Deal or No Deal?

A newly minted – and controversial – agreement has been reached between the UK government and 170 large companies to promote public health. Whether it eventually succeeds or fails, and the reasons why it does so, may give us interesting new data on how companies create shared value, and what that means for how to regulate business.

Earlier this month, the UK government announced its new Public Health Responsibility Deal – a cross-sector agreement, involving government, industry and the nonprofit sector, to tackle issues in public health including inactivity, poor diet and alcohol misuse. The Deal forms a central part of one of the (mostly centre-right) government’s central policy ideas, known as “The Big Society,” which accepts that there are issues that should be addressed collectively by society, but argues that that doesn’t always mean government action in the form of legislation or spending.

It is very controversial. Within industry, it has gathered widespread support, with 170 companies signing up to the pledges it contains. SAB Miller, for example, hailed the agreement as a “comprehensive, multi-faceted response” to complex problems, which “sets out practical, measurable and deliverable steps [that] can be a real catalyst for change if everyone plays their part.” On the other hand, a number of public health groups, such as Diabetes UK and the British Medical Association, have refused to participate, denouncing the Deal as ineffectual and soft on big business. The Institute of Alcohol Studies (IAS) cited a “conflict of interest between industry economic objectives and public health goals of reducing alcohol consumption and associated harms.”

Time will tell which (if either) side of the debate is correct; this blogger certainly hasn’t yet seen enough evidence to form a judgment either way. However, the way in which the Deal plays out will tell us some interesting things about how companies create shared value, and what that means for the regulation of business.

Creating Shared Value posits that companies can prosper while contributing to progress on specific social issues, which would lean against the view illustrated by the IAS quote above. However, it also argues that companies that create shared value do so around a limited set of key issues. It is possible to imagine that, for example, there may be a way for the drinks industry to prosper while successfully promoting a culture of moderate, responsible drinking. However, it is also conceivable that the right shared value approach for such a company is to drive economic development in poor countries by optimizing its value chain, and that the objectives of temperance and maximizing shareholder value cannot be reconciled. Just because an issue is thematically close to a business, does not mean it is necessarily a shared value opportunity, and vice versa.

The logic of the Deal is that industry needs to be part of a solution to complex public health issues (almost certainly true), and that if the right incentives are set, shared value opportunities will be discovered and pursued – reducing or even eliminating the need for detailed, industry-specific regulation. It will be fascinating and illuminating to see how events unfold.

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