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.
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.
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.
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.
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?
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
Walmart in China
Prime philosophical theory compatibilities
Duty theory, Utilitarianism, Culturalism
Individualism in mutually dependent balance with collectivism
Independence in mutually dependent balance with belonging
Individual dignity in mutually dependent balance with compassion