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Foreword -- creating shared value: restoring the legitimacy of business and

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Article  in  Competitiveness Review An International Business Journal incorporating Journal of Global Competitiveness · January 2019
DOI: 10.1108/CR-11-2017-0080

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 Competitiveness Review: An International Business Journal
Foreword
Marc Pfitzer, Markus Scholz,
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 Foreword
Foreword
Creating shared value: restoring the legitimacy of business and advancing
Under Michael Porter and Mark Kramer’s leadership, we have engaged business
around the principles of shared value for over a decade – underpinned by the notion
that the competitiveness of companies, and by extension of whole economies, is deeply 5
connected to the health of society and natural resources where these firms operate.
Conceptually, and as evidenced since by numerous case studies[1], this mutual
relationship suggested that firms that embed distinctive social or environmental
objectives in their strategy and operations would, despite all the free-riders, perform
better than their peers over time.
We have understood over the years that shared value is a journey that operates on
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several levels: it is the journey of companies and their stakeholders discovering new markets
and efficiencies by focusing on unmet social or environmental needs. And it is the journey of
those who study these companies with the passion to find solutions to daunting global
challenges, whose understanding of the dynamics between business and society, like ours,
keeps evolving.
Our Harvard Business Review articles, referenced frequently in this new series of
excellent papers, may suggest a static understanding of shared value – seemingly frozen at
the time of publication (Porter and Kramer, 2006, 2011; Pfitzer et al., 2013; Kramer and
Pfitzer, 2016). That is not the case; insight generation has been mutual and on-going, and it
is therefore with great joy that I reviewed these new contributions. Our work with
companies and their stakeholders over the years keeps us on a learning pathway, as does the
vibrant dialogue and research on the linkages of these concepts to a rich stream of research
on corporate social responsibility.
Clearly, we all agree that business-as-usual is a dead end and that practices in most
companies are not changing nearly fast enough to achieve sustainability (Brundtland, 1987).
The Glauner paper challenging our prevailing mental models of society as a fight over
scarce resources, leading to vast resource depletion and inequity, is particularly provocative
in questioning why such an obvious shared value equation is not acted upon more rapidly
and profoundly by companies around the world. The notion of “symbiotic surplus” is
wonderfully consistent with the notion of interdependence between society and business,
locked in a mutually reinforcing spiral rather than a destructive one.
The need to keep studying and pushing the field is therefore evergreen, and to do this
effectively, we must appeal to the inherent pragmatism of business. Management
understands innovation, distinctive positioning, efficient activities and results, but like all of
us, it is also daunted by the complexity of social change. The Lee paper insightfully
suggests that shared-value strategies that consider multiple societal needs in multiple
locations demand too much information to be processes in day-to-day decision-making,
leading back to business-as-usual. The proposed solution to anchor firm decision-making
more firmly in identity and values is well argued. Our experience also suggests that
company purpose, in particular, is vital to decision-making and resource allocation to
shared-value innovation. Companies that define their purpose primarily around societal Competitiveness Review: An
needs help their people make the right decisions: from corporate strategy levels dealing with International Business Journal
Vol. 29 No. 1, 2019
divestment and acquisitions to business-unit-level decision on which products to develop to pp. 5-7
© Emerald Publishing Limited
all staff questioning whether the footprint of their activities is consistent with company 1059-5422
purpose. So yes, we agree with the “CSVþ” champions referred to in these papers: firms DOI 10.1108/CR-11-2017-0080
 CR pursuing shared-value models cannot forget footprint and the potential cost of their
29,1 activities on society. The ultimate objective has to be shared-value business operating at
zero footprint while anticipating that what is considered “good” or “bad” is constantly
evolving. Purpose and values must guide the choice of which markets to compete in and
where to follow or lead on norms of operation.
As we learn from, and provoke, business to change, the one element that all contributions
6 must continue to relentlessly focus on is measurement. The stories we tell – as powerfully
illustrated by the Alberti and Alcaraz paper around building a technical vocational pipeline
to boost the competitiveness of Dominican companies or creating a food-waste innovation
cluster in Northern Italy – need to demonstrate clear business value creation and
incremental social or environmental gains. INCA, Caterpillar’s local representative, invested
an impressive 10 per cent of profits in improving technical education – but we thirst to know
over time what has happened to youth in terms of career pathways and what concrete
changes occurred in INCA’s workforce productivity indicators – gains that would warrant
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sustained investments from industry, lest we fall back into subsidized and, therefore
inherently, unsustainable social contributions. Similarly, with Whirlpool’s investment in the
food-waste cluster, described in the Alberti paper, data on the R&D pipeline and launch of
new market and progressive competitiveness in the food-waste technology market are
necessary to convince other potential “shared-value champions” of the soundness of such a
proposition. I hope these thoughtful papers will have “B” and “C” versions that document
such evidence over time.
The emphasis of this series on the linkages between companies’ innovations and the
ecosystem in which these innovations will be operating is truly frontier-thinking the shared-
value journey. In the cases described above, for example, it is clear that INCA needed to
work with government, experts in technical curriculum development and many other local
companies to change an education pipeline on a national scale. Similarly, the food-waste
innovation case illustrates a mutually reinforcing dynamic between business, academia,
local government and social entrepreneurs in their hope to create a competitive food-waste
sector in Lombardia. To bring more companies to see that the potential of their shared-value
innovations is a function of the health of the system in which these innovations will operate,
we must be even better in anticipating and documenting how each actor in such an
educational or food-waste system stands to gain (or indeed sometimes lose) from change.
That “value charting” is the glue that keeps all parties committed to implementation over
time, overcoming challenges to powerful incumbent interests, and it requires measurement.
The intellectual leadership demonstrated in the following papers is laudable, and
undoubtedly another valuable nudge to leadership across sectors to re-purpose business to
truly meet our global challenges. These papers focus on important issues: the role of mental
models; the inherent complexity of understanding social needs; the fact that shared value
models do not remove ethical obligations, real conflicts of interests, operational externalities
or the evergreen need to keep innovating; and the necessity of working across systems or
clusters to achieve change. Moving companies to embrace shared-value models is indeed
often first about mindsets and values. The notions that society and business are stuck in a
zero-sum game and that dealing with society’s needs holds back business are deeply
engrained; bringing new frames of reference that highlight the contrary will help.
Addressing the practical challenges to decision-making that includes understanding of
social needs is also most pertinent. Choices must be guided by powerful yet simple points of
reference, starting, for example, by answering the questions “why are we in business?” and
“who does not benefit from that mission today?” Finally, cases that illustrate how value can
 be created for multiple stakeholders in a system through collaboration paves the only way to Foreword
achieve large-scale progress and value creation.

