The following is an essay of the article “Creating Shared Value” by Michael E. Porter and Mark R. Kramer. The purpose of this article is about recreating capitalism. Companies only cared about profit maximization. This article discusses how businesses have separated themselves from social progress. The company’s focus in participation in creating shared value should be on health, nutrition and fair trade. According to Porter & Kramer (2011) “Capitalism as an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and building wealth”.
Companies have been acting for themselves and not the society as a whole. Companies must reverse this and not just act on profit, but create a shared value. According to Porter & Kramer (2011) “The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.” Shared value is increasing the connection between the societal and economic progress.
There are several issues this article addresses such companies growing at the expense of the community. Companies are living in the past on how to apply the shared value of creation approach. Companies are depleting natural resources, relocating overseas for cheaper labor and putting stress on the communities in which they are located. Businesses have separated business and society and must find a way to combine the two back together. Shared value is intertwining with the company’s success and the community’s success.
The company has prospered at the expense of the community. Companies can create shared value by meeting the needs of the society by improving existing markets and creating markets that meet the needs of the society. Companies can also create supportive clusters where the company is located. By using shared values it will reconnect the company’s success with the improving the society (Porter & Kramer, 2011). The largest society needs that are not met in the global economy are health, housing, nutrition, help for elders, financial security and environmental damages.
Companies are beginning to use shared value to reconnect them with the society. Wal-Mart reduced their packaging and rerouted their trucks which in turn lowered carbon emissions and saved Wal-Mart $200 million in costs. Coca-Cola and Dow Chemical have reduced their water consumption, which has resulted in less water and decrease our natural resources.
Companies have cut wages, reduced benefits and moved their companies overseas for lower wage costs. These cuts result in lower productivity. Johnson & Johnson helped employees stop smoking and started other health wellness programs, which in turn has saved the company $250 million in health care costs.
Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business Review, 89(1/2), 62–77. McConnell, C.R., Brue, S.L., & Flynn, S. M. (2012). Economics (19th ed.) New York, NY: McGraw-Hill/Irwin.