'Corporate shared value' trumpeted

"Corporate shared value" can be a new capitalist model for companies to make money as well as to cope with social needs, Harvard Business School guru Michael Porter said yesterday.

Corporate social responsibility (CSR) has evolved further into "corporate shared value", he said at an exclusive World Economic Forum session. It is a "responsibility" for companies to be good corporate citizens, but there are limitations on their ability to give away profits or make re-distributions or donations.

CSR is an activity separate from the "core business".

His groundbreaking notion of shared value leads to a bigger opportunity for business on "how we practise capitalism."

Porter cited an example of a food company developing a successful product but ending up with the result that people eat too much.

"But what if the company developed a product which also meets the need for nutrients? It is about transformation of the mindset."

He also gave an example of the pharmaceutical industry, which used to produce drugs for 400 million to 500 million people who can afford to pay in the developed economies.

"Now they are re-engineering for a global population of 8 billion ... to look at the production and supply chains."

Porter said now all companies are apt for shared value. There are three features to shared value - products with social dimensions, value chains and procurement, and business cluster eco-system.

The business guru, famous for his work on national and corporate competitiveness, cited the case of Nestle buying coffee from small farmers. In the past, it used to try to bargain for the lowest prices.

Now the process has become more engaging with offers of technical know-how and support for farmers to become efficient, achieve greater yields and quality.

"Before, CSR was fair trade to pay more for something, but it's not sustainable. Corporate shared value is about acting as a capitalist. It is not a charity but something for a better capitalist."

He underscored the "beauty of capitalism" in the way that is scalable and pays for itself, and if it doesn't work it goes out of business.