Below is a second tranche of Q&A from our corporate panelists on the 2/6/13 Measuring Shared Value webinar. In our first Q&A blog, we featured responses from Intel and Nestlé, and below are responses from Coca-Cola and InterContinental Hotels Group.
As context, since we could only answer a subset of the over 100 questions on the webinar, we are fortunate that our panelists have volunteered additional time to continue the conversation on FSG’s shared value blog.
Thanks to Paul Snyder, Global Head of Environmental Sustainability at InterContinental Hotels Group, and Claudia Lorenzo, Social Business Director at Coca-Cola Brasil, for taking the additional time to share their insights and experiences!
1. Did InterContinental Hotels Group (IHG) see the Green Engage shared value initiative as profitable from the start? If not how long did it take for investment to show results?
Paul: To answer this question, it’s important to make a distinction between IHG and IHG’s franchises. Green Engage itself provides no contribution to profit for IHG. We have committed to our owners (i.e., franchisees) and GMs that all revenue from subscriptions to the tool will be used to maintain and enhance the platform. If you are asking in terms of an individual hotel property, then they often see enhanced profitability right away when they engage with the tool.
First of all, the tool points them to the "lowest hanging fruit" when it comes to sustainable initiatives, many of which have in-the-year savings. Over time the results are more profound, obviously. Properties have recorded energy savings from 5% – 25%. Second, by subscribing to Green Engage our hotels are making a statement about their commitment to sustainability. That commitment, along with the substantive solutions they execute, resonates with guests from individual travelers to large group accounts. That translates into incremental revenues which enhances profitability. Finally, when a property commits to Green Engage, their employees notice and we know that employees care about authentic commitments to sustainability. Turnover costs (the costs associated with recruiting and training a replacement worker) are a significant profit drain for hotels. Our employee surveys show that what IHG is doing around sustainability with Green Engage enhances the employment brand of our company and that of our hotels. While it is nearly impossible to measure, we know that Green Engage leads to higher employee engagement and higher employee engagement leads to lower turnover, which contributes to higher profitability.
2. How can we think about social and business outcomes in a more complex way than “they happen at the same time”? In your experience, what is the relationship between social and business outcomes? Are some outcomes independent and others dependent, and have you found any patterns? What are the lessons learned here, in terms of truly integrating / exploring the relationships between social and business value?
Paul: I think the questions you ask are exactly the right ones and the ones that are top-of-mind for everyone involved in progressing the shared value framework. We all know, both intuitively and anecdotally, that a relationship exists between social and business outcomes. We see patterns in isolation, but we can't seem to relate them to each other. Some outcomes seem dependent, some independent, some we just don't know. I think we can say this as a maxim – business and social outcomes reinforce each other. The commonly held belief in their combined resonance explains why we have well known aphorisms such as "growing the pie bigger" and "1+1=3". This webinar and our work in it indicate how we are all seeking to determine the exact nature of the relationship. To me, it is like physics' grand unified theory. There must be an equation out there that can describe and measure the relationship between business and social outcomes. The trick is this: I think it is both more complex than a simple regression type function and, at the same time, more simple than we realize. If we are right and there is a grand unified function that expresses this relationship, then I suspect that when we discover it we will all slap our hands to our foreheads and say "Of Course!"
3. With Coca Cola tracking business goals, incremental sales could not have been 100% attributable to this project. There would have been other factors at play. How did you track that?
Claudia: First of all, thanks for raising this great question. This was our concern since the first moment: a tracking process that could isolate the contribution of the Coletivo project against any other variable that could impact business development in low income communities, such as external factors or even our own ‘business as usual’ strategy. Our methodology is based always on comparing business goals with control groups—areas we don’t reach with the project. For example, we track sales growth vs. the previous year in Coletivo areas against other low income communities that are not reached yet with Coletivo. That clear understanding of the business contribution—through a consistent tracking process—was key to create the culture of shared value and establish a fact-based dialogue with the whole organization.
4. As a practical matter, could the panel members talk about how they measure quantitatively some of the softer aspects of societal impact, such as youth self-esteem in the case of Coca-Cola’s Coletivo?
Claudia: We think that it’s a great challenge for all of us. Let us answer your question focusing on three important aspects:
- LONG TERM PROCESS: When we talk about self-esteem or any other ‘soft aspect’, it’s important to measure long term impact in a way that we can deliver a consistent social legacy. So, we have to create a permanent contact and dialogue with the communities to measure and see their real change.
- CONSISTENCY: We apply the same methodology as for business goals – that is about comparing control group evolution with impacted areas performance. By doing that, we can guarantee the understanding about the specific Coletivo impact in youth self-esteem.
- PARTNERSHIP: Coca-Cola has a strong culture of measuring hard and soft indicators, so we could start accessing our own competencies. But as Coletivo has a strong innovation component, we had to co-create this special capability with research partners—that have great expertise in measuring both aspects, social and business. Together we built the first model, and now we are evolving to a ‘2nd wave’ that counts all learnings and new challenges.
Thanks again to our contributors and we look forward to additional dialogue on these important topics!