Creating Shared Value

Report
Negocios Inclusivos and
Valor Compartido
Companies can increase competitiveness and
profitability by helping to solve social problems
“
“Creating Shared Value,”
Porter and Kramer
Shared Value holds the key
to unlocking the next wave of
business innovation and
growth.
[Exploring] societal needs will
lead companies to discover new
opportunities. . . and recognize
the potential of new markets
previously overlooked.
-- Professor Michael Porter
”
Social needs represent enormous markets
Social needs can represent
enormous markets:
Social
Needs
Business
Opportunities
Sources: EIU, WRI
Corporate
Assets and
Expertise
• Healthcare spending in Latin
America is estimated to be $600
billion
• The BOP market for energy in Latin
America is over $30 billion
• The market for clean water in
developing countries is estimated
at $13 billion
FSG.ORG
Thinking about Sustainability and CSR has
evolved
Blind Eye
Damage Control CSR = Good PR
New Paradigm
“What
problems?”
“Problems
could harm
us”
“We should do
something”
“We see
opportunity”
- Let’s ignore the
problems
- Let’s donate
money to
minimize brand
damage
- Let’s create
dedicated CSR
efforts
- Let’s
strengthen our
company by
solving societal
problems
relevant to our
business
4
© 2011 FSG
FSG.ORG
Shared Value goes beyond compliance and
sustainability
Shared
Value
CREATE
Company Specific
Sustainability
PROTECT
Industry Specific
Compliance
COMPLY with laws, codes of conduct
Required from all businesses
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© 2011 FSG
FSG.ORG
Shared Value is different from traditional CSR
Corporate Social Responsibility
Creating Shared Value
Motivation
• Corporate reputation
• Competitive advantage
Main Driver
• External stakeholders
• Corporate strategy
Approach
• Reactive
• Proactive
Measurement
• Spending, standard ESG metrics
• Social and economic value created
Management
• CSR / Public Affairs
• Across the whole firm
Business Benefit
• Risk reduction and goodwill
• New business opportunities
Social Benefit
• Successful projects
• Large scale sustainable change
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© 2011 FSG
FSG.ORG
How do companies create Shared Value?
Shared Value is:
Enhancing the
competitiveness of a company
while simultaneously
advancing the economic and
social conditions in the
communities in which it
operates
Shared Value strategies:
Reconceiving Products
and Markets
Redefining Productivity
in the Value Chain
Shared Value is NOT:
•Sharing the value already
created (philanthropy)
•Personal values
•Balancing stakeholder interests
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Enabling Local Cluster
Development
© 2011 FSG
FSG.ORG
1
Reconceiving Products and Markets
• Design products and services to address societal challenges
– E.g., Health, education, poverty, environment
• Open new markets by serving unmet needs in underserved communities
– Often requires redesigned products or different distribution methods
• Businesses can be more effective than governments and NGOs in
marketing solutions to social problems
• Shared value offers new opportunities for differentiation, innovation,
and growth
8
© 2011 FSG
FSG.ORG
1
Reconceiving Products and Markets
GE mobilizes assets across its business to improve healthcare and grow
the market for GE’s products. Expertise in R&D and venture funding is
leveraged to develop new products (such as Vscan, a lower-cost handheld
ultrasound machine, pictured below) while GE’s marketing expertise is used to
educate and engage consumers in healthcare improvement.
Business Goals
•
•
Social Goals
Products are designed to achieve three goals
for healthcare by 2015:
• Decrease costs by 15%
• Increase access by 15%
• Improve quality by 15%
Create 100 new products by 2015. Fortythree products have been developed to
date.
Realize revenues and enter new markets
with Healthymagination products*
* Sales targets not publically available
Source: Company websites and reports, news articles
9
© 2011 FSG
FSG.ORG
2
Redefining Productivity in the Value Chain:
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Operations Outbound
Logistics
Logistics
Marketing
& Sales
After
Sales
Service
M
a
r
g
i
n
Every activity can be redefined through a social perspective
10
© 2011 FSG
FSG.ORG
2
Redefining Productivity in the Value Chain
Walmart is reducing transportation costs and helping sustain
the livelihoods of small-scale farmers in the US and emerging
markets by working to source produce for its stores locally and by
providing training and support to farmers near store locations.
CSV Investment
Business Goals
•
•
Social Goals
•
Reduce transportation costs –in the US
Walmart has already cut 100 million miles
from delivery routes saving the company
$200M in fuel costs
Reduce food waste - goal of 15% in
emerging markets and 10% in US by 2015
Source: Company websites and reports, news articles
•
•
11
Increase income of small and medium
farm suppliers by 10 – 15%
Reduce waste and carbon emissions
Provide low-cost, healthy food for
Walmart customers – goal is to sell $1B in
locally-grown produce by 2015
© 2011 FSG
FSG.ORG
3
Enabling Local Cluster Development
• A strong local cluster with capable local suppliers and institutions improves
company productivity
– e.g., greater supply chain efficiency, lower environmental impact, and better
access to skills
• Companies, working collaboratively, can catalyze major improvements in the local
cluster and the local business environment
• Local cluster development strengthens the link between a company’s success
and community success
• What suppliers are inefficient or missing locally?
• What institutional weaknesses or community deficits create internal costs
for the firm?
12
© 2011 FSG
FSG.ORG
3
Enabling Local Cluster Development: Mars
CSV
CSVInvestment
Investment
Mars is tackling a declining cocoa sector in Cote d’Ivoire by
improving smallholder farmer livelihoods and cocoa sustainability.
