Is purpose shared value? SVP CEO Helen Steel weighs in on the discussion. Originally published on LinkedIn.
Earlier this month, I attended the 2019 Shared Value Leadership Summit in Boston; joining the global shared value community in exploring the shift towards purpose-driven outcomes through the adoption of shared value.
In his keynote address, Professor Michael Porter, co-creator of the shared value concept, went so far as to suggest that purpose is shared value, prompting lively debate. What exactly does it mean to be a purpose-led organisation, and what distinguishes shared value from other purpose-led approaches?
Purpose has many faces
Unlike shared value, purpose has evolved into a ubiquitous term to reflect a multitude of well-meaning business initiatives. In this way, it can be difficult to define, and open to interpretation and manipulation by companies and consumers alike. By contrast, shared value has very specific terms, which Professor Porter summarises as creating a “synergistic connection between social impact and excellence in company performance”. Whilst purpose guides a company’s decision-making, shared value is the business model upon which it exists. If purpose is the ‘why’, then shared value is the ‘how’.
Doing well by doing good
Another big difference between purpose and shared value is the connection between social contributions and the bottom line. Shared value is ultimately a reworking of capitalism, to transform business models into cyclical value chains which “meet social needs while simultaneously creating wealth and prosperity”, as Professor Porter describes it. However, purpose-based initiatives can be entirely virtuous, bearing no specific impact on a company’s long-term profitability or resilience.
Keeping good company
No company operates in isolation; each exists in an ecosystem where external conditions may curtail its markets and restrict the productivity of its suppliers and distributors. These conditions are beyond the control of any single purpose-driven company. As such, shared value prompts the formation of cross-sectoral partnerships between government, not-for-profits and businesses in a way that other purpose-led approaches do not. By using our collective capacity to solve shared problems, we are not only multiplying our outcomes, but we are also future-proofing them.
Good marketing versus genuine good business
As purpose emerges as a lever for increasing customer loyalty, sales and brand equity, purpose-washing has become rife. The ‘purpose’ label can be tokenistic; and if not, it can appear to be. Moreover, as Professor Porter points out, companies’ purpose statements often neglect to explain howthey are delivering on their purpose, making it difficult to measure. Conversely, the collaborative nature of shared value makes companies more accountable for achieving dual social and financial returns, when reporting to their stakeholders.
A means for stimulating innovation
Purpose and shared value drive innovation differently. Corporate purpose predominantly inspires creativity by building a culture where employees become invested in the success of a business because they are personally invested in what it stands for. Meanwhile, innovation is intrinsic to the very act of creating shared value; where staff are moved to discover new markets, reimagine their products and services and push the boundaries, in line with their ambitions to help create a better world.
We look forward to further considering the theme of Business on Purpose at the 2019 Shared Value Summit Asia Pacific held in Sydney 18-20 June, where the region’s shared value leaders will convene to advance this important conversation.