Measuring Shared Value

Measuring Shared Value
How to Unlock Value by Linking Social and Business Results

Michael E. Porter, Greg Hills, Marc Pfitzer, Sonja Patscheke, and Elizabeth Hawkins

ABOUT THIS REPORT
The genesis of this article occurred at the FSG-hosted Shared Value Summit in Cambridge, Massachusetts in June 2011 where sixty company representatives and co-authors of the Harvard Business Review article“Creating Shared Value,” Michael E. Porter and Mark Kramer, identified measurement as a key driver of shared value adoption. Nestlé, Intel, InterContinental Hotels Group, and the Rockefeller Foundation committed to work with and support FSG in developing this article on measuring shared value. Insights were drawn from a systematic literature review, in-depth interviews with featured companies, andFSG’s work on shared value with dozens of corporations.

AUTHORS
Michael E. Porter Professor, Harvard Business School Greg Hills Managing Director, FSG Marc Pfitzer Managing Director, FSG Sonja Patscheke Senior Consultant, FSG Elizabeth Hawkins Associate, FSG

For more information, please contact: Greg Hills: Greg.Hills@fsg.org Marc Pfitzer: Marc.Pfitzer@fsg.org

Measuring Shared Value: Howto Unlock Value by Linking Social and Business Results by FSG is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License. Permissions beyond the scope of this license may be available at www.fsg.org.

Measuring Shared Value How to Unlock Value by Linking Social and Business Results

M

ore and more, companies are creating shared value by developing profitable businessstrategies that deliver tangible social benefits. This thinking is creating major new opportunities for profit and competitive advantage at the same time as it benefits society

by unleashing the power of business to help solve fundamental global problems. Despite the widespread embrace of the shared value concept, however, the tools to put this concept into practice are still in their infancy. Inparticular, a new framework for measurement that focuses on the interaction between business and social results is among the most important tools to drive shared value in practice.

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Even the companies that are most advanced in pursuing shared value today lack the data they need to optimize its results. Companies cannot know the extent to which they are creating shared value if they do notmeasure their progress on social objectives and, importantly, the degree to which social performance improves economic value for the business. When companies do not understand or rigorously track the interdependency between social and business results, they miss important opportunities for innovation, growth, and social impact at scale. Companies today track and report myriad financial, social,and environmental metrics, drawing in part on efforts by the social sector to develop more sophisticated methods for evaluating social impact. There is also a nascent integrated reporting movement that aims to add sustainability measures to financial statements. Still missing, however, is a framework to link social progress directly to business success, and vice versa. Efforts to understand thelink between business performance and social value creation are just beginning.

When companies do not understand or rigorously track the interdependency between social and business results, they miss important opportunities for innovation, growth, and sustainable social impact at scale

Measurement approaches that link social and business results are vital to unlocking shared value for companiesand scalable solutions to social problems. Effectively measuring shared value starts with a well-developed shared value strategy. To develop such a strategy, companies must identify key social issues to focus on, plan the relevant business activities involved, and model anticipated business and social benefits relative to projected costs. Shared value measurement, in turn, assesses progress...