Linking private sector investment to social prosperity is not a new idea. Business leaders and politicians alike have touted the benefits of private investment in job creation and GDP growth. The impact of these investments on social prosperity, while undeniable, also has limits. As Harvard Professor Michael E. Porter states, “We’ve long understood that while economic development is beneficial for social progress, generally, it’s not sufficient.” Shared value can play a unique role in driving the national dialogue about increasing competitiveness while fostering social prosperity. Placing social value creation at the core of business strategy rather than as a byproduct has the potential to uncover big opportunities for individual companies and create greater prosperity at the national level.
A few months ago, FSG launched a new research effort to further explore how shared value can create more widespread prosperity in Chile, a country that epitomizes many of the challenges of countries that are trying to extend the benefits of economic growth to a broader portion of the population.
Over the last few decades, Chile has experienced rapid and sustained economic, social, and institutional development. In 2012, Chilean GDP per capita reached over $21,000, the highest among 17 major Latin American economies, up from the 9th highest in 1990.[i] Social indicators of health, education, housing, and crime have improved significantly. However, crucial challenges remain. Chile has the highest level of income inequality in the OECD;[ii] levels of mistrust and social unrest are high; and many Chileans suffer from a lack of opportunity.
Chile is now at an inflection point. While the business community has contributed to, and benefited from, the growth and development of the last decades, social challenges pose a very real constraint on its growth potential. Chilean society views companies with suspicion. Many Chileans believe that profit-making activities are merely a demonstration of corporate greed. This dynamic is likely to worsen unless companies are able to find ways to authentically connect their business strategies with strengthening Chilean society. Likewise it is vital that the public sector recognizes business as a critical piece in its development agenda, and civil society is able to balance holding businesses accountable and accepting legitimate business imperatives. Failing to do so will lead to squandering an important engine for creating shared prosperity.
This study is a call to action for the Chilean private and public sectors. It will highlight specific opportunities and examples on how Chilean companies can contribute to three important country challenges: 1) Increasing micro, small, and medium enterprise competitiveness; 2) Closing the skills gap; and 3) Reducing obesity. It will also outline specific roles that governments can take to foster and accelerate the creation of shared value.
While the study will be grounded in the Chilean context, the social and economic challenges, examples, and lessons learned will be relevant to many developing and developed countries.
Read the study here Shared Value in Chile.
Our research is being conducted in partnership with Universidad del Desarrollo, Arauco, Banmédica, BCI, BHP Billiton, Coca-Cola, Nestlé, the Inter-American Development Bank, and Casa de la Paz.
[i] Includes 17 major Latin American countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. GDP per capita is measured in 2011 international dollars, adjusted for purchasing power parity (PPP).
[ii] Based on the Gini coefficient measure of inequality.