Understanding shared value
12 October 2021 at 8:02 am
Dr Virginia Munro reflects on the current lack of understanding around shared value and why this needs to change.
Countries and governments around the world are dealing with fluctuating COVID scenarios, vaccine roll out urgency and escalating climate change. Add to this, rising levels of social media commentary, an influx of social innovation, tech gadgets and apps, and we are bombarded with messages, both good and bad.
In this setting, we have also suffered job loss, insecurity, isolation, and the loss of loved ones, culminating in a global surge in mental health issues and a universal panic for “survival”.
These are the individual and collective crises we now experience. In this context, there is a growing call for businesses to help. But holding many businesses back is a lack of understanding on what is required.
Will a new and more “responsible” business strategy be the answer? Will shared value; integrated value; transformed value creation; a new type of corporate social responsibility (CSR) – or some other surrogate or alternative theme help?
Adding to the confusion is the increased use of different business labels and terms to succeed in these new environments. In addition, many of us refer to these various labels as being “replaced” by other terms, such as sustainability, ESG, corporate citizenship, CSR, shared value, integrated value, B-Corp, social entrepreneurship, and so on. But instead of one label being “replaced” by another, all these terms overlap and are complementary to each other.
Regardless of which model, strategy or term is selected by an individual or a business – there is a lack of understanding across society of what many of these new terms mean.
In this article I focus on the lack of understanding for shared value.
In my research, I’ve found business managers do not fully understand what shared value is. A simple give-away might be the comment, “Yes, we have shared values” (with an “s” on values).
Here they are referring to the fact they share the same values as their employees, customers and their community. However, “shared value” is not about sharing the same “values” with others. Instead, it’s a business model or methodology which consumes an organisation’s entire operations and shares the “value” gained through both monetary and social means.
An additional source of confusion to understanding shared value is that it is often referred to as creating shared value (CSV). Essentially, they mean the same thing, except the latter is the more formal term used in the academic literature. Both terms can therefore be used.
Another issue which may cause misunderstanding, is the ongoing debate between CSR and CSV. One concept is often referred to as a “development” of the other. There is also a belief that one can be integrated into the other. Currently, only a sprinkling of literature is available to examine both sides of the argument.
It is important to understand some of this debate, as corporate examples such as Intel were first referred to as CSR examples, and many CSV projects were initially developed through the company’s CSR department. Hence, there is much integration of terms, suggesting there is room for CSR and CSV to share the stage in solving wicked challenges in society, if both are incorporated correctly.
Put simply, shared value exists across the organisation’s products, profits, productivity, and supply chain, and within the communities where the organisation is located. Its founders, Michael Porter and Mark Kramer, define it as: “Policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates”.
The word “simultaneously” is key to understanding shared value. However, to fully pass the litmus test for a shared value example, three pillars must be present. The social project or initiative must:
- reconceive products and markets
- redeﬁne productivity in the value chain
- build supportive industry clusters at the company’s locations.
Understanding the intricate layers of shared value as a term or business model, is embodied in incorporating these three pillars.
A good example to understand the pillars in action is my favourite case study from a Korean and Vietnamese partnership.
CJ CheilJedang is a food production company requiring ongoing agricultural products. It partnered with Korea International Cooperation Agency (KOICA) to tackle endemic poverty in a region of Vietnam by integrating rural Vietnamese farmers into their supply chain.
To do this they developed a shared value strategy and partnership, improving their manufacturing and distribution while also enhancing the life and capabilities of local Vietnamese farmers. As a result, their province (Ninh Thuan) also became a successful and sustainable agricultural community, through increased wealth and the development of infrastructure, technology, and skills.
At the same time, CJ CheilJedang also beneﬁts from ongoing and high-quality raw food ingredients for their retail business.
Mapping these achievements on to the CSV framework and three pillars listed previously illustrates how this unique public-private collaboration developed:
- Redeﬁning productivity in the value chain – CJ CheilJedang provided the latest farming techniques and practices and redesigned the agricultural water system (infrastructure) in the province. Through technical assistance, model farms, and research facilities, local farmers receive timely information, and with an assured steady market, the farmers receive a fair price, improving the local environment and the company’s value chain.
- Improving the local operating environment – in addition to the above, many tactics were used to reinforce Vietnamese farming by increasing proﬁts and strengthening farmer’s skills. This also reinforced the capabilities of the community by supporting farmer unions, providing microcredit, and by renovating educational facilities and remodeling town facilities.
- Advancing partnerships and responsible business leadership – a global network of partnerships organised by CJ CheilJedang connects the company with KOICA, the Vietnamese Central Government, the Ninh Thuan Provincial Government, and Syngenta (a Swiss global agribusiness). These relationships also enhanced CJ CheilJedang’s business knowledge and integration.
Overall, understanding the concept of CSV is vital as: “… [it] includes a methodology (and business model) with the view to ‘scale up’ and therefore potentially assist at greater levels. The CSV framework is of great interest as it allows (businesses and) organisations, multinational corporations and enterprises to work toward the concept of addressing social problems. It can, however, also be quite daunting for companies who not only see so many opportunities but also face constraints as an organisation, especially where large-scale reinvention of their operations may be required”. (Taken from my book, CSR for Purpose, Shared Value and Deep Transformation: The New Responsibility)
This is where the three pillars framework is useful and where shared value projects combined with other existing strategies such as CSR and the organisation’s social projects, provide a head start toward CSV integration and the deep transformation required for planet survival.
To enhance greater understanding, universities need to empower their students, so the next generation understands shared value alongside “normal” business training. This then filters down to a more in-depth understanding of shared value, its impact on businesses and society, and how these types of projects can be intricately actioned.
Understanding shared value at a deeper level is therefore one of the first steps toward the new ecosystem transformation we need to urgently achieve. This combined knowledge, alongside the future of social responsibility, provides the vehicle required for businesses to seek greater equilibrium between profit and common good. This equilibrium is now the most important strategy for both our individual and collective “survival”.