Porter Kramer 2006 & 2011-Creating Shared value PDF

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Herbst-Wintersemester 2021-2022; Summary of CSV Articles by Porter & Kramer (2006; 2011)...

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Strategy & Society – Michael E. Porter & Mark R. Kramer (Porter & Kramer, 2006) Prior CSR efforts of companies are not that effective since: 1. Efforts pit business against society, when clearly the two are interdependent 2. Efforts pressure companies to think of CSR in generic ways instead of in the way most appropriate to each firm’s strategy (potential to take actions that would support both their communities and their business goals) 

Successful corporations need a healthy society; Act in a way that both sides profit  create shared value

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Inside-out linkages: Company impinges upon (eingreifen) society through its operations in the normal course of business  Nearly all activities in company’s value chain touches communities in which firm operates (positive or negative consequences) Outside-in linkages: External social conditions influence corporations (for better or worse)  competitive context significally affects ability of company to carry out strategy  competitive context can be divided into four areas: o Quantity and quality of business inputs o Rules and incentives that govern competition o Size and sophistication of local demand o Local availability of supporting industries

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Choosing which social issues to address: o Generic social issues:  Neither significantly affected by company’s operations nor influence the company’s long term competitiveness o Value chain social impacts:  Significantly affected by the company’s activities in the ordinary course of business o Social dimensions of competitive context  Factors in the external environment that significantly affect the underlying drivers of competitiveness in those places where the company operates

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Prioritizing social issues: Strategic CSR unlocks shared value by investing in social aspects of context that strengthen company competitiveness the success of the company and the success of the community become mutually reinforcing

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The most important thing a corporation can do for society is to contributed to a prosperous economy Each company can identify the particular set of societal problems that it is best equipped to help resolve and from which it can gain the greatest competitive advantage

Creating Shared Value – Porter, Kramer 2011- (Porter & Kramer, 2011) 

Shared value = Creating economic value in a way that also creates value for society by addressing its needs and challenges

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Shared value can give rise to the next major transformation of business thinking

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Defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates

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Shared value creation focusses on identifying and expanding the connections between societal and economic progress

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Capitalism is unparalleled vehicle for meeting human needs , improving efficiency, creating jobs and building wealth however narrow conception has prevented business from harnessing its full potential to meet society’s broader challenges Opportunities have been there all along, but have been overlooked Business acting as businesses, not charitable donors, are the most powerful force for addressing the pressing issues we face new conception of capitalism required

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Competitiveness of companies and health of communities around it are closely intertwined

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How shared value is created: o Companies can create economic value by creating societal value o Three ways, which are mutually reinforcing  Reconceiving (Überdenken) products and markets; e.g. serve lowerincome/disadvantaged consumer markets while making substantial profits  low priced cell phones for poor people in Kenya that provide mobile banking services helps poor people to save money more securely 

Redefining productivity in the value chain e.g. avoid excess packaging of products, which is not only bad for the environment but also costly for the business e.g. Wal-Mart: Reduced packaging & rerouting of trucks saved 200million in 2009 and reduced environmental impact

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Building supportive industry clusters clusters include not only businesses but also institutions (e.g. academic programs), trade associations, standard organizations & draw on broader public assets in surrounding communities (e.g. schools, universities, clean water, fair competition laws etc.) clusters drive productivity (e.g. capable local suppliers foster logistical efficiency; good public education increases productivity) e.g. Nespresso (Nestle) built clusters in coffee regions to make procurement practices more effective  build & support agricultural, technical, financial, logistical firms and capabilities in respective regions to foster efficiency and high-quality local production & thereby improved local conditions e.g. Yara (worlds largest mineral fertilizer company); Realized that lack of logistical infrastructure in Africa prevented farmers from gaining efficient

access to fertilizers and other essential agricultural inputs Investment to improve ports and roads together with local government and support of Norwegian government  200,000 farmers will benefit; 350,000 new jobs; Yara will grow its business

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Opportunities to create shared value arise because societal problems can create economic costs in the firm’s value chain

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Creating shared value represents a broader conception of Adam Smith’s invisible hand  It is not philanthropy but self-interested behavior to create economic value by creating societal value...