“Shared Value” is the name given to a business strategy that focusses on creating measurable economic value by identifying and addressing social problems that intersect with the business.
Shared Value is not philanthropy; it’s not corporate social responsibility (CSR) or corporate social investment (CSI) either. CSR/CSI initiatives are not intrinsic to the business strategy, which results in them becoming short-term programmes that are not sustainable, because they are not self-funding.
Simply put: Shared Value is how a business makes money; whereas philanthropy, CSR or CSI is a way in which a business spends money. To qualify a business strategy as creating shared value there must be an identifiable economic benefit to the company, as well as a measurable impact to some social issue.
Business acting as business – not charitable donor – becomes a powerful force capable of addressing the pressing issues that we face today. Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and business’ wealth; but a narrow concept of capitalism has prevented business from harnessing its full potential to meet society’s broader challenges.
How does a business create shared value?
The creation of shared value operates on 3 levels:
- Reconceiving products and markets
Creating new products and services for existing or new markets based on having a customer centric approach; colaborating with customers and community stakeholders to understand customer’s core needs.
Discovery: the Vitality program targets preventative health problems by incentivising customers to live a healthy lifestyle through their rewards program and lower premiums. This has created a healthier customer base and lowered costs for the company.
- Redefine productivity in the business’ value chain
Business will need to work with suppliers, internal / external stakeholders to improve processes, quality, sustainability, productivity, social outcomes and competitive advantage.
Nestle: water is key to human life, every system in our body depends on it. Nestle, as a nutrition, health and wellness company acknowledges this because water is key to their operations and products. They use it to clean and prepare their raw materials or for cooling and cleaning equipment. They also use water to provide healthy hydration solutions for their customers.
Therefore one of their shared value priorities is to improve the sustainability of their withdrawal, use and treatment of water. They have implemented water saving projects at their factories which has saved them a lot of water (which has an impact socially and financially)
- Enabling local cluster development
Involves facilitating the clustering and sustainable development of the market and geograpic environment in which the business operates.
Absa: small and medium enterprises (or SMEs) currently account for 33% of the continent’s GDP. However, this is a tricky space to succeed in. Supporting SMEs can reduce poverty and inequality – and that’s where Absa fits. They provide SMEs with a range of innovative financial solutions, as well as business development support services through their network of entrepreneurial development centres. They also help large corporates to integrate small businesses into their supply chains in ways that create business opportunities and contribute to economic growth. This will, in turn, mean a stronger SME sector, which would ultimately benefit the entire continent and Absa.
Social and financial value are not mutually exclusive, they are infact interdependent and when the link is connected, it can stimulate sustainable value for business and society.