What Is Shared Value?

by Anne Legg

shared valueThe idea of shared value is based on the premise that organizations can no longer compete on profit alone. Instead, they need to create a business model that incorporates both an economic value and a value to society. Why? Because communities and businesses are interdependent, each benefiting from the other’s strength and growth.

Several large organizations have embraced this concept. Shared value models have helped businesses like Alcoa, Nestlé, Intel and Coca-Cola reap benefits both in terms of their bottom line and the communities where they work.

Coca-Cola Brazil’s Coletivo initiative is a great example of creating shared value. Coca-Cola recognized that Brazil’s high unemployment rate and lack of skill development among low-income residents posed significant challenges for business opportunities as well as for society in general. Rather than trying to work around the problem, Coca-Cola looked for a mutually beneficial way to help address it. The resulting initiative focused on increasing the employability of low-income young adults by providing business and retail training; in turn, the initiative also strengthened the company's retail distribution channels and brand equity. During its first year, the initiative trained over 50,000 young people; in the second year, it became a profitable investment.

Credit Unions and Shared Value

Today, many credit union leaders are asking critical questions about the sustainability of their own business models. Although ideas such as increased business lending caps and secondary capital have merit, we believe that the shared value concept is a perfect fit for credit unions.

Credit unions are unique among financial institutions because of the seven cooperative principles on which they were founded. They’re also locally owned and managed, so they are naturally positioned to have stronger community relationships. The credit union mindset tends to be one of helping others. In addition to offering relevant products, credit unions also serve their communities through volunteer efforts, donations, and community outreach. That sounds an awful lot like creating shared value.

Even though many of these community-focused initiatives aren’t formalized, they could be. We believe taking that step holds enormous potential for CUs. By embracing a shared value business model, they would be able to quantify the value they provide to their community in economic betterment metrics. This data would help local, state and national legislators understand the relevance of credit unions and the importance of protecting their existence.

After all, credit unions are built on the philosophy of people helping people - and that’s what shared value is all about.

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