Wednesday, April 27, 2016

Is Shared Value Too Good to be True?

While reading the Creating Shared Value (Porter & Kramer, 2011) article, I couldn’t help but take a skeptical stance. As the article notes, there is some level of distrust between non-profits/government, and business. My background in environmental and food studies supported this as we learned of environmental externalities – things like nitrogen and phosphorous runoff from farms that cause cultural eutrophication in bodies of water, water and air pollution from industrial sites/plants, etc. Can businesses (on a large scale) truly achieve shared value and eliminate the need for corporate social responsibility programs that attempt to reduce these negative consequences of day-to-day business operations?

I was certainly intrigued while reading this article. It made me hopeful that things could change… that businesses could look beyond purely economic growth and profit, and link their business to the needs of society. However I wonder at what scale is this really feasible? The article brings up some nice examples of companies like GE and Nestle that are adopting this shared value methodology. But are they the exception to the rule? How many companies could afford the potential upfront investments required for shared value projects, say workforce development to create local supply chains?  If shared value projects require a lot of upfront investment (for instance ITC had to invest in order to develop their programs which required farmer training, start-up materials), is it feasible for smaller companies not currently using a shared value model to develop business offerings based on shared value? How many companies have CEOs or leaders that are forward thinking enough to see the potential benefits of shared value projects?

An additional topic that comes to mind is the likelihood of green-washing. With the great potential and need for products that address many societal problems, there is also a risk that consumers will be taken advantage of.  For instance, there is a strong desire for “green products” or socially responsible products that are less damaging to the environment and to human health and support important social initiatives – paraben-free lotions and phosphorous-free shampoos, BPA-free containers, locally sourced foods, grass-fed meats, etc. Companies often take advantage of consumer willingness to pay extra for these types of products. There are numerous accounts of restaurants that claim to serve locally soured foods (local food sourcing allows restaurants to charge a higher price while also supporting the livelihood of local farmers, reducing transportation costs, and often with food grown on small family-owned farms comes with the assurance that food is raised to a certain standard), but are actually falsifying their sourcing information. Countless companies trick consumers with labels and crafty wording to believe that the products they are buying are better for the environment, better for society, better for their health, but are truly not. Since the desire for socially responsible and beneficial products is so strong, there should be some way of verifying and guaranteeing the truthfulness of product claims. There are certifications available for some products, such as Rainforest Alliance Certified, certified-organic, etc., but considering the abundance of products and services offered throughout the world, there needs to be more.


Overall, I think the concept of shared value is important and could transform how businesses operate as well as the relationship between business, non-profits, and government, however I would be interested in learning more about the feasibility of shared value on a large and widespread scale, as well as methods for ensuring consumer protection from companies trying to take advantage of the strong desire for products that achieve shared value.

Reference

Porter, M. E., & Kramer, M. R. (2011). The big idea: Creating shared value.Harvard Business Review89(1), 2.

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