THE ROLE OF GOVERNMENT IN

CREATING SHARED VALUE

BETWEEN BUSINESS, SOCIETY, AND THE ENVIRONMENT

The Role of Government in Creating Shared Value between Business, Society, and the Environment Table of Contents I.Introduction………………………………………………………………………………………………………….. Page1 ThePoweroftheMNE……………………………………………………………………………….. Page1 HowGovernmentCanInspireEnvironmentalism……………………………………….. Page1 WhatWeNeedToSucceed………………………………………………………………………… Page3II.WhatisSharedValue?…………………………………………………………………………………………. Page4 SharedValueasDefinedbyMichaelPorterandMarkKramer ……………………Page4III.RegulatoryPrograms………………………………………………………………………………………… Page6IV.Taxes………………………………………………………………………………………………………………… Page9V.SharedValueasaParadigmShifter…………………………………………………………………… Page12VI.Conclusion ……………………………………………………………………………………………………… Page13VII.References …………………………………………………………………………………………………….. Page14IIX.PrimaryResearchAppendix…………………………………………………………………………….. Page18 NotesfromInterviewwithJakeBarnes………………………………………………………. Page18 NotesfromInterviewwithValerieBerg……………………………………………………… Page18 NotesfromInterviewwithJennaCurtis …………………………………………………….. Page19 NotesfromInterviewwithImanElKhatib ………………………………………………… Page19 NotesfromInterviewwithNickTesta ……………………………………………………….. Page20 NotesfromInterviewwithTaraMikhail ……………………………………………………. Page20 [Partial]TranscriptionofInterviewwithVeronicaMeyer……………………………. Page21 [Partial]TranscriptionofInterviewwithHarryHarrison …………………………….. Page23 [Partial]TranscriptionofInterviewwithMikeMcBreen …………………………….. Page24 EmailCorrespondencewithCarlosSanfelici……………………………………………….. Page25 By Danielle Sponder Testa MA Fashion and the Environment Contextual Studies, Terms 1 and 2 March 2011 © Danielle Sponder Testa, 2011

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I. Introduction

Fashion has been an essential business in the growth ofeconomiessincethebeginningofmultinationalenterprises(MNEs).Apparel companies suchasNike influence theworldofmarketing,supplychainmanagement,andlogisticsforindustriesrangingfromagriculturetoautomobiles(Klein,2000). Textileproductionaffectsemissionsofgreenhousegasesfromsyntheticfiberproductionandprocessingofalltextiles,wateruseandfertilizeruseinthegrowthoffiberssuchascotton,hemp,andbamboo,andethicalconditionsin factories and community cooperatives in developing nations.Whileallconsumerindustriesinfluencetheenvironment,fashionisan industry that is sometimes considered unnecessary andtherefore has a lot to lose or gain in the green movement. Theprogression to an environmentally responsible industry can createnew significance to global business. For the green movement tosucceed in fashion – an industry built on excess – it must createvalueforbusinessesandconsumers.Thisreportisaninvestigationintotheabilityofgovernmentstocreatesharedvaluebetweenthefashionindustry,society,andtheenvironment.

The Power of the MNE

Multinational Enterprises (MNEs) have more power thangovernments or religion in determining where the future of ourworld goes (Ehrenfeld, 2009), yet, these companies are self‐governed and often have never seen much of the land, air, orcommunities they impact. While Corporate Social ResponsibilityStatements (CSR) and philanthropic initiatives are growinglyavailable in such companies, companies are also being heldincreasingly accountable to the damage being done to the earth(Porteretal.,2011).Whetherthisisrightorwrong,businessistheworld’smostinfluentialcitizenandnocitizencantakeontaskssuchas climate change and environmental degradation alone.Government taxes and regulations can create opportunities forbusinessesandconsumers to change theirwayof livinganddoingbusiness into one that creates shared value and benefits theenvironment. Repeated throughout interviews with various lawstudents during the research for this report was the idea thatgovernmentsalonecannotchangeourimpactontheearth;ittakesindividuals, activists, and businessesworkingwith governments tocreateasupportedeconomicsystem.Throughregulationandtaxesthatpromotevaluecreation,governmentcanchangetheirstandingfrom a business barrier to a support system that inspires growthandprosperity.How Government Can Inspire Environmentalism

