The Journey to Shared Value

Transcription

1 The Journey to Shared Value INSTITUTE OF MEDICINE FORUM ON PUBLIC-PRIVATE PARTNERSHIPS FOR GLOBAL HEALTH AND SAFETY DECEMBER 3, 2015 FSG 1

2 What does the shared value journey look like for these companies? Food & Agriculture IT & Industrial Health & Pharma Financial Services Energy Retail & Consumer FSG 2

3 A reminder: what is shared value? Business Opportunities & Challenges 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 Social Needs Corporate Assets and Expertise Shared Value is NOT: Sharing the value already created (philanthropy) Personal values Balancing stakeholder interests Compliance with local regulations FSG 3

4 Shared value as part of a portfolio Philanthropy CSR Shared Value Motivation Be generous Be responsible Be competitive Focus Community needs Mitigating harm in value & supply chain Strategic opportunity Resources Contributions & volunteering CSR budget & capital investments Corporate & R&D budget Department Foundation & corporate giving CSR or Sustainability Strategy, crossfunctional team, or social innovation Format External programs Corporate initiatives Product Innovations & new business models Social Value More resources for charities Less social and environmental impact Enduring, scalable solutions Business Value Goodwill Reduced risk & improved reputation Long-term profitability FSG 4

5 The shared value journey Readiness Years 1-3 Executive commitment to exploring SV and initial opportunities are identified Initial set of shared value initiatives are created and launched, establishing proof points for value creation Shared value is understood as integral to company strategy by senior leadership Adoption Years 3-5 Shared value initiatives are cultivated and launched across the company Shared value initiatives are measured, refined and scaled Shared value is seen as integral to company strategy across all levels and departments Expansion Years 5+ Shared value initiatives are integral to every business unit's strategy and goals Systems are put in place to spur continuous shared value innovation across the company Company is recognized as a leader in creating shared value by the public FSG 5

6 Common shared value entry points How do we build upon the original purpose of our company to improve health for all? How do we generate more cost savings and use fewer resources in our operations? How do we create more value for society from our corporate philanthropy? How will we compete in emerging markets? FSG 6

7 The people who create shared value CEO Sees opportunity to transform their company and thinks about shared value across the enterprise Marketing See social purpose as an opportunity to create competitive advantage through a company s or product s brand Business Units Sees the opportunity to address specific business challenges and thinks about shared value with a more specialized lens CSR Sees opportunity to complement traditional CSR with shared value and looks across company s many interactions with society FSG 7

8 Initiative: Identifying shared value opportunities Goals Identify 2-3 priority issues to address in significant ways with shared value Distinguish shared value efforts from other CSR / philanthropic activities Review existing investments Develop a landscape of issues Screen issues for shared value potential Prioritize shared value opportunities FSG 8

9 Shared value across sectors Reconceiving Products and Markets Redefining Productivity in Value Chains Enabling Local Cluster Development Pharma & Med Tech Products for unmet health needs Locally adapted distribution channels in new markets Strengthen health systems Extractives Build local markets for intermediate products Strengthen local workforce or suppliers Sustainably manage operational resources Invest in shared infrastructure and logistics networks Food & Agric. Banking Products that reduce negative health impacts or improve nutrition & wellness Improve financial health or access for individuals Improve local supply chains and manufacturing Finance solutions to critical social and environmental needs Improve productivity and farming communities Finance community development FSG 9

10 Social Impact Review existing investments for the impacts delivered Shared Value Enhancers Create an enabling environment that supports company s growth plans and social goals Shared Value Initiatives Develop initiatives that improve competitiveness by simultaneously creating economic and social value Fund social initiatives that meet critical community expectations Community Obligations Focus on excellence in the core business Business First Business Impact FSG 10

11 Company A in the food service industry may have many shared value opportunities Touch Points with Society Food Shared Value Opportunities Health & Nutrition Improve nutritional profile of menu items Supply Chain Improve sustainability of supply at right price and quality People Employment Create appealing and sustainable career pathways Community Re-establish brand as a trusted hub in communities Environment Stores Improve visibility of reduce, reuse, recycle in-store Transportation / Logistics Improve efficiency of supplier-to-store supply chain FSG 11

12 Enterprise: Companies on the journey embed shared value throughout the company Organizational Commitment Enabling Infrastructure Passionate and Capable Leaders Redefining company purpose and setting a shared value vision Designing innovation structures and external partnerships Motivating and incentivizing employees Connecting defined social needs to business strategy Developing or adapting business processes Developing knowledge, competencies, and leadership Building an organizational culture Creating systems for measuring shared value Recruiting top talent FSG 12

13 Successfully pursuing shared value requires a different approach to measurement ILLUSTRATIVE SHARED VALUE MEASURES SHARED VALUE TYPE BUSINESS RESULTS SOCIAL RESULTS Reconceiving products and markets Targeting unmet needs to drive incremental revenue and profits Redefining productivity in the value chain Better management of operations to increase productivity and reduce risks Enabling cluster development Changing societal conditions outside the company to unleash growth and productivity gains Increased revenue Increased market share Increased market growth Improved profitability Improved productivity Reduced operating costs Secured supply Improved quality Improved profitability Secured supply Improved distribution infrastructure Improved workforce access Improved profitability Improved patient care and health outcomes Improved nutrition Improved education Reduced energy use Reduced water use Reduced raw materials Improved job skills Improved employee incomes Improved education Increased job creation Improved health Improved incomes Strengthened legal environment FSG 13

