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Redefining Value Chain Productivity in Africa

Business Action for Africa recently released its 2010 Report on the role of business in meeting Africa’s development challenges. In the report’s introductory section, Graham Baxter of the International Business Leaders Forum (IBLF) notes that “a growing number of businesses, from large multi-nationals to small-sized start-ups, are moving beyond philanthropic, risk-mitigating CSR focused activities, to find new ways to do business that benefit both the poor and their core business.”

Baxter’s comments reinforce a central theme of the January / February 2011 Harvard Business Review article from FSG co-founders Michael Porter and Mark Kramer on Creating Shared Value. While CSR programs focus mostly on reputation and have limited connection to the business, Porter and Kramer note that shared value initiatives leverage a company’s core assets and expertise to create joint community and company value. As Porter and Kramer’s article suggests, a company can create shared economic value and social value in three key ways: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations.

Business Action for Africa’s report includes several case studies of companies that are driving enterprise development in Africa by creating shared value. For example, Coca-Cola bottlers in East Africa have created Micro Distribution Centers (MDCs) that involve thousands of micro-entrepreneurs serving as local distribution centers to retail outlets in a 1-2km radius. Many MDC owners are first-time entrepreneurs, and approximately 1,000 are women. Beyond the economic development benefits for local communities, the MDC model addresses a key distribution challenge for Coca-Cola and accounts more than 80% of the company’s sales volume in East African countries like Tanzania.

Coca-Cola’s MDC model offers a promising example of a company that is actively creating shared value. By tapping into local entrepreneurial talent and redefining productivity in the value chain, Coca-Cola is not only meeting a core business need but also providing local economic development opportunities in a high-potential emerging market context.

What other examples have you seen where companies have identified synergies between social progress and productivity in their value chain?

Robert Albright

Former Director of Programs, Collective Impact Forum