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Prepared for:

The Shared Value Opportunity

August, 2014

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About FSG

• Nonprofit consulting firm and think tank specializing in strategy, evaluation and research, founded by Professor Michael Porter and Mark Kramer

• We work with corporations, foundations, nonprofits, and governments to develop more effective solutions to the world’s most challenging issues

• Recognized thought leader in shared value, philanthropy, and collective impact, with multiple articles published in HBR, SSIR, Chronicle of Philanthropy, and the American Journal of Evaluation

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FSG advances shared value as a global thought leader,

advisor, and field builder

Seminal Articles and

White Papers

Corporate Clients Across

Industries

Communities of Practice

Connect cross-sector

practitioners to support peer

learning and promote best

practice

Market Intelligence

Identify and explore industry

sector, geographic, and

thematic research topics

Decision-Making Support

Develop tools for decision-

making, adoption, and

implementation

Shared Value Consultants &

Practitioners

Train a global network of

affiliated professional services

firms providing shared value

strategy and communications

consulting

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Launched in 2012, the Shared

Value Initiative is a global

community of practice

committed to driving

adoption and

implementation of

shared value strategies among leading companies, civil

society, and government

organizations.

sharedvalue.org

By the Numbers

30+ Corporate Funding

Partners

45 Countries Host 2013

Initiative Events

450 Summit Attendees

in 2014

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• Deepen understanding of shared value key

concepts

• Share approach for identifying shared value

opportunities

• Explore stages and common challenges along the

Shared Value Journey

What are the goals of this session?

Goals for today

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Michael E. Porter and Mark R. Kramer, “Creating Shared Value,” Harvard Business

Review, January-February 2011

Shared value

holds the key

to unlocking the next

wave of business

innovation and growth

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What is Shared Value?

Shared Value is: •

Policies and practices that enhance the competitiveness of a company while

simultaneously advancing the economic and social conditions in the

communities in which it operates

Shared Value is NOT:

• Sharing the value already created (philanthropy)

• Personal values

• Balancing stakeholder interests

• Compliance with local regulations

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Shared value is taking place in developed markets…

“Bad” fats causing

20’000 deaths HIV co-infection from

needle stick injuries

600’000 tons of transfats taken out of the U.S. diet,

# 1 product line for Dow

Protected millions of health workers,

25% of BD’s revenues

Safety devices Cooking oils

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…and in developing countries

Mobile banking service

Reinforced spices

70% of women, 57% of children anemic in India

No access to financial services

14M users in East Africa

18% of Safaricom’s revenues

138M servings sold, 87% growth

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• The long-term competitiveness of companies depends on

social conditions

− An educated and skilled workforce

− Safe working conditions

− Sustainable use of natural resources

− A flourishing local economy

• Business has an essential role to play in solving social

problems

− Only companies can create prosperity that funds government and civil

society

− Companies can create solutions to many social problems in ways

that governments and NGOs cannot

− Companies have the incentive to take risk

− Competition fuels innovation, efficiency, and adoption

− For-profit models are scalable and sustainable

Businesses can find new opportunities for profit and overcome

constraints that limit their growth

Linkage between societal and corporate success

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The blame on businesses

#OCCUPYWALLSTREET

BUSINESS IS THE PROBLEM

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- Focus on public

relations

- Increase

philanthropy

- Engage

stakeholders

“It is a problem”

- Add costs to fix the

problem

- Report

transparently on

our results

- Leverage

corporate assets

“Let’s solve the problem”

“It is not a problem”

- Ignore it

- Minimize our

responsibility

- Philanthropy is

enough

- Build social issues

into corporate

strategy to:

- Lower costs

- Grow revenues

or

- Differentiate our

value proposition

“It is an opportunity!”

Evolving Perspectives on Corporate Social Engagement Approaches

Evolution of corporate mindset

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Shared Value is an emerging business discipline that allows

companies to discover new opportunities by solving social problems

What is Shared Value?

Shared value business models increase

profits, reduce costs, and enhance

competitiveness by solving social

problems.

Shared value uses a virtuous cycle to

maximize business and social impact:

By linking social and business impact,

companies can unleash greater innovation,

scale, and value creation.

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Among the following initiatives, which create mostly business value, mostly

social value or shared value?

How did you decide which activities were shared value?

Activity: “Seeing Shared Value”

Objective: Explore the shared value concept by categorizing example

initiatives by those that create “mostly social value,” “mostly business value,”

or “shared value.”

Business Value Shared Value Social Value

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Starbucks invests in its farmers, providing US$20M in loans

that finance necessary activities prior to the harvesting

season and operations improvements in their supply chains

Activity: “Seeing Shared Value”

Business Value Shared Value Social Value

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BP invests millions of dollars in development activities in

communities damaged by the Macondo oil spill in April 2010

Activity: “Seeing Shared Value”

Business Value Shared Value Social Value

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LAN Airlines finalizes their merger with TAM Airlines,

creating the largest airline in Latin America

Activity: “Seeing Shared Value”

Business Value Shared Value Social Value

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Pharmaceutical Company D launched an unbranded

marketing campaign aimed at raising awareness among

parents and physicians about the risk of heart disease. The

goal is to encourage use of Company D’s preventative drug

Activity: “Seeing Shared Value”

