Creating Shared Value - Harvard Business Review

by Michael E. Porter and Mark R. Kramer

The capitalist system is under siege. In recent years business increasingly has been viewed as a major cause of social,environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broadercommunity.

Even worse, the more business has begun to embrace corporate responsibility, the more it has been blamed for society’sfailures. The legitimacy of business has fallen to levels not seen in recent history. This diminished trust in business leadspolitical leaders to set policies that undermine competitiveness and sap economic growth. Business is caught in a vicious circle.

A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creationthat has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financialperformance in a bubble while missing the most important customer needs and ignoring the broader influences thatdetermine their longer-term success. How else could companies overlook the well-being of their customers, the depletion ofnatural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell? How else could companies think that simply shifting activities to locations with ever lower wages was a sustainable “solution” to competitive challenges? Government and civil society have often exacerbated the problem by attempting to address social weaknesses at the expense of business. The presumed trade-offs between economic efficiencyand social progress have been institutionalized in decades of policy choices.

Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.

The solution lies in the principle of shared value, which involves creating economic value in a way that alsocreates value forsociety by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not onthe margin of what companies do but at the center. We believe that it can give rise to the next major transformation ofbusiness thinking.



New Sustainability Research by MIT Sloan Management Review and The Boston Consulting Group Reveals a Troubling Gap

New research by MIT Sloan Management Review and The Boston Consulting Group looks at companies that “walk the talk” in addressing significant sustainability concerns. So-called “Walkers” focus heavily on five fronts: sustainability strategy, business case, measurement, business model innovation and leadership commitment. For them, addressing significant sustainability issues has become a core strategic imperative and a way to mitigate threats and identify new opportunities.