Inspiring MNEs to take positive environmental actionscannot be done simply by setting higher water and energystandards, limiting waste, or setting up recycling programs;governments must work with companies for the greater good ofbusiness and society (Porter et al, 2006). Early versions of the

“Today, many global corporations have more economic power in the world market than do entire nations. Fifty of the largest 100 economies in the world are run by multinational corporations, not by countries. General Motors is larger than Greece, Thailand, or Norway; Mitsubishi is larger than Saudi Arabia; Wal-Mart is larger than Malaysia, Israel, or Colombia.” – Going Global, pg. 90

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modern corporation worked with government for the good ofsociety; the townsandcities they supportedwere theirhomeandthe companiesweredependanton those communities for success(Achbaretal.,2003).

The onset of globalization allowed companies to seethemselvesasglobalcitizenswithoutanysinglecommunitytorelyon,making themaccountableonly to themselvesandgovernmentpolicy (Achbar et al., 2003). For this reason, governments haveshiftedfromsupportingindustriestorestrictingthemthroughtaxes,quotas, monitoring systems, and transparency laws (Kunz et al.,2007). Many companies concede with legislation simply becausetheyhave to, not because it is in their best interest (Porter et al.,2011). In order for companies to act in the best interest of theearthitmustbebeneficialtothebottomline.Governmentscanbethe initiator of such a shift by showing the value that can comethroughinvestinginsocietyandtheenvironment.

Currently environmentalism is a hot topic in fashion,designers are using organic textiles, street fashions includeupcyclingandvintagefindshighlightingtheimportanceofcaringforour clothing on a deeper level, yet, environmentally friendlyclothing is still kept in a separate category than conventionalfashion (Black,2008). Brandswilldedicateasectionof their storetoitorcreateafewpieces(toheavilyadvertiseshowinghowmuchthey care about the earth), but few designers are taking theinitiativetocreatemainstreamfashionthatissoldpurelyonfashionmeritsand,by theway, is sustainablymade. The fashion industryneedsaparadigmshift,notjusttrendresearchthatsaysgreenisinvogue.How can such a powerful industry be influences to changethe core of their business in every department from buying totransportation?

Government can be an agent of change forenvironmentalisminthefashionbusinessthroughcollaborationandcreationofsharedvalueacrossfirms,individuals,governments,andtheplanet. Thispaperaddressesgovernmentcanusepoliciesandtaxationtocreatesharedvaluefromenvironmentalactionsforbothbusinesses and society. Based on collated responses frominterviews with experts and additional literature reviews, I havefound that there are two ways that government can create suchvalue,throughregulationandtax.

Environmentaltaxesonmanufacturerscreatethementalitythat acting in the best interest of the earth is a cost to business(Fullertonetal.,2007),butifthemoneygainedisbeingreturnedtothecompanyasasubsidyfornewenergydevelopmentorecofiberdevelopment, it creates an opportunity for the company, ratherthanjustaddinganotherexpense(Nordvik‐Carr,2010).Thesesortsoftaxesareinuse(TheEnvironmentAgency,2011),butwhatseemstobemissing is themental linkbetween the taxes, subsidies, andmoreefficientandprofitableprocessesandproducts. Taxesalonewill not create shared value between consumers, businesses, andgovernment; it requires proper distribution of the funding in an

“Governments’ general response to the speed and scale of global changes has been a reluctance to recognize sufficiently the need to change themselves. The challenges are both interdependent and integrated, requiring comprehensive approaches and popular participation.” – Our Common Future, Page 127

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easily visible manner for societies to begin to understand theenvironmentaltaxasaninvestment.

