Transcript Creating Shared Value
Negocios Inclusivos and Valor Compartido
Companies can increase competitiveness and profitability by helping to solve social problems
“
Shared Value holds the key
to unlocking the next wave of business innovation and growth.
“Creating Shared Value,” Porter and Kramer
[Exploring] the
societal needs
will lead companies to discover new opportunities. . . and recognize
potential of new markets
previously overlooked.
-- Professor Michael Porter
”
Social needs represent enormous markets
Business Opportunities Social Needs Corporate Assets and Expertise • • • Social needs can represent enormous markets: 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 Sources: EIU, WRI
Thinking about Sustainability and CSR has evolved
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Blind Eye Damage Control CSR = Good PR New Paradigm “What problems?”
-
Let’s ignore the problems
“Problems could harm us”
-
Let’s donate money to minimize brand damage
“We should do something ” “We see opportunity ”
-
Let’s create
dedicated CSR efforts
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Let’s strengthen our
company by solving societal problems relevant to our business
4 © 2011 FSG
Shared Value goes beyond compliance and sustainability
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Shared Value CREATE
Company Specific
Sustainability PROTECT
Industry Specific
Compliance COMPLY with laws, codes of conduct
Required from all businesses
5 © 2011 FSG
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Shared Value is different from traditional CSR
Motivation
Corporate Social Responsibility •
Corporate reputation
Main Driver
• External stakeholders
Approach
•
Reactive
Measurement
• Spending, standard ESG metrics
Management
•
CSR / Public Affairs
Business Benefit
• Risk reduction and goodwill
Social Benefit
• Successful projects Creating Shared Value •
Competitive advantage
• Corporate strategy •
Proactive
• Social and economic value created •
Across the whole firm
• New business opportunities • Large scale sustainable change 6 © 2011 FSG
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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 7 Enabling Local Cluster Development © 2011 FSG
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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 and
growth differentiation, innovation,
8 © 2011 FSG
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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
• • Create 100 new products by 2015. Forty three 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
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% © 2011 FSG
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Redefining Productivity in the Value Chain:
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Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales After Sales Service M a r g i n
Every activity can be redefined through a social perspective
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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 FSG.ORG
Business 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 • • •
Social Goals
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
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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?
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Enabling Local Cluster Development: Mars
Mars is tackling a declining cocoa sector in Cote d’Ivoire by improving smallholder farmer livelihoods and cocoa sustainability.
Business Impact
• Cote d’Ivoire produces
40% of the world’s cocoa supply
• Increased supply sustainability through
improved productivity and post harvest processes Social Impact
• Improved
farmer income
• Access to healthcare and education • Protection of
biodiversity, reduced deforestation and control of runoff
Source: Company websites and reports, news articles 13 © 2011 FSG
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Creating Shared Value: An Integrated Approach
1 Reconceiving Products and Services 2 Redefining Productivity in the Value Chain 3 Building Clusters and Framework Conditions 1
Jain created new micro-irrigation products and agronomy services specifically designed for the smallholder Indian farmer Jain offered a suite of services to participating farmers including farm management training, soil sampling, and limited financing
2
Jain partnered with the Indian government to help secure access to financing for smallholder farmers
3
seeking working capital and investment loans • •
Business 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 • • •
Social Impact:
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
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Shared Value focuses on eliminating trade-offs between business and society
“Trade-off Busting Innovations”
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“New R&D” “Less Product Complexity” “Local Production” “New Partnerships for Sales and Consumer Education”
© 2012 FSG
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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
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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 has drawn important lessons from its work helping clients implement Shared Value FSG.ORG
1 Companies should work from the inside out and from the top down
• In any organization,
corporate leadership sets the tone
– win the hearts and minds of those at the top first • 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.
2 It takes time to embed a shared value approach
• •
Identify and communicate early successes
to maintain momentum – such quick wins could be from “legacy” programs
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
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
19 © 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
Social need Rural farmers in India lack access to market data and are forced to sell produce at a steep discount
A Shared Value Case Study: Intuit Fasal
“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.
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3 Enabling Local Cluster Development Products
•
Portfolio:
79 products in 12 therapeutic areas
Novartis “Arogya Parivar” Case Study Services Results & next steps
• • • •
Affordable
: Sandoz generics Over-the-counter (OTC) medications & nutrients Pharma products Custom small packs branded in local dialect
Community health 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 Improved access to health 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
Nestlé Portugal 9/29/11 23 © 2010 FSG
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3 Local Cluster Development: Cisco Networking Academy Business Problem and Innovation
• Cisco’s
growth is limited
by the number of trained network administrators worldwide • As a result, Cisco established the
Networking Academy
• Developed a
distance learning program
that combines a web based curriculum with local instructors and lab facilities •
Partnered
with industry peers, schools, governments and universities • Focused on
economically deprived regions around the world
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Social Impact
• Over
10,000 Academies
established in all 50 states and 165 countries •
Over 4,000,000
students have been trained • More than
70% have attained a new job, a better job, increased responsibility, or higher salary Business Impact
• Alleviates a
key labor constraint
for Cisco customers • Students become
familiar with Cisco products
• S
trengthened relationships
with key suppliers, local businesses and government © 2011 FSG