Mark Kramer stands firm on the role business can play in driving social progress while at the same time gaining a competitive edge.
In fact, he has been on a mission to change how those in the corporate world talk and think about social issues and their relationship to business.
“Solving social problems is a business opportunity and a business necessity,” says Kramer, founder and managing director of FSG and senior lecturer at Harvard Business School. In his plenary session at the 2019 Executive MBA Council Conference, Kramer shared the groundbreaking work that has defined the concept of creating shared value (CSV).
Kramer and co-founder of FSG Harvard Business School Professor Michael Porter first presented the CSV concept in 2006. Currently, a 160-person global social impact consulting firm, FSG includes the Shared Value Initiative and the Collective Impact Forum, a partnership with the Aspen Institute for Community Solutions. Kramer has managed more than 100 consulting projects throughout the world for FSG, with a particular focus on corporate opportunities to create shared value. He also leads both MBA and executive education courses on creating shared value at Harvard.
He teaches MBA and EMBA students because he wants to reach business leaders with the CSV message. It’s a common misperception that social problems are going to be solved by the government and that they don’t offer businesses a way to earn revenue, says Kramer.
Government and non-profit organizations lack the resources and capabilities to meet these challenges alone, he says. Companies can find solutions in ways governments and non-profits can’t, because they have the incentive to take risks, they fuel innovation, efficiency, and adoption, and they are scalable and sustainable.
In turn, societal and corporate interests are “inextricably linked,” says Kramer. Companies depend on an educated and skilled workforce, safe working conditions, sustainable use of natural resources, and a flourishing local economy.
“With the magnitude of problems that we face, we cannot get there without engaging the private sector.”
Climate change. Health care. Food and water shortages. The list of worldwide social problems seems to grow larger each day. And they strike right at the roles of business in society, not just the profit-making one for the company, but the larger one that deals with its deeper reason for existence. Those two roles aren’t in conflict, says Kramer.
“We can and must have both,” he says. Indeed, those that do thrive. “Companies that create a great sense of purpose outperform.”
Leaders are in a position to show others “how they can create positive social change through their day-to-day jobs – to give them a sense of meaning and purpose that they might not otherwise have.”
CSV involves strategies that simultaneously create value for business and for society. CSV does not replace philanthropy or corporate social responsibility, and unlike environmental, social, and governance (ESG) factors, CSV tackles one or a few key social issues that the company can materially impact and that can contribute to its economic success. CSV focuses on innovation and competitive differentiation within an industry rather than mitigation of harm, license to operate, or accountability to stakeholders.
By looking through the lens of shared value, corporations bolster their brand by demonstrating interest in the greater good of the community, which, in turn, helps strengthen their marketplace position and competitive advantage.
Take the case of Discovery, a shared value insurance company in South Africa, which employed behavioral economics to engage members in making healthier choices. Discovery designed incentives that helped their members eat better and exercise more, resulting in 15 percent reduction in doctor visits and an increase of eight years in life expectancy.
The vision of the CEO is key to putting the shared value model into practice, says Kramer. For a company to really embrace shared value, the CEO has to pave the way.
“CSV is about taking the blinders off of executives,” he says. “If it’s a social issue they think it’s not a business issue, so they have missed billions of dollars and opportunities because of those blinders.”