The other mode of involvement governments can use topromote shared value is regulation. The concept initially seemscontradictory to value creation since past regulations were oftenobstacles for businesses (Kunz et al., 2007), but regulations alsocreateanopportunityforcompaniestofindnewalternatives.What We Need To Succeed

Forthegreenmovementtosucceedinanindustryasoftenupdated as fashion it must create value for businesses andconsumers. Aswithmostbusiness concepts though, shared valuewillnotbediscussedonedayandwidelyacceptedthenext,ittakesapushfromconsumersorgovernments.Thefollowingsectionswilldiscusstheconceptofsharedvalue,thewaysinwhichgovernmentregulations can create shared value, the way in which taxes cancreate shared value, and the potential shift in business and socialparadigms that can come from the initiationof sharedvalue. Theinformationhasbeengatheredfromavarietyofsourcesbutthekeyconcept of government’s role in value creation was informedthrough interviews of professionals within the fashion system,governmentemployees,andexpertsintaxandlaw.Itisimportantto note that the examples used and ideas discussed impact thefashion industry, but because government impacts all industriesmuchoftheinformationwillbemoregeneralized.

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II. What Is Shared Value?

Shared value, as defined by Michael Porter and Mark

Kramer (2011), refers to the connection between social andeconomic progress. The concept recognizes that social troublescreate internal costs for firms such as wasted energy or rawmaterials (Porter et al., 2011). Addressing these harms does notneedtoraisecosts,theycanbeusedasatooltoinspireinnovationandcanincreaseproductivityandexpandmarkets.

Sharedvalueistypicallyappliedtocompaniesbutisequallyapplicabletogovernments(Porteretal.,2011). Governmentslookatspendingasacost,whencitizensvoteontaxesandpoliciestheyaddress them in terms of the added expense, but each tax andpolicy setby government is aimedat adding value for society andtherefore government is an essential entity in the relationshipbetweensocietyandbusiness.Theconceptofsharedvaluefocusesoncreatingeconomicandsocietalvalueandminimizingcosts;manygovernmentsfocusoncostsandregulationratherthanvalue,butashifttowardspromotinginnovationandgrowthratherthanlimitingthemiskeytoagreenercorporateworld.

Asignificant issue in therelationshipbetweengovernmentand environmentalism is the thought of environmental policy as aregulation or expense. This context does not encourage newexploration but frames environmentalism as a cost of doingbusiness(Maatta,2006).Imaginehowdifferentbusinesswouldbeif advertising were framed as an expense rather than a profitgenerator.Thesamecontrastexistsinenvironmentalismifitcanbereframed to show the opportunities rather than limitations. Thetextile and apparel industry can expand through new processes,fiber development, and value creation in communities throughoutthe supply chain. Yet when faced with environmental issuescurrently, most companies do not see it as an opportunity toimprove business (Meyer to Testa, 2011). Acting with theenvironmentandpreservationofresourcesinmindreduceswastedmaterials and energy, which reduces costs. Investing in newtechnologycansustainablyincreaseprofitability.

Shared Value as Defined by Michael Porter and Mark Kramer “The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”

Shared Value looks at the relationship between society, or communities, and businesses in a way that can create value for all parties involved, but this traditional understanding of shared value leaves out two significant parts of the cycle; the environment (the resources we are dependant on) and the government. The image at right is my reinterpretation of the value creation cycle.

