Peter Shergold

The American media, somewhat belatedly, is now asking the question:  how big can the ‘Occupying Wall Street’ campaign become?  What began as a relatively small group of protestors in New York’s Lower Manhattan a month ago has now spread to around 150 cities in the US.  As unionists, environmentalists and students join the so-called ‘leaderless movement’, the broad-based anti-corporatist sentiment that has fuelled the agitation seems to be growing.  Numbers are swelling.  Media interest is increasing.  Politicians are positioning.

Amped Status, which claims responsibility for the birth of the ‘99% Movement’ which prompted the “ground-up grassroots decentralised movement”, sees the protest’s origins in the growing inequalities of wealth and power perpetuated by the “neo-liberal economic domination” of corporate America.

I’m not persuaded that all of the protestors, let alone their many sympathisers, would recognise such an ideological presentation of their beliefs.  Nor is it clear that the increasing range of grievances being brought to the protests can sustain collective cohesion amongst the disparate groups involved in “direct and transparent participatory democracy”.  The future of the protests is uncertain.  The increased organisation of spontaneity may either undermine the movement’s appeal or else – less likely I think – mould it into a more enduring form of political protest.

What is certain is that the concerns that underlie the street occupations are real.  The diversity of opinions, and the lack of political sophistication with which they are often expressed, should not lull observers into the complacent belief that the protest is just the latest day out for the usual ‘anti-globalisation’ suspects.

Something serious is going on.  It was the Harvard Business Review, no less, that earlier this year published an article premised on the prescient view that the “capitalist system is under siege”.  The article, by Michael Porter and Mark Kramer on “Creating Shared Value”, pointed to the fact that companies are “widely perceived to be prospering at the expense of the broader community”, that the legitimacy of corporate activity is falling and that trust in business is now much diminished.

A couple of years ago, at the height of the GFC, I reflected on what impact the severe economic downturn might have on corporate social responsibility (CSR).  I argued that the fundamental causes of the financial crisis – the unconstrained pursuit of high-risk short-term profits – represented the antithesis of the ethical values of corporate citizenship which community and environmental programs were intended to exhibit.

My concern in 2009 was (and remains) that CSR and corporate sustainability are too often located at the periphery of business strategy.  They are embraced as a matter of good corporate relations which can bring the economic benefits of reputational integrity.  Unlike those sleeping on Wall Street, I am persuaded that the community and environmental initiatives of companies really are of significant social benefit.  Their influence is weakened, however, to the extent that they are pursued and reported upon as if they are a peripheral ‘bolt-on’ to core business activities.

This structural weakness helps feed the angry cynicism of the Occupy Wall Street movement.  Corporate responsibility and sustainability are portrayed by protest leaders as little more than a low-cost sop to ‘the 99%’:  a ‘launch, lunch and logo’ designed to present brand identity in a favourable light and a self-serving ploy to ‘greenwash’ products for unwary consumers.  It seems to the protestors that business leaders lack any genuine concern or empathy for society at large.  At best CSR is perceived as a strategy to win political support on Capitol Hill.

The challenge for those of us who believe in market economics is how to restore business legitimacy.   The ‘licence to operate’ needs to be rearticulated.  Business must be able to exhibit its societal value, not to trade-off against the social and environmental costs of economic success but as integral to the supply-chain by which goods and services are produced.  ‘Giving back’ is no longer sufficient.  Charity won’t save capitalism.

This is the provocative thesis that lies at the heart of the arguments propounded by Porter and Kramer.  Companies, they propound, need to demonstrate that, through their policies and practices, they simultaneously advance both economic and societal value.  They need to recognise that they create ‘shared value’ through their business.

Of course companies must return economic value or their financial viability is at risk.  Yet they also need to focus on the societal value they can create through the investors they attract, the suppliers from whom they buy, the employees who work for them and the consumers to whom they sell.  Sustaining a financial return to shareholders requires businesses to take account of their impact on multiple stakeholders.

Crucially, companies need to build into their strategic planning an explicit awareness that long-term economic returns can be accrued through the pursuit of societal value.  Improving value in one area gives rise to opportunity in the other.  The future of capitalism, according to Porter and Kramer, lies in corporations creating a “virtuous cycle of shared value”.

Business needs to get serious about establishing trust in business itself.  Corporate philanthropy alone won’t win the hearts and minds of the public.  Companies need to show, right along the value chain, how societal needs are being embodied in their products, benefits being achieved and harms mitigated.  They need to recognise that they pursue societal impacts because, in a competitive market, they are integral to sustaining long-term project profitability.  Creating shared value is a matter of corporate self-interest.

None of this is likely to persuade those engaged in the Wall Street sit-ins to go home and embrace capitalism.  Their anger will take longer to assuage.   Nor will the virtues of shared value convince those business and political leaders who continue to argue, channelling Milton Friedman, that the only responsibility of business in a capitalist society is to make a profit on their investment of private capital.

The battle for hearts and minds needs to be fought.  An increasing number of hard-nosed multinational companies – such a Google, IBM, Intel, Johnson and Johnson, Unilever and Wal-Mart – have begun to embark on important shared value initiatives.  Indeed in a recent edition of Social Business, I interviewed Peter Kelly, Director of Corporate and External Relations at Nestlé  on the way in which the company was embracing the new approach.  From the support they offer to their agricultural producers in the developing world to the care with which they market their products, Nestlé has become a market leader.

What about Australia?  Do we have companies that are starting to present their business in terms of the shared economic and societal value they are creating?  The answer, I’m pleased to say, is in the affirmative.  Over the next few weeks I’ll blog about a few of our own ‘shared value’ companies.

Peter Shergold is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW.  This blog post first appeared on the CSI Blog.