Creating shared value

Creating shared value (CSV) is a business concept first introduced in Harvard Business
Review article Strategy & Society: The Link between Competitive Advantage and Corporate
Social Responsibility.[1] The concept was further expanded in the January 2011 follow-up piece
entitled "Creating Shared Value: Redefining Capitalism and the Role of the Corporation in
Society".[2] Written by Michael E. Porter, a leading authority on competitive strategy and head of
the Institute for Strategy and Competitiveness at Harvard Business School, and Mark R.
Kramer, Kennedy School at Harvard University and co-founder of FSG,[3] the article provides
insights and relevant examples of companies that have developed deep links between their
business strategies and corporate social responsibility (CSR). In 2012, Kramer and Porter, with
the help of the global not-for-profit advisory firm FSG,[3] founded the Shared Value Initiative to
enhance knowledge sharing and practice surrounding creating shared value, globally.
The central premise behind creating shared value is that the competitiveness of a company and
the health of the communities around it are mutually dependent. Recognizing and capitalizing on
these connections between societal and economic progress has the power to unleash the next
wave of global growth and to redefine capitalism.
Critics, on the other hand, argue that “Porter and Kramer basically tell the old story of economic
rationality as the one and only tool of smart management, with faith in innovation and growth,
and they celebrate a capitalism that now needs to adjust a little bit.” They regard the author's
arguments as a “one-trick pony approach” with little chance that an increasingly critical civil
society will buy into such a story.[4]

Mechanism[edit]
Companies can create shared value opportunities in three ways:

 Reconceiving products and markets – Companies can meet social needs while better
serving existing markets, accessing new ones, or lowering costs through innovation
 Redefining productivity in the value chain – Companies can improve the quality, quantity,
cost, and reliability of inputs and distribution while they simultaneously act as a steward for
essential natural resources and drive economic and social development
 Enabling local cluster development – Companies do not operate in isolation from their
surroundings. To compete and thrive, for example, they need reliable local suppliers, a
functioning infrastructure of roads and telecommunications, access to talent, and an effective
and predictable legal system
Many approaches to CSR put businesses against society, emphasizing the costs and limitations
of compliance with externally imposed social and environmental standards. CSV acknowledges
tradeoffs between short-term profitability and social or environmental goals, but focuses more on
the opportunities for competitive advantage from building a social value
proposition into corporate strategy.

Ecological accounting challenges[edit]

A significant challenge of CSV resides in accounting for ecological values and costs that are
generated within the realm of agricultural production. Up to 90% of the ecological footprint in food
processing can be attributed to land management activities outside the control of corporations.
An eco commerce model that accounts for ecosystem services at the production unit (farm) level
allows "shared value" to emanate from the production unit outward. Centering the shared value
at the farm level allows for utilities, biomass processors, food processors, environmental liability
insurers, landlords, and governments to participate in the shared value process.[5] This
ecocommerce shared value process accounts for and includes positive [environmental]
externalities within the economic system.
Comparison with corporate social responsibility[edit]
Corporate social responsibility (CSR) differs from Creating Shared Value, although they share
the same ground of "doing well by doing good".[6] Mark Kramer, the co-writer of Harvard Business
Review article on Creating Shared Value,[7] states in his "Creating Shared Value" blog that the
major difference is CSR is about responsibility, whereas CSV is about creating value.[8] Whether
it is an extended "new form of CSR" or "shared value", CSV is fundamentally different from the
CSR activities of the past.[9]
In a 2013 video for the Huffington Post World Economic Forum, Porter said shared value is a
logical progression from CSR because incomes are raised for everyone, not through charity and
by a being a “good corporate citizen,” but by “being a better capitalist – it’s a win-win.”
CSV is a transition and expansion from the concept of CSR. Business responsibility has evolved
from Traditional CSR 1.0 (Stages: Defensive, Charitable, Promotional and Strategic),
Transformative CSR 2.0 and to CSR 3.0 what is similar to CSV.[10] Such development of stages
by redefining CSR has laid theoretical foundations for companies and society to sustainably and
communally overcome societal issues. As capitalism matures, it is companies’ duties to break
itself out of the traditional CSR by realizing its limitations and try to restructure and pursue new
market strategies that value both economic and societal development.
CSV concept supersedes CSR for it is a way for corporations to sustain in the competitive
capitalistic market. Whereas CSR focuses on reputation with placing value in doing good by
societal pressure, it generates both economic and societal benefits relative to cost in real
competition of maximizing the profits. Instead of being pushed by external factors, CSV is
internally generated not confined to financial budget as CSR is. With the advent of CSV and
following strong worldwide advocacy for it, companies started to overthink about their vision for
their sustainable growth.[11]
Critics, however, argue that Porter & Kramer seem to have “a very particular and limited
understanding of CSR, one that neither reflects the academic debates of the past few decades
nor captures most of today’s CSR practices adequately. (…) Instead of dealing with a
contemporary understanding of CSR, corporate social responsibility seems to be used instead as
a straw man to rhetorically justify the authors’ contribution and its proclaimed originality.“[12]
Relational contracting and collaborative business models, including Vested outsourcing, have
incorporated Porter's and Kramer's shared value principles as the basis for implementing
collaborative relationships that creates, shares and expands value for parties in a business or
outsourcing relationship.[13]