Marc Pfitzer
FSG Inc. Boston, Geneva, Estado de Mexico, Mexico, and
Markus Scholz
Department of Corporate Governance and Business Ethics, FH Wien, Wien, Austria 7

Note
1. For example, consider how Nestlé outperformed its peers in sales and stock performance through
its “Nutrition, Health and Wellness” strategy (Henderson and Johnson, 2011; or Porter et al.,
2015). Or how Discovery grew revenues 10 and outperformed stock indexes by focusing on
health prevention as an insurer (Porter et al., 2014). Consider that Becton Dickinson (BD) grew
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revenues from $5m in 1988 to $21.1bn in 2013 by focusing on safety devices to protect health
workers (BD: Healthcare Worker Safety. Shared Value Initiative Case Study). For example, how
Novo Nordisk gained a 63 per cent market share in China through improved insulin products,
physician training and patient awareness campaigns against diabetes (Porter, 2012).

References
Brundtland, G.H. (1987), “Our common future – call for action”, Environmental Conservation, Vol. 14
No. 4, pp. 291-294.
Henderson, R.M. and Johnson, R. (2011), “Nestlé SA: nutrition, health and wellness strategy”, Harvard
Business School Case 311-119 (Revised May 2012).
Kramer, M.R. and Pfitzer, M.W. (2016), “The ecosystem of shared value”, Harvard Business Review,
Vol. 94 No. 10, pp. 80-89.
Pfitzer, M., Bockstette, V. and Stamp, M. (2013), “Innovating for shared value”, Harvard Business
Review, Vol. 91 No. 9, pp. 100-107.
Porter, M.E. (2012), “Competing by saving lives: how pharmaceutical and medical device companies
create shared value in global health”, Creating Shared Value in Global Health, FSG, New York
City, NY.
Porter, M.E. and Kramer, M.R. (2006), “Strategy and society”, Harvard Business Review, Vol. 84 No. 12,
pp. 78-92.
Porter, M.E. and Kramer, M.R. (2011), “Creating shared value: redefining capitalism and the role of the
corporation in society”, Harvard Business Review, Vol. 89 Nos 1/2, pp. 62-77.
Porter, M.E., Kramer, M.R. and Sesia, A. (2014), “Discovery limited”, Harvard Business School Case 715-
423 (Revised August 2017).
Porter, M.E., Kramer, M.R., Herman, K. and McAra, S. (2015), “Nestle’s creating shared value strategy”,
Harvard Business School Case 716-422 (Revised October 2017).

Further reading
Shared Value Initiative Case Study (2019), “BD: healthcare worker safety”, available at: https://
sharedvalue.org/resources/shared-value-action-case-study-bd-healthcare-worker-safety

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