioneering innovations in the value chain and product offering –for example, targeting “zero emissions mobility” if you are Toyota – is the first fundamental way in which corporations can create shared value. The other is to invest in social aspects of the company’s competitive context – for example, driving awareness of the link between washing hands with soap and health if you are Unilever’s Lifebuoy soap brand.

Many progressive companies and their cross-sector partners are seeing social issues through this new lens. And yet, in a world that often positions the private sector in opposition to the social sector, much skepticism remains about whether value can truly be shared. Recently, one of FSG’s team members was asked in a conference, “but who says how the value gets shared...?” This is a simple and yet crucial question to address for the concept of shared value to take root in management practice. A few perspectives on the matter follow.
SHARED NOT REDISTRIBUTED
Simultaneously doing well while doing good
Part of the confusion around creating shared value comes from a legacy of responsive CSR that has focused on “doing good” outside of strategic business operations. However, shared value is not about doing harm with one hand and good with the other, or maximizing profit to engage in philanthropic largess. It is about making simultaneous progress on important social issues and business objectives. If you care about giving seniors a chance to stay at home longer at the later years of their lives, for example, it is about building houses that ensure mobility for the elderly as well as penetrating a growing and high value customer segment.
SHARED BY OBJECTIVES
Sharing around targeted objectives
Companies aiming to create shared value should begin by asking themselves: "what specific objectives can we pursue that will improve what we do as a company and at the same time positively impact or even transform society?" Carefully choosing the right objective will automatically lead to creating shared value. For example, when Firmenich – a global leader in flavors and fragrances – works with farmers to ensure their vanilla is harvested at the right time, the results are both better vanilla as an input to Firmenich products as well as improved revenue security for farmers. Economic and social value is shared in different combination, but the more specific the objectives are, the clearer and more measurable sharing becomes.
SHARED FOR VALUE, NOT VALUES
Sharing because it's the 'right' and 'smart' thing to do

Real shared value objectives should not result in a trade-off between economic and social value creation. It is because a company improves farmer’s practices and income, that it can ultimately access a higher quality supply. Objectives, though, can be defined to include specific trade-offs between short-term and long-term economic gains: for example, a company may recognize that there is enough value in the chain to the consumer that it can afford to pay farmers in excess of market prices. This objective boosts a development agenda as farmers re-invest profits into more sustainable farm practices, or in health and education for their families. Healthier families make for better farmers, etc. Choosing not to maximize returns, at least in the short-term is a values-driven choice for companies. But, the concept of shared value does not presume to dictate values: it is not about determining the right thing to do, but doing the smart thing.

We hope you’ll participate in the dialogue about Shared Value--please send us a note with your comments to insights@fsg.org or to learn more about Authentic Engagement for Strategic CSR, please contact Marc Pfitzer.
 
We hope you’ll continue in the dialogue about Shared Value--please send us a note with your comments at insights@fsg.org or to learn more about Authentic Engagement for Strategic CSR, please contact Marc Pfitzer.