This post originally appeared on CECP's blog.
If you don’t fully understand the concept of “shared value,” I can assure you you’re not alone.
I had the pleasure of speaking on a panel at the Committee Encouraging Corporate Philanthropy (CECP) 2012 Corporate Philanthropy Summit in NYC. My designated topic was “Measuring Shared Value,” and I was excited to share new research findings from a white paper I’m writing with my fellow colleagues at FSG.
However, as my table discussion ensued, the group’s questions were exploring more basic questions on creating shared value. It was quickly clear that a focus on measuring shared value was putting the cart before the horse. So we shifted gears and focused more on clarifying and exploring the definitions of shared value strategy. Our discussion emphasized responses to three key questions:
- “How does shared value differ from corporate philanthropy and CSR?” While shared value builds on the decades of valuable work by CSR and corporate philanthropy programs, it is fundamentally different in intent and execution. Creating shared value is about driving profitability and competitive advantage by finding sustainable business models to address social problems. In essence, a shared value strategy is a business strategy, but with a lens that looks beyond business-as-usual opportunities. Of course overlap does exist – some CSR/sustainability efforts create shared value (e.g., reducing energy use cuts costs and reducing CO2 emissions) and some corporate philanthropy efforts can strategically incubate or catalyze shared value.
- “Is reputation benefit considered shared value?” Company reputation is an important driver of business performance. However, reputation is influenced by a range of factors and I encourage folks to avoid the “reputation trap” – thinking that shared value strategies are a panacea transforming a company’s reputation. They are not. Shared value strategies should focus on generating tangible business value such as revenue increases, cost reductions, supply stability, new market growth, etc. If reputation benefits also accrue from successfully executed shared value strategies, that value should be considered incremental.
- “Don’t a lot of companies already create shared value?” Yes, of course they do. Pharmaceutical companies and medical device manufacturers make life-saving products. Food and agriculture companies provide nourishment for a growing global population. But, do these companies know much shared value is being created and where they could create more shared value? Shared value measurement is the lynchpin – it validates and quantifies the social impact and business performance achieved by a shared value strategy. It also allows companies to “unlock” new sources of value creation, as Novo Nordisk did with its diabetes business in China.
My lesson from CECP is that for every leader who is interested in the cutting edge idea of how to measure shared value (the cart), there is still an army of leaders seeking to understand and apply the basic concepts of shared value strategies (the horse) in their companies. I look forward to continuing to engage with folks to refine and apply these concepts in their companies.