Organizations of the Future: How Can Companies Create Shared Value for Business and Society?

Why Is Creating Shared Value a Better Model Than Traditional CSR?

Discover the concept of Creating Shared Value (CSV). Learn how businesses can generate economic value by identifying and addressing social problems, creating benefits for both the company and society, and moving beyond traditional CSR.

Question

The idea of “Creating Shared Value” focuses on:

A. Maximizing profits with no regard for society
B. Disconnecting societal needs from business strategy
C. Identifying intersections between business and society to generate benefits for both
D. Prioritizing short-term shareholder wealth only

Answer

C. Identifying intersections between business and society to generate benefits for both

Explanation

The concept of Creating Shared Value (CSV) focuses on identifying intersections between business and society to generate benefits for both. This strategic framework, developed by Michael Porter and Mark Kramer, redefines the role of business in society.

The Core Principle of CSV

CSV proposes that a company’s competitiveness and the health of the communities around it are mutually dependent. It moves beyond the idea that social costs are a constraint on business. Instead, it views societal problems—such as poor health, environmental issues, or a lack of skilled workers—as business opportunities.

By addressing these problems through its core business model, a company can create “shared value”:

• Economic Value: By creating new markets, improving productivity in the value chain, or strengthening the local business environment.
• Social Value: By creating a positive impact on the societal issue it is addressing.

For example, a technology company could create shared value by developing educational software for underserved schools. This addresses a societal need (education) while opening up a new market for the company (economic benefit).

Why Other Options Are Incorrect

Maximizing profits with no regard for society (Option A): This describes a narrow, traditional view of capitalism that CSV directly opposes. CSV argues that ignoring societal needs is a poor long-term strategy.

Disconnecting societal needs from business strategy (Option B): CSV does the exact opposite. Its central thesis is that integrating societal needs into the core business strategy is the key to creating sustainable competitive advantage.

Prioritizing short-term shareholder wealth only (Option D): This is the concept of shareholder primacy, which CSV challenges. CSV promotes a stakeholder perspective, arguing that by creating value for society, employees, and customers, a company will generate more sustainable long-term value for its shareholders. It is about expanding the total pool of value, not just distributing it to one group.

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