The Journal The Authority on Global Business in Japan

ACCJ EVENT | SOCIETY

May 2014
Shared Value
A model for sustainable social and economic progress
By William R. Bishop, Jr.

Shared value is not about sharing the value the company has already created through philanthropy, charity, or corporate social responsibility (CSR). Rather, the strategy sits at the intersection of a company’s assets and expertise, unmet social needs, and compelling business opportunities.

Thus, shared value is a management approach by which companies gain a competitive advantage and create economic value for the company by addressing unmet social needs with a sustainable business model.

Companies have expanded their CSR activities considerably in recent years. Nevertheless, there will always be a need for companies to reach out to their communities and beyond to help through volunteerism, by making donations of cash, goods, and services, as well as through other CSR activities.

However, these kinds of activities are typically treated as outside the core business interests of the company. Businesses have rarely approached societal issues from a value-creation perspective. In the social sector, thinking in terms of value creation is even less common. Social and non-government organizations (NGOs) as well as government entities often see success solely in terms of the benefits achieved or the money spent.

As governments and NGOs begin to identify the connection between economic and social outcomes, their interest in collaborating with the business sector will inevitably grow.

Shared value can thus be defined as policies and operating practices that enhance the competitiveness of a company, while advancing the economic and social conditions in the communities in which it operates.

Shared-value creation focuses on identifying and expanding the connections between societal and economic progress. The concept rests on the premise that sustainable economic and social progress is best addressed with an innovative business model.

According to the principal advocate of the concept, Michael Porter, professor at the Institute for Strategy and Competitiveness, Harvard Business School, there is an ever-growing awareness of major societal challenges.

Porter believes business is facing growing scrutiny as the cause of, or a contributor to, many of these problems. CSR efforts are greater than ever, but the legitimacy of business has fallen.

Governments and NGOs lack sufficient resources and capabilities to fully meet social challenges. Thus, a new business model is needed. “Shared value holds the key to unlocking the next wave of business innovation and growth. An ongoing exploration of societal needs will lead companies to discover new opportunities for differentiation and repositioning in traditional markets, and to recognize the potential of new markets they previously overlooked,” he said.

Whether a venture is shared value or simply business is, in part, determined by the intent of an initiative. Shared value starts with the intent to address an unmet social need by applying an innovative business model with the goal of addressing that unmet need through sustainable value creation.

In a globalizing world economy, and as the shared-value concept evolves, the priority of helping to address urgent unmet social needs, while creating value through innovative business models, will become increasingly common.

At the ACCJ Healthcare Committee luncheon on February 21, Gary Cohen, executive vice president of Becton, Dickinson and Company (BD) indicated that the largest example of BD’s application of shared value began in the mid- to late-1980s, when advocates were raising, to healthcare workers, concerns about the risk of HIV and hepatitis transmission from occupational injuries such as needlesticks.

Despite these early developments, interest in adopting safety-engineered devices (needles with integral features to protect health workers) was low. Leaders in hospital settings didn’t regard this issue as a priority, and nurses were often blamed if they experienced an injury while performing their patient-care responsibilities.

In this market context, BD recognized that a strategy focused only on product development wouldn’t be sufficient to address healthcare-worker safety risks. Thus, BD needed a strategy that would increase awareness of the risks, educate health workers on how to protect themselves, and motivate adoption of products and procedures that reduce the risk of sharps injuries.

BD, as the world’s leading producer of needles, embarked on a comprehensive strategy to address these risks by collaborating with activists, creating training programs with medical associations, funding injury surveillance systems, and investing in development of a broad range of safety-engineered devices to protect healthcare workers from injuries.

To accomplish this, the company considered three complementary approaches to shared value:
• Developing new products
• Establishing a new approach to engaging and collaborating with a broader constituency of key stakeholders that included awareness building, advocacy, data gathering, and policy changes
• Recapitalizing BD’s manufacturing base

BD’s shared-value strategy—first implemented in the United States—contributed to reductions in sharps injuries to health workers (a 51 percent reduction among nurses in the United States from 1993 to 2001), revitalization and differentiation of BD’s core needle-based products and businesses, and creation of significant sales growth and shareholder value.

In addition to advocates and clinicians recognizing the importance of using safety-engineered devices, policymakers in many countries have taken steps to mandate their use.

Laws requiring healthcare facilities to use safety devices in place of conventional needles were passed in 2000 in the United States, 2011 in the European Union, and 2012 in Taiwan (the first country in Asia to mandate the use of safety-engineered devices whenever possible).

Cohen summed up the future outlook for companies in a globalized economy: “The most successful companies in the future will not only be leaders in innovation, growth, competitiveness, and profitability; they also will be distinguished by their positive contributions to society in areas such as poverty elimination, environmental stewardship, health of individuals and populations, and ethical standards of governance.

“By doing so, they will enhance global prosperity and stability, as well as their own sustainability as enterprises.”

Bishop

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William R. Bishop Jr. is chair of the ACCJ Healthcare Committee and director of corporate affairs at Nippon Becton Dickinson Company, Ltd.

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