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Currentlybusinessesinwesternnationsviewvaluecreationin a purely economic and profit driven manner, but the truemeaning of value refers to profits and costs (Porter et al., 2011).Shared value refers to using innovation to benefit both thecommunity in which a company exists and the company itself(Porter et al., 2011. In Micheal Porter and Mark Kramer’sexplanationofsharedvaluetheyuseanexampleofsharedvalueinenvironmentaltermsthroughtheconceptoffairtrade.Infairtradethe value of a product is redistributed in the supply chain so thatfarmers growing cotton will get a larger chunk of the profitgeneratedby the salesof the cotton t‐shirt. Sharedvalue insteadconsiders new technologies and operations and forms clusters ofsuppliersandproducersinordertoincreaseefficiency,quality,andsustainability on top ofmaking sure fairwages are being paid, sothat rather than thebusinessgivingup someof theirprofit to thefarmer, both parties increase their profitability. Fairtrade canincrease farmer’s profits 10‐20%, but focusing instead on sharedvalue creation and investing in more efficient processes canincrease farmer’s profits three hundred percent (Porter et al.,2011).Whichfarmerwouldyouliketobe?

Rather than investing in the limited supply of organic andsustainablefibersthatcurrentlyexist, if textilecompanies investedin improved efficiency of processing, creation of new fibers, andreducingwastetheywouldn’t justbebuying intosustainabilitybutwouldbecreatingit.Duetothelengthoftheapparelsupplychainit can be challenging for companies to see their opportunities forimproved efficiency. Through government programs that assist indiscoveringsuchventuresthough,paymentofenvironmentaltaxesand compliance with regulations becomes less of a burden andmoreofaninvestmentinbusinessdevelopment.

Governmentsandinternationalgoverningagenciescanusetaxes and regulations to encourage corporate environmentalism.Both taxesand regulationhavea significant impacton the fashionindustry since the industry encompasses so many countries andcommunities(Kunzetal.,2007),butthatalsomeansthisindustryismissing out on value creation opportunities by not utilizing theopportunities specific to various communities throughout thespanningvaluechain.

Value is defined as benefits relative to costs, not just benefits alone.

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III. Regulatory Programs

Governmentscreateavarietyof regulatoryprograms fromfree trade programs and tariffs to penalties for employing unfairlaborpractices(Kunzetal.,2007).Whileallofthesepracticesservea purpose, not all regulations can create visible value for bothcorporationsand communities. Direct regulationsareoften set inplace specifically to limit certain actions or unfair advantages, butother regulations can be created that don’t stop companies fromdoingbusiness,but force themtodoso inamanner that requiresnewinnovationandefficientdevelopment.Regulationsonthetypeofmaterialsusedormethodofprocessing canbeeffective if theyareseenasanopportunityfordevelopment,butiftheyareseenasabarriertobusiness,companieswillfindawayaroundthem(Frank,2008).

Inthe1990savarietyofretailersfromNiketoGuesswerepublicly scrutinized when it was discovered that the factoriesproducing their products used sweatshop labor – underage andunderpaidemployees–andthereforedidnotfollowethicalpolicies(Esbenshade,2004). TheensuingactivismbycollegestudentsandconcernedconsumershadabigimpactontheactionsoftheUnitedStates Congress which brought many companies, including thosementioned above, to trial for violation of humans rights laws(Esbenshade, 2004). Much of the resulting actions though weretaken fromthecompanies that facedcriticism inorder to improvetheir reputation with customers, leaving many wondering ifanythingwouldhavebeendone ifconsumersandthegovernmenthadn’tpushedthemtodoso(Karpova,2009). Whilethisexampleended in business regulating business, it shows how governmentcanplayaninfluentialrolewithvaryinglevelsofinvolvement.

Duringthesweatshopscandalssomegovernmentstookanactive role to improve social responsibility through placing highpenalties for lack of compliance. Several Asian nations discussedlaborpoliciesbywhichcompaniesfoundtobeemployingchildlaborwould then be held responsible for putting that child throughprimaryschool,nomatterhowlongittakes(TestatoTesta,2011).The cost of this is higher thanwhat is saved by taking the risk ofemploying them and is strict enough to force change. Such strictpoliciescanhavesomesuccess inenvironmentalpolicyaswell ifasignificant penalty can be agreed upon, however, these policiesframesocialandenvironmentalpolicyasacostratherthanavaluegenerator and thereforemay not be the right avenue for shiftingthe image of environmentalism. Without creating value for thecompany there will not be total compliance with such policiesbecause some factories only have short‐term profits in their sightandseelow‐costlaborasthebestvalue(Frank,2008).Inorderforcompaniestowanttocomply,theremustbevisiblevaluecreation. Another government‐monitored restriction placed oninternational businesseswas thequota system,whichwasphasedout of the textile and apparel sector in 2005 (Kunz, 2007). Thequotasystemregulatedthequantitiesofgoodsthatcouldbetraded

