Michael Kramer’s recent visit to Melbourne has once again stirred welcome discussion on the role of business in society. Unless you’ve been living under a rock, you will have by now read, or at least heard of, Kramer’s article in Harvard Business Review. Together with strategy guru Michael Porter, the article promoted the concept of shared value. In his talk at National Australia Bank last month, Kramer distinguished between the idea of corporate social responsibility and shared value. He put forward shared value as a new form of capitalism that encourages business to solve societal problems by bringing its skills and capabilities to bear in innovative ways.

The term ‘shared value’ was coined several years ago by Porter for Nestlé.Image While for many, shared value is just another new term for an old idea, Porter and Kramer’s take on the subject has resonated, particularly with those who have traditionally embraced an American idea of corporate social responsibility.

Corporate social responsibility is defined and practiced differently in many parts of the word. It is a product of each county’s unique history of relationships between business, society and government, in interaction with cultural norms. What all approaches have in common is an agreement that corporate social responsibility tries to answer the very important question: what is the role of business in society? Shared value is the latest attempt to answer that question.

In the USA, business has traditionally played a larger role in social welfare than in Western Europe and Australia. This role has arisen as a product of that country’s small government and large population, where industrial barons of the 19th and 20th centuries took what was then regarded as an enlightened view of business which was both paternalistic and philanthropic.

In the 1970s management scholars crystallised this view of business in society into a definition and framework for corporate social responsibility. This pyramid model viewed economic and legal responsibilities as the foundations of business, with social responsibilities deemed a discretionary activity that companies could undertake.

This represented the birth of the ‘separation thesis’ – the idea that corporate social responsibility is separate from business and can be indulged in via philanthropy if there is enough excess profit. This is the idea of CSR as social obligation.

Against this background the economist Milton Friedman argued that the business of business is business, while more recently, companies like Shell argued that profits and principles were not mutually exclusive.  If you think corporate social responsibility is about social obligation, then shared value is a new idea that neatly does away with the separation thesis.

In other parts of the world, the separation thesis did not take such deep root. In the UK, for example, the realisation that you cannot have a healthy high street without a healthy back street (i.e. business relies for its success on healthy societies) led to the development of Business in the Community. Other ideas about the role of business in society led to a stream of scholarship and practice called corporate citizenship. Corporate citizenship rejected the idea of social obligation as the foundation for the role of business in society. Instead it espoused the rights, as well as the responsibilities, of business.

Over the last 20 years, the rising focus on sustainability has encouraged us to think about the impacts of business on society and their environment. This idea is very prominent in new frameworks for social responsibility, such as the ISO 26000 Guidance Standard on Social Responsibility and the Global Reporting Initiative framework for sustainability reporting. This discursive shift may help explain the turn away from terms like corporate social responsibility towards the simpler ‘corporate responsibility.’

But as Kramer notes, the focus on sustainability impacts, while very responsible, does not necessarily encourage thinking about innovation. ACCSR’s last State of CSR in Australia report showed that innovation is not yet a big feature of CSR practices in Australia.

But the idea that innovation can flow from CSR is not new.  For example, bottom of the pyramid ideas developed by management scholar C. K. Prahalad and exemplified by Nobel Peace Prize winner, Muhammad Yunus are all about innovation. Many of the examples of shared value advanced by Kramer during his Melbourne visit were straight out of the Yunus play-book.

Kramer also talked about harnessing business know-how to drive broad scale social impact.Social entrepreneurs have been focusing on this area for some time. Among the latest branches of this school are the ‘B Corporations’ and the concept of social impact investing.

At ACCSR’s short course on Introduction to CSR, we emphasise the multi-faceted nature of CSR, its origins and how it is expressed differently around the world. We expect that ideas about corporate social responsibility will continue to change in coming years. This is because the answer to the question, ’what is the role of business in society?’ constantly evolves in parallel with the changing expectations of society over time. New terms will emerge to capture new thinking. Shared value taps into the current zeitgeist.

It’s great when ideas about the role of business in society get an airing in a prestigious and influential journal like Harvard Business Review. Porter and Kramer are such significant management thinkers that when they speak, we listen.

But as we consider the newest term in the business and society lexicon, let’s not throw the baby out with the bathwater. Corporate social responsibility is a broad and powerful idea that makes us think about the role of business in society. The term has been used for over a hundred years. We all enjoy wearing new clothes. Shared value is quite possibly, just a shiny new suit.