Eighty-five individuals – mostly senior corporate executives – gathered at the Charles Hotel in Boston on May 31 to spend a day deepening their practice of Shared Value. The Shared Value Leadership Summit hosted by FSG, marked the beginning of a true community of practice. The participating corporate executives hailed from companies at varying stages of the shared value journey but they all had one thing in common – their belief in shared value as the future of capitalism. The focused agenda allowed participants the opportunity to delve deep into four specific topics: (1) the role of partnerships with government and NGOs to create shared value, (2) creating shared value in emerging markets, (3) measuring shared value, and (4) perspective of investors/capital markets on shared value. Each discussion yielded rich insights and each participant probably took away insights most relevant to where they were on the shared value journey.
The following are some of the key insights I took away:
- Role of Partnerships in Creating Shared Value. Partnerships with corporations are evolving from viewing the corporation as a sponsor or check-writer to viewing them as partners in effecting lasting social change. For example, Carolyn Miles, the CEO of Save the Children described their partnership with Proctor & Gamble and local government to reduce school drop-out rates due to menstruation in South Africa. Using a three-pronged strategy of education (of the girls, their care-givers and teachers to empower girls during the transition), tools (providing sanitary towels to address the shame girls felt), and supportive environment (working with school governing bodies to upgrade their toilets) the program reduced dropout rates by 50%. By being partners in social change, corporations can bring the full extent of their reach and scale to social programs – in this case the partnership was able to scale the program to all nine provinces in South Africa. The discussion acknowledged challenges in creating and sustaining such partnerships including the time such partnerships can take to have impact, striking the right balance between the social purpose and business opportunity, and the importance of champions within the company.
- Shared Value in Emerging Markets. There is an abundance of opportunities to create shared value in emerging markets such as India and Latin America. In particular, there are many opportunities to create shared value in these locations by strengthening the business cluster. Examples discussed included vocational skills development (Godrej in India, Arauco in Chile), addressing demand conditions such as responsible consumption of alcohol (beer companies in Latin America), and strengthening healthcare distribution systems (Abbott in India). Both local companies as well as multinationals can avail of these opportunities but need to develop the intuition spot and leverage these opportunities that surround us in emerging markets. Creating shared value in emerging markets is an absolute imperative for continued economic growth of these economies.
- Measuring Shared Value. The purpose for measuring shared value is to optimize the value creation and to unlock new opportunities to increase the value created. Measurement of the social value should be rooted in the intent i.e. companies should measure the intended social impact of their shared value efforts. The measurement of business value on the other hand, should be coupled to that arising directly from addressing the social problem. For example, David Jerome, Senior Vice President at the Intercontinental Hotels Group, described their measurement of cost savings (business value) that is derived directly from reducing energy use (social value). Nestle and Intel both acknowledged that measuring shared value was challenging but possible if broken down into “chewable” parts. Shared value measurement can leverage social and business impact measurement already being done by the company but needs to be differentiated in its purpose from other types of measurement such as compliance and sustainability.
- Investor perspective. Long-term value creation analysis must take into account the environmental, social and governance (ESG) aspects of a business. Unfortunately, the market today has become too short-term oriented – Erika Karp, Managing Director Head of Global Sector Research at UBS described how the average holding period of a single stock is mere seconds! David Blood of Generation Investment also emphasized the importance of factoring in changes to business context (due to factors such as climate change, social issues arising out of the increasing income gap especially in emerging markets, etc.) when analyzing long-term performance of a company’s stock price. This is the approach Generation Investment takes and the firm has a seven year track record and has consistently outperformed the market. The broader market is slowly beginning to recognize this fact and is beginning to demand this information. Curtis Ravenel, Global Head of Sustainability from Bloomberg described how the number of companies providing ESG information has increased to 6,000 from 500 just seven years ago. A culture of thoughtful analysis and investing is needed for shared value efforts to be fully rewarded.
Such a rich discussion!
In the end, the value of a community of practice hinges on its ability to create the right vehicles and tools to engage its members in a process of continuous learning. The Shared Value Initiative, guided by a leadership council (composed of 5-7 companies and 2-3 government/NGOs) and supported by FSG, will attempt to build just such a community of practice. It will attempt to increase the adoption of shared value as well as deepen the practice of it.