The idea of Shared Value.

The Idea of Shared Value builds up on a management and organisational models where business itself is concevied as a complete tool for Creating Value towards all stakeholders.

The principle of Shared value (Porter, 2011) involves policies and operating practices that enhance competitiveness of a business while simultaneously advancing the economic and social conditions of the surrounding Society by addressing its needs and challenges.

It's a multidisciplinary and holistic approach which leverages businesses' sustainability, compliance and management practices in order to create real social innovation and, therefore, increase the value transferred to Society and the Environment.

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Specifically, Shared value creation focuses on identifying and expanding the connections between societal and economic progress. This concept is based on the premise that both economic and social progress must be addressed using value principles. Value is defined as benefits relative to costs, not just benefits alone. Value creation is an idea that has long been recognized in business, where profit is revenues earned from customers minus the costs incurred. However, businesses have rarely approached societal issues from a value perspective but have treated them as peripheral matters. This has obscured the connections between economic and social concerns.

In the social sector, thinking in value terms is even less usual.  Social organizations and government entities often see success solely in terms of achieved benefits or money expended. As governments and NGOs begin to think more in value terms, their interest in collaborating with business will inevitably grow.

Management scholars such as Porter & Kramert (2011) argue that shared value might have the power to unleash the next wave of global growth. An increasing number of  companies known for their hard-nosed approach to business have begun to embark on important initiatives within the principle of Shared Value. Actually shared value is just at the beginning of its real potential. Specifically, there are three key ways that companies can create Shared Value opportunities:

  • by redesigning products and markets
  • by redefining productivity in the value chain
  • by enabling local cluster development

Each of the above tasks is a relevant part of the virtuous circle which build on Shared Value; improving value in one area gives rise to opportunities in the others. Every firm should look at decisions and opportunities through the lens of Shared Value. This will lead to new approaches that generate greater innovation and growth for companies as well as greater benefits for the whole Society.

For example, the design and development of hi tech innovations has to be considered a way to satisfy societal needs. Furthermore, the way some business might be imagined by incorporating in their core the societal view, for example, business netwroks which aims to disseminate sustainaibility practices.

For further reference please see: Porter, M. E., & Kramer, M. R. (2011). The big idea: creating shared value. Harvard Business Review, 89(1), 2. link