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Sustainability / Management And Training
June 2014 Feature 5

Business Sustainability Through Shared Value

Finding benefical ways to address the needs of people, profit and planet.

June 06, 2014
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Our industry has continued to embrace “green” or “environmentally-friendly” products, but there is a lot more to what defines sustainability.

It is time to look beyond purely environmental factors and begin to understand other key aspects that drive sustainability improvements within the cleaning industry.

Business sustainability focuses on the balance and interdependence of three areas referred to as the three “Ps” of sustainability: People, planet and profit.

The balance between all three is sometimes referred to as the triple bottom line, where all are positive in order to be considered a “sustainable” business.

This article will address how people can benefit while businesses succeed as we maintain our environmental consciousness.

Addressing People

People are a significant contributor to sustainable development, and considering the impacts to human capital and communities is important to the overall success of any business.

One way that social issues are often addressed is through the concept of social justice.

Social justice is defined by the United Nations as “the fair and compassionate distribution of the fruits of economic growth.”

Candidly, I am not a proponent of this concept.

Who determines what is fair and compassionate?

What are the benefits to a business to distribute, or redistribute, the fruits of its economic growth?

From the perspective of a business owner, I think there is a far more productive viewpoint to consider — that of mutual benefit.

Common Desires

What is a common desire of all stakeholders in a business?

Employees, customers, owners, partners, vendors and regulators should all want to make a positive impact on our community through business growth.

Businesses have been suffering from a general lack of public trust and credibility for many years.

They are seen as seeking short-term gains and quarterly profits frequently at the expense of society at large.

This is an unfair view since most often businesses attempt to grow but merely manage to survive due to growing costs related to social, environmental and regulatory requirements.

The best way we can correct this misperception is to call attention to the immense value our industry provides to our customers, our shareholders and our communities.

Shared Value

Finding value that we can share is the key.

Shared value is implicitly more beneficial to stakeholders.

In shared value, businesses create economic growth in a way that must also create increasing value for society by addressing its needs and challenges.

Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

Shared value places the responsibility for “doing good” on the side of business and managers.

Companies create measurable business value (again, this is economic value … or profit) by identifying and addressing social problems that affect their business.

The sustainability concept of shared value is based on the idea that both economic and social progress must be addressed using “value” principles.

Value is the relationship between benefits relative to costs, not just benefits alone.

Value creation is an idea that has long been recognized in business, where profit is easily understood as revenues earned from customers minus the costs.

However, businesses have rarely approached societal issues from the perspective of “value.”

Nostalgically we think back to the small town business running a tab for local customers, extending credit based on the good word of a neighbor or doctors making house calls.

In modern times, businesses have more often treated these societal or community issues as outside concerns, beyond their management or interest.

This has confused or hurt the connections between businesses and people.

The concept of shared value can be put to work as operating practices that increase the competitiveness of a company while at the same time advancing the economic and social conditions in the communities in which it operates.

Shared value links the two entities; they are mutually dependent upon each other just as the triple bottom line connects people, planet and profit.

In society, thinking in value terms is less common than in business.

Social organizations and government agencies seem to see success in terms of the benefits achieved or the money expended.

If governments and non-governmental organizations (NGOs) begin to think more in value terms, their interest in collaborating with business will inevitably grow.

NGO’s such as CARE and Save the Children have helped companies in the cleaning industry develop new or expand the markets for the products they sell.

The shared value concept will leverage the power of market-based competition in addressing social problems rather than turning to the “the fair and compassionate distribution of the fruits of economic growth” of social justice.

Shared value is relatively new as a formal concept and was defined in the Harvard Business Review article “Creating Shared Value” (January/February 2011), by Michael E. Porter and Mark R. Kramer.

Creating Shared Value

The authors identified three ways in which shared value can be created.

It can first be done by re-conceiving products and markets.

This means that markets are evaluated in terms of unmet needs or social ills, businesses then develop profitable products or services that remedy these conditions.

Second, businesses redefine productivity in the value chain; businesses increase the productivity of the company or its suppliers by addressing the social and environmental constraints in its value chain.

Third, shared value is achieved with local cluster development.

By this, a company strengthens itself in important geographic regions in ways that contribute to the company’s growth and productivity.

Shared value is not about redistributing value created through philanthropy or about including stakeholders’ values in your corporate decisions.

Shared value instead focuses on the creation of meaningful economic and social value by your company that is greater than the costs to both your business and society.

Ultimately, value > benefits > cost.

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