By M Muneer
For a while now, especially post the 2008 financial meltdown, most economists and management gurus have been questioning the merits of capitalism as we know it. From the famous proclamation of Peter Drucker, “The business of business is to make money”, to the essence of corporate strategy as maximising shareholder value, capitalism has been like an aeroplane that refuses to land—but it will run out of fuel sooner or later. The widening income gaps certainly forecast that eventuality.
This idea of creating shared value invites businesses to transcend the traditional boundaries of corporate social responsibility (CSR) by integrating societal good into their core operations. Unlike CSR, which focuses on philanthropy detached from the profit-driven core of business, shared value allows companies to address pressing social issues while driving economic gains.
Many CEOs brush this idea aside whenever a discussion emerges using the Drucker statement and terming utopian. Besides, most are not clear about working on creating shared value in the business context, barring a handful of conpanies in India. There are many global enterprises that have successfully implemented this transformative approach.
At its core, shared value is about recognising that business success and societal progress are inherently intertwined. Businesses do not operate in a vacuum; they thrive in robust, healthy communities. When businesses focus on meeting societal needs—whether through innovation, addressing environmental concerns, or enhancing consumer welfare—they create a ripple effect of positive outcomes that extend far beyond the Quarter-Se-Quarter-Tak (QSQT) race.
Take the case of Mastercard’s Center for Inclusive Growth. Launched to combat the pervasive issue of financial exclusion, Mastercard sought for and provided financial tools and services to 500 million people globally by 2020. They aim to reach 500,000 small businesses in India by 2025 through the Strive India programme. By committing $432 million in grants to 186 organisations, they have helped promote sustainable, equitable economic growth for millions across 104 countries.
Through this initiative, Mastercard has not only advanced financial access for millions but also reinforced its brand as a socially conscious leader, proving that doing good and doing well can indeed go hand in hand.
Similarly, SodaStream has demonstrated how shared value can meet consumer needs while addressing societal challenges. Their innovation allows people to make sparkling water at home, reducing reliance on single-use plastic bottles. By aligning product innovation with environmental sustainability, they have built a business model that works well for all.
There are many other examples—from Mahindra to IKEA to Patagonia—but what is more important is to figure out the right approach to shared value for implementation. It requires rethinking business models, reimagining products, and a company-wide cultural shift.
The first step to shared value creation is to pinpoint societal challenges that align with the company’s strengths. Companies should ask what unique resources or expertise they can use to address societal needs. For Nestlé, this alignment led to the Nestlé Waters Project, which addresses the global water crisis. Recognising that access to clean water is vital both for society and their operations, Nestlé focussed on sustainable water management, benefiting communities and safeguarding their long-term supply chain.
Companies must also rethink their core mission. Purpose should not reflect profitability but a commitment to addressing social challenges. Unilever, for example, embarked on its Sustainable Living Plan with the goal of doubling its business while reducing its environmental footprint. This bold mission drove the company to develop innovative products that are aligned with environmentally-
conscious consumers, all while positioning it as a leader in sustainability.
Shared value is not a solo endeavour; it thrives on collaboration with employees, customers, suppliers, governments, and communities. By seeking inputs and building partnerships across the value chain, companies can create solutions that benefit all parties. Danone’s One Planet. One Health initiative exemplifies this by engaging farmers, non-governmental organisations, and local communities to build sustainable agricultural practices that benefit both the environment and the enterprise’s supply chain. Pepsi tried a similar initiative in India to improve the yield from potato farming for their Lays brand.
Innovation plays a major role in creating shared value. Whether it’s creating new products or redesigning existing ones to address societal challenges, companies can tap into vast new markets by innovating with purpose. Johnson & Johnson’s Reach Every Mother and Child initiative is a testimony to this approach.
By developing affordable healthcare solutions for underserved populations, the company has improved public health outcomes while expanding its market presence in emerging economies, or as CK Prahlad advocated, the bottom of the pyramid.
Companies must also re-engineer their value chains to truly realise shared value. This can mean sourcing raw materials more sustainably, improving labour practices, or minimising environmental impact. Levi Strauss & Co., for instance, transformed its supply chain through the Water<Less initiative, which drastically cut water usage in the production of its jeans. By doing so, it has saved over three billion litres of water while boosting profitability and consumer trust.
To ensure credibility and demonstrate the tangible benefits of shared value, companies must measure and report on their social and business impact. The Mastercard initiative discussed earlier is a good case in point. They regularly publish progress reports on financial inclusion, showing stakeholders the real-world effects of their initiatives. Impact measurement is much easier today and this could become a normal practice in annual reports. Enterprise boards can play a key role taking a leaf out of the environmental, social and governance (ESG) reporting being mandated by many regulators across the world.
Maximising shareholder value had triggered the failure of capitalism as we know it and perhaops the shared value concept can remodel its future. Research from Harvard Business School reveals that firms adopting shared value strategies report stronger long-term performance.
When profit meets purpose and impact fuels innovation, the real magic happens—because everyone benefits. Corporations might just about save capitalism from extinction by rephrasing Druckerism: The business of business is now business for good!
The writer is Fortune-500 advisor, start-up investor and co-founder of the non-profit Medici Institute for Innovation. X: @MuneerMuh.
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