I think we're all aware that the world today is full of problems. We've been  hearing them today and yesterday and every day for decades, serious  problems, big problems, pressing problems, poor nutrition, access to water,  climate change, deforestation, lack of skills, insecurity, not enough food, not  enough health care, pollution. There's problem after problem. And I think what  really separates this time from any time I can remember in my brief time on  Earth is the awareness of these problems. We're all very aware. Why are we  having so much trouble dealing with these problems? That's the question I've  been struggling with coming from my very different perspective. I'm not a social  problem guy. I'm a guy that works with business, helps business make money,  God forbid. So how do why do we having so much problem with these social  problems, and really, is there any role for business? And if so, what is that role? I think that in order to address that question, we have to step back and think  about how we've understood and pondered both the problems and the solutions  to these great social challenges that we face now, I think many have seen  business as the problem, or at least one of the problems in many of the social  challenges we face. Think of the fast food industry, the drug industry, the  banking industry. This is a low point in the respect for business. Business is not  seen as the solution. It's seen as the problem now for most people, and rightly  so in many cases, there's a lot of bad actors out there that have done the wrong  thing, that actually have made the problem worse. So this perspective is  perhaps justified. How have we tended to see the solutions to these social  problems, these many issues that we face in society? Well, we tend to see the  solutions in terms of NGOs, in terms of government, in terms of philanthropy,  indeed, the kind of unique organizational entity of this age is this tremendous  rise of NGOs and social organizations. This is a unique, new organizational form that we've seen grown up, enormous innovation, enormous energy, enormous  talent now has been mobilized through this structure to try to deal with all of  these challenges, and many of us here are deeply involved in that. You know,  I'm a Business School professor, but I've actually founded, I think now, four  nonprofits. Whenever I got interested in became aware of a societal problem,  that was what I did, form a nonprofit. That was, that was the way we've thought  about how to deal with these issues. Even a business school professor has  thought about it that way. But I think at this moment, we've been at this for quite  a while. We've been aware of these problems for decades. We have decades of  experience with the in with our NGOs and with our government entities, and  there's an awkward reality. The awkward reality is we're not making fast enough  progress. We're not winning. These problems still seem very daunting and very  intractable, and any solution we're achieving are small solutions. We're making  incremental progress what's the fundamental problem we have in dealing with  these social problems? If we cut all the complexity away, we have the problem  of scale. We can't scale. We can make progress. We can show benefits. We can

show results. We can make things better. We're helping. We're doing better.  We're doing good. We can't scale. We can't make large scale impact on these  problems. Why is that? Because we don't have the resources, and that's really  clear now, and that's clearer now than it's been for decades. There's simply not  enough money to deal with any of these problems at scale using the current  model. There's not enough tax revenue. There's not enough philanthropic  donations to deal with these problems the way we're dealing with them now.  We've got to confront that reality, and the scarcity of resources for dealing with  these problems is is only growing, certainly in the advanced world today, with all  the fiscal problems we face. So if it's fundamentally a resource problem, you  know, where are the resources in society? How are those resources really  created, the resources we're going to need to deal with all these societal  challenges? Well there, I think the answer is very clear. They're in business.  Why all wealth is actually created by business? Business creates wealth when it meets needs at a profit, that's how all wealth is created. It's meeting needs at a  profit that leads to taxes, and that leads to incomes and that leads to charitable  donations. That's where all the resources come from. Only business can actually create resources. Other institutions can utilize them to do important work, but  only business can create them, and business creates them when it's able to  meet a need at a profit, the resources are overwhelmingly generated by  business. The question then is, how do we tap into this? How do we tap into this business generates those resources when it makes a profit. That profit is that  small difference between the price and the cost it takes to produce whatever  solution business has created to whatever problem they're trying to solve, but  that profit is the magic. Why? Because that profit allows whatever solution we've created to be infinitely scalable. Because if we can make a profit, we can do it  for 10 100, a million, 100 million, a billion, the solution becomes self sustaining.  That's what business does when it makes a profit. Now, what does this all have  to do with social problems? Well, one line of thinking is, well, let's take this profit  and redeploy it into social problems, business should give more business should be more responsible, and that's been the path that we've been on in business.  But again, this path that we've been on is not getting us where we need to go.  Now, I started out as a strategy professor, and I'm still a strategy professor. I'm  proud of that, but I've also over the over the years, worked more and more on  social issues, worked on health care, the environment, economic development,  reducing poverty, and as I worked more and more in the social field, I started  seeing something that had a profound impact on me and my whole life in a way.  The conventional wisdom in economics and the view in business has historically been that actually there's a trade off between social performance and economic  performance. The conventional wisdom has been that business actually makes  a profit by causing a social problem. Classic example is pollution. If business  pollutes, it makes more money than if it tried to reduce that pollution. Reducing 