Academic literature[edit]
Origins and development of shared value[edit]
A literature review was conducted into the important early work of 'shared value'. Researchers
found some literature focusing on the development of shared value by Porter and Kramer (2006)
with most work coming from few sources like the Monitor Group.[14]
More extensively the literature is from development organisations focusing on case studies into
the interrelated area of business ventures at the bottom of the pyramid or inclusive
business strategies/models.[15]
Outside these case studies, limited literature was found so the paper presented lessons learnt
from shared value and interrelated business models to show how they developed and business
strategies to engage with the bottom of the pyramid.[14]
the term “shared value” is found in Porter and Kramer (2006), “Strategy and society: the link
between competitive advantage and corporate social responsibility” and was a development by
Porter of previous thinking on business strategy.[14]
From the Corporate Social Responsibility perspective, they observed companies could have
worked harder reflecting flaws in CSR that business is pitted against society rather recognising
their interdependence; and second, CSR is viewed in a generic sense rather than strategically.[14]
To boost innovation and competitive advantage they say companies need to make CSR part of
their core business strategy and researchers saw this as development of Porter's 1985
‘Competitive Advantage’ work where firms’ activities were redefined through their value chains to
boost competitive advantage through cost improvements or differentiation.[14]
They argue shared value can do both contrasts with Milton Friedman’s view that the social
responsibility of business is to increase its profits.[14]
Social value activities can overlap with traditional CSR. Efforts to promote sustainability through
CSR may cut costs for the company and boost profitability, CSR and core business processes
can become indistinguishable from one another, moving to what the authors’ term “corporate
social integration. By drawing attention to the way society impinges on business (rather than only
business on society) it provides justification for solving society’s problems as a core business
strategy.[14]
Porter and Kramer (2002) “The Competitive Advantage of Corporate Philanthropy”, seeks to
address the tension of addressing the demand for greater levels of CSR with the demand for
short term profits focusing on how a society's ‘competitive context’ impacts business arguing it is
possible to see long term economic and social goals as connected.[14]
Creating shared value[edit]
The researchers found Shared value has not greatly progressed, with subsequent literature
focused on the types of models and activities that businesses are undertaking to create shared
value (create shared value).[14]
They claim a slight development was Porter and Kramer's 2011 attempt to broaden the concept
of shared value beyond the arena of corporate social responsibility with a greater focus on the
nature of capitalism and markets, noting dislocations with current capitalism, emphasising the
inherent social nature of markets, and suggesting that by adopting shared value principles
business and society will be reconnected creating new innovation and socially imbued
capitalism.[14]
Whilst it can be argued that capitalism would certainly change if businesses on mass re-
orientated their core frameworks to focus on shared value there is little analysis on how this
would occur. The authors themselves recognise this.[14]
Porter and Kramer identify GE, Google, IBM and Unilever as having adopted shared value
principles but note that, “our recognition of the transformative power of shared value is still in its
genesis.” and argue that addressing social constraints does not necessarily raise internal costs
for firms. Through innovation in new technologies, operating methods, and management
approaches a firm can improve society while increasing their productivity and profitability.[14]
To create shared value companies should:-

 Reconceive products and markets to provide appropriate services and meet unmet needs.
For example, the provision of low-cost cell phones developed new market opportunities as
well as new services for the poor.
 Redefine productivity in the value chain to mitigate risks and boost productivity. For example,
in reducing excess packing in product distribution reducing cost and environmental
degradation.
 Enable local cluster development by improving the external framework that supports the
company's operations, for example by developing the skills of suppliers.[14]
The business perspective[edit]
The researchers found little evidence of an overall business perspective on the shared value
framework, not surprising given the relatively newness of the concept as firms may have been
pursuing shared value practices without it being realised as such, especially outside of the US
and it was not clear how to measure if a business is pursuing shared value as opposed to
overlapping areas of CSR or philanthropic activities. Counterfactuals of non SV approaches in
case studies were not offered and tools and strategies to integrate, operationalise and measure
shared value are only now being developed.[14]
They found authors that have promoted shared value provide case studies from US based
Multinational Corporations (MNCs) that are explicitly pursuing shared value principles and that
resource flows could be significant as GE are investing $6bn to improve health-care access
through there ‘Healthymagination’ programme. They found little analysis as to how much this
represents of total GE investment or how shared value investment in a sector compares with
nonshared value- investment.[14]
The researchers claim Multi National Corporation motivations are mixed with some highlighting
climate change and others a desire for employees to have better links with local communities.
They found little documentation outside success stories of influence elsewhere. Porter noted in,
“Measuring shared value; how to unlock value by linking social and Business Results” that
without clear evidence of the impact of the shared value proposition (and tools to measure it) it
will be difficult to attract investors.[14]
The researchers propose that shared value may have added to the wider discourse that views
the private sector as key for development and profitable business models as consistent with
enhancing social impact but make clear that they don't mean that shared value directly
influenced the more established interest in inclusive business, with few of the initial inclusive
business papers discussing shared value concepts in any detail. They say a more direct
influence, consistent with moves in inclusive business, is companies pursuing shared value
developed new types of relationships with other organisations like NGOs.[14]
Shared value and the bottom of the pyramid[edit]
Much focus has been on the application of shared value at the bottom of the pyramid reflecting
both greater social needs among this group and the new markets they offer.[14]
The researchers mention Porter and Kramers example of Hindustan Unilever's innovation in
hygiene products distribution, using smaller package sizes, creating new business opportunities
and appropriate products for the poor, a classic the bottom of the pyramid model. They also
mention Prahalad and Harts “The Fortune at the Bottom of the Pyramid” paper which sets out
how attractive the bottom of the pyramid is for MNCs with commercial and social opportunities
through mutual value creation by reorientating their core business to provide products for these
consumers.[14]
The researchers claim this thesis challenged assumptions that business success and creating
social value was not possible at the lower end of the market.[14]
Inclusive business models[edit]
Direct links between shared value and the bottom of the pyramid were further brought together in
a 2007 conference titled “The role of the private sector in expanding economic opportunity
through collaborative action” hosted by Harvard CSR Initiative, FSG Social Impact Advisors, and
the IFC focusing on how companies could improve livelihoods of the bottom of the pyramid
through both new services and new markets.[14]
Two complementary frameworks companies were using promoting shared value were examined
by the researchers:

