Building Social Capital

It is the core mission of all nonprofit efforts (a good paper about social capital is here) and seeing the forprofit sector embrace it at a deeper level—under the rubric, ‘creating shared value’—is inspiring, as this article from Stanford Social Innovation Review does.

This would be a good area of research for nonprofits seeking corporate grants.

An excerpt.

“A growing number of multinational corporations—including Unilever, Intel, and Wal-Mart Stores—are embracing a new way of doing business, one that puts societal issues at the core of the company’s strategy and operations. This approach differs from traditional “corporate social responsibility,” which is often built around compliance with environmental and social regulations, improving the corporation’s reputation, and unfocused charitable giving to a variety of causes frequently unrelated to the business.

“The new approach to doing business, dubbed “creating shared value” by FSG co-founders Mark Kramer and Michael Porter, extends well beyond those practices. (See their cover story, “Creating Shared Value,” in the January-February 2011 issue of the Harvard Business Review.) Shared value is created when companies generate economic value for themselves in a way that simultaneously produces value for society by addressing social and environmental challenges. Companies can create shared value in three distinct ways: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations.

“Shared value taps the capacity of global businesses to solve social problems, just as social entrepreneurs do through smaller-scale enterprises. Porter and Kramer believe that widespread adoption of a shared value approach could reshape capitalism and its relationship to society. They also predict that it will drive the next wave of innovation and productivity growth in the global economy as it opens managers’ eyes to immense human needs that must be met, large new markets to be served, and the internal costs of social deficits—as well as the competitive advantages available from addressing them.

“The idea that companies should create shared value carries many implications that corporate leaders are only beginning to understand, which is why we brought together corporate practitioners to share their experiences and discuss evolving practices. On Dec. 8, 2010, executives from 10 major corporations gathered at Goldman Sachs’s New York City headquarters to discuss how their companies were implementing shared value. They were brought together by FSG, the Stanford Social Innovation Review, and the Committee Encouraging Corporate Philanthropy (CECP). Some of the companies—such as Cisco Systems, Hewlett-Packard, and IBM—have been taking a shared value approach for some time. Other companies—such as Western Union, Alcoa, and InterContinental Hotels Group—are new to the approach. But all of the participants—which also included Goldman Sachs, Dow Chemical, Medtronic, and PG&E—are enthusiastic about the results and prospects for the future.

“The candid discussion, led by Kramer and FSG managing director John Kania, was wide ranging and posited a number of interesting shifts in the way companies address social problems when they pursue shared value. It profoundly changes the relationship between companies and nonprofit organizations, creating a mutual interdependence and heightened accountability for delivering results. Shared value engages companies more deeply in social issues, holding the promise of far greater resources and a multitude of innovations to address today’s most urgent needs. Above all, it accelerates and expands the potential for social impact as major corporations launch initiatives that reach millions of people at a pace and scale that have rarely been achieved by the nonprofit sector. At the same time, as the participating executives acknowledge, shared value demands a delicate balance between social needs and corporate profitability that is not easily achieved.”