“Our recognition of the transformative power of shared value is still in its genesis. Realizing it will require leaders and managers to develop new skills and knowledge… And government must learn how to regulate in ways that enable shared value rather than work against it. “ – Michael Porter and Mark Kramer, Shared Value

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internationally(Kunzetal.,2007).Thequotasystemwasineffectivedue to transshipment, a processwhere factories get certificationsthat their products are made in another country that had notsurpassedtheirallowance(Kunzetal.,2007). Thesystemwasputin place to limit some nations while giving other nations theopportunitytogrow(UNDPI,2004). Thesamecouldbeappliedtotheenvironmentbylimitingimportsofcertainfibersormaterialstocreatemoredomesticproductionandalso to createanadvantageto less used fibers and materials. Imagine the following example,whichwhileunlikely,paintsavividpictureofsharedenvironmentalandcorporatevalue.

If import/exportrestrictionswereputoncotton,Chinaandthe United States, the two largest cotton producers, maydevelop their industries to meet the requirements of thefullcottonlifecyclesincetheactualgrowthofcottonwouldnotbelimited.However,atthesametimetherewouldbeamanufactured‐demand for other fibers, whether they aresustainable (economically – not just environmentally)natural fiberssuchashempor flaxorsynthetic fiberswithsimilar characteristics of cotton. Just as with the quotasystemthiswouldgivetheunderdog(developingcountriesorlesserused/newfibers)thechancetogrowwithoutbeingbulliedbythebigkidslikeChinaandcotton.

Thisexampleillustratessharedvaluethroughafewaspects.Whileit isalimitation,it isnotalimitationonbusinessbutratherontheproductsusedwithinbusiness.Retailerswouldcontinuetomaket‐shirtsandcottonfarmerswouldcontinuetofarm,buttheretailersmay buy local cotton or invest in a new fiber, and the cottonfarmersmayfindwaystometmorelocaldemandorstartrotatingcrops,aprocessthatisalsogoodforthefertilityoftheearth.Thistype of regulation, one that does not simply tell business theycannot do something but instead gives them new boundaries ofhow to do things, coupled with programs explaining alternativeinvestments createsopportunities for innovation – and innovationleads to new developments, utilizing efficient and sustainableresources,andcreatessharedvalue.

Restrictions have been passed in many western nations,includingtheUK,limitingthetypesofchemicalsthatcanbeusedonfood, garments, or other products (Office for National Statistics,2010). This is a way to impact the policies of factories andfarmlandsindevelopingnationswhereworkersmaybeunawareofthe health risks and governments are often corrupt putting asideknown toxic effects. The usage of pesticides can be damaging toboth humans and the environment and many developed nationshave enacted bans, but developing nations resist such bans, evenwith known health effects, because of the profitability of thechemicals(EnvironmentalJusticeFoundation,2010).Suchhasbeenthe case for endosulfan, a chemical studied by the EnvironmentalJusticeFoundationbecauseithasbeenbannedin62nationsbutis

Distribution as it should be following Quota legislation

More likely imagery of export distribution during the time of quota legislation

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producedby the Indiangovernmentwhoadamantly resists itsban(2010). In instances such as these, when international governingbodiessuchastheWorldTradeOrganizationenactlegislation,ithasa higher chance of being followed by all partnering countries,particularlydevelopingcountriesthatrelyoninvestmentfromothermembernations(UNDPI,2004).

