Theories of corporate responsibility
 
Pure Marketplace Ethics Libertarian Marketplace
(Shareholder
Theory )
Social Marketplace Ethics Shared Value Ethics Stakeholder Theory - Soft Progressive Corporate Social Responsibility Triple Bottom Line / Sustainability Stakeholder Theory - Hard
 
Theories of corporate responsibility distributed across tensions
 
Profit
versus
social and
environmental engagement
Individualism versus collectivism Independence versus belonging Dignity
versus compassion
Opportunity
versus
equality
Shareholder
versus
stakeholder
   
Shared Value Ethics
shared-value
  Overview Shared value ethics requires businesses to pursue profits, and also requires businesses to value social and environmental welfare. Social and environmental engagement is pursued when profitable. Perceiving social/environmental initiatives as independently valuable is thought to create profit opportunities.  
  Values

Profit

Respect for laws, regulations and commonly accepted codes for operation

Social and environmental welfare hold autonomous value independent of bottom line concerns, but are pursued only within the profit-making operation, only insofar as they create profit.

 
  Responsibilities

Gear decisions to the economic rules of the marketplace

Checked for compliance with the letter (and potentially with the spirit) of applicable laws, regulations and accepted practices

Identify broader social and environmental needs

Pursue opportunities to increase profit while serving the broader social and environmental welfare.

 
  Key concepts
Shared value splits the difference between marketplace and social responsibility theories.

From the marketplace side, shared value accepts the premise that businesses are obligated to orient all actions around the ideal of increasing profit. Shared value rejects the marketplace premise that social and environmental initiatives tend to be antithetical to the pursuit of profit: social and environmental initiatives are acknowledged - though not necessarily pursued - as part of normal business.

From the social responsibility side, shared value accepts the concept of businesses as citizens with social and environmental responsibilities that are independent of the profit-making operation. Shared value rejects the premise that social responsibility implies wealth redistribution; instead, social responsibility implies wealth creation under the premise that perceiving social/environmental initiatives as independently valuable creates profit opportunities..

Shared value claims to escape the zero-sum game dividing marketplace ethics from social responsibility theories. It opposes the thesis that corporate social responsibility is ethically reproachable because money is being stolen from owners (shareholders) by directors and executives for their own charitable projects.

Shared value rests on the assumption that an eye to broad social and environmental needs opens the way to new profit-making operations. The theory's key weakness is that it fails to clearly distinguish this strategy from normal management practice which includes the search for new profit opportunities wherever they may appear. The response is that shared value ethics allows social/environmental initiatives that are not as profitable as the business's core operation, but this reopens the question about theft from shareholders.

 
  Hard questions

Do contributions to social welfare or environmental stewardship count when undertaken only if they increase profit?

Theoretically, there's a difference between the social marketplace (which acknowledges and reacts to social needs because there is a profit opportunity) and shared value (which acknowledges social needs independently, and reacts when there's a profit opportunity). But, does the theoretical distinction make any difference in practice?

 
  Examples

trade not aid

One of Nestlé’s fastest growing divisions. Nespresso combines a sophisticated espresso machine with single-cup aluminum capsules containing ground coffees from around the world. The product offers quality, convenience and the environmental blight of mountains of spent aluminum pods. Obtaining a reliable supply of specialized coffees is extremely challenging: most coffees are grown by small farmers in impoverished rural areas of Africa and Latin America, who are trapped in a cycle of low productivity, poor quality, and environmental degradation that limits production volume. To address these issues, Nestlé redesigned procurement. It worked intensively with its growers, providing advice on farming practices, guaranteeing bank loans, and helping secure inputs such as plant stock, pesticides, and fertilizers. Nestlé established local facilities to measure the quality of the coffee at the point of purchase, which allowed it to pay a premium for better beans directly to the growers and thus improve their incentives. Greater yield per hectare and higher production quality increased growers’ incomes, and the environmental impact of farms shrank. Meanwhile, Nestlé’s reliable supply of good coffee grew significantly. Shared value was created. Nestlé found a societal need - poverty in rural coffee-producing areas - and developed a two-sided initiative: anti-poverty and improved coffee supply.
(Adapted from Porter, Michael, and Kramer, Mark. Creating Shared Value. Harvard Business Review)

Fair trade coffee versus the Nestlé approach: Both acknowledge broad corporate social obligations, but fair trade redistributes wealth and subtracts from the bottom line while shared value adds wealth and contributes to the bottom line

GE Ecoimagination

Walmart in China

 
  Prime philosophical theory compatibilities Duty theory, Utilitarianism, Culturalism  
  Human values

Individualism in mutually dependent balance with collectivism

Independence in mutually dependent balance with belonging

Individual dignity in mutually dependent balance with compassion

 
  Associated notable figures Michael Porter, Mark Kramer  
  Branding connect

GE Ecoimagination

IBM: Building a Smarter Planet