Michael Porter suggests that sustainability can be achieved, or at least supported, by a shift in business focus in order to create shared value. Porter describes shared value as the refocusing beyond the simple pursuit of short-term profit and towards a model which also values sustainable business practices and social welfare. Porter suggests that shift in perspective will benefit businesses because it will lead to improvements in the wellbeing of communities which businesses rely on, which will in turn lead to more sustainable supply chains and an expanded consumer base. This shift in perspective will supposedly benefit society because it will lead businesses to recognize the incentives of sustainable investments in a more effective manner than is possible through government mandates or voluntary corporate altruism.
While shared value sounds appealing, I am not yet convinced that it is as powerful a tool as Porter predicts. For one thing, I have trouble conceiving of shared value as the revolutionary a paradigm shift that Porter describes. Now, to be clear, I respect the ideals of shared value and agree with the premise that businesses should recognize the incentives of investing in social and environmental welfare. However, the concept that it is necessary to look at social impacts beyond short-term profits in order to create a long-term sustainable business model has been around for a long time, from Fordism to the triple bottom line. Porter finds current examples of positive corporate decisions motivated by shared value, but these examples have existed for decades and are still outweighed by the harm caused by those that ignore shared value in order to prioritize short-term profit maximization. The fact is that idealists, pragmatists, and cynics have all been expressing variations of this idea since capitalism was invented and yet short-sighted corporate greed remains a strong force in the world. Thus, I am skeptical that Porter’s well intentioned new articulation of what I consider to be an old idea, could lead to such different results than have occurred in the past.
Another flaw that I can see with shared value is that it doesn’t seem to provide a clear definition of what values should be shared, or how these benefits should be prioritized. While I can understand the reasons for this (sustainability is a notoriously broad and hard to pin down concept), I fear that it could lead to counterproductive ends if a corporation is able to gain accolades for increasing shared value in one arena while simultaneously eroding shared value in other area. Porter uses Walmart as an example of a company which led a shared value effort to reduce shipping costs, leading to environmental and societal benefits. I’m sure that Porter chose to use Walmart as an example because of its notorious reputation among liberals for its environmental practices. The implied argument is that if shared value can persuade Walmart, then it can persuade anyone. But tell that to any liberal and they’ll likely respond with a long critical list of Walmart’s labor practices. And therein lies the fundamental shortcoming with shared value: if we can’t agree on what sustainability means or what we value, then this perspective can be just as much of a distraction as it can be a benefit.
Porter might respond that if shared value is a limited tool without explicit direction and prioritization of values, then proper government regulation can help to achieve sustainability. Porter describes the kinds of government regulation which he feels promote shared value as those that provide incentives and set ambitious goals for corporations to achieve but do not limit innovation by mandating specific methods to reach these goals (which he fears would stifle innovation). While I agree with Porter that incentives can sometimes be the most appropriate tool for lawmakers to use, I feel that he is wrong to say that they are always less appropriate than mandates. Furthermore, I fail to see how this is a revolutionary concept. Regulators have been setting these types of guidelines for years, including emission reduction targets, pollution trading mechanisms, incentives, tax breaks, and prizes. Sometimes they are successful and sometimes they are not. Governments have also issued many mandates on corporations over the decades which Porter would predict would stifle shared value. Again, sometimes these were successful and sometimes they were not. Take, for example, the mandates over the years requiring automobiles sold in the United States to include seatbelts. Porter would have predicted that this rule would be too inflexible a prescription and would limit public value, but after 40 years of implementation the consensus is still that seatbelts save lives without stifling automotive innovation. I’m not saying that Porter is totally incorrect in his advice about what kinds of regulation work best, but I do think that it’s much more complex and nuanced than Porter lays out.
Of course, Porter doesn’t claim that shared value is a silver bullet that will solve all the world’s problems overnight, so perhaps I am being too harsh on the concept. The real question is whether embracing shared value could potentially lead a better system than we have today without causing any undue harm. The idealist in me hopes that this is the case, but I’m still going to keep working hard to support sustainability in other ways because the pragmatist in me is pretty sure that we’re going to need to do a whole lot more to solve a problem as big as this one.