Business Impact
•
•
Social Impact
Cote d’Ivoire produces 40% of the
world’s cocoa supply
Increased supply sustainability through
improved productivity and postharvest processes
Source: Company websites and reports, news articles
13
•
Improved farmer income
•
Access to healthcare and education
•
Protection of biodiversity, reduced
deforestation and control of runoff
© 2011 FSG
FSG.ORG
Creating Shared Value: An Integrated Approach
1
Reconceiving Products
and Services
Redefining Productivity
in the Value Chain
Jain offered a suite of services to participating
farmers including farm management training, soil
sampling, and limited financing
Building Clusters and
Framework Conditions
Jain partnered with the Indian government to help
secure access to financing for smallholder farmers
seeking working capital and investment loans
2
3
Business Impact:
•
•
1
Jain created new micro-irrigation products and
agronomy services specifically designed for the
smallholder Indian farmer
2
3
Social Impact:
Market expansion – 1,800 new contracts
due to lower barriers to entry (90% with
smallholder farmers)
Improved supply chain security – More
than 35,000 tons of onions from contract
farmers in the first year
14
•
Increased farmer incomes by $300-400 per
acre for onion farmers
•
Increased farmer incomes among irrigation
users by $100-$1,000 due to efficiency gains
•
Reduced water use by an estimated 500M
cubic meters of water/year
© 2011 FSG
FSG.ORG
Shared Value focuses on eliminating trade-offs
between business and society
“New R&D”
“Trade-off Busting Innovations”
“Less Product Complexity”
“Local Production”
“New Partnerships for Sales and
Consumer Education”
15
© 2012 FSG
FSG.ORG
Why is Shared Value important to
Latin America?
• Local companies will miss out on opportunities that MNCs
are capturing
• Social problems will go unaddressed
• Shared Value represents a rare opportunity to close an
ideological divide
16
© 2011 FSG
FSG.ORG
How can Latin America accelerate the adoption
of Shared Value?
• Change mindset
• Accelerate learning
• Governments and Multilaterals can champion
17
© 2011 FSG
Negocios Inclusivos and
Valor Compartido
FSG.ORG
FSG has drawn important lessons from its work helping clients
implement Shared Value
1
Companies should work
from the inside out and from
the top down
2
It takes time to embed a
shared value approach
• In any organization,
corporate leadership sets
the tone – win the hearts
and minds of those at the
top first
• Identify and communicate
early successes to
maintain momentum – such
quick wins could be from
“legacy” programs
• Although led from the top,
shared value is typically
created at the business unit
level. Engaging managers
from across the company
in CSV is therefore
essential.
• Track progress against
goals to keep initiatives on
track and to demonstrate
progress
• Constantly adapt and
update your strategy
based on new information –
treat shared value
implementation as the
launch of a new business
unit
19
3
The process requires
change managers more than
program managers
• The primary emphasis of the
team charged with
implementing shared value
should be internal
facilitation and change
management – not external
relations (e.g. grant
administration)
• The team will also require a
strong link with and
oversight from the board
and sufficient managerial
authority to act
© 2012 FSG
A CSV Implementation Story:
How Nestlé Began the Journey
Established a shared
value alignment board
Embedded shared
value in the brands
Created plans with key
performance indicators
Engaged hearts and
minds of employees
“Creating Shared Value is the centerpiece of our business strategy.”
– Janet Voute, VP, Public Affairs
© 2011 Coinstar, Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of Coinstar, Inc.
A CSV Implementation Story:
How Medtronic Began the Journey
Set a specific and
ambitious goal
Tested at scale in
India
Involved multiple parts
of the company
“Through alignment of citizenship and business strategy, we leverage all
of our corporate assets to strengthen our long-term sustainability”
– Omar Ishrak, Chairman and CEO
A Shared Value Case Study:
Intuit Fasal
Social need
Rural farmers in India
lack access to market
data and are forced to
sell produce at a steep
discount
“Focus the organization on tackling big problems, and you will have a better shot at
getting big results.”
- Intuit CEO Scott Cook
© 2011 Coinstar, Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of Coinstar, Inc.
FSG.ORG
3 Enabling Local Cluster Development
Novartis “Arogya Parivar” Case Study
Products
Services
Results & next steps
 Portfolio:
• 79 products in 12
 Community health
 Improved access to health
therapeutic areas
 Affordable:
• Sandoz generics
• Over-the-counter (OTC)
medications & nutrients
• Pharma products
• Custom small packs
branded in local dialect
education:
• ~300 health educators
• Focus on prevention, child
& maternal health,
symptom awareness
 Healthcare provider
education:
• Address low level of
medical training
 Supply chain management:
• Ensure continuity of supply
in village pharmacies
• Provided directly in
villages via health camps
Nestlé Portugal 9/29/11
23
education and medicines for
42 million patients in
28,000 villages
 Partnering with ~50 000
pharmacists and clinics
 Portfolio expansion in 2011:
vaccines, generics,
diagnostics and more
 Will pilot in Indonesia,
Vietnam and Kenya (2011)
 Partnering to expand access
to health infrastructure
financing
© 2010 FSG
FSG.ORG
3
Local Cluster Development: Cisco Networking Academy
Business Problem and Innovation
Social Impact
• Cisco’s growth is limited by the
number of trained network
administrators worldwide
• Over 10,000 Academies established in
all 50 states and 165 countries
• As a result, Cisco established the
Networking Academy
• Developed a distance learning
program that combines a webbased curriculum with local
instructors and lab facilities
• Partnered with industry peers,
schools, governments and
universities
• Focused on economically
deprived regions around the
world
• More than 70% have attained a new
job, a better job, increased
responsibility, or higher salary
• Over 4,000,000 students have been
trained
Business Impact
• Alleviates a key labor constraint for
Cisco customers
• Students become familiar with Cisco
products
• Strengthened relationships with key
suppliers, local businesses and
government
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© 2011 FSG

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