The current issue of the Harvard Business Review carries a compelling piece by Michael Porter (my favorite author on business strategy) on how businesses can do well by doing good.
Porter and his co-author, Mark Kramer, make the case that companies that create shared value – i.e., value for the corporation as well as for the communities and customers it serves – to unlock new opportunities to innovate and grow.
The authors note that capitalism has come under siege as business has been blamed for a range of social, environmental and economic issues. Much of this blame is well deserved – the result of companies off-shoring jobs and shuttering plants (and communities) in pursuit of better quarterly earnings.
Porter argues that companies such as Wal-Mart, GE, IBM, etc are creating high returns from activities that create social value. According to their research:
Porter and his co-author, Mark Kramer, make the case that companies that create shared value – i.e., value for the corporation as well as for the communities and customers it serves – to unlock new opportunities to innovate and grow.
The authors note that capitalism has come under siege as business has been blamed for a range of social, environmental and economic issues. Much of this blame is well deserved – the result of companies off-shoring jobs and shuttering plants (and communities) in pursuit of better quarterly earnings.
Porter argues that companies such as Wal-Mart, GE, IBM, etc are creating high returns from activities that create social value. According to their research:
- "There are three distinct ways to do this: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company's locations."
- "By better connecting companies' success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets."
We see this theory in action in Wal-Mart's efforts to decrease its carbon footprint throughout its supply chain, Sun Chips' support of solar energy and recycling, the Toyota Prius (a former client of mine), Johnson & Johnson's employee wellness programs.
Porter and Kramer draw an important distinction between corporate social responsibility and creating shared value – the former is largely a strategy to improve a company's reputation and is often divorced from business strategy, while the latter is integral to a company's profitability and competitive position.