14 Corporations need unconventional partners to successfully create shared value Reconceiving Needs, Products, and Customers Redefining Productivity in the Value Chain Enabling Local Cluster Development FSG 14

15 FSG 15

16 Both businesses and INGOs have unique assets and skill sets to bring to the table Partnerships Businesses Global customers Supplier networks Government leaders INGOs Civil society Public sector leaders Relationships with base of the pyramid consumers Knowledge Specialized product knowledge Marketing and distribution Intellectual property Understand needs of the underserved Scientific and technical knowledge and expertise Resources Investment capital Philanthropic partners Influential voice Influential voice Philanthropy FSG 16

17 Successfully pursuing shared value requires a different approach to measurement OTHER SOCIAL MEASUREMENT APPROACHES LIKE SROI AND IMPACT ASSESSMENTS Focus on measuring social impact alone SHARED VALUE MEASUREMENT TAKES A DIFFERENT APPROACH TO DELIVER DATA TO DRIVE BUSINESS GROWTH Measures and illustrates the links between business and social value When measurement is done right, you develop theories about how targets impact your business. Measurement leads to real refinements, not only of the things you measure, but in how you run your business David Jerome, IHG Aim to conduct comprehensive assessments, capturing as much data as possible Captures select, targeted data that will result in high-value analyses If you want to improve farmers lives, for example, it s only possible when measuring progress at a farm and rural community level. Janet Voute, Nestle Result in communications aimed at external stakeholders, to build the brand or earn a license to operate Results in analyses to support internal business decision-making and targeted communications to attract and manage external partnerships Having the data isn t everything. It s more about how you use that data and how you change your decision making with that data. Shelly Esque, Intel FSG 17

18 Measurement data informs shared value strategy at several key stages IDENTIFY SELECT MANAGE ASSESS REPORT What is the projected 10- year financial return and social impact of a workforce development initiative near the company s largest factory? Which initiative is likely to deliver greater value the workforce development program or a loan fund for local SMEs? What do we need to do to make this initiative succeed? How are we doing against our goals? What is working well? What s been challenging? How many people have we supported? What impact has that had on income and livelihoods? What organizations may want to partner with us? Examples of measurement questions FSG 18

19 The Journey ALTERNATE SLIDE CAUTION: Font is small for projected presentations FSG 19

20 Social Impact Shared value portfolio framework Social/Environmental Impact First Shared Value Initiatives Community Obligations Business First Business Impact FSG 20

21 Establish proof points The Journey Readiness Years 1-3 Adoption Years 3-5 ALTERNATE SLIDE CAUTION: Font is small for projected presentations Expansion Years 5+ Executive commitment to exploring SV, along with identification of initial opportunities Shared value initiatives are cultivated and launched across the company through cross-functional teams and staff competencies in shared value are developed Shared value initiatives are incorporated into every business unit's strategy and goals; individuals are incentivized to seek and develop opportunities Initial set of shared value initiatives are created and launched, establishing proof points for value creation Shared value initiatives are measured and refined Systems are put in place to spur continuous shared value innovation across the company Shared value is understood as integral to company strategy by senior leadership Shared value is seen as integral to the company s strategy across all levels and departments The company is recognized as a leader in creating shared value by the public and communicates lessons learned externally FSG 21

22 Initiative Life Cycle ALTERNATE SLIDE Developing shared value strategies Prioritizing and selecting Developing the initiative Managing Scaling Making the case to internal and external investors FSG 22

23 How Companies Get Started IDENTIFYING SHARED VALUE OPPORTUNITIES FSG 23

24 Innovating for shared value CAUTION: Font is small for projected presentations Embed a social purpose into the company s competitive positioning Identify and understand specific social needs that the company is well placed to address at scale Create optimal innovation structures based on the maturity of other ingredients Shared Value Innovation Anticipate, validate, and continuously measure the link between social and business outcomes Co-Creation of Shared Value Integrate external partners with unique expertise in the social problem throughout the innovation cycle FSG 24

25 Innovating for shared value ALTERNATE SLIDE Shared Value Innovation Co-Creation of Shared Value FSG 25

26 Shared value measurement CAUTION: Font is small for projected presentations GROW SHARED VALUE INITIATIVE FOR GREATER BUSINESS RETURN AND SOCIAL IMPACT Identify market opportunities and address barriers to initiative success MEASURING THE INNOVATION Measurement informs internal business innovation to improve initiative performance Realize business return Demonstrate the current or potential social impact of the initiative MODELING THE IMPACT Social impact models make the case for investment to external partners Attract social sector partners Reinvest in the initiative Continue to scale the initiative with partners FSG 26