pollution is expensive, therefore, businesses don't want to do it. It's profitable to  have an unsafe working environment. It's too expensive to have a safe working  environment, therefore business makes more money if they don't have a safe  working environment. That's been the conventional wisdom. A lot of companies  have fallen into that conventional wisdom. They resisted environmental  improvement, they resisted workplace improvement. That thinking has led to, I  think, much of the behavior that we have come to criticize in business, that I  come to criticize in business, but the more deeply I got into all these social  issues one after another. And actually, the more I tried to address them myself,  personally, in a few cases, through nonprofits that I was involved with, the more I found actually that the reality is the opposite. Business does not profit from  causing social problems actually not in any fundamental sense. That's a very  simplistic view. The deeper we get into these issues, the more we start to  understand that actually business profits from solving social problems. That's  where the real profit comes. Let's take pollution. We've learned today that  actually reducing pollution and emissions is generating profit, saves money,  makes the business more productive and efficient. It doesn't waste resources,  having a safer working environment, actually, and avoiding accidents. It makes  the business more profitable because it's a sign of good processes accidents  are expensive and costly. Issue by issue by issue, we start to learn that actually,  there's no trade off between social progress and economic efficiency in any  fundamental sense. Another issue is health. I mean, what we found is actually  health of employees is something that business should treasure, because that  health allows those employees to be more productive and come to work and not be absent. The deeper work, the new work, the new thinking on the interface  between business and social problems is actually showing that there's a  fundamental, deep synergy, particularly if you're not thinking in the very short  run. In the very short run, you can sometimes fool yourself into thinking that  there's fundamentally opposing goals, but in the long run, ultimately, we're  learning in field after field that this is simply not true. So how could we tap into  the power of business to address the fundamental problems that we face?  Imagine if we could do that, because we could do we could scale. We could tap  into this enormous resource pool and this organizational capacity, and guess  what? That's happening now, finally, partly because of people like you who've  raised these issues. Now for year after year and decade after decade, we see  organizations like Dow Chemical leading the revolution away from trans fat and  saturated fat with innovative new products. This is an example of Jain irrigation.  This is a company that's brought drip irrigation technology to 1000s and millions  of farmers, reducing substantially the use of water. We see companies like the  Brazilian forestry company Fibria, that's figured out how to avoid tearing down  old growth forests and using eucalyptus and getting much more yield per  hectare of pulp and making much more paper than you could make by cutting 

down those old trees. You see companies like Cisco that are training so far 4  million people in IT skills to actually, yes, be responsible, but help expand the  opportunity to disseminate IT technology and grow the whole business. There's  a fundamental opportunity for business today to impact and address these  social problems, and this opportunity is the largest business opportunity we see  in business. And the question is, how can we get business thinking to adapt this  issue of shared value? This is what I call shared value, addressing a social issue with a business model that's shared value. Shared value is capitalism, but it's a  higher kind of capitalism. It's capitalism as it was ultimately meant to be, meeting important needs, not incrementally competing for trivial differences in product  attributes and market share. Shared value is when we can create social value  and economic value simultaneously. It's finding those opportunities that will  unleash the greatest possibility we have to actually address these social  problems, because we can scale. We can address shared value at multiple  levels. It's real. It's happening. But in order to get this solution working, we have  to now change how business sees itself, and this is thankfully underway.  Businesses got trapped into the conventional wisdom that they shouldn't worry  about social problems, that this was sort of something on the side, that  somebody else was doing it. We're now seeing companies embrace this idea,  but we also have to recognize business is not going to do this as effectively as if  we have NGOs in government working part in partnership with business. The  new NGOs that are really moving the needle are the ones that have found these partnerships, that have found these ways to collaborate. The governments that  are making the most progress are the governments that have found ways to  enable shared value in business, rather than see government as the only player  that has to call the shots. And government has many ways in which it can impact the willingness and the ability of companies to compete in this way. I think if we  can get business seeing itself differently, and if we can get others seeing  business differently, we can change the world. I know it. I'm seeing it. I'm feeling  it. Young people, I think my Harvard Business School students are getting it. If  we can break down this sort of divide, this unease, this tension, this sense that  we're not fundamentally collaborating here in driving these social problems. We  can break this down. We finally, I think, can have solutions. Thank you. 



Last modified: Monday, February 3, 2025, 8:31 AM