FOR TOO LONG, BUSINESSES have pursued narrow, short-term strategies that maximize quick profits and don't address society's greatest needs. They are squandering an incredible opportunity, argue Harvard Business School professor and management strategy guru Michael E. Porter and Mark R. Kramer, cofounders of the social impact consulting firm FSG. Business leaders believe that all profits are equal, but Porter and Kramer argue that "profits involving a social purpose represent a higher form of capitalism." By investing in communities, a clean environment, and a healthy and well-paid work force, companies will reap big profits over the long haul, they say.
When it comes to addressing problems such as housing and health care affordability, and assistance for the elderly, companies have relegated helpful initiatives to peripheral social-responsibility units.
By exploring business solutions to such problems, managers can create what Porter and Kramer call "shared value, meaning, simply, everybody wins--society will benefit from the innovation business can bring to bear, and businesses will be more productive and more efficient, and over time will create greater markets for their goods. "The purpose of the corporation must be redefined as creating shared value, not just profit per se," the authors write.
They contrast their plan with well-intentioned strategies such as fair trade, which …