Earlier this month Thomas Friedman wrote on the New York Times about two very different groups trying to shape the economic environment worldwide.
The second group was the “square people”--according to Friedman, it includes mostly young people, who are aspiring to a higher standard of living and more liberty, seeking either reform or revolution in their country (depending on their existing government) and “demanding a new social contract.”
On the same day the article was published, describing the differences between the two groups, the Shared Value Leadership Summit was convened in New York. This was an interesting coincidence, as the premise of the summit was that shared value has the power to reinvent capitalism as we know it and become the bridge connecting “Davos men” and the “square people.”
This premise came from the speakers at the summit, many of whom are no strangers to Davos, who explained why it makes so much sense to address societal needs and challenges (of the kind that gets “square people” into the squares) with a profit-driven business model.
The rationale behind this premise is quite simple: There’s a symbiotic relationship between business and society, where one cannot thrive without the other, and therefore the purpose of business should be to create economic value while creating shared value for society, as Prof. Michael Porter, the main force behind the shared value concept suggested in his keynote address.
But is it really possible? Can shared value really become the glue connecting society and business, turning corporations into a powerful force for good?
To the speakers in the summit it was clear that the answer is a resounding yes. “It is possible to reward shareholders by embracing stakeholders,” Arif Naqvi of The Abraaj Group explained.
How exactly? “Defining the social purpose underlying a company’s products and activities opens new opportunities for growth and profitability, while motivating and attracting consumers, business partners, employees, shareholders, and the public,” Porter explained. More specific examples came from Ben & Jerry's CEO, Jostein Solheim, mentioning that top talents wants to work for companies with purpose, and President of Coca-Cola's Latin America Group, Brian Smith, talking about the value of building brand equity with regards to the company’s Coletivo program in Brazil.
When you think about it, this is very similar to the challenge of making the business case for sustainability–after all, shared value as Porter himself explains is basically the current evolution of corporate social responsibility (CSR), which he identifies mostly with “good corporate citizenship” and sustainability initiatives. And so even if companies might still be reluctant to show that in addressing a societal problem, they are making a profit as Porter suggested, we do know from a growing number of examples and studies that the business case is there.
I believe that even if it might take a while more companies will eventually understand that shared value pays and embrace it one way or another. This is great because the challenge now as Porter explained in the summit is for shared value to evolve from an idea into a movement, and to do so you need many more companies on board.
The main challenge that I see for shared value is with the “square people”–would they embrace it as a strategy for prosperity? Would they agree to let business fix the problems they demonstrate about? These are important questions because if society won’t embrace shared value then it won’t be meaningful, and without meaning, it dooms to fail no matter how many businesses will be on board.
This is not an easy challenge for couple of reasons. First, in many cases the “square people” see “Davos men” as a group that has some responsibility for the problems it wants to fix like inequality, poverty, corruption, climate change and so on. Therefore it will require a lot of effort on the business side to convince society that business has been changing and it works now hard to be part of the solution, not the problem.
Porter understands this challenge, which is why he was talking at the summit about the need to redefine corporate missions from product to purpose based strategic positioning. This is by no means an easy challenge for companies as it means they need to truly align purpose with profits.
For some companies it is relatively easier–Ben & Jerry’s, for example has a linked prosperity model, where every ingredient builds prosperity in the communities where the company works, CEO Solheim explained. Still, not every company is Ben & Jerry’s or even Unilever, Visa and other companies that also presented successful examples of their work in the summit. Most companies will have to work really hard to convince the “square people” that they really mean it when they claim to be purpose-based.
It’s also not clear if the changes Porter talks about go far enough to truly make the difference the “square people” look for. Are companies really willing to pay fair taxes, change their business models to fight climate change or adopt a net positive approach that will “demonstrate positive environmental or societal impacts in key areas of their operations”?
My guestimation is that in order for shared value to really become a meaningful force for good business will have to be open to co-creating solutions together with stakeholders. “Davos men” need to understand that the “square people” won’t settle for the business version of the solutions–they want to help shape the solutions to ensure these solutions meet their needs.
If Porter will get it right, he can definitely be part of reinventing capitalism. If not, the “square people” will do it eventually without him.
Image credit: The Photo Bureau / Shared Value Initiative
Raz Godelnik is an Assistant Professor of Strategic Design and Management at Parsons The New School of Design. You can follow Raz on Twitter.
Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.