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Does Michael Porter understand sustainable business?

I’m in two minds about Michael Porter.

On the one hand, he’s written some landmark works.

With regard to both corporate strategy and the “Competitive Advantage of Nations“, it’s hard to argue that he’s been both insightful and influential.

But when it comes to corporate responsibility, it’s not clear that he has added any thing new intellectually to a much-discussed field.

In 2003 Porter came to the premier academic/business conference on CR, the EABIS Colloquium, and caused some outrage amongst European academics.

His mistake? Referring to CSR as nothing much different from corporate philanthropy.

Since then, he’s published an influential 2006 Harvard Business Review article on corporate responsibility, with Mark Kramer.

He also, back in 2003, established a “non-profit” sustainability-related consultancy, with Nestle as a major client and Kramer as a director.

The 2006 HBR article by Porter and Kramer both inspired and irritated in equal measures.

It inspired many out-of-touch CEOs and managers to take an interest in the field.

That’s not to be under-estimated.

(Despite the steep decline in the quality of HBR articles in recent years, the magazine is still held in high regard by many in business)

The article also irritated many who have been in the sustainability field for a long time.

It appeared to state that Porter and Kramer’s paradigm of corporate responsibility, via new terminology, “Shared Value”, was a new phenomenon and was only now evolving from philanthropy.

It was a very clever pitch for consulting work but added nothing new to the field it proposed to revolutionise.

Now Porter and Kramer have published a new article on the topic of corporate responsibility, again attempting to re-name responsible business as something more fundamental, the “Shared Value” concept.

There’s a recent podcast interview with Porter available here. (It’s the first programme on the list)

I’ve heard Porter give a speech on the topic of “Shared Value” last year and was not impressed at all with his grasp of the issues.

He might have been having a bad day. Clearly he’s a very smart man.

But I do wonder what his motivation is in creating this new term of “Shared Value”. I just do not see whose interest it serves other than those of his consulting group.

Porter does really matter when it comes to influencing business that doesn’t yet ‘get’ sustainability. But we shouldn’t believe there is anything new in what he is saying.

In 2006 some business leaders were undoubtedly swayed by Porter and Kramer’s articles.

The ideas they proposed, as now, are by no means revolutionary from current thinking, particularly in Europe.

But the mechanism for dispensing them: HBR, was.

That was what made the difference, alongside the name and fame of the author.

Old concepts, unnecessary new terminology

My problems with the 2011 piece are twofold:

Firstly, Porter and Kramer present an old idea, conceived by others, as a new idea that they have thought of themselves.

They argue that “CSR programs focus mainly on reputation and have only a limited connection to the business”.

They assert that this revolutionary new idea of “shared value”, “recognizes that societal needs, not just conventional economic needs, define markets”.

But responsible business, corporate responsibility and sustainable business thinking has acknowledged this for decades. Perhaps not in Harvard Business review, but in many other respected academic journals.

Whilst CSR has indeed been used in most cases as they describe, increasingly its later iterations, corporate responsibility, responsible business and sustainable business, go far beyond how Porter and Kramer claim all CSR/CR is used by business.

This is not new. Companies, particularly in Europe and also in emerging markets, have been doing this for quite a while.

I cannot see any difference between “shared value” and “responsible business” or “sustainable business”.

Only that a consultancy has decided to re-name a generic term into something that fits well with their marketing and growth strategy.

It’s a clever idea, but I can’t see it really taking off when there is nothing wrong with our existing terminology.

“Sustainable business”, “corporate responsibility” and “responsible business”, for example, were pioneered by many others.

They only had to look at European business to see this. The US is far behind Europe in sustainability thinking, as we all know. If the new HBR article demonstrates anything, it simply re-enforces that fact.

Does disclosure matter? Yes…

Secondly, at least one paying client of FSG, Porter and Kramer’s consultancy (Nestle) is mentioned in the new article as being innovative.

But the financial relationship between the authors and the company is not declared or made explicit.

This strikes me as wrong.

The example they use, Nestle, is also a poor one.

The company, although improving slowly, is a notorious laggard on responsible business and corporate responsibility.

Marks and Spencer, Timberland (and Unilever, mentioned but not in sufficient depth), would have been far better examples to focus on.

So I am still in two minds about Michael Porter.

I don’t believe he knows much about responsible business, compared with many of the other folks I have come across. (Kramer on the other hand, clearly does, and must write most/all of the articles)

But I appreciate the important influence Porter has on CEOs and the managers of large companies who do not yet grasp the sustainable business imperative.

On balance, Porter’s involvement in the field has to be a good thing for that reason alone.

As the old saying goes, “better late than never”.

7 Comments

  1. I had the same pebble-in-my-shoe reaction.

  2. Your point about re-naming an old term reminded me of Seth Godin's blog post: http://bit.ly/g204Xh

  3. I think it is important to set the record straight that FSG (www.fsg.org), the consultancy Michael Porter and I founded, is indeed a tax-exempt nonprofit corporation dedicated to helping corporations, charitable foundations and NGOs more effectively address social problems. Porter receives no compensation from the consultancy whatsoever, and any surplus generated by the grants and consulting fees that support FSG is reinvested to further the organization's work.

    Many aspects of shared value are not new, of course. The concept overlaps with well-established CR and sustainability practices as well as BOP marketing, but Porter and I would argue that it is indeed a different lens through which to view the intersection between business and society. And, as you conclude, even if the article merely causes more company leaders to pay attention to already established CR thinking, it serves a valuable purpose.

  4. Had the same reaction – read the piece and thought 'So what? – tell us something we don't know.'

    What was more incredulous was listening to veteran BBC biz journo, Peter Day, rhapsodising about Porter and 'shared value' – literally – as the next big idea after CK Prahlad's BOP on his influential radio programme.

    Quite gobsmacked. Do these guys know something those of us in the field don't know? …

  5. Yes agree Toby, rather annoying I am sure for those hammering home the same message for the last 30 years.

    However there is one thing I do like, which is the term Shared Value. What I have against CSR is the loaded word 'responsible', which is not at all motivating or energising and smacks of 'business is bad, something must be done' thinking. It only gets you so far and inevitably leads down the box ticking route I think.

    Also I never really liked 'sustainable' either, as businesses were using the term sustainability many years before it become funky and green to mean 'not going bust anytime soon'.

    So I think Shared Value is a step forward in that it speaks to business about these issues in their own language, rather than trying to ram someone else's language down their throat. I've been trying and failing for years to think of better words and will adopt this. Hope it's not copyrighted!

  6. I think it's good for business and society that Michael Porter is supporting CSR given that he is very influential in the business world. It's like a celebrity endorsing a cause; it makes people notice and support the issue when they might not otherwise.

    I agree that Michael Porter shouldn't pass the CSR ideas off as his own but I do think that it's good for business and society for him to incorporate CSR in his articles.

  7. Anonymous

    Third paragraph: I don't think you mean "argue." I think you mean "gainsay" or "deny"

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