The creation of shared value: Reconnecting business and society: An overview

• Date: 01 March 2019
• Author: John McManus
• DOI: http://doi.org/10.1002/jsc.2251
• Published date: 01 March 2019

OVERVIEW ARTICLE

The creation of shared value: Reconnecting business

and society: An overview

*

John McManus

Suffolk Business School, Suffolk University, Ipswich, United Kingdom

Correspondence

John McManus, Suffolk Business School, Suffolk University, Neptune Quay, Ipswich, IP4 1QJ, United Kingdom.

Email: professormcmanus@gmail.com

Businesses throughout the world share a common goal of creating

profit and in the main that is profit for the firm's shareholders and

financial backers. Nevertheless, businesses do not operate in a profit

vacuum so they should also create value for other stakeholders and

the wider society. Morally business has an obligation to be relevant to

society and help advance societal needs and opportunities for

employees and other stakeholders. In the last decade, we have wit-

nessed a wider gap between those with high net wealth and those

with little net wealth and without doubt widening income inequality is

one of the defining challenges of our time. As an illustration, the UK

Governments report on Social Mobility (and incomes) suggest that

successive Governments have failed to deliver on their promises on

mobility and sustainable incomes and that whole swathes of British

society now feel left behind. Perhaps more eye watering is that the

richest 1% holds about 40% of all privately held wealth in the United

States, while the bottom 90% holds 75% of all debt. Although one

may argue with the statistics that one thing is certain, this disparity is

likely not to be tolerated in the longer term.

Many western economists believe that the capitalistic system is

the only way to generate and distribute wealth. This view is promoted

with fierce intent by countless multinational corporations where capi-

talism is seen as the principle economic methodology for meeting

human needs, improving efficiency, creating jobs, and building wealth.

Anchored to this view is also the philosophy that markets need to

function with the least possible government intervention. Following

the banking crisis of 2008, all western banks and other financial insti-

tutions were obliged to undertake reforms of the banking system and

become more transparent in their business and social dealings focus-

ing on corporate social responsibilities (CSR) policies to protect the

most vulnerable in society. Recognizing our obligations to society is

not simply a charitable gesture but can be a profit-generating activity

when utilized with an appropriate and beneficial strategy.

The paper by Hwy-ChangMoon and Jimmyn Parc discusses the con-

text of CSR and that of creating shared value (CSV) which benefits

wider society. The authors describe the boundaries that exist between

the two concepts especially those related to terminologies, definitions,

and their impacts. In practice, such obscurity hinders the ability of cor-

porations to formulate effective management strategies. The authors

introduce a new typologyof four social activities based on an in-depth

analysis using a historical approach: CSR forsurvival, CSR for self-satis-

faction, CSO for reputation, and CSO for competitiveness. They argue

that this typology is useful in guiding corporate social activities to

increase effectively both corporateand social benefits simultaneously.

The eighteenth century Scottish economist Adam Smith (1723–

1790) credited withlaying the foundations of classical free marketeco-

nomic theory, suggested that each member of society needs help from

the others, and is at risk to harm from them. When the needed help is

given and returned from love, gratitude, friendship, and esteem, the

society flourishesand is happy. A contemporary of Adam Smith, Josiah

Wedgewood (1730–1790) was an English potter and entrepreneur.

Josiah Wedgewood founded the Wedgwood Company in 1759, in the

county of Staffordshire. Wedgewood is credited with modernizing the

manufactureof pottery (and the ceramics industry). Josiah Wedgewood

was influenced by the writings of Adam Smith and is credited with

being an early adopter of social responsibility investing in employee

welfare, and improving employee livingand working conditions.

The paper by Ian Jackson and Lorraine Limbrick offers a critique of

CSV with specific reference to the development of local clusters in

conurbations such as the North Staffordshire ceramics and pottery

agglomeration in the UK. The paper outlines evidence from business

history that pottery firms such as Wedgwood were developing forms

of CSV over 250 years ago at the commencement of capitalism. This

is followed by contemporary evidence from the North Staffordshire

ceramics industry regarding the role of cooperation and competition.

Cooperation in clusters is based on interchanges that facilitate the

exchange and flow of information and knowledge in the cluster

(between buyers, suppliers, and related industries) that ultimately

*JEL classification codes: B12, G32, L25, L61, M14, M16, R12, Q56.

DOI: 10.1002/jsc.2251

Strategic Change. 2019;28:113–114. wileyonlinelibrary.com/journal/jsc © 2019 John Wiley & Sons, Ltd. 113