Inordertocreateopportunitiesforvaluecreationandshiftthe paradigm of government as a restricting body to a supportsystem for the shared benefit of society and business,environmental regulations must be passed that don’t just outlawcertain processes or products but instead focus on the damagingcharacteristics of such processes so that companies can innovatenew more sustainable supply chains. For each environmentalrestrictionthatismade,anopportunitymustalsobeoffered.

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IV. Taxes

A widely discussed approach to improve corporate andindividual environmental responsibility is through taxation(Fullerton et al., 2007). The goal of environmental taxes are tomake individuals and companies socially responsible for theiractions;notjusttoproducegovernmentfunding(Robertson,1996).While it may be hard to imagine the ecological impact of ouractions,itiseasytounderstandthatpayingforabadhabitreducessuch a habit. This is the theorybehind cigarette taxes, becauseofthe added cost, smokers begin to smoke fewer cigarettes a daywhen the price rises and eventually try to stop altogether to savemoney. A gradual tax increase on environmental damage wouldalsoslowthedamagetotheenvironmentallowingotherprogramsto come in and shift the laissez faire attitude towardsenvironmentaldegradation.

In order to slow the corporate habits of pollution, energyuse,andwaterwaste,avarietyoftaxeshavebeenimplementedtoincreaseawarenessofecologicalimpact;themostcommonbeingacarbon tax (Fleming, 2006). Setting a carbon tax affects coal,petroleum, and natural gas users and increases the competitiveadvantage of renewable resources such as wind, hydro, and solarpower while reducing the emission of greenhouse gases (TheEnvironmentAgency,2011).Thegoalofsuchataxisnottostoporevenslowproductionofgoods,butrathertochangetheprocessinwhichproduction isdone. It isunrealistic toexpect companies toreduce theiroutputandsubsequentprofitability justbecause theyareaskedto,butitisentirelyfeasibletoconvincethemtoswitchtomoreefficientformsofproduction.Ifmoneygeneratedbyacarbontaxisusedtosubsidizegreenenergy,thedemandforgreenenergywillriseandtheefficiencyanddevelopmentofitwillalsospeedup.

CarbonTaxesdonotaimtoclosefactoriesandstopglobalbusiness,buttocreateandimproveenvironmentalalternatives.Inthe car industry we have begun to see electric cars that do notrequiredriverstochangetheirtransportationhabitsbutallowthemtothinkofdrivinginanewway.Whilethisdidnotoccurbecauseitwas more efficient or reduced costs, it created a competitiveadvantage for companies. While some apparel companies havesoughtsimilaradvantages,ithasbeenrestrictedtospecificproductlines within business or sectors of the fashion industry such asoutdoorwearcompanies.

A key problemwith a carbon tax is determiningwhere toadministeritandmakingthepartiespayingthetaxunderstandhowit is a benefit to their business (Testa to Testa, 2011). While allpartiesareresponsibleforthecarbonthatgoesintoaproduct(andintheendanyaddedtaxtypicallygetspassedontothenextlevel),thebestplacetoadministerthetaxistothebusinesssourcingtheproduct and selling it to the consumer because taxes areinterpreteddifferentlybybusinesses thenbyconsumers.Althoughcorporationsareseenas‘alegalperson’theydonotbehaveinthesamewayasaperson(Achbaretal.,2003).Acorporationdoesnothave a moral compass to guide its actions (Achbar et al., 2003).

