From the CEO’s Desk: February 2019
THIS IS SHARED VALUE – PROFIT WITH PURPOSE
There is a lot of talk about the annual letter to CEOs written by Larry Fink, CEO of Black Rock – the world’s largest investor, with $6 trillion under management. Larry shared that that CEOs and organizations need to embrace a purpose beyond profit maximization and that profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked.
This leads me back to Shared Value and business creating economic value (profit) and value for society (purpose). In the last 30 months of focusing on and working in this space, we have realized that there are still an enormous amount of organizations that truly misunderstand what creating Shared Value means. We have some calling it Shared Values and others confusing it with CSI as they feel it is easy to link CSI to social impact. Shared Value becomes blurred and misunderstood when lost in a fog of business jargon, buzzwords and well-meaning conflation.
In essence, Shared Value is about reconnecting company success to social progress. It is a management strategy that enables business to create economic value in a way that also creates value for society by addressing its needs and challenges. Nothing more, nothing less. Business does not operate in a vacuum – it is dependent on society at large for its license to operate. There are so many communities in which business operates that are sometimes forgotten, including but not limited to employees, suppliers, customers, shareholders, other stakeholders and the entire value chain.
The primary criteria to assess a Shared