Differences between "Shared Value" and CSR - Part II

Michael Porter and Mark Kramer believe that CSR is "stuck in a 'social responsibility' mind-set,  such that addressing the needs of the broader society is still not considered as immediately relevant to corporate success. They perceive their more expansive idea of "Shared Value" as distinct from CSR in that their construct: considers cost-effective stewardship of resources; addresses human needs beyond those related to customer behavior and marketing; addresses societal impacts on businesses "beyond regulation and macroeconomics"; espouses that business schools incorporate public policy and development issues into their curriculum; and finally that capital markets be directed to actually create value in companies rather than simply give financial returns to market participants.

Their framework for "Shared Value" begins by linking economic value creation to societal value creation in three categories. Firstly, products and services should be developed in response to existing social needs rather than creating consumer demand for products and services which may not be socially necessary. They emphasize that social benefit alone would not be the value of success, but that the company and society should both thrive in the sense of "shared value." They cite the societal benefits created by social entrepreneurs, which they applaud as developing socially appropriate products to underserved markets with minimal resources while making decent profits. They chart out company productivity as directly impacted by the following societal issues:  energy use; water use; environmental impacts; supplier access and viability; employee health; worker safety; employee skills.

Secondly, they encourage productivity in the value chains by dealing with social issues such as responsible use of natural resources,  good working conditions, and health and safety controls. This includes rethinking corporate distribution practices and location strategies which seek out the lowest labor costs. They consider that the "the strongest international competitors will often be those that can establish deeper roots in important communities." "Shared Value" means that the suppliers are economically successful and create good social and environmental outcomes. To this ends, Porter and Kramer believe that companies should practice technology sharing with suppliers as well as offering financing to advance quality and productivity. This orientation of promoting better productivity, they feel, will "trump lower prices."

Thirdly, they emphasize the concept of "clusters" referring to defined geographical areas in which certain industries, supporting service firms and suppliers tend to be concentrated - such as the IT sector in the Silicon Valley. "Clusters are prominent in all successful and growing regional economies and play a crucial role in driving productivity, innovation, and competitiveness." Therefore, the more these firms nurture local capacities in support areas such as education, transportation, clean water, etc. - the better it is for the individual firms. "A focus on clusters and location has been all but absent in management thinking. Cluster thinking has also been missing in many economic development initiatives, which have failed because they involved isolated interventions and overlooked critical complementary investments." They believe that a focus on "cluster weaknesses" would be more strategic to corporate success than the usual community programs promoted by CSR.

Photo Credit: by Joost J. Bakker Ijmuiden