“One of the central goals of a green economy would be to make prices reflect true costs. At present, prices place an artificially low value on non-renewable natural resources and completely ignore external costs – to the air, the water, the soil, to future generations, to workers’ health. The whole economic system is geared to keeping these costs ‘externalized’. A green economy would adjust prices to include real costs and would institute a system of ‘green taxes’ to drive this forward.” - James Robertson, New Economics Foundation

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While individuals within a corporation may, the beliefs amongmanagementmaydifferindividually,butevenifthatisnotthecasepersonalbeliefsarerestrictedinbusinessbecausetheyarepolitical(McLeanetal.,2004).Thereforesocialresponsibilityoftengetsleftin the wind or treated as merely a numbers game of cost versusprofit (Porter et al., 2011). In such an instance where this ‘legalperson’isprimarilydrivenbycostsandprofits,increasingthecostsof production can be an effective way of increasing interest inalternative modes of production, as long as other modes ofproduction are alsomade available at an affordable price. This isthe goal of administering a carbon tax although the subsidies andinvestmentaspectsarenotalwaysrealized.

While a carbon tax is most successfully applied tocorporations,other taxesexist that canhavesuccessful impactsatvarious stages of the supply chain. For example, a tax on wastecouldbesuccessfulforbothconsumersandcorporations.Ifthereisan additional charge to throw away something and it is suddenlymoreaffordabletorecycle,itislikelythatpeoplewilltrytorecyclewhenpossible for the sameprinciple I discussedpreviously – costandprofit.Butrecyclingisalreadygrowinginpopularityandisfreeand easy in many places within western nations and growinglyelsewhere(OfficeforNationalStatistics,2010a).Thisisnotsowithapparelthough.Lookingattextilesspecifically,arecyclingprogramforfiberscangreatlyreducetheamountoftextilesinlandfills.Thiswould require companies tomakemore pure‐fiber garments thatcouldbebrokendownandrecycled,butgiventheamountofwastefabric that isproducedbymanufacturers itwouldprovebeneficialtobothcompaniesand individuals (Hethornetal.,2008). Awastetax could also have benefits for new textile development, ascompanies would have reason to invest in research for newsyntheticfibers.Ofcourse,whiletextilerecyclingcancreatesharedvaluebetweencompaniesand for consumers, it isunlikelywewillseesuchprogramsinitiatedbygovernmentsbecauseitisnotinthebestinterestoftheirinvestors,atleastuntilnewfibersarecreatedtosubstitutepopularcombinationssuchaspolyester‐cottonblends.These fibers are so ingrained in the industry it is impossible forcompaniestoenvisionvalueelsewhere(Blackburn,2011).

Taxesmay not be themost obviousway to create sharedvalue, but if the money can be kept within a company andredistributed to green initiatives it can be seen as an investmentandvaluecreatorratherthanataxandsubsidyprogram(MeyertoTesta, 2011). Through encouraging companies to find alternativetechnologies to deal with regulations, taxes can be an effectivemeans of promoting efficiency and productivity (Nordvik‐Carr,2010).Taxshiftingcanalsoartificiallyjumpstartaneconomy. There are other options for companies to improveenvironmental action of companies beyond just implementing anadditionaltax;theycanalsoimposemultilateraltaxcredits,aformof Foreign Direct Investment (FDI) (Testa to Testa, 2011).Multilateraltaxcreditsallowacompanytoinvestinamanufacturer–inthiscaseinagreenmanufacturer–andsetupthebusinessina

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manner allowing it to grow quickly to meet the demands of theinvestingcompany. In turn thecompanygiving the loangetsa taxcreditfromthegovernment. Similartothemulti‐lateraltaxcredit,Brazilhasaprogramthatallowsindividualstoapplyforaloanfromthegovernmentforanewbusiness,butratherthangettingtheloanfrom the government they take proof of the certified loan tocompaniesand then that company is able toagree to support thestart‐up business rather than paying that amount of governmenttaxes(SanfelicitoTesta,2011). Multilateral tax credits allow companies in developednations to invest incompanies indevelopingnations inaway thatminimizes environmental degradation and the same opportunitiesexistwithindevelopingnationsasisevidentinBrazil(TestatoTesta,2011). This is a promising investment option for governmentsbecauseratherthansimplyshowingenvironmentalismasacostorexpense, it is a method of increasing profitability and reducingcosts. FDI creates a unique concept of community benefit. As Imentioned earlier, companies used to depend on the communitythey were physically in and therefore cared about social andeconomicsuccess,butwithglobalizationthisconcepthasbeenlost.While FDI is not a necessary social act for companies today like itwas in small towns centuries ago, it can instill the same sense ofcommunitycommitmentandvaluecreation. Thecurrenttaxprogramsinwesternnationsaresetupwiththegoaltohelppeopleandtheenvironment,butbybeingstuckonmonetary value they fail to create true value. Foreign DirectInvestment creates the opportunity for government to fund valuecreationwithinregionalorglobalcommunities.Byusingtaxmoneygenerated by un‐environmental practices to invest in greeninitiatives and innovations government can show that theredirection of cash flow can create awareness, profit, and futureinvestment.

