Shared Value – The Thing With Growth vs. Development

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At a meeting this week organized by the Bureau of European Policy Advisers, a think tank affiliated with the European Commission, we discussed raising awareness "for systemic risks and global resilience". Unlike many conferences in Brussels, this was an exchange of scary insights into how the global community is set to eventually go off the rails.

Jack Jacometti, a former Shell colleague of mine, set the tone by showing a graph from the New Scientist in 2008 called "How our economy is killing the earth." Hannes Kuntz from the Institute for Integrated Economic Research said in his talk that the expectation of continued growth – a return to the situation before the 2008 financial crisis – is based on a fallacy. Natural resources are dwindling, technology is not the silver bullet people see it as, and the availability of credit is finite. Kuntz said to me he will test in research among informed publics the societal and political acceptability of the notion that we need to learn to live in a no-growth economy.

Tom Brookes from the European Climate Foundation, a meeting participant, asked some pertinent questions: Why is it that we define individual success as our ability to accumulate wealth, and why has the notion of societal progress become so closely tied to the development of GDP (gross domestic product)? What happens to stability if we continue to deplete the planet's resources? And is there anything that can be done? Which politician would have the courage to tell voters that their quality of life – as measured in economic terms – will have to deteriorate if we are to save the planet for future generations? Are there really other values that can replace growth as a measure of progress, and wealth as a source of personal satisfaction? Sustainable growth is biologically impossible, said our host, Anne Glover, chief scientist adviser to the president of the European Commission. Another participant said that while continued growth might be untenable, development may come in many shapes and flavors. The situation is dire. I wondered, what can companies do?

My view is that business can do little in isolation, except expand on the work some business thinkers and progressive corporations are doing on creating shared value. In their landmark paper in the January 2011 issue of the Harvard Business Review, Michael Porter and Mark Kramer raised the possibility of redefining the way corporations look at value creation, beyond shareholder value. They wrote: "The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress…. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center.

We believe that it can give rise to the next major transformation of business thinking." Some companies have embraced the shared value concept, but they are still outliers. Ideas continue to emerge, so there might be some movement – even though "the Market" doesn't see far beyond de-risking when it comes to a corporation's obligation to address societal concerns. CSR isn't much help, since so much of it happens outside the real business of the business. Let's face it - companies are the building blocks of the modern world. But can companies change the world? Probably not. The world will not change positively, though, unless companies embrace shared value creation. The Economist's Schumpeter column this week examines how to go from narrow, short-term profit maximization aimed at satisfying shareholders to long-term, purpose-focused ways to run companies – and incentivize those who run them – to secure development in the interest of all stakeholders. Like so often, the magazine ends up on the fence. Here's another though: the art of management – the structured processes to run large firms – is probably one of the most important inventions in the past 100 years or so. So says Gary Hamelin one of the best overviews of business challenges I've seen in recent years. Bottom line: what can CCOs do to help their companies understand and address these and similar issues? As I see it, the challenges are, firstly, the old truth about the limits to growth (the Club of Rome's report is 40 years old this year). Secondly, add the new truth that unless we address the resource limits (seen most clearly in the food, water and energy nexus), we will see systemic collapse.

Thirdly, how do we interpret and act on the insight that with the present crisis of leadership – both in business and in politics and government – who will develop an attractive vision for a different future? Probably the answer comes in many parts. My proposal is that those CCOs with the gift of some foresight and a willing leadership must start to develop a different narrative for the business world. And business must encourage politicians to be more long-term in their thinking, and urge them to craft visions that appeal to a sense of civic responsibility rather than just push government for some comfortable version of status quo. Smart companies have already learned to treat consumers like citizens. But ironically, in parallel, governments more and more treat citizens like consumers – of entitlements and services. A new sense of shared destiny is needed, in big ways and small ways. As George Soros said more than 10 years ago, "a global economy needs a global society". Companies, and the CCOs looking to implement the best thinking such as the New Model, should in my view accept the responsibility they have as spokespeople for the bedrock of civic society – they are not just representing economic entities built to make money by meeting customers' needs. Until we get there, let's start with one idea. Let us look at the data, and no longer confuse progress with growth. Let us also not forget that development – as opposed to growth – comes in many guises, including human development and the satisfaction of needs that require no resources. An appeal to civic responsibility will be fundamental to create what a new narrative needs to aim for – a sense of shared meaning. Shared meaning in turn would create community – a community of purpose. And that would help shape the sociopolitical space that is necessary for the changes we must aim for. The alternative is frankly too scary. Climate change causing droughts, storm devastations, food shortages, riots, wars, societal chaos. Resource competition – including competition for access to potable water – becoming the cause for war. Societal instability leading to socioeconomic paralysis, and blocking any avenue for positive change which today is still open.