business Shared Value

In 1970, Nobel laureate Milton Friedman wrote an article in The New York Times called “The Social Responsibility of Business is to Increase its Profits.” The article lambasted social responsibility programs as “hypocritical window-dressing” – small, well-intentioned gestures that The New York Times more recently compared to “the modern equivalent of John D. Rockefeller handing out dimes to the common folk.” While that may have been true at the time, Harvard Business School Professor and business strategist Michael E. Porter has a different take on social responsibility and business, called “shared value.” At the core of the “shared value” concept is the principle that “the ability to address societal issues is integral to profit maximization instead of treated as outside the profit model.” GE has demonstrated this concept in action with their successful “ecomagination” program, which features products that deliver significant environmental benefits versus previous designs. Jeffrey R. Immelt, G.E.’s chief executive maintains that “We did it from a business standpoint from Day 1…It was never about corporate social responsibility.” Similarly, accounting software giant, Intuit, actively serves low income populations. According to founder and chairman, Scott Cook, it’s not a matter of social responsibility; rather, “I look at it as the business we’re in.” But not everyone agrees that social responsibility should be woven into the strategic fabric of business, even as shared value. Key arguments:

In favor of socially responsible business

· No business succeeds in a vacuum. The reliance of business on the rest of society creates an obligation for businesses to operate as responsibly as possible.

· The disproportionate power of business in society amplifies its obligation to operate responsibly.

· Integrating social responsibility into strategic planning is the only way to ensure that businesses will give the obligation the priority it deserves.

· Social responsibility not only enhances the image of businesses, but also creates a more positive, favorable environment for employees.

· As more businesses are trending toward social responsibility, NOT participating could have a negative impact on profitability.

Against socially responsible business

· If social responsibility programs are not the most profitable use of company resources then they violate management’s duty to maximize shareholder returns.

· Business owners should have the right to decide how (and if) they want to support socially responsible programs with the profits that their business yields for them. The business should not make that decision and spend that money before distributing profits.

· Prioritizing social responsibility or even shared value could cause a business to miss more significant profit opportunities.

You decide

· Do you believe businesses should actively pursue social responsibility, or shared value opportunities?

· How could small businesses incorporate social responsibility into their planning and management?
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