Companies Scaling Solutions to Social Challenges Demonstrate the Power of a Unifying Idea
When Michael Porter and Mark Kramer published Creating Shared Value in 2011 in the Harvard Business Review, the concept struck an immediate and resonant chord with business leaders globally. Why? Recall that particular moment in time – trust in the private sector was at an all-time low on the heels of the 2008 global financial meltdown and an ever-expanding list of social and environmental issues seemed beyond the reach of governments driven by partisan divides. Ten years later, the narrative sounds familiar with issues like growing inequality, climate change, and access to medicine for underserved populations proving to be challenges that are too big for any one entity to solve alone.
Enter shared value – the idea that companies can help solve social problems at scale through their core business in ways that enhance competitiveness and deliver financial value to shareholders. For some companies who embraced this approach, such as Nestlé or Walmart, shared value wasn’t new, but helped provide a conceptual framework for efforts they had been pursuing for some time. For others, shared value presented an opportunity to fundamentally re-think their company’s engagement with society through their core business, rather than through bolt-on activities.
Enter shared value – the idea that companies can help solve social problems at scale through their core business in ways that enhance competitiveness and deliver financial value to shareholders.
The launch of the Shared Value Initiative has helped catalyze an ever-growing number of companies on the shared value journey and crowd-sourced a robust body of knowledge on how to effectively deliver shared value strategies.
As we look across the business landscape, we see four distinct trends capturing the attention of C-suite leaders who are increasingly called upon to lead solutions to the grand challenges the world faces.
1. Eyes on two prizes – delivering short-term results within a longer-term vision – The short-term pressures on companies to deliver quarterly results are often misaligned with society’s longer-term interests. Larry Fink’s extraordinary letter to CEOs in January 2018 is yet another indicator to companies that their success lies not only in delivering near-term financial performance, but also in sustained contribution to society, the latter of which generally does not happen in convenient 90 day increments.
One does not have to come at a cost to the other, however. In a study conducted by Harvard Business School professor George Serafeim, analysis of sustainability investments – classified as material and portfolio stock return regressions — showed that companies “making investments and improving their performance on environmental, social, and governance (ESG) issues exhibit better stock market performance and profitability in the future. For companies, this suggests that their efforts to do good are rewarded.” Those who ignore the opportunity to deepen their impact risk losing customers, talent, competitive advantage, license to operate, and now, investors.
Those who ignore the opportunity to deepen their impact risk losing customers, talent, competitive advantage, license to operate, and now, investors.
2. Moving from CEO activism to CEO action – We’ve recently witnessed unprecedented displays of CEO activism in the United States. From the business response to the proposed Muslim ban to the U.S.’s withdrawal from the Paris Climate Accord to the conversation about racial equity following the events in Charlottesville, it is evident that CEOs are keenly aware of the platform they have to influence conversation and action.
Take the topic of racial discrimination. Companies like PayPal, Cigna, and Prudential recognize that racial inequity is bad for business – it keeps people of color from participating fully as employees, consumers, and suppliers. They’re innovating around their core business products and practices to address racial inequity while creating a competitive edge for themselves. But there is a risk in this CEO activism and it relates to the gulf between what CEOs say and what actually happens within the company. In the future, the most successful CEOs will be deeply engaged in the pressing societal issues of our day in ways that are intertwined with how those issues affect the long-term success of their companies. In other words, they’ll do more than speak up when the news cycle demands it; they’ll develop new business models that uncover sources of profit linked to solving our society’s urgent problems.
In the future, the most successful CEOs will be deeply engaged in the pressing societal issues of our day in ways that are intertwined with how those issues affect the long-term success of their companies.
3. The battle for talent is heating up – These days it’s hard to miss articles about the future of work – whether it’s the gig economy or the debate about robots replacing humans, there’s no doubt that the nature of work is changing. We don’t yet know the full impact these technologies will have on the workforce, but what we do know is that companies need to look at ways to redefine the workplace experience for their employees, particularly for groups who have historically faced barriers to employment including people of color, women, and immigrants.
Companies like Walmart, Gap, and Hilton recognize that high turnover costs them billions of dollars each year. They’re getting ahead of that trend by innovating best practices in hiring, retention, and advancement in order to build a skilled workforce and remain competitive in the war for talent. The companies that break down the preconceived notions that prevent all qualified candidates from getting in their door will be rewarded with a more diverse workforce that delivers superior products, services, and profits.
4. In the end, deeper organizational transformation unlocks value – Finally, time and again, we observe the greatest success on shared value comes to companies that are aligning their commitments to social issues with the greatest impact on their future business. While this may seem self-evident, these companies find that the hard work of embedding shared value into planning processes, organizational design, corporate strategy formulation, and employee training, just to name a few dimensions, is the heavy lifting required for shared value success. When these changes are multiplied against countries of operation, lines of business, and so forth, the complexity becomes clear. However, these are the steps that ultimately hold the key to deliver the success companies are seeking within shared value.
On April 30 – May 2, 2018 the Shared Value Initiative will convene its eighth annual Shared Value Leadership Summit at the Conrad New York where speakers from Facebook, IBM, TIAA, and Bain Capital, to name a few, will gather to discuss the significance of the trends outlined above in the context of business-led solutions to the world’s most pressing problems. Learn more at www.sharedvalue.org/summit.