Creating shared value (Porter and Kramer)

Creating shared value embeds a social or environmental need within the way a company creates economic value, rather than treating corporate social responsibility as a separate programme.

When to use it

Use it to search for strategies between pure Maximising shareholder value and Balancing stakeholder interests (corporate social responsibility), where solving a social constraint also improves competitiveness.

Origins

Michael Porter and Mark Kramer developed the concept across influential articles published in 2006 and 2011. They argued that companies should move beyond philanthropy and defensive CSR by making social progress part of competitive strategy.

What it is

Many companies describe CSR as voluntary activity outside the business’s main engine of shareholder-value creation. That separation can reduce responsibility to communication or philanthropy.

Porter and Kramer’s 2006 and 2011 articles instead place selected societal problems inside strategy. Shared value occupies the overlap between economic performance and stakeholder benefit.

Societal needs can define markets just as conventional demand does. Social weakness also creates business cost through wasted energy and materials, accidents, poor health or remedial training made necessary by inadequate education. Addressing such constraints need not be a pure cost: innovation in technology, operations and management can increase productivity or create new demand while improving social outcomes.