April 25, 2017Published Article

Creating Shared Value - What Does It Mean?

What does it mean to “create shared value?” The phrase, coined by Michael Porter and Mark Kramer, stands for the concept that society’s problems (everything from natural resource shortages, environmental harm, government or supplier inefficiency, or poorly prepared workers) all create both direct and indirect costs for the business sector. In addition, those problems create opportunities for companies who can identify and develop creative, market-based solutions. Cutting-edge business are gravitating toward the concept of shared value as a way to expand product and service offerings, improve profitability, meet consumer and community demands for responsible business conduct, and attract and retain a talented workforce. Many businesses have adopted corporate social responsibility programs and environmental sustainability programs to enhance their community standing and reputation. Those efforts can sometimes be integrated into core business strategy in a way that accomplishes good results for society and good results for the business bottom line. When that happens, the business is said to be “creating shared value.”

Take Kroger’s approach to sustainability as one example. Kroger’s efforts run the gamut, from making significant reductions in energy consumption in its stores, powering Kroger stores with biogas from the food waste generated in those stores, and working with suppliers to bring new products to market (like a plastic milk jug that is made of 10% less recyclable plastic than current designs). Kroger’s supply chain strategies include emphasizing sourcing from minority and women-owned businesses. These sourcing strategies recently won Kroger recognition on the Omni50, a list recognized top corporate and government buyers using the economic impact of their sourcing activities to, in the words of the list sponsor, “gain market share by doing the right thing.”  Altogether, these efforts yield positive environmental impacts, reduce Kroger’s operating expenses, create economic opportunity for business partners, and build a positive image of the Kroger brand.

While Kroger’s efforts are comprehensive, they are by no means unique. In future newsletters, we will highlight examples from other industries, including companies headquartered here in Wisconsin.

Michael Best Strategies works with clients across industries to develop and implement shared value strategies in environmental sustainability, workforce development, and community engagement, particularly where those strategies intersect with government in some way. Companies that are industry leaders in their environmental, employment, and community development practices have an opportunity to shape their industries by working with regulators to ensure that their forward-thinking approaches are rewarded not just by consumers and the overall marketplace, but by the government sector as well. To learn more, contact Karen Timberlake.

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