It’s not often you go to a conference and speak earnestly and comfortably with the CEOs and Chairs of the world’s largest companies and NGOs. That was exactly the experience at the Global Leadership Summit in Boston on May 23, 2013 and the reason it was possible was not an exclusive club membership or overpriced ticket, it was ideas. The amazing energy and disarming influence a big idea can have when it is still in formation.
At this event the networking was primarily co-creation. Leading consultants, NGOs, philanthropists, companies and governments all asking the same questions. How can shared value work in my business? What would it look like? What problems can I solve while delivering economic returns?
The Australian cohort in Boston are advanced in our thinking. We have many answers to the questions asked, but also plenty of thinking to do. That’s why FSG has launched the Shared Value Initiative, to create a global platform for knowledge sharing. A community of practice.
Assuming you know what shared value is all about, here are my take-aways from the conference.
1. Shared value is powerful nuance.
A variation on a theme or a bold new direction? That is the question often asked of presenters and practitioners developing shared value models and executing strategies. Someone working in sustainability or corporate social responsibility (CSR) inevitably considers ‘is this new?’ and ‘what does it mean for my learning, my role, my career?’ In practice, shared value does build upon CSR work but the subtle differences in approach and resourcing make the potential for impact so much greater. Shared value creation relies on people who understand the social dimensions of a business – internal and external to the company – but they can have an operations, research or financial role. That can be a challenging or inspiring prospect for CSR and sustainability practitioners. The bold will own the idea and lead it’s cross-business execution.
2. Measurement poses some important questions for business.
To measure something is to validate its existence. Shared value demands measurement of social and economic value creation to define its relevance. But here’s a question debated at length at the consultant forum over three days in Boston: shouldn’t we be measuring net impact? If a company does good in one area shouldn’t it be correlating that against any negative impact it has to society and defining the net result.
An example. Coca-Cola has a successful initiative called, Coletivo, which offers two-month courses in business and retail training to young adults, entrepreneurs and artisans, and has grown from five to 136 programs across Brazil. To date, 66% of the over 25,000 graduates have been women, and 30% have gained jobs through participating retail customers. Sales of Coca-Cola in those communities has also increased considerably along with brand reputation. The unmeasured negative impacts of Coca-Cola’s expansion could be higher levels of sugar in diets leading to health conditions, more waste and a lack of diversity in the local drink market (local manufacturers who may employ more local people per volume of output cannot compete).
Should Coca-Cola’s shared value creation be measured on a project by project basis or a whole of company or market net impact?
3. Measureable social value creation takes time.
Most projects discussed over the week of workshops are not standalone shared value projects – they are projects that are being measured and assessed for shared value creation. This is because new projects designed from the conceptual stage as ‘shared value’ in outcome, are at an early stage and impact is yet to be measured. That said, there are some very good examples of shared value based initiatives that are highly likely to yield positive social impacts on health, empowerment and employment.
“Get social issues into the capitalist bucket” and “create magic”, was the clarion call of Michael Porter. The importance of scale was re-iterated throughout the day. Despite the great work of philanthropic and non-government organisations, society has not been able to overcome large scale persistent health and social problems. When there is an economic incentive, capital is mobilised and rapid investment in innovation leads to large scale results. This is the most compelling benefit of shared value thinking. Like the start-up with a great idea but no capacity to develop it and take it to market, NGOs face the problem of capital and reach. In partnership with corporations, scale is achieved, taking localised solutions to many other regions/markets which can benefit.
5. We need to change the tools and metrics of investment analysts
Short termism is framed into the business thinking of today and is the greatest threat to adoption of shared value as a core business strategy. Stock analysts set 20 year growth projections on one quarter’s data. And they punish under-delivery with ‘sell’ advice. This makes it highly problematic for a company executive proposing major capital investment in long term projects – the kind that generate significant economic and social returns. A company is naturally sensitive to the investment expectations of its owners but, when they get ill-informed advice, how can the resolution be balanced?
6. Shared value investing.
One of the most interesting findings from the summit was that, in the words of the Chairman, Peter Brabeck-Letmathe, 30% of Nestlé’s institutional investors are social impact investors. Impact investors primarily intend to address social and environmental challenges through their deployment of capital. A major consumer of agricultural production employing 340,000 people, Nestlé has great potential to impact local communities.
During his presentation, Michael Porter introduced the next direction in shared value thinking – shared value investing. Again, there is powerful nuance here. In essence, investors will be encouraged to seek out companies where shared value is core business philosophy and strategy because it fundamentally places social impact as a primary objective. How is that different from impact investing? Let the debate begin but my feeling is that impact investors will seek reporting to validate the social intent of their investment, whereas shared value investors will seek strategy successfully implemented. Shared value creation can release tremendous growth through new products and services, and demand, so it is attractive to any investor.
7. “Suppliers create the value, not head office.”
One of the most poignant quotes from Brabeck-Letmathe. In his case this means the milk and cocoa producers that supply Nestlé’s factories. Acutely aware of the cost to the business of not nurturing communities and working to stabilise supply chains, the Nestlé Chair now says the business invests in sustainability of regions through improvements in infrastructure (roads, drainage, water) that also facilitate other areas of economic growth.
8. Creation of shared value makes you aware of societal value impacts.
The stakeholder engagement and research necessary for shared value creation ensures companies are aware of societal value creation – and destruction. The journey can clearly raise short term pain points but remedying the negative activities transforms relationships and creates shared value opportunities. Investment decisions made using a shared value framework represent risk management and business development.
For a more detailed briefing, read more.