Business Value Shared Value Social Value

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1

• Meeting societal needs

through products

• Addressing unserved or

underserved customers

Reconceiving Needs,

Products, and

Customers

2

• Changing practices in the

value chain to drive

productivity through better

utilizing resource,

employees, and business

partners

Redefining

Productivity in the

Value Chain

3

• Improving the available

skills, supplier base, and

supporting institutions in

the communities where a

company operates to

boost productivity,

innovation, and growth

Enabling Local Cluster

Development

Three Levels of Shared Value

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Activity: Identifying opportunities

• In groups of 2 or 3, select one industry and brainstorm potential

shared value opportunities across the three levels for one hypothetical

company

• Write down your assumptions about the business and social context in

which your hypothetical company operates

Pharma & Medical

Technology

Food &

Agriculture

Extractives

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Activity: Identifying opportunities

Redefining Productivity

in Value Chains

Enabling Local

Cluster Development

Reconceiving

Products and Markets

Pharma &

Med Tech

• R&D for drugs, vaccines,

or devices for unmet

needs

• Tailored product offerings

to meet local market

conditions

• Locally adapted

distribution to penetrate

new markets and better

meet patient needs

• Health system

strengthening to enable

delivery of needed

products and services

Food &

Agric.

• Adaptation of existing

products to reduce

negative health impacts

• New products designed

to improve health &

wellness

• Local supply chains and

manufacturing to reduce

production costs

• Investments in farmer

productivity and farming

communities

Extractives

• R&D for alternative,

clean energy sources

• Employee health and

wellness to boost

productivity and reduce

the spread of diseases

like HIV/AIDS and TB

• Local supplier and

workforce development

to support production

• Local market

development in emerging

markets

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Once opportunities have been identified, they need to be

prioritized

Common Secondary Criteria

Engages Key

Stakeholders

Engages

Employees

Leverages the

Firm’s Assets

Establishes the

Firm as a Leader

Primary Criteria

Creates Social

Impact

Delivers

Business Value

Is Feasible for

the Company to

Achieve

Reputational

Impacts

Partnership

Opportunities

Potential Ability

to Scale

Level of Risk

Involved

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Creating shared

value entails embedding

a social mission in the corporate

culture and channeling resources

to the development of innovations Marc Pfitzer, Valerie Bockstette, and Mike Stamp, “Innovating for Shared Value,” Harvard Business Review, September 2013

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A company’s Shared Value progression

Understanding

Shared Value

Seeing Shared

Value as

Relevant for

the Business

Implementing

Shared Value

Initiatives

Creating a

Shared Value

Enterprise

The Shared Value Progression

Creating shared value entails shifting perspectives

and embedding a social mission/purpose in the

corporate culture

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Shared value requires a shift in perspective

Reactive efforts to improve

reputation

Pro-active social and

economic development

Isolated projects Ongoing collective efforts

Tracking dollars spent

Tracking business and social

outcomes

Social problems are a

community issue

Social problems are a

business priority

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Automotive Green Mobility

Food Nutrition

Computing / IT Smarter Cities

Shoes Health

Chemistry Enabling Life

Redefining Purpose

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Companies face common challenges in their Shared Value

progression

Common Challenges

• Identify opportunities

• Make the business case

• Measure outcomes

• Engage senior leadership

• Organize for shared value

• Nurture effective partnerships

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Some strategies can help overcome common challenges (1/3)

1. Identifying

opportunities

Conduct a systematic review of social issues that affect the business as

part of conversations with internal staff, clients, and shareholders

Create hybrid teams blending CSR divisions with business units to fully

leverage internal assets in identifying critical gaps

Initiate discussions with external stakeholders, including NGOs,

governments, and competitors for big-picture understanding

2. Building the

case

Identify and quantify estimated business outcomes (e.g., lower cost from

efficiency and productivity gains, decreased risk, increased revenue from

new markets and/or products)

Develop metrics for social outcomes (such as number of MSMEs trained

or changes in health behaviors) and define connection with business

outcomes

To ascertain commercial viability, consider incubating the initiative within

a philanthropic/ social responsibility unit or working in partnership with

other corporations, non-profit, or government organizations

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Some strategies can help overcome common challenges (2/3)

4. Engaging

senior

leadership

Leverage the CEO’s influence in setting public and internal shared value

goals

Share examples from the field to create awareness of shared value

Meet with other companies pursuing shared value to ask questions and

better understand the benefits and inherent challenges

Conduct workshops or executive education programs to train senior

leadership in thinking about shared value for their own business units

5. Organizing

for shared

value

Generate ownership and collaboration across all business units and

functions with the resources and initiative to achieve shared value goals

Create incentives for shared value creation that are aligned with the

company’s short and long-term business goals

Balance corporate strategic alignment with the flexibility to innovate at

country and business unit levels to maximize overall outcomes

3. Measuring

outcomes

To maximize value creation, create iterative measurement processes that

integrate social performance measurement with business strategy

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Some strategies can help overcome common challenges (3/3)

6. Nuturing

effective

partnerships

When considering implementation, identify other stakeholders with a

vested interest in the social and/or business challenge (including NGOs,

public sector organizations, and even competitors) and analyze whether

their assets could amplify the impact of your efforts

Understand regulatory frameworks governing collaboration in each

market, to confirm that your collaborative efforts do not cross the line

towards collusive practices

Ensure a shared sense of urgency and leadership commitment from

each partner; establish common, aligned goals, and effective governance

structures to drive operational effectiveness, while ensuring tangible,

positive benefits for all partners

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Dane Smith, FSG

Dane.Smith@fsg.org

Marina Pol Longo, FSG

Marina.Pol.Longo@fsg.org

Thank You!