What is Shared Value and Why You Need It
Fashion companies are dealing with paradigm-shifting challenges when it comes to developing their brands.
If just 10 years ago, customers were happy to buy fashion products just because of their designs and quality, nowadays expectations towards fashion companies include so much more, especially in the realms of sustainability and philanthropy.
In this post, we’re going to analyze Porter’s and Kramer’s theory of shared value and analyze how this can be applied to a fashion brand.
Shared value refers to the link that Porter and Kramer identified by overlapping the concept of competitive advantage with the one of corporate social responsibility. To get started it may be helpful to start with a few definitions.
Shared Value: Defined
The simple definition is the following: Shared Value refers to a business approach whereby businesses pursue social and environmental causes as a primary organizational goal, but still manage to generate a profit and support the financial needs of the company.
As mentioned above, the concept of shared value derives from the combination of two other business concepts: competitive advantage and corporate social responsibility. Let’s see them in further detail.
First off, competitive advantage refers to the unique assets and capabilities that allow a company to compete profitably on the market. The source of competitive advantage can be attributed to many variables: it could be connected to the quality or standard of production, or conversely to the ability to sell products at a premium price or provide services at a lower cost than the competition.
This term is designed to identify those key activities that allow a business to grow and succeed because of a series of “points of difference” that set it aside from the competition.
What if the source of this advantage was to be connected with the pursuit of a goal that is not “mere” profit, but instead connected to tackling a social or environmental issue? In this case, the business would not simply pursue its own – selfish – interest but would succeed by helping others. This insight is what drives us to discuss the concept of Corporate Social Responsibility, or CSR which we’ll discuss next.
Corporate Social Responsibility
The types of activities that a company should pursue to build a brand and associate it with a cause are usually associated with Corporate Social Responsibility.
Let’s look at CSR in greater detail. Corporate Social Responsibility is a business concept that suggests how managers should include social and environmental objectives in the business strategies pursued by an organization. When a decision is being made, managers should expand on the categories of stakeholders which would be affected by a business decision and make sure they include groups such as outsourced workers, communities living in the regions where their manufacturing facilities are located, and local environmental protection agencies.
If in the past the concept of company stakeholder was very limited, it could have included communities internal or very close to the company. The breadth of this term has now expanded so that communities who may not even be directly affected by an organization, may still be considered as part of the extended community surrounding an organization.
The issue with CSR however, and the reason why shared value moves past it, is due to the fact that CSR initiatives are often used as part of greenwashing initiatives, which are focused on communicating great intents on behalf of a business, but are often not backed by actual change.
As a result, shared value tends to approach the subject differently advocating for companies to be impact-first or essentially committed to tackling a social or environmental issue at the cost of jeopardizing a business’ profitability.
In the next section of our post, we’re going to look into how businesses can design a business model based on shared value and create a brand strategy that matches the value brought to customers.
How to create shared value
How should your fashion brand tap into this new way of developing a business and thrive by lifting others? Well, there is no textbook approach yet, as the subject is taking shape as we speak. However, if we had to break it down into a few steps, these are the ones to follow:
Pick the Right Cause
The first step is to pick the right cause to follow. A quick way to tell greenwashing and cause-marketing apart is by looking at how specific and focused a cause-marketing campaign is.
You need to conduct extensive research to understand what types of values you feel are close to you and to your brand, so that you may identify a purpose to your business that can make your organization unique.
The more specific you can be, the better, as in this field there are so many attempts to follow the trend of greenwashing that many businesses can still be confused with each other despite their efforts.
Remember to not make any assumptions. You should always strive to understand the problem in its full depth, without looking for easy fixes or feel-good strategies, you need to build a path that may lead, in time to lasting change.
The pursuit of a greater cause will allow you to invest in the relationship with your customers too. In the process you will understand their problems and their daily challenges, you will learn what are the issues that they perceive as urgent and important.
In the process of picking the right cause, you’ll be able to look at your organizations with fresh eyes and identify many different areas where the cause you pick can enhance the value your organization is creating.
But let’s remember that to avoid greenwashing, you need to make an actual difference, and that’s why we need to talk about picking the right metrics. This is what we’ll be discussing next.
Pick the Right Metrics
If you want to deliver actual change, it’s important to take into account that in social and environmental areas, the scientific approach is the way to go.
In this article we discuss an important framework to define the goals and objectives of your strategy and make sure you can deliver lasting change by focusing on results and evidence: All You Need to Know To Start a Cause Marketing Campaign.
Applying the NESTA Foundation Framework can be a very effective way to set you on the right track and make sure you’re investing in developing strategies that will make a difference.
Commit to the Strategy (At the Cost of Impacting Potential Profits)
The most important thing in business is commitment. The hard thing about cause-related marketing and impact-first organizations is that their determination to pursue lasting change can come at the cost of jeopardizing profitability.
This is why ultimately you can’t fake it.
There is no real reason why an organization may encumber itself with changing the world unless this drive came from within its core values. Just like in a startup, the best predictor of success is consistency and determination.
Having said this, there are still quite a few benefits that could potentially offset the added financial risk. This is what we’ll be addressing in the next paragraph.
What Are the Benefits of Creating “Shared Value”?
Is this strategy only suitable for dreamers who aspire to change the world?
Well, we all want to change the world, really, and a cause-marketing approach is based on academic literature and growing evidence that companies can build a long-term social return on investment.
Of course, earning this return may take time, but the rewards are quite relevant as they connect to increased customer loyalty and advocacy
As your business is showing its ability to trailblaze a new business dimension: one that is not entirely focused on profits, your customers will want to show their support and feel as if they are part of the change.
As fashion brands can be a tool to express identity and belonging, customers will be responsive to brands that stand up for causes that are relevant to them.
Moreover, this is no short-term commitment. Connecting to your audience through unique social and environmental causes can be a way to delve into your customer’s lifetime value for years to come.
Great! Now that we’ve touched upon all of the relevant topics on this matter, it’s time to draw a few conclusive remarks.
As a result of the strategy we have discussed in this post, your organization is out to gain many valuable benefits. Let’s see them in more detail:
- As a purpose-driven, cause-oriented, organisation your business will be creating a unique space for itself which will allow it to avoid competing on price with its closest competitors and build a strong loyal following. As a consequence of this your business may experience very low customer acquisition costs, as discussed in this article: Creating a No-Budget Marketing Campaign: How Cause Marketing Can Get You There.
- Cause-related strategies do not have to be fixed, unchangeable relationships, on the contrary they can be considered versatile strategies to focus on the most urgent matters that influence the fashion industry. If you’d like more guidance to navigate cause-marketing strategies, here’s a resource that can help you out: All You Need to Know To Start a Cause Marketing Campaign.
- Last but not least, remember to focus on delivering actual change: one that can be assessed and measured. In this post: Fashion Sustainability and Measuring Success: From ROI to Social Return on Investment we delve deep into calculating returns to show how achieving both social goals and profits is doable and it’s the new way to run a business.
There you have it. Here at 440 Industries, we have a lot of resources on sustainability, cause marketing, and purpose-driven companies. Take a look at our blog to find new and helpful resources. Enjoy!