The economic success of a company is directly related to its competitiveness. However, business logic makes it increasingly evident that no company can be successful if the community in which it operates is not successful.

"A company's competitiveness and the health of the communities in which it operates are strongly intertwined. A company needs a successful community, not only to create demand for its products, but also to provide crucial public assets and an environment that supports the business," say Michael Porter and Mark Kramer, in an article that made them the academic gurus on the subject.

"A community needs successful businesses that provide jobs and wealth creation opportunities for its citizens," they add.

With this approach, a concept that goes beyond social responsibility, philanthropy and sustainability is increasingly being coined.

This is Shared Value which, as defined by Porter and Kramer, focuses on identifying and expanding the connections between economic and social progress. In this way, the generation of business economic value is related to and depends on the creation of value for society.

But how do you create shared value? There are three different ways to do it: by reconcile products and markets, by redefining productivity in the value chain, and by building industry support clusters around the company's facilities.

"Each is part of the virtuous circle of shared value; increasing value in one area increases opportunities in the others," the authors add.

The essence of Porter and Kramer's theory is that capitalism has failed to address the most important needs of society, such as health, welfare generation, nutrition, environmental protection and preservation.

As a result, and despite the fact that companies have made their products more sophisticated, they have lost opportunities for innovation and growth by losing focus of society's real needs. It is therefore necessary, and almost essential, to reconceive products and markets, because "meeting needs in underserved markets often requires redesigned products or different methods of distribution".

Redefining productivity in the value chain means understanding that "society's problems can create economic costs in a firm's value chain". For this reason, it is urgent to internalize these problems and address them, in order to benefit society and the company.

Local supplier systems bring business benefits such as reduced transportation costs and supply times. And among the social and collective benefits are: the reduction of carbon emissions by reducing mobility needs, and the contribution to the economic development of communities, generating greater brand recognition by having a closer relationship with the community. By all accounts, it is a win-win relationship.

Building clusters improves company productivity because "capable local suppliers foster greater logistical efficiency and easier collaboration. Stronger local capabilities in areas such as training, transportation services and related sectors also raise productivity. Conversely, productivity suffers without a supportive cluster.

For all of the above, conducting business by integrating the concept of shared value into the strategy allows for the possibility of innovations in markets, products and configurations of the value chain of companies, ensuring long-term economic profits and creating benefits for society.

"Shared value holds the key to unlocking the next wave of innovation and growth for companies. It will also reconnect the company's success with that of the community in ways not perceived during the era of narrow approaches to management, short-term thinking and growing separations between the various strata of society," insist Porter and Kramer.


Excerpt from the article published by the Colombian newspaper El Espectador