What do carpenters turning wood waste into furniture, ex-guerillas making retail sales, and students using digital learning tools have in common? They are all participants in and contributors to innovative shared value initiatives led by companies throughout Latin America.
As we highlighted in a recent blog post, companies across Latin America are rethinking their place in society and exploring how to play a more active role in addressing regional social challenges and driving local development. Corporations have a suite of unique assets—financial resources, influence, and the ability to scale—that position them to tackle social issues in a way that other actors cannot. By taking a shared value approach, companies can leverage those assets to drive social change while boosting their competitiveness and bottom line.
The opportunity for shared value in Latin America is enormous and still largely untapped. The food and beverage, extractives, forestry, and financial services industries are among those with high potential for shared value creation due to a foundation of shared value sophistication in these industries in other regions. Industry players have pursued several social issues highly relevant across Latin American markets: fostering healthy lifestyles (including nutrition and obesity reduction), boosting agricultural development, upskilling workforces, and including historically marginalized groups in economic development.
A scan of five top economies in Latin America reveals that many companies in these countries are already engaged in creating shared value. Through our work at FSG, we know that many Latin American companies are beginning to address social problems as a core part of their business strategy. Companies such as CEMEX and BASF are leading shared value work in the materials and chemicals industry; Coca-Cola, AB InBev, and FEMSA in the beverages industry; and Arauco, Fibria (now part of Suzano), and Cerrejón in the forestry and extractives industries. Alongside these efforts, we have seen a growing number of companies embracing shared value over the last few years. They may not all use the term “shared value” to describe their work, but they are all finding business opportunities in helping to solve social problems in the areas in which they operate. Let’s take a look at some examples:
In Latin America’s largest market, a handful of fashion and pharmaceutical companies are finding new business opportunities that also address local social needs. In the northern state of Ceará, whose GDP per capita ranks 22nd Catarina Mina trains and hires local women to make beautiful woven handmade bags that offer a sustainable source of income for the producers, and are sold all over the world. Saissu, a fashion design brand that manufactures jewelry and goods, partners with local NGOs to train and empower female artisans living along the Tupana River in the Amazon by providing a platform for them to sell their goods made from recycled rubber, cotton, and PET fibers. Eli Lilly, through its NCD Partnership, plays a large role in addressing the deeply-rooted healthcare challenges of diabetes, which disproportionately affects low-income families in Brazil. The company partnered with the Hospital Israelita Albert Einstein’s Diagnostic & Preventive Medicine and Research Institute to pilot comprehensive, sustainable approaches to patient care, ranging from patient education and provider training to increased access to care.
Chilean companies are applying the shared value approach to increase the competitiveness of micro-, small, and medium-sized enterprises (MSMEs). They are developing the skills of the local workforce and promoting healthy lifestyles. In the extractives and forestry industries, companies are strengthening local businesses and filling local gaps in skilled labor by launching training and education centers. Arauco, a forestry and pulp manufacturing company, launched Campus Arauco, a 2,500-square-meter training center that provides four technical diploma programs to over 660 students per year. The company also created AcercaRedes, a network of hubs that connect nearly 14,000 local entrepreneurs with public and private actors to strengthen their capacity for local development. In the health and food industries, several companies are focusing their shared value efforts on preventive health and nutrition. Nestlé has committed to enhancing the nutritional value of its products, introducing the Popularly Positioned Products (PPP) line in Chile to offer consumers high quality, nutritionally-enhanced food products in smaller formats that enable affordable prices. Sales of the company’s 109 PPP products in Chile grew 20% within one year. The company also supports local workforce development through Alliance for Youth, a collaborative initiative to help young people enter the job market in Chile, as well as in Colombia, Mexico, and Peru.
Both domestic and multinational companies operating in Colombia are embedding shared value in their operations. In parallel, the National Industry Association (ANDI) has been creating momentum around shared value, as well as building an evidence base for how this approach helps companies and society thrive at a critical time for the country. Colombian conglomerate Grupo Nutresa has improved livelihoods for smallholder cocoa farmers through its Cacao para el Futuro program. In addition to increasing input quality and traceability, the company has also reduced raw material imports for its chocolate products by 87% over the past decade, contributing to significant cost savings. Grupo Éxito, one of Latin America’s retail giants and Colombia’s largest private-sector employer, has adjusting its employment policies to hire and retain historically marginalized and vulnerable groups. Through its policies that support groups including victims and ex-combatants of Colombia’s 50-year domestic conflict, the company has increased employee productivity and reduced voluntary turnover-related costs. Grupo de Energía de Bogotá (GEB) is also making bold moves to support peacebuilding efforts in Colombia by clearing landmines across hundreds of square kilometers of remote area surrounding its transmission lines. While improving the lives of thousands of people in rural Colombia, GEB is also reducing its costs as it prevents blowups of its transmission lines, safeguards the lives of its employees and contractors, and improves its social license to operate.
In the region’s second-largest economy, two companies present interesting shared value examples. In the state of Coahuila, global renewable energy producer Enel Green Power operates the “Wood Seeds” program that provides 260 tons of wood waste from construction of its photovoltaic solar plant to nearby communities and trains dozens of local residents as carpenters who repurpose these materials into furniture and other home goods. The initiative not only helps Enel cut costs related to recycling and waste collection but also reduces CO2 emissions as waste is transformed into valuable assets for individuals, communities, and organizations. CEMEX, a Mexican multinational manufacturer of building materials and aggregates headquartered in Monterrey, offers low-income families access to affordable credit and technical assistance for home improvement projects via its Patrimonio Hoy program. The program has been profitable since 2004, contributing to CEMEX’s bottom line, reputation, and customer loyalty. It has allowed over 2.4 million families to build houses three times faster and at a third of the average national cost, thereby increasing their net worth and creating jobs for local craftsmen.
While the majority of corporations in Peru are still early in their shared value journeys, several companies are pioneering innovative shared value strategies. Carlos Rodrigez-Pastor, the CEO of Intercorp, a financials company dedicated to growing Peru’s middle class, started an ambitious project to design Innova Schools, a new kind of private school network to meet the country’s need for high-quality, low-cost education. Intercorp partnered with human-centered design firm Ideo to introduce new curriculum and teaching strategies as well as innovative building designs and financial models. The success of the Innova Schools model was evident after only a few years—students at these schools report higher levels of math and reading literacy, and some have continued on to pursue college degrees at prestigious universities across the world. Since they were established, Innova Schools have generated millions in revenue for Intercorp, which has reinvested earnings to quickly scale the network to include over 50 schools and more than 43,000 students. Innova is now on its way to becoming the largest private school system in Peru.
These examples illustrate just a few of the many inspiring ways that companies across Latin America are applying the shared value approach to generate both business benefits and progress on complex social issues. Devising, piloting, scaling, and measuring the impact of shared value initiatives—not to mention convincing executives and boards to support them—is a perennial challenge. In spite of the challenges, Latin American companies are demonstrating that it can be done, and that there are ample opportunities for others to follow suit. Those companies that do engage in shared value, and the societies in which they operate, are poised to reap the benefits.