27 Common shared value opportunities CAUTION: Font is small for projected presentations Reconceiving Products and Markets Redefining Productivity in Value Chains Enabling Local Cluster Development Financial access Health and nutrition improvement Energy efficient product development Education and learning product development Reaching underserved markets Affordable housing Energy / resource efficiency Limiting emissions and waste Worker safety and health Last-mile Distribution Agricultural development Value-added procurement Local sourcing Community development Education and skill-building Workforce development Local institution and governance capacitybuilding Behavior-change campaigns Human rights strengthening FSG 27

28 What is shared value measurement? FSG 28

29 Three approaches in the pharma industry Reconceiving Needs, Products, and Customers R&D for drugs, vaccines, and devices that fill unmet health needs Adapt existing products to reduce cost or complexity Tailor products to meet local market conditions Redefining Productivity in the Value Chain Reduce production costs through efficient, local supply chains and manufacturing Adapt sales and distribution to penetrate new markets and better meet patient needs Enabling Local Cluster Development Increase demand for health care Strengthen healthcare systems to enable delivery Improve policy and regulatory environment FSG 29

30 Health Systems Framework Household Point of Care / Sale Need Identification Intervention (provider) Correct Use / Follow Up Care Systems Policies Supply systems Information Products/Technologies Financing Source: Adapted from Ross-Degnan, D., Vialle-Valentin, C., and Briggs, J Improving Medicines Access and Use for Child Health: A Guide to Developing Interventions. Submitted to the US Agency for International Development by the Systems for Improved Access to Pharmaceuticals and Services (SIAPS) Program. Arlington, VA: Management Sciences for Health FSG 30

31 Introduction DEFINING SHARED VALUE FSG 31

32 The Journey GROUNDING Understand Shared Value DEFINING Identify shared value opportunities CO- CREATING Craft your value proposition ACTIVATING Address barriers and plan for action FSG 32

33 The Journey ALTERNATE SLIDE Aspiration Understanding Action Journey Results Shared value is relevant and important for us We are trying to create and grow shared value in our business We are creating shared value Identify the opportunity Design and pilot the initiative Implement, measure, and scale FSG 33

34 The Virtuous Cycle Shared value s virtuous cycle maximizes business and social impact: By linking social and business impact, companies can unleash greater innovation, scale, and value creation Companies innovate by: 1. Reconceiving products and markets 2. Redefining productivity in the value chain 3. Enabling local cluster development FSG 34

35 The Shared Value Enterprise Probably too much to review in a short presentation Organizational Commitment Enabling Infrastructure Passionate and Capable Leaders Redefining company purpose and setting a shared value vision Designing innovation structures and external partnerships Motivating and incentivizing staff Connecting defined social needs to business strategy Developing or adapting business processes Developing knowledge, competencies, and leadership Building an organizational culture Creating systems for measuring shared value Recruiting top talent Denotes an Innovation Ingredient FSG 35

36 Pharmaceutical shared value opportunities Summary version on p. 7 Business Opportunity Develop or adapt products / services to access new markets Pharmaceuticals Invest in R+D for new drugs, vaccines and devices that meet unmet health needs Adapt existing products to reduce complexity and cost Tailor (e.g., pricing/packaging) products to meet local market needs Improve productivity in the value chain Invest in local research institutions to reduce costs Establish efficient, local supply chains and manufacturing to reduce costs Adapt sales and distribution to access new markets Enhance the enabling environment Deliver behavior change campaigns to increase demand for healthcare Strengthen the healthcare system (e.g., staff capacity) Provide advocacy and capacity building to strengthen policy/regulatory environment FSG 36

37 Agriculture shared value opportunities Summary version on p. 7 Business Opportunity Agriculture Develop or adapt products / services to access new markets Deliver extension services to improve agricultural productivity and quality Deliver mobile enabled agricultural information services to farmers to improve productivity and quality Improve productivity in the value chain Strengthen distribution channels for high quality agricultural inputs Improve flow of working capital financial products to farmers Improve market access for farmers by enhancing product aggregation, brokering, and wholesale Enhance the enabling environment Build the capacity of farmer associations and cooperatives Improve access to reliable market information Improve access to health and social services for farmers FSG 37

38 Extractives shared value opportunities Summary version on p. 7 Business Opportunity Extractives Develop or adapt products / services to access new markets Build local markets for intermediate products created by extractive activity (e.g., drinking or irrigation water, electricity) to reduce costs Improve productivity in the value chain Improve local workforce capabilities Increase local disaster and emergency preparedness, response, and rehabilitation capabilities Improve utilization of water, energy, and other resources in operations Enhance the enabling environment Develop local clusters supporting the extractives sectors Play an active role in local and national economic development Improve local and national governance capacity to improve stability and reduce operation risk FSG 38

39 Finance shared value opportunities Business Opportunity Finance Summary version on p. 7 Develop or adapt products / services to access new markets Develop products and services that support social impact (e.g., financial literacy, health insurance) Extend banking services to financially excluded individuals or SMEs (e.g., Microcredit, micro insurance, mobile banking) Improve productivity in the value chain Provide financing to strengthen local industry supply chains Establish local branches and build local workforce capability of management and staff Enhance the enabling environment Structure place and invest in impact investments (e.g., debt and equity financing; social impact bonds, etc.) FSG 39