Creating Shared Value
CREATING SHARED VALUE
For many years leading up to today, profit seeking enterprises have been viewed as a major cause of problems in the society and are believed to prosper at the expense of the community. The legitimacy of businesses has fallen and this diminished trust has led politicians to impose tougher restrictions on businesses that cause them to be uncompetitive. The problem lies in the fact that businesses continue to be short sighted in their approach to growth. They continue to look for ways to optimize short term gains while missing the bigger picture. Businesses must lead the effort in bringing them back together with society, but a proper framework for this is still lacking. The solution to this lies in the principle of shared value, which involves creating economic value in a way that also creates value for the society. Capitalism is an unparalleled vehicle for meeting human needs but a narrow conception of capitalism has prevented businesses from harnessing their own true potential. The purpose of corporations must be redefined to creating shred value and not just profits.
Shared Value:
Requiring businesses to focus on social improvement imposes a constraint on the corporation. Externalities arise when the firm creates social costs that they do not have to bear. Such situations have shaped businesses’ strategy and the resistance of regulatory standards. Governments have, in turn, imposed regulations that make shared value harder to achieve. In contrast, the concept of shared value recognizes that societal needs and not just economic needs, define markets. Thus shared value is not about sharing the value created, but about expanding the total pool of economic and social value.
Roots of Shared Value:
In a very old age view of capitalism, business contributes to society by making profits that support employment, wages and taxes. In this type of environment, the communities in which these businesses operate perceived little benefit even as
For many years leading up to today, profit seeking enterprises have been viewed as a major cause of problems in the society and are believed to prosper at the expense of the community. The legitimacy of businesses has fallen and this diminished trust has led politicians to impose tougher restrictions on businesses that cause them to be uncompetitive. The problem lies in the fact that businesses continue to be short sighted in their approach to growth. They continue to look for ways to optimize short term gains while missing the bigger picture. Businesses must lead the effort in bringing them back together with society, but a proper framework for this is still lacking. The solution to this lies in the principle of shared value, which involves creating economic value in a way that also creates value for the society. Capitalism is an unparalleled vehicle for meeting human needs but a narrow conception of capitalism has prevented businesses from harnessing their own true potential. The purpose of corporations must be redefined to creating shred value and not just profits.
Shared Value:
Requiring businesses to focus on social improvement imposes a constraint on the corporation. Externalities arise when the firm creates social costs that they do not have to bear. Such situations have shaped businesses’ strategy and the resistance of regulatory standards. Governments have, in turn, imposed regulations that make shared value harder to achieve. In contrast, the concept of shared value recognizes that societal needs and not just economic needs, define markets. Thus shared value is not about sharing the value created, but about expanding the total pool of economic and social value.
Roots of Shared Value:
In a very old age view of capitalism, business contributes to society by making profits that support employment, wages and taxes. In this type of environment, the communities in which these businesses operate perceived little benefit even as