Create Shared Value with a Trampoline Approach

This post is part of the HBR series of blog posts by and about the new generation of purpose-driven leaders.

Too often companies approach their engagement with social and
environmental issues with a safety net mentality: reacting to vocal
stakeholders, minimizing risk, doing the bare minimum to comply with
standards, and at best, striving for footprint reduction rather than
ecological value creation.

This approach is nowhere near enough to tackle the pressing problems
we all face — water scarcity, low quality education systems, an aging
population in some parts of the world, a rapidly growing one in others,
and so on. Indeed, I see some of our most vexing societal problems as
opportunities for the private sector. But these are opportunities that
can only be seized through a different approach: a trampoline approach.

A trampoline approach is one that is focused on value creation, not
the mitigation of value destruction. An approach that turns societal
challenges into new markets. Safety nets prevent things from falling;
they are responsive and defensive. But trampolines propel things
forward.

Creating shared value,
a paradigm for how companies engage with society pioneered by Michael
Porter and FSG, captures this trampoline mentality very well. Michael Porter and Mark Kramer
argue that shared value encompasses corporate policies and practices
that enhance the competitiveness of a company while simultaneously
advancing social and economic conditions in the communities in which it
operates. When corporations create shared value they increase their
profits and create greater social impact, resulting in powerful
transformations and innovations in both business and society.

Last month, I had the privilege of attending and speaking at a conference about innovation,
and specifically, about how shared value can infuse new innovation into
companies competing in the 21st century. One of my fellow speakers,
Reinhard Otten from Audi, introduced a new initiative
where Audi will become a trampoline for the whole renewable energy
movement in Germany. Audi is seeking to build a car that is
carbon-neutral — one that when driven does not create any new net
emissions. This is laudable, but I would argue somewhat safety-net
oriented, as Audi is merely joining its competitors in an inevitable
trend for the automobile industry.

But Audi is not stopping there. Audi believes that in order for the car to be truly carbon neutral, it needs to be manufactured
using only renewable energy. Easier said than done it, turns out!
Germany benefits from wind farms and solar energy, and in any given year
from net excesses of these renewable sources of energy. However,
Germany currently lacks the capacity to store excesses from sunny or
windy days at scale, meaning that on the many days of deficits in these
renewable sources, conventional sources of energy are still needed. So
Audi has decided to become a trampoline. Audi helped spearhead a
technology solution to this problem, which will enable excess renewable
energy to be captured, stored, and used in its production processes.
While this is good for Audi, it is also good for the country and society
as a whole, as this solution was badly needed to move toward more
renewable energy.

This initiative is new, and it is too soon to tell if it will work at
scale the way Audi hopes it will. But it is energizing to see that a
car company — which in the old paradigm of safety nets could have easily
said that helping to solve Germany’s energy storage problems was not
part of its mandate — has decided to become a trampoline for renewable
energy.

In the world of shared value, companies need to ask themselves a broader set of questions to compete:

  • What are the key societal issues in my company’s context?
    If you’re a car company like Audi, you are worried about access to
    renewable energy. If you’re a healthcare technology provider like GE,
    you’re worried about the healthcare sector at home and abroad. Or, if
    you’re an F&B company like Nestlé, you’re worried about the
    practices in your supply chain.
  • Which of these are impeding growth (or representing untapped markets)?
    In Audi’s case, it is the inability to capture daily excesses in
    renewable energy. In GE’s case, it is the quality, cost, and access
    issues plaguing healthcare, and for Nestlé, it is excess water use in
    agricultural production.
  • How can I — and capable partners from all sectors — actively solve the problem?
    For Audi, it is engineering an energy storage solution in cooperation
    with multi-sectoral partners. For GE, it is the multifaceted healthymagination campaign. And for Nestlé, it is working with agronomists to help hundreds of thousands of smallholder farmers improve their farming practices.

It is easy to be a safety net; you just react to trends, regulations,
and loud voices that fall into your lap. It is much harder to be a
trampoline and to spot opportunities for societal progress and
competitive advantage proactively. However, in the 21st century
companies with safety-net mentalities will soon find themselves in need
of one. Only a trampoline mentality will allow companies to successfully
compete in this world.

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