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V. Shared Value as a Paradigm Shifter

In order for social actions to considerably impactenvironmental degradation, climate change, and depletion ofnatural resources society needs to understand how to instigatechange. In interviews with individuals in mass retailers such asTarget andMacys, and in government or law offices, therewas adisconnectbetweentheirrolesandtheinterconnectednessoftheiractionsoneachother. Theindividuals incorporatesourcingrarelythoughtcriticallyabouttheopportunitiesandchallengesplacedonthemby the government (Meyer to Testa, 2011). Peopleworkingwithin governments rarely interacted with individuals within theindustries they impacted. The idea of value creation caught theinterestofmanyofmy intervieweesasabridgeofcommunicationthat seemed to be an obvious necessity yet remained relativelyunutilized. The idea of creating a stronger relationship, and apositive relationship at that, between business, government, andthe environment was well received by many but seen as‘unnecessary’ by some. Regulation appears to be an overlookedaspectof the fashion industry thatcanhaveasignificant influenceontheindustrygoingforward.

Thisreportshowsthatthroughpoliciesintaxandregulationgovernments can showmultinational corporations and individualshow to approach environmental change as a business investmentnotaphilanthropicactivitymaking itworthwhile for thecorporate‘legal person’ and not just the people within the corporation.Sustainable living takes a paradigm shift of values and meaning(Ehrenfeld, 2009), in a timewhen individuals are greatly impactedbyadvertisingandproducts,shiftingthebusinessparadigmcanshiftindividual paradigms. This cycle ultimately needs a push though,andgovernmentcanoffersuchanincentive.

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VI. Conclusion

Sharedvalue isaconceptthat identifiesthesignificanceofsociety in the corporate agenda (Porter et al., 2011). Whendiscussed by Porter and Kramer (2011), the environment isconsidered a part of societal well‐being, but when looking at thecycleofproductiontheearthcanstandaloneasaentityinthecycleofvaluecreationforwithoutitwewouldnotbe.Ihavebroadenedthe understanding of shared value from one that considers twoparties, business and society, to also consider the role ofgovernment and the earth. As businesses continue to get dirtierand cleaner at the same time through sweatshop labor andimproper waste disposal along with philanthropy and energyefficient andwaste reducing processes, someoneneeds to step inandguidebothbusinessesandcommunitiestowardsanetworkthatisbothsustainableandprofitable.Thisistheroleofgovernmentincreatingsharedvalue. Theenvironmentcanbeacatalysttoshowhowvaluecreationcanbegoodfortheearth,society,andbusiness.

Oneof thebiggest drawbacks in the greenmovementhasbeenitspositioningasacostofbusinessratherthananinvestment.Inordertochangetheactionsofcompaniesonthelargescalegreenhas to be more than just compliance; promoting efficient greenbusinessdevelopmentallowsittobeawaytocreatesharedvalue.Through government programs that don’t hinder business butredistributethemeansandtaxesthatfocusonvisibleredistributionof funds and efficiency creation, businesses will begin to see theenvironmentasavaluableresourceratherthanacosttobusiness.

“Business is now the most powerful institution in the world, more so than religion or government.” – John Ehrenfeld.

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