 "inclusive business models" which aim to directly involve the poor in their value chains
 "complementary strategies" that aim to enhance the overall environment for such models to
flourish, for example by shaping public policy or up-skilling workers.[14]
The researchers used the 2008 UNDP definition “create value by providing products and
services to or sourcing from the poor, including the earned income strategies of non-
governmental organisations” to describe‘Inclusive business models’ as an umbrella term for a
range of models.[14]
They show the UNDP paper (2008) “Creating Value for All: Strategies for Doing Business with
the Poor” which examines over 50 inclusive business ventures and the partnership between
World Business Council for Sustainable Development (WBCSD) and SNV (2008) which
developed the concept in Latin America, captured in, “Inclusive Business - profitable business for
successful development.”[14]
They found whilst inclusive business is closely related to shared value in that both highlight
profits motives as being compatible with “doing good”, its origins are less centred in CSR
strategies, and that Caroline Ashley in her 2009 paper that as the shared value concept moved
CSR to be more grounded in business strategy and inclusive business moved sustainable
business terminology towards a more profit and less ethical framework.[14]
Within inclusive business there is also less of a focus on gaining competitive advantage through
social impact (although that is still one of the potential benefits) with the overriding feature that
marries profit with development impact. Inclusive business models can be found in a wide variety
of companies, while shared value literature has so tended to be focused on MNCs, and as noted
in relation to Hindustan Unilever, a number of business models could be described as consistent
with shared value and inclusive business.[14]
Application of Inclusive business models[edit]
The landscape of inclusive business[edit]
This section provides an insight into both practical development and the types of business
strategies being pursued. The researchers of the literature review into shared value found no
single framework for shared value or inclusive business models. They found Davis commenting
in 2012[16] about how the corporate sector is highly non-uniform and Caroline Ashley's 2009
paper, “Harnessing core business for development impact”[17] illustrating four inclusive business
models with different value propositions and the variation in size of inclusive business models.[14]
• Group A consists of commercial businesses that sell products needed by the poor which
possess a high development impact such as financial services. • Group B are companies that
impact the poor in the normal course of their activities but take deliberate action to expand and
improve this impact, for example, mining companies that improve their local value chains. •
Group C captures SMEs that are embedded in the local economy and therefore dependent on its
development. • Group D companies are enterprises that focus on a social product but with a
commercial model of delivery.
The researchers found that while much of the literature on shared value concentrates on MNCs,
the focus in developing countries is on a range of different company types.[14]
Applying inclusive business models to the bottom of the pyramid[edit]
The researchers identified a number of constraints for companies attempting to create shared
value. They found the IFC[18] presenting the results of a survey analysing the obstacles to
companies wishing to incorporate inclusive business models in their value chains. Around 90% of
the 167 applicants identified access to finance as one of the main obstacles to their business.[14]
They found other major obstacles included poor infrastructure and lack of qualified labour with
the UNDP[19] also identifying further obstacles including a hard-to-reach customer base, suppliers
with limited capabilities, limited market information and inadequate regulation.[14]
As inclusive business model products are often entering new markets they tend to be push
based requiring high levels of awareness-building and education, unlike pull categories that
customers already desire, like low cost cell phones[20]
They found Lucci's 2012 paper “Post-2015 Millennium Development Goals: What role for
business?”[21] identifying two dominant core business models pursued at the bottom of the
pyramid: “harnessing innovation capacity” and “leveraging supply chains and the production
process.”[14]
The first can in part be viewed as the earlier framework of inclusive business models, which
aimed to target low-income consumers through product innovation, such as the example
mentioned above of Unilever Hindustan marketing products in more appropriate
packaging[22][23] which relied on a high return of capital employed, often through shared access
services, and a low cost, high volume strategy.[14]
In contrast, they found a recent business review paper by Simanis[24] who argued there was a
flaw in this low-price, low-margin, high-volume strategy that MNCs have adopted and only works
if two characteristics exist: the ability to leverage existing infrastructure that already serves
wealthier customers; and consumers already know how to buy and use the product offering.
They found Simanis theorised these characteristics were often missing with him concluding that
“because the high costs of doing business among the very poor demand a high contribution per
transaction, companies must embrace the reality that high margins aren’t just a top-of-the-
pyramid phenomenon; they’re also a necessity for ensuring sustainable businesses at the bottom
of the pyramid.”[14]
Simanis's three solutions for generating higher values are

 a localised base product with final processing prior to sale as close to the target market as
possible, saving on labour costs;
 offering an enabling service to improve the value of the service offered;
 and to cultivate customer peer groups to drive up aggregate demand.
These received criticism in Karnani's 2007 paper[25] which suggests that costs to serve the poor
are still too high and the bottom of the pyramid will not be reached. The researchers found
consistencies with an IFC report that a number of its successful models were ‘whole pyramid’
models, with the ‘bottom of the pyramid’ segments part of a broader market, allowing companies
to leverage existing infrastructure, achieve economies of scale, cross subsidise and manage
risk.[14]
Karnani (2007)[25] also argued that as the poor often make choices that are not in their own self-
interest like the use of whitening cream in developing countries, consumer-led models that
develop new product options may be inappropriate with much of the current discussion around
consumer protection and over-indebtedness in microfinance[26] Karnanis paper also criticises the
focus on MNCs in exploiting opportunities at the bottom of the pyramid given the greater
development impact that SMEs could potentially have and he argues that inclusive business
models frameworks should see the poor primarily as producers rather than as consumers.[14]
London et al.[27] analysed the specific constraints producers face: on value creation that relate to
a producer's ability to access affordable and high-quality raw material, financial, and production
resources; and on value capture that relate to a producer's ability to access the marketplace,
assert market power, and obtain secure and consistent transactions.[14]
The researchers thought London et al.’s focus on producers similar to the broader development
of inclusive business models incorporated by UNDP (2008)[19] and in Porter and Kramer[28] with a
greater focus on value chain development as opposed to product innovation. Lucci’ [21] second
major category and she provides the example of SABMiller encouraging the local production of
sorghum in Uganda to replace more expensive imports of barley, developing local production
alongside more affordable raw materials for their breweries.[14]
Within these broad categories there are a huge range of specific models that companies have
adopted. An IFC publication[29] identifies a range of model types which include:-

 “micro distribution and retail” which leverages existing retail outlets in neighbourhoods where
consumers make small, frequent purchases locally, like telecommunication companies
selling airtime;
 “experience-based customer credit” provided by non-financial firms mostly to their own
employees, providing access to finance and to the provider companies.
 “last-mile grid utilities” through a combination of financing, technology and management
innovations, mitigate normal constraints extend grid coverage to more distant and often
lower-income neighbourhoods;
 “smallholder procurement” value chain upgrades through aggregation methods;
 “value for money housing” through a combination of facilitating mortgage financial and new
housing products which are appropriate to the poor including support services, such as
understanding training in the mortgage process; and
 “e-transaction platforms” which can bring a range of new services (and therefore new
markets) more conveniently and securely to the poor.”[14]
Inclusive business (and shared value) ecosystems[edit]
The researchers wrote that an emerging development in these models consistent across
the inclusive business and shared value literature is the types of partnerships that they may
involve between companies and other actors.[14]
They found companies need often to enter into broader partnerships to leverage local knowledge
or scale up interventions. Lucci[21] highlights two examples of this:

 the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) where governments and
donors commit to investing in infrastructure to incentivise agricultural business
 longer term platforms that seek to recreate market mechanisms in research and
development, such as work by the GAVI Alliance in health vaccines.[14]
They found Davis[16] arguing that the state and corporate sector need a “genuinely symbiotic
relationship” which recognises the potential developmental activity that companies undertake as
core operations, noting however that this rarely exists.[14]
An emerging development that builds on this is captured in a joint collaboration between the IFC
and Harvard's CSR Initiative “Tackling Barriers to Scale: From Inclusive Business Models to
Inclusive Business Ecosystems”[30] who suggest that despite some successes, given the levels of
investment, inclusive business models record is limited and there are systemic barriers to scale
that can only be tackled in collaboration with other players in the private sector, in government
and in civil society.[14]
This can be achieved by strengthening ‘inclusive business ecosystems’ through “strategically
engaging the networks of interconnected, interdependent players whose actions determine
whether or not their inclusive business models will succeed.” This move of focus away from the
firm level, similar to market development approaches, such as Making Markets Work for the
Poor (M4P).[14]
They conclude the initial stage of the research by identifying that a number of strategies
companies have used to strengthen these eco-systems including the bottom of the pyramid
awareness-raising and capacity building within the company, research, information-sharing and
public policy dialogue.[14]
Lessons learned[edit]
Measurement and impact[edit]
Researchers found little rigorous analysis into the impact of shared value mechanisms, with the
majority of evidence existing as standalone case studies of mixed analytical rigour. As
documented above, many of these are highly positive stories combining evidence of increased
revenue growth with first hand stories of social impact and found it was difficult to find a
comprehensive and rigorous study into their overall impact.[31] says that feel-good stories aside,
it's been nearly impossible to gauge the success of these ventures.” And this further complicated
in relation to inclusive business models by the variety of business cases for companies operating
at the bottom of the pyramid[14][32]
They found London[31] also arguing that the predominant focus in terms of social impact is on
income, missing wider social dimensions and ignoring potential negatives like undesirable
products becoming more accessible and proposed this as less of the case for inclusive business
models, often supported by development agencies that have more experience with the wider
dynamics of social impact at the bottom of the pyramid. All current measurement models suffer
from standard impact challenges, with the emphasis on tasks completed or products distributed
rather than outcomes.[14]
They say there is little attempt to fully attribute a company's impact through the use of
counterfactuals and recommend Wach[33] for a description of current methods used.[14]
Establishing attribution to a specific company's intervention is made more difficult given the
growing emphasis on partnerships that the bottom of the pyramid approaches entail. As the
researchers commentary shows, most of the impact discussion to date has been focused on the
contribution of companies to enhancing development.[14]
They call for future research to go a step further and attempt to establish the linkages between
pursuing core business model and the subsequent impact on both business and social indicators
for example, compared to a counterfactual of a non-core business approach.[14]
Porter et al.[34] discuss the problems of current measurement tools that measure business and
social impact separately and provides guidance in how to link social benefit to core indicators.[14]
Successful strategies[edit]
Notwithstanding the limitations in the evidence base there have been a number of reports that
have sought to capture and synthesise lessons from successful shared value and inclusive
business ventures. In an extensive report looking into various aspects of inclusive business
models,[35] Gradl and Knobloch document a range of benefits for business, in particular access to
new markets, in terms of access to new consumers and producers and through the potential for
cheaper and higher quality production based on growth-intensive sales and the development of
new products.[14]
They found that enhanced reputation may also lead to enhanced partnerships from customers,
suppliers and governments UNDP.[19] An IFC report into the impact of their portfolio of inclusive
business models,[36] found that revenue growth had been the main business outcome for
business, whereas development outcomes included expanded economic opportunities for
suppliers, distributors and retailers and access to goods and services[14][36]
They found factors which led to successful models included, adaption of products and processes
that leveraged networks and to reach significant numbers of low-income consumers; models
designed to be appropriate with low-income groups’ cash management strategies, also
leveraging social networks of the poor; capacity building of suppliers, distributors and retailers
and collaborations with other organisations (NGOs, development organisation, social
enterprises) to leverage knowledge and infrastructure. UNDP (2008) also highlight that business
have had to remove market constraints that would more normally be the province of government,
for example by investing in education, energy supply and infrastructure. This is consistent with
Porter and Kramer (2006) view on competitive context.[14]
They found Hills, et al.[37] mention a number of external conditions were also identified that
successful shared value companies had been able to leverage, including governments'
openness to private sector participation in socio-economic development and/or the availability of
external funding.[14]

 Indian government support of ICICI Lombard's weather-based insurance and microfinance

providers (through priority lending mechanisms),
 DFID's support of Vodafone in developing M-PESA.
Strong partners are also important, either through civil society organisations that provide insights
into local needs or other companies that share similar philosophies, for example distributors who
may also need to adapt their business model. The level of penetration in ICT can significantly
lower transactions costs and link informal economies to more established markets.[14]
They found Hills et al.[37] identify two key areas that are essential for successful create shared
value companies, “intentionality” and “materiality.” Intentionality requires a company or business
unit to set specific goals for intended social and financial benefits with clear guidelines that can
guide resource allocation decisions along the way and recommend looking at Gradl and
Jenkins[30] A number of company factors are identified that help successful implementation, these
include: a culture of innovation that allows experimentation, together with a long term outlook;
senior management embracing shared value principles; cross department buy in; and strong
local buy in at a local level like affiliates in developing countries. They also stress the importance
of building local knowledge through developing local structures and/or strong local partners and
employing multidisciplinary teams that are open to new ideas[14][29][35]
The concluded by saying that materiality is important as it incentivises management to support
CVS. It represents the extent to which creating shared value is central to the financial
performance of a business unit or company and as materiality grows strategies are likely to be
scaled up.[14][37]

Shared Value Initiative[edit]

The Shared Value Initiative (SVI)[38] was created in the fall of 2012 with a commitment to action at
the Clinton Global Initiative.[39] The SVI serves as a global knowledge and learning hub for
companies and other stakeholders in SV strategies of practice. The establishment of the SVI
capitalizes on global momentum surrounding Shared Value by driving new adoption of SV
strategies amongst companies while also improving the implementation of SV strategies that
have already been put into practice. The SVI engages in four major activities – deepening and
documenting knowledge, creating toolkits for implementation, building communities of practice
via both physical and virtual engagement opportunities, and serving as a general steward of the
concept of Share Value. The founders of SVI have committed to developing the following
capacities within the first two years of the initiative: developing and interactive communications
platform, developing shared value content and events, and conducting outreach to a wide range
of stakeholders by identifying and developing outreach plans for stakeholders critical to shared
value adoption and implementation.[39]
The SVI is managed and staffed by the global social impact consulting firm FSG.[39][40] Current SVI
programs include shared value executive education, an affiliate program that trains consulting
firms on the implementation of SV strategies, an online community portal, and a variety of shared
value resources.[41] The SVI also hosts the Global Shared Value Summit, an annual three-day
gathering of over 200 leaders from the business, public, and not-for-profit sectors citation.[42]

Further examples[edit]
General Electric's Ecomagination[edit]
We did it from a business standpoint from Day 1. It was never about corporate social
responsibility.

— Jeffrey R. Immelt, CEO of General Electric.

General Electric’s redirection of its business plan to "Ecomagination" program in 2005 was a
result of the societal and governmental push for reduction in electrical and fuel costs and in
carbon emissions.[43] With the help of environmental consulting firm, GreenOrder, GE managed to
modify its products to be more eco-friendly and energy saving. Its sales reached $18 billion in
2009 and is predicted to grow twice as fast as overall company revenues over the next five
years.[44]
Dow AgroSciences[edit]
Dow AgroSciences, a wholly owned subsidiary of the Dow Chemical Company, developed a line
of Omega-9 rich canola and sunflower oils, with zero trans fats and the lowest levels of saturated
fats. Since 2005 Omega-9 Oils have eliminated nearly a billion pounds of trans fat and 250
million pounds of saturated fat from North American foods.
Nestlé[edit]
Companies can also improve the competitive context in which they operate by investing in their
communities. Nestlé, for example, worked closely with the farmers of the Moga Milk
District in India, investing in local infrastructure and transferring world-class technology to build a
competitive milk supply chain that simultaneously generated social benefits through improved
health care, better education, and economic development.
Criticism[edit]
The CSV concept has busted out from 2002 and in this article,[45] they hinted the application of
Porter's diamond mode.[46] Despite CSV theory is related to the diamond mode which has four
endogenous variables, Porter and Kramer (2011) presented three distinctive steps to CSV; (1)
reconceiving products and markets, (2) redefining productivity in the value chain, and (3)
enabling local cluster development. By applying the diamond model, Moon, Parc, Yim, and Park
(2011) added one more step, i.e., a step to define core competence.[47] Furthermore, Moon, Parc,
Yim, and Park (2011) incorporated internationalization, which Porter's diamond model
missed,[48] and extended Porter and Kramer's (2011) three distinctive steps; (1) defining core
competence, (2) redefining productivity in the value chain, (3) reconceiving comprehensive
targets, and (4) enabling local or global cluster development.
The Economist referred to CSV as 'undercooked' without much empirical evidence. Noting that
CSV's efforts to get corporations to look beyond the bottom line are not new. Also pointed out, is
the "striking similarity between shared value and Jed Emerson's concept of blended value".
Finally, The Economist questions whether CSV is "merely a pious hope" without any tangible
improvement on the current way of doing business. A common criticism of CSV is the downplay
of trade offs that businesses have to make.[49]
However, by tracing a historical evolution, Moon and Parc (2019) argue that (1) responsive CSR
of Porter and Kramer (2006) and traditional CSR defined by Porter and Kramer (2011) are
identical while strategic CSR of Porter and Kramer (2006) and CSV developed by Porter and
Kramer (2011) are similar when compared; (2) the CSV concept has been developed through
Porter and Kramer (1999, 2002), hence Porter and Kramer initiated this CSV concept earlier than
Jed Emerson and Stuart Hart; (3) precedent literature already have similar ideas of CSV as
Crane et al. (2014) emphasized;[50] finally, (4) CSV is a process to reach corporate social
opportunity (CSO) from CSR.[51]

Embedded sustainability – the next big

competitive advantage?
A growing number of companies talk about embedded
sustainability but what are they doing about it?

The above headline, albeit without the question mark, is the title of a new book
by Chris Laszlo and Nadya Zhexembaveva and it is provocative and compelling
by any corporate sustainability junkie's standard.

The book argues that the incorporation of environmental, health and social
values into core business activities (with no trade-offs in price or quality) is the
answer for enduring profit and growth. And one might cite communications
from Marks & Spencer, Unilever and the like as moving in this direction.

Intuitively, embedded sustainability makes a lot of sense. It's likely to mean

that organisations have a more decentralised handle on efficiency in its
broadest sense, an in-depth awareness of environmental and social trends and
related risks and opportunities, and may even lead to innovation and
experimentation that encompass more bottom-line benefits. Moreover,
embedded sustainability offers employees and stakeholders new opportunities
to find meaning in organisational life.

This is all well and good but one might then ask what is the process for
"embedding" itself? What does it take to get from A to B? How do we know
when the time is the right, and that we have the right resources, capabilities
and permissions (implicit and explicit) to make a go of it?

To help answer the timing/readiness question, I spoke with an experienced

sustainability professional in one of the big four. She reflected that over the
last 10 years we have seen large organisations do one of two things in this area.
"On the one hand we have seen organisations take a formulaic approach to the
concept, whereby they have applied similar approaches year on year, with little
changing, a bit like applying a quality standard. For these organisations the
overall benefits have been incremental, and proving the business case a
constant challenge.

"On the other hand we have seen organisations that have used the challenges
presented by sustainability to look at themselves in new ways and to refresh
and even reposition or repurpose themselves. It is the second group that is
now beginning to communicate outwardly what they are confident they are
capable of, often seeking forgiveness rather than permission and really
stretching their targets."

In late 2010, the Ashridge Centre for Business and Sustainability began
further research into this area. It began with a desk-based review of 170
organisational sustainability reports, including those compiled by the FTSE
100 companies, to see what they were saying about this issue. Perhaps
surprisingly, about 60% of the reports surveyed do have statements
proclaiming to have embedded sustainability in one way or another although
many of these statements are not supported with examples, detail or KPIs.

Organisations were ranked by the number of times statements around

embedding or integrating were used in the reports, including stock phrases
such as "it's in everything we do" or "it's in our DNA". We were also interested
in those that had set a date after which the sustainability department would no
longer exist such as Ericsson UK as we suggest that this is a key indicator of
either embeddedness or irrelevance.

From this first phase, the top five organisations based on self-declared
information are as follows:

E.ON AG – 13 statements (2009 report)

Experian plc – 11 statements (2010 report)

HSBC Holdings – 11 statements (2009 report)

M&S – 11 statements (2010 report)

United Utilities – 11 statements (2010 report)

While we know that rankings are an effective way to begin a dialogue on an

issue, this research is intentionally appreciative and we are really interested to
find out what works and to disseminate and share this information as widely
as possible. Therefore the second phase of the research consists of interviews
with organisations focused on a "pocket of brilliance" approach whereby we
take one example of where integrating a particular facet of sustainability went
well and unpick all the conditions, approaches and theories that led to its
success. The resulting case studies will be shared among all the contributing
organisations as part of a further sense-making exercise.

We have 15 organisations taking part in this phase and the first set of
interviews has already led to some fascinating insights into what works and
when. We believe this information will become a key resource for all corporate
sustainability change agents wishing to increase their chances of their own
success and their ability to partner strategically.

We still have places for five more organisations to take part, so if your
organisation is doing something particularly innovative or successful when it
comes to integrating sustainability more broadly into organisational life,
please contact me at the Ashridge Centre for Business and Sustainability.

Nicolas Ceasar is head of sustainability practice at

Ashridge, Nicolas.ceasar@ashridge.org.uk

FAQ: Sustainability and

Shared Value
Q: Is ‘shared value’ the same as ‘sustainability’?
A: No. Although the terms are often used loosely together, and generally share the
same intended outcome (a more equitable society living within ecological boundaries)
they differ in scope and application.
 Shared value is overtly about business strategy and the decisions that companies take in
pursuit of profit. It refers to a particular kind of business strategy – one that that delivers
competitive advantage by addressing societal challenges. It works explicitly within the
business framework, seeking to engage business in addressing societal challenges.
  Sustainability, while admittedly meaning different things to different people, takes a
broader perspective. It highlights the need for transformative, systemic change, informed
ultimately by a values-based lens. As John Elkington has put it: “If Shared Value is
essentially about creating new types of win-win outcomes, then sustainability—in
addition—is about identifying and handling the inevitable win-lose and lose-lose
outcomes that will cascade from the… grand challenges that the global economy will face
in coming decades.”
Shared value is unapologetic in framing the response to societal challenges through the
‘win-win’ lens of business. While recognising the need for broader system change,
shared value proponents recognise that achieving such change will take more than
business alone. But by framing societal challenges in the language of business, we are
more likely to have greater business engagement, tapping into their capacity for
innovation and their influence to create a positive impact, both for their own businesses
and for society.

Mark Kramer neatly sums up the difference between the two concepts: “Although less
visionary (than the sustainability agenda), shared value is perhaps easier to put into
practice – a limitation that has its virtues.”

Q. What is a corporate ‘sustainability strategy’?

A. Many organisations profess to having a sustainability strategy. In practice, few of
these strategies focus explicitly on ensuring that an organisation endures into the future,
and even fewer sufficiently address the systemic issues that underpin our currently
unsustainable growth path. Most sustainability strategies tend to focus on managing risk
and optimising the value delivered to society within the current business model. Typically
the strategy is used as means of protecting the current business model, rather than
promoting broader business model innovation.

Q. What is a ‘shared value strategy’?

A. Shared value is a business strategy that creates an improved profit formula or new
market opportunity by addressing societal challenges (such as unemployment, climate
change, inequality or resource scarcity). The strategy is usually activated through
selected business units or product lines that put into operation one or more shared value
initiatives. An example of this is Nestle’s drive to be the leading Nutrition, Health and
Wellness company, which it seeks to achieve through a range of initiatives such as its
launch of micronutrient-fortified foods in markets with high levels of nutrition deficiency.
Similarly, GE’s decade-old ecomagination initiatives seek to drive product innovation as
means of addressing societal challenges around resource efficiency and pollution.
Ecomagination grew at twice the rate of GE’s other business units, indicating that the
strategy was timely and well positioned. In each case, the strategy is geared directly to
market growth or penetration, as well as delivering positive societal impact.

Q. What are shared value initiatives?

A. Shared value initiatives are innovations that deliver measurable social and financial
value, at scale, as part of the company’s business proposition. According to Porter and
Kramer in their seminal HBR article on the subject, Shared value initiatives deliver value
by redefining productivity across the value chain, reconceiving products and markets, or
creating enabling local environments. Examples include:
  Global brewer SAB Miller, redefining productivity through inclusive supply chains and
local sourcing;
 Kenyan mobile phone company Safaricom, developing new products (such as M-PESA)
that target low-income customers traditionally excluded from the formal market system;
and
 Norwegian fertilizer company Yara, creating an enabling local environment by
establishing agricultural growth corridors in Southeast Africa.

Q. Can shared value initiatives form part of a company’s sustainability strategy?

A. Yes. Sustainability cuts across business silos to highlight any initiative that delivers
value to society. A sustainability strategy might include:
 Corporate social investment (CSI) initiatives that respond to social needs through
philanthropic contributions;
 Environmental, social and governance (ESG) initiatives that typically seek to work within
the company’s existing business model, promoting efficiencies and managing risks; and
 Shared value (SV) initiatives that deliver measurable social and financial value, at scale.
This is not to suggest that the sustainability team is responsible for all these initiatives: it
simply means that they contribute to the organisation’s social value proposition.

Q. What is a shared value enterprise?

A. Where the entire business model is geared to deliver shared value, the organisation
may be called a shared value enterprise. Arguably, Discovery and Unilever are examples
of relatively few peer-recognised shared value enterprises. As shared value strategies
prove themselves in the market, we would expect to see more shared value enterprises
positioning as market leaders in their sector.

Q. Can sustainability be integrated into the business strategy instead of being a

separate strategy?
A. In theory, this is possible and most organisations already claim to do this. In practice,
societal issues tend to be sidelined in a business strategy because we live (and
compete) in a business world that is illogical; it tends to reward behaviour that is
ultimately self-defeating:
 Shareholder returns are prioritised over everything else;
 We do not sufficiently value the natural and human resources on which these returns
depend; and
 Our discount rate is too high: we value the short-term more than the future.
Companies develop separate sustainability strategies to highlight these challenges
associated with business strategies and to counteract the persistent trends associated
with them.
Embedded vs Bolt-on Sustainability
Incorporating environmental, health, and social value into core business activities

Nadya Zhexembayeva, the Coca-cola Professor of Sustainable Development at

IEDC-Bled School of Management examines the opportunity for embedding and
not bolting-on sustainable change.
In recent years, three big sustainability trends – declining resources, radical
transparency, and increasing expectations – have redefined the way we do
business. We are running out of resources (and the erratic prices for everything
from oil to tomatoes are just a testament to that decline), we are facing new
demands from customers, investors, and governments alike, and we have to figure
it all out while being under the microscope of NGOs, media, and society at large.
With these new pressures on our hands, what is business to do?
In response to these mounting pressures, the overwhelming majority of managers
continue with the familiar approaches to sustainability in business, treating the new
social and environmental demands as annoying obligations to be addressed by a
random corporate social responsibility program. Then there are some that now
recognize social and environmental performance as business opportunity, most
continue to “bolt it on” to existing strategy and operations. Remember all those
solar panels and two-sided copying promoted at the office headquarters of a dirty
manufacturing business? Way too often we just keep bolting it on!
Only a handful are choosing to embed sustainability into the very DNA of what
they do, incorporating environmental, health, and social value into core business
activities with no trade-offs in price or quality. The Nissan Leaf, a 100% electric
car named World Car of the Year 2011, offers features at a price found in most
gasoline powered cars. Combined with the emerging infrastructure to recharge
electric cars, Nissan's multi-billion euro investment is driven by the quest for
industry leadership, not selling eco-cars to environmentalists.
Unlike the omnipresent bolt-on approaches, embedded sustainability requires a
fundamental shift across every dimension of the business system.
Leading companies such as Unilever, General Electric, Clorox, HSBC and many
others are learning to leverage global challenges, such as climate stability, for
enduring profit and growth. The key to making it work is innovation – in product
designs, processes and business models – enabling these companies to create even
more value for their customers and investors than they otherwise would.
Let me put it in a different way. We know how to meet the demands of shareholder
value – years of managerial excellence testify to this achievement. We know how
to create stakeholder value: traditional approaches such as CSR and philanthropy
that predictably lead to added costs. We also have a growing number of bolt-on
sustainability efforts producing fragmentary and symbolic wins at the fringes of the
company.
What we are still discovering is how to meet both shareholder and stakeholder
requirements in the core business – without mediocrity and without compromise –
creating value for the company that cannot be disentangled from the value it
creates for society and the environment. When that is done, your company
becomes untouchable – as such competitive advantage is nearly impossible to
imitate. Embedded sustainability offers you a path towards this advantage, the one
that will only grow as today’s global challenges continue to deepen.

How to Move From "Bolt-On" to

Embedded Sustainability
Switching over to recycled paper, adding solar panels to the roof or increasing
philanthropy are all a good start for a company jumping in to the sustainability pool,
but they are not going to generate actual progress on climate change or other global
issues.

The "bolt-on" just doesn't cut it as a sustainability strategy anymore.

Chris Laszlo, author of Embedded Sustainability: The Next Big Competitive

Advantage (along with Nadya Zhexembayeva), shared a few examples of companies
that are doing a great job on embedded sustainability and those that still have work
to do in his presentation at Sustainable Brands 11. Laszlo compared Chrysler, which
has chosen to make incremental MPG improvements to Nissan with its big hairy
audacious goal of an all-electric car. Which one do you perceive to be more
sustainable? Which one are you likely to buy stock in? Nissan is demonstrating
innovation and leadership in sustainability - something that will quickly transform into
financial wins.

It wasn't very long ago that accomplishments like Chrysler's would be lauded in
blogs like ours. However, the sustainability landscape is crowded enough that
incremental change no longer makes the cut.

Creating Value with CSR

Laszlo takes a fresh look at the value chain and lays out three ways that
sustainability initiatives build value for the firm:
 1. Declining Resources-as energy and other inputs get more expensive, it
makes financial sense to conserve them.
2. Increasing Expectations- customers, investors, regulators and employees
expect more (as I mentioned above) and therefore a company has to deliver
more in order to remain competitive.
3. Radical Transparency, often associated with CSR reporting, puts NGOs,
unions, and government officials on the outside looking in with no secrets. A
company has to do good things, otherwise their reputation and brand value
will quickly suffer.

Notice that 2/3 of those have to do with how your company is perceived by the
outside world?

Embedded sustainability represents a tremendous opportunity to build brand value--

loyal customers-- beyond any incremental financial benefits your company might
receive from targeting efficiency projects.

Laszlo has figured out a way to display that value visually:

Embedding CSR, Strategically

Given the nature of the corporation these days, embedded sustainability means a
huge increase in brand value over what can be gained from an incremental
approach.

As you brainstorm new initiatives for your company, think about where they fit on
Laszlo's chart. The more up and to the right they are, the more opportunity they give
your company to make a big win in the court of public opinion which will lead directly
to many a return customer.

Share your ideas for big company innovations in the comments- these companies
are reading and they might even take some of your ideas!

The Environmental Impact of Food Waste

United Nations estimates that one in nine people in the world do not have access to
sufficient food to lead a healthy life. More people are reported to die from hunger
every day than AIDS, malaria and tuberculosis combined. But at the same time,
nearly one-third of the food that is produced in the world is lost or wasted due to one
reason or the other. Food wastage, which includes both food loss and food waste, is
not only morally irresponsible, but also causes huge economical losses as well as
severe damage to the world around us.

What causes food waste?

While food loss happens mainly at the production stage due to insufficient skills,
natural calamities, lack of proper infrastructure and poor practices, food waste
occurs when edible food is intentionally discarded by consumers after they fail to
plan their meals properly and store food till it spoils or goes past the expiry date. At
times, food waste can also happen due to oversupply in markets. Retailers also tend
to reject a lot of food because it doesn’t conform to their quality and aesthetic
standards. A 2013 FAO (Food and Agriculture Organization of the United Nations)
report, which was the first study to analyze the impacts of global food wastage on the
environment, says that nearly one-third of all food produced in the world for human
consumption does not find its way to our tables.

More than 50 percent of the waste occurs during “upstream” or the production, yield
handling and storage phase and the remaining happens during processing,
distribution and consumption stages or the “downstream” phase.

The FAO report was also able to discern a clear pattern in food waste at the global
level. While middle and higher income regions showed greater food loss and waste
during the downstream phase or at the consumption level, developing countries were
more likely to lose or waste food at the upstream phase due to lack of proper harvest
techniques and infrastructure.

It goes without saying that the later food is wasted along the chain, the greater is its
environmental impact, because then we also have to take into consideration the
energy and natural resources expended in processing, transporting, storing and
cooking it. If included in a list of countries ranked according to their greenhouse
emissions, food waste would come in the third spot, right after USA and China.
Food waste that ends up in landfills produces a large amount of methane – a more
powerful greenhouse gas than even CO2. For the uninitiated, excess amounts of
greenhouse gases such as methane, CO2 and chloroflurocarbons absorb infrared
radiation and heat up the earth’s atmosphere, causing global warming and climate
change.

With agriculture accounting for 70 percent of the water used throughout the world,
food waste also represents a great waste of freshwater and ground water resources.
It is said that a volume of water roughly three times the volume of Lake Geneva is
used just to produce food that is not eaten. By throwing out one kilogram of beef, you
are essentially wasting 50,000 liters of water that were used to produce that meat. In
the same way, nearly 1000 liters of water are wasted when you pour one glass of
milk down the drain.

If you look at land usage, around 1.4 billion hectares of land, which is roughly one-
third the world’s total agricultural land area, is used to grow food that is wasted.
Millions of gallons of oil are also wasted every year to produce food that is not eaten.
And all this does not even take into account the negative impacts on biodiversity due
to activities like monocropping and converting wild lands into agricultural areas.

What can be done to tackle food waste?

As FAO director Jose Graziano da Silva says, in addition to the environmental

imperative to tackle food waste, there is also a moral one. How can we simply let so
much food go waste when millions of people around the world go hungry every day?

To stop food waste, changes have to be brought in at every stage of the process –
from farmers and food processors to supermarkets and individual customers. As a
first step, priority should be given to balancing production with demand. This
essentially translates to lesser use of natural resources to produce food which is not
needed.

Secondly, more effort should go into developing better food harvesting, storing,
processing and distributing processes. If oversupply happens, steps should be taken
to redistribute the food or to divert it to people who are in need. Though the UN says
that food production will have to increase by more than half to meet the demands of
the growing population by 2050, the actual increase would be much lesser if food
waste was reduced.

Large restaurants, supermarkets, retail outlets and individual consumers can also
reduce their “food footprint” by identifying where waste occurs and taking steps to
tackle the same. Fruits which are misshaped or “ugly” are not necessarily bad and
can still be bought and used in dishes like soups.

Consumers should also try to buy food in accordance with a meal plan so that they
don’t end up wasting edible food. Food may be cheaper when you purchase in bulk,
but in reality, you are not really saving money when all you are doing is chucking it in
the bin at the end of the week.

If the food still ends up unfit for human consumption, it can be used for feeding
livestock, saving precious resources that would have otherwise been used for
producing commercial feed. If the food cannot be reused at all, then we should at
least try to recycle it in a responsible manner instead of sending it to the landfills
where it continues to rot. Did you know that an average home can divert about 150
kg of food waste a year from local waste disposal facilities by adopting home
composting?