Politics of Poverty

‘Doing good by doing well’? Reflections of a critical friend at the Shared Value Summit

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Heavy equipment rumbles down a road between a recently cleared area and a sliver of remaining forest at the Butaw Oil Palm plantation in Sinoe County, Liberia. Palm oil is a highly sought-after commodity sold in markets around the world, including to large food and beverage companies like Cargill, Kellogg, and General Mills. (Photo: Anna Fawcus / Oxfam America)

The idea of Shared Value aspires to marry social impact with companies’ core business – but important questions remain.

Last week representatives of some of the world’s most powerful companies got together in New York for the Shared Value Leadership Summit. Oxfam was also there – co-organizing a panel and discussion event with Mars around the company’s Farmer Income Lab – to which Oxfam is contributing. I have for a long time been intrigued by the level of attention the idea of ‘Shared Value’ has been getting as an alternative approach to business’ relationship to social issues. Even some of the world’s leading companies, such as Nestlé, have adopted Shared Value as their core sustainability framework. So I took advantage of being invited to the Summit to see where the field was heading.

For those not familiar with the concept of Shared Value, a bit of context might be helpful. As Michael Porter – one of the two creators of the idea – emphasized in his remarks at the Summit, the concept of Shared Value sets itself apart from frameworks like philanthropy and corporate social responsibility (CSR). The key distinguishing feature of Shared Value is that it aims to address social and environmental problems through company’s core business, rather than as a separate side project. Sustainability and human rights are not add-ons or compliance tasks but part of a corporate strategy. It’s the old business case argument on steroids.

From Oxfam’s perspective, the motivation behind Shared Value, to better align core business and social impact, is an ambition we agree with. For too long, we have struggled to move attention to social issues out of niche sustainability departments and onto the agenda of corporate executives. Nevertheless, the discussion at the Shared Value Summit left me with more questions than answers. Three themes in particular that I feel deserve greater attention stood out:

How do we create an enabling environment for Shared Value?

The two days of panels and presentations were united in one key theme: demonstrating the merit of Shared Value.  The emphasis on success stories of companies doing good while doing well isn’t much of a surprise given that the idea of Shared Value  originated to overcome the ‘trade-off mentality’ that conceived a business’ social contribution as a distraction from its core business. Yet, if Shared Value is such an obvious proposition from a profitability perspective, why aren’t more companies jumping on the bandwagon?

Shared Value remains an aspirational concept rather than an empirical fact. Oxfam’s work abounds with examples of companies facing the fundamental tensions between their commercial agenda and their social commitments (be it in the extractive industry sector, within global supply chains, or around companies’  tax practices).  Resolving these instances where the ambition of Shared Value is difficult to realize requires a deeper look at the enabling environment, particularly the role of governments and the investment community, in shaping companies’ Shared Value opportunities.

While speakers at the Summit acknowledged the key role and recent moves by investors as key stakeholders in the Shared Value space, I was missing a more substantive discussion on the role of short-term earning pressure by mainstream investors as major impediment on companies’ ability to invest in creating Shared Value. The critical role of governments as creators of a level playing field for Shared Value creation was even more muted.

How do we maximize social value?

Listening to the presentations at the Summit, it remained unclear how companies engaging in Shared Value were prioritizing which social issues to target apart from their perceived potential for delivering value for business. The Shared Value Initiative’s guidance materials echo this approach by stating that “…the starting point for shared value is identifying and prioritizing specific social issues that represent opportunities to increase revenue or reduce costs.”

While this approach makes sense for business, it might pose problems for society since it may lead to ‘cherry picking’, and the sidelining of issue areas with the greatest potential for social impact – simply because they don’t deliver the most value for the business.

Business’ engagement in Shared Value creation doesn’t start with a blank slate. This is why assessing impact has been a central concern for Oxfam (both in our programmatic and advocacy work) when it comes to businesses engaging in social issues. Oftentimes, the most important positive contribution a company can make to creating social value is to minimize the risks for negative impacts of their operations and supply chains, particularly on human rights.

What is the role for values in Shared Value?

My most challenging reflection coming out of the Summit concerns the relevance of Shared Value within the changing socio-political environment businesses are facing in US and around the world. Both concluding presentations – one by Jennifer Dulski of Facebook and the other by Hilary Clinton – highlighted the rapidly-evolving and tension-filled nexus between business, politics, and society. It became clear that many of these tensions – from rising economic inequality, to the erosion of democratic freedoms, and the destructive potential of climate change impacts – require a more concerted response from business.

In a world marked by record corporate profits and stagnating wage levels for large parts of the population, promoting the idea that business and social value are aligned can be a hard sell. With popular trust in business declining across countries, there is a need to expand upon the Shared Value argument.  The discussion must start with shared values, not just Shared Value, as basis for building a vision of an economic system that works for all people, the planet, and business.

Where next?

Shared Value had its impetus as a counterpoint to the idea that there is a fundamental trade-off between businesses doing good (socially) and businesses doing well (commercially). Since that time a lot has been achieved in terms of changing mindsets and giving life to related concepts and initiatives like social entrepreneurship or B Corps. Yet, I fear the field is heading toward the opposite extreme of making a uniform case for Shared Value without addressing some of the still unresolved issues outlined above.

In order to avoid such an extreme, we should publicize and learn from companies’ experiences (both successes and failures) to date; we should involve more diverse voices to create a richer discussion, particularly around our understanding of the social value part of the equation; and we should be open to the evolution of the idea of Shared Value in order to adapt to changing global realities. It is this type of Shared Value creation that I, and we as Oxfam, look forward to contributing to.

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