Sunday, December 6, 2015

Shared Value and Conscious Capitalism

The article "Creating Shared Value" shows us an innovative way in which to perform business. Instead of focusing solely on profits, authors Porter and Kramer suggest that businesses should generate shared value by creating societal value and benefits through their business activities. This is different from corporate social responsibility, which generally expects companies to engage in charitable activities. Shared value is created instead by using the organization's activities to improve its environment, including its surrounding economy and infrastructure. Doing this is important because it helps companies collaborate with governments instead of going against each other, while at the same time ensuring its success. As the authors clearly put it, "the success of every company is affected by the supporting companies and infrastructure around it".

While reading this article, it immediately reminded my of a book I read a couple of years ago called "Conscious Capitalism: Liberating the Heroic Spirit of Business", by Rajendra Sisodia and John Mackey (co-founder of Whole Foods Market) [1]. The main idea of this book is very similar and makes the same suggestion: companies should develop strategies and activities that allow them to improve the society around them instead of focusing merely on profits. In order to do so, the authors propose four main principles:

  • Higher Purpose: As seen on several articles before, a company's higher purpose determines what is the ultimate goal of a company, what it wants to accomplish other than simply obtaining profits. A clear and ambitious higher purpose engages and inspires employees and customers.
  • Stakeholder Orientation: This is a big shift from the traditional shareholder orientation to a more holistic stakeholder orientation. Under this approach, a company should perform activities that are in the best interest of its surrounding environment, including employees, customers, suppliers, investors and communities. This is the essence of shared value.
  • Conscious Leadership: Moving a company towards a common objective requires good leaders and a leadership culture that guide the company's activities. Both leadership and management are necessary for an organization to be effective, however they are different. Leadership inspires people and aligns them with a common vision while management attempts to control desired outcomes.
  • Conscious Culture: Several articles have presented the importance of culture as well, defined mainly by a company's values. A good culture with an agreed and common set of values connects people to each other and creates a productive work environment. Such is the example shown by Southwest Airlines. "Culture eats strategy for breakfast" is a quote usually attributed to Peter Drucker [2].
After reading "Creating Shared Value" and this book, it has become clear to me that there is a trend towards shifting the role that companies play in society. Organizations that understand the importance of its supporting environment in their activities will not only get ahead of the competition by engaging more effectively with communities, customers and suppliers, but will also contribute to a better society overall. It's a win-win situation and, as Björn Stigson, president of the World Business Council for Sustainable Development (WBCSD), puts it: "Business cannot succeed in societies that fail. Likewise, where and when business is stifled, societies fail to thrive" [3].

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