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Date: 2024-05-20 Page is: DBtxt003.php txt00002701

Both of these ideas are problematic in that they don't address
comprehensive management of socio-enviro-economic performance

If business aligns its commercial and societal objectives, it can better evolve scalable solutions to key global challenges. Photograph: Getty

Original article:
Peter Burgess COMMENTARY
This post by John Elkington contains very important observations about the Porter / Kramer initiative to develop and promote Shared Value, or Corporate Shared Value ... as the next big thing in business management.

I have observed elsewhere that the core idea that it is only 'business' that creates wealth .... government does not and government cannot ... is just plain wrong. In my world of True Value there is wealth creation when a child goes to school and becomes educated, and it does not matter whether the education is furnished through government or through a for-profit business enterprise.

Another core idea in TrueValueMetrics is that the reporting entity should be the place together with the people rather than the organization. In this framework for metrics and reporting, the organizations is subsidiary to the community and not the other way round.

TVM also embraces a deep analysis of the value chain ... again the value chain not only moves through organizations, but also through locations. A business profit may accrue to investors because there is profit and value add in one place, and a valueloss and no accounting about profit in another place. Accounting can be very creative within the internal value chain of an organization to the detriment of community
Peter Burgess
More COMMENTARY ... January 2023
There has been a substantial growth in activity associated with social and environmental reporting, but it remains a 'side-show' related to the power of financial / profit reporting aimed at investors. My guess is that less than 5% of total investment and investment flows are driven by social, environmental or sustainability performance actual or projected. What there is is more and better, but it is nowhere near mainstream.

I also remain concerned that none of the main contenders for leadership in the social and environmental reporting space have the same rigor as the basic accounting associated with financial reporting, and don't show much interest in getting to that state. Worse, the financial accounting ecosystem also seems to show little interest in becoming the anchor for a broader comprehensive system of reporting fully suited to this century. This is, I would argue, the way management metrics fully suired for the 21sr century should evolve, but rather the professional institutions of the accountancy profession seem to be solidly anchored into the 19th century, not even the 205y!!!!!!!!
Peter Burgess
Sustainability should not be consigned to history by Shared Value ... If Shared Value is to offer real, long term transformation it must address the flaws of capitalism, look beyond incrementalism and not just align commercial and societal goals, says John Elkington
Written by John Elkington ... John Elkington is Executive Chairman of Volans and non-executive director at SustainAbility. His latest book is The Zeronauts: Breaking the Sustainability Barrier (Earthscan/Taylor & Francis).

I was delighted to participate in the recent Shared Value Leadership Summit hosted by FSG, a non-profit consultancy founded by Mark Kramer. Together Professor Michael Porter and Kramer wrote Creating Shared Value, published in the Harvard Business Review in 2011.

However, I left Cambridge, Massachusetts somewhat unsettled about some aspects of the way Porter seems to see the sustainability agenda.

At exactly the moment that world leaders are heading to Rio de Janeiro to assess progress on the agenda, one of the world's leading management gurus seems determined to elbow sustainability aside and replace it with Shared Value.

That said, Shared Value is undeniably a key step forward in corporate strategy. In the Harvard Business Review it is gaining real traction. The idea is that if business aligns its commercial and societal objectives, it can better evolve scalable solutions to key global challenges.

The central message is indisputable: 'Business and society have been pitted against each other for too long,' Porter and Kramer argue. 'That is in part because economists have legitimised the idea that to provide societal benefits, companies must temper their economic success. In neoclassical thinking, a requirement for social improvement – such as safety or hiring the disabled – imposes a constraint on the corporation.'

The net result, Porter and Kramer insist, is that the strategies of many corporations 'have largely excluded social and environmental considerations from their economic thinking'. They continue: 'Corporate responsibility programs – a reaction to external pressure – have emerged largely to improve firms' reputations and are treated as a necessary expense. Anything more is seen by many as an irresponsible use of shareholders' money.'

So far, so good. But if you seem to scoop sustainability up with corporate social responsibility and dump them in the 'bucket of history', as Marx attempted with capitalism, you risk antagonising those who - because they see the systemic nature of the crises we increasingly face - have embraced the sustainability framing of the agenda.

FSG, is signaling its intention to open the Shared Value platform out to wider inputs, which is very welcome. But, there are three things Professor Porter said at the summit that left me wondering whether more fine-tuning may be needed. First, he enthused that capitalism works like 'magic', conjuring value 'out of nothing'. Yet industrial capitalism typically converts natural capital that has evolved over millions of years into things that financial markets value. If Shared Value is to create real long-term value, it must acknowledge that capitalism is not invariably a benign process, indeed it can play a key role in destroying key resources, reducing the planet's biodiversity and destabilising the climate.

Second, he reduced corporate sustainability to resource efficiency. That may be what companies can currently measure, but recall that the original formulation of sustainability focused on the idea of intergenerational equity. At a time when the world population is heading towards nine billion, our economic model is often dangerously myopic in systematically favouring a few forms of capital (financial, physical, intellectual) over others (human, social, natural).

If you focus on the narrow commercial interests of particular companies, then it makes sense to encourage CEOs and others to cherry-pick their priority issues from a menu of options. But what if, unlike items on a restaurant menu, the challenges are all symptoms of the systemic dysfunction of modern-day capitalism? Might the Shared Value approach encourage incrementalism rather than the necessary transformative, systemic change?

Finally, Professor Porter seemed to suggest that Shared Value offers a values-free way for leaders to select their strategic priorities. What he meant, I am told, was that this isn't so much a shared-values agenda, as an infinitely better way to identify areas where commercial and societal value creation align. Still, declared or not, values are shot through all forms of capitalism, even if masked by market pricing signals.

This is something that PUMA Chairman Jochen Zeitz is trying to address with the environmental profit & loss methodology, seeking to place a market value on the environmental impacts of his company and supply chain. In 2010, PUMA calculates that the environmental costs imposed by its business activities were 'worth' €145m. Once you know the numbers, whether or not the market incentivises you to address them, it's a matter of values as to whether you decide to take a free ride, or pay your bills.

UN Secretary-General Ban Ki-moon characterises sustainability as offering 'what economists call a 'triple bottom line' – job-rich economic growth coupled with environmental protection and social inclusion.' Porter doesn't much like the triple bottom line concept, which I coined in 1994, seeing it as an attempt to balance off different forms of value creation. But the declared intent was always to achieve what Jed Emerson some years ago dubbed 'blended value'.

Perhaps the difference of opinion reflects the fact that FSG started out advising foundations on how to direct their philanthropy. Perhaps theirs is an 'inside-out' world, where you take a given quantum of resources and use it to achieve the greatest possible impact. The 'outside-in' sustainability movement comes from a different starting point, a world in which our species is moving into the Anthropocene. This is a new reality in which our species has impacts on a geological scale and where the interests of future generations need to be brought back into the present – in ways that today's capitalism systematically fails to do.

Unquestionably, Shared Value is an exciting, emerging management discipline. But among previous management disciplines with a huge impact was total quality management (TQM). Recall the criticism that certain forms of quality management could be used to design a 'concrete submarine,' as long as that was what the customer specified, even if the end result was that the submarine promptly sank with all hands. We have to be very careful how our commercial specifications are set in the Anthropocene. In the end, however, properly addressed, sustainability could be the ultimate form of Shared Value.

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Creating Shared Value: solving social problems and increasing profitability by aligning its commercial and social interests. Photograph: Bon Appetit / Alamy/Alamy

Shared Value is a corporate strategy, to fulfill it's systemic mandate sustainability needs more than business on side, argues Mark Kramer

Shared Value: how corporations profit from solving social problems

Mark Kramer for the Guardian Professional Network ... this is in response to John Elkington's blog

Fri 8th June 2012 08.09 EDT

We were delighted that John Elkington attended our second annual Shared Value Summit, held last week in Cambridge Massachusetts, and I was pleased to read his blogpost highlighting some of the synergies between shared value and sustainability. It is high praise indeed for John to say that sustainability might be the ultimate form of Shared Value.

John agrees with the central message of Shared Value about the power of business to solve social problems and increase profitability by aligning its commercial and social interests, but he raises several concerns. First, he claims that we do not acknowledge the values implicit within capitalism or its destructive force in the world, and second, that we overlook the much larger systemic issues that are at the root of the social problems that Shared Value would treat separately. He points out the risks of sweeping aside sustainability in favour of Shared Value.

But our intent is not to sweep aside sustainability. Rather, we see Shared Value and sustainability as complementary and overlapping concepts that give rise to mutually reinforcing but different agendas for action. Sister concepts, perhaps, more than one as a subset of the other. There are aspects of sustainability that do not serve a company's economic interest which would not be Shared Value, and aspects of Shared Value which would not address a sustainability agenda.

In particular, I found John's observation that Michael and I came to Shared Value by looking at the way corporations could profit from solving social problems as both insightful and accurate. We focus on the scale of impact and degree of innovation that companies can bring to society's needs that traditional NGOs and governments have often lacked. And so our framework is rooted in identifying the specific issues that a given company can and should tackle to improve its own performance and create large-scale social benefits. Our view is not inconsistent with the much broader and more systemic mandate of sustainability but Shared Value is rooted in a company-specific agenda.

We agree that capitalism as practiced today does not adequately value the natural and human resources from which it derives profit. Michael Porter would argue that undervaluing these resources is inherently self-defeating as it undermines a company's own future profitability and therefore that such actions are capitalism misapplied and inefficiently managed. Sustainability's efforts to engage companies in reporting on and valuing the resources they consume and the harms they cause is therefore in the longterm interests of capitalism – a point Michael made nearly 20 years ago in a much debated Harvard Business Review article, entitled 'Green and Competitive: Ending the Stalemate.'

The values that lead capitalism to wreak destruction, however, are not inherent in capitalism itself: the ground rules are shaped by governments and public opinion. Wise businesses with a long term view will embrace sustainability's mandate, but whether the global sustainability agenda ultimately prevails will depend on world governments as well as business.

Shared Value, on the other hand, is fundamentally about corporate strategy and the decisions individual companies make in pursuit of profit. And Shared Value's unapologetic embrace of capitalism is one reason why it has resonated so strongly with corporate leaders who are less willing to embrace the sustainability agenda. Although less visionary, it is perhaps easier to put into practice – a limitation that has its virtues.

Ultimately, it will take sound government and an informed, empowered citizenry to fulfill sustainability's mandate, but along the way, corporations that pursue a Shared Value strategy can create a huge positive impact – for themselves and for the world.

Mark Kramer is founder and managing director at FSG and a senior fellow of the CSR Initiative, at Harvard Kennedy School of Government

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