In the January-February 2011 edition of the Harvard Business Review, the article by Michael Porter and Mark Kramer was published, highlighting that efficiency in the economy and the social process are not opposite. Thus, creating economic value must also create value for society. In these terms they point out: businesses must reconnect the success of the company with social progress.
The concept of shared value starts from recognizing the needs of society and that is why they reiterate the interconnection that must exist between the needs of businesses and the needs of the community. ”
In this sense, it is highlighted that the solution to reinvent capitalism is to go beyond CSR, which translates into the creation of shared value (CSV, for its acronym in English).
shared-value-success-cases-hugoThese renowned authors point out that efficiency in the economy and the social process are not opposite. Thus, creating economic value must also create value for society. In these terms they point out: businesses must reconnect the success of the company with social progress.
In this way, shared value is not social responsibility, philanthropy, or even sustainability. It is a new way to achieve economic success. As you learn how to create shared value, the way you do business will be legitimized again.
The concept of shared value starts from recognizing the needs of society and that is why it reiterates the interconnection that must exist between the needs of business and the needs of the community (Association of Business Foundations, 2016).
Corporate Social Responsibility (CSR) is the responsibility of an organization for the impacts that its decisions and activities cause on society and the environment.
To face this responsibility, corporations have at their disposal different tools that will help them achieve the sustainability objectives that have been set in their business strategy.
Creating Shared Value (CVC) is one of those tools, since it allows the company to generate economic value for the business while achieving a positive impact on society.
Thus, the Creation of Shared Value puts the solution of real problems in society at the center of the business operation. Through these solutions, the company establishes and strengthens its competitive advantages and, therefore, its long-term financial results. The CVC puts the economy at the service of society to organize the company in order to meet the real demands of the community.
Along these lines, the Sumarse project was born, in which five companies worked on the design of Shared Value Creation projects with the support of Vision ASM. At the end of this program, the participating companies designed a concrete and profitable project, where they created a business opportunity, which at the same time meets or solves an economic, social or environmental challenge of the community where it operates (Alfaro, 2015).
Definition
The concept of shared value, according to its creators (Porter & Kramer, 2011) can be defined as the operational policies and practices that increase the competitiveness of a company while simultaneously developing economic and social conditions in the communities where companies have the seat of their business.
(Alfaro, 2015) He says that Creating Shared Value is a business strategy that analyzes the role that the private sector can play in solving social problems through its business model.
Peter Brabeck-Letmathe (President of Nestlé SA) and Paul Bulcke (Chief Executive Officer of Nestlé SA) executives of Nestlé, a company that stands out for being one of the pioneers and reference in terms of the implementation of Shared Value explain what this strategy consists of:
CVC means that for a company to be successful in the long term, it must take into account the needs of its two main stakeholders at the same time: the people of the countries in which we operate and our shareholders.
Any business that has a future vocation and applies sound business practices creates value for society and for shareholders through its activities; Thus, it employs workers, pays taxes to help finance public services, and supports economic activity in general.
But the Creation of Shared Value goes further. A company conscientiously identifies its key areas, in which: a) the interests of shareholders and society clearly converge; and b) value creation can be optimized for both groups. Consequently, the company invests resources, both talent and capital, in the areas that have the maximum potential to create value jointly, and seeks to act in collaboration with the corresponding stakeholders (Nestlé, 2016).
According to Porter and Karamer, there are three key ways in which companies can create shared value opportunities:
Steps to Create Shared Value
1. Reinvention of products and markets.
The starting point to create value is for companies to identify the needs of society, benefits and harmful effects that their products may have. These needs are not static; they permanently change with the evolution of technology. Knowing these unmet needs in the markets requires a redefinition of a company's products and services.
Microfinance is an example of how the needs of people in developing countries that were previously unmet by the financial sector are being met.
2. Redefinition of productivity in the value chain.
Porter and Kramer reiterate the consistency between social progress and productivity in the value chain, which implies not only exercising environmentally friendly practices, but also procuring purchases from small companies or local firms, as well as using new distribution models, as the case Google Scholar that offers school texts on the net; as well as implementing occupational health programs.
All of these innovative practices not only reduce costs but additionally generate immense shared value that most companies have traditionally ignored in their operations.
3. Development of local business clusters.
The success of a company depends on the companies and the infrastructure that is around them. These clusters are not only made up of other companies, but also other types of institutions, academic programs, trade organizations, universities, drinking water, fair competition laws, transparency in the markets.
Success stories of companies that implemented strategies for creating shared value
(Alfaro, 2015) He quotes in his publication that the “Creation of Shared Value” is not just a theoretical proposal. Many global companies, leaders in their industries, have internalized shared value in their operations. Nestlé, Intel, General Electric, Vodafone, Shell and Walmart are just some of the big companies that have boosted their businesses with this strategy.
That leading companies with such long trajectories develop CVC projects in their operations is indicative that the next restructuring of the way of doing business will have a lot to do with aligning the companies' plans with satisfying the real needs of the company. society.
As briefly shown in the examples below, CVC can be generated from three complementary strategies:
- Building industrial support groups or clusters, like Nestlé's “Nespresso” Rethinking products and markets, such as strategies
"Transformation of Education" from Intel, "Ecomagination" from General Electric and "M-Pesa" from Vodafone.
- Redefining productivity in the value chain, the way Shell and Walmart do.
- Illustration 1 CVC Nestlé Illustration 2 CVC GE Illustration 3 CVC Vodafone Illustration 4 CVC Walmart Illustration 6 CVC Shell Illustration 5 CVC Intel
conclusion
Creating Shared Value represents an opportunity to drive widespread prosperity while strengthening business competitiveness.
Companies must look beyond the perceived opportunity costs between facing social problems and increasing profitability, they must look for opportunities that allow them to generate new economic value by solving social problems.
It is necessary to take advantage of the resources and experiences of the company and align them with the will of the highest management of the organization, in order to identify the social needs that can be positively impacted by the provision of the goods and services that the company provides.
Acting in this sense allows companies to objectively measure and evaluate the impact of their operation from the point of view of generating social welfare, as well as in financial reports.
This interconnection with the company's business and the direct results for the business will allow long-term sustainability of the projects (Alfaro, 2015).
Gratitude
I thank the Orizaba Technological Institute for providing the tools and human capital to develop professionally and the MAE Fernando Aguirre y Hernández professor of the Fundamentals of Administrative Engineering subject for promoting learning through practice among their students, thus encouraging proactivity and genuine learning.
References
- Alfaro, T. (2015). JOIN. Obtained from SUMARSE.ORG Website: http: //www.sumarse.org.pa/wp-content/uploads/2016/01/SUMARSE-guia-creacion-devalor-compartido-2015-digital.pdfAsociación de Fundaciones Empresariales. (December 11, 2016). AFE Colombia. Obtained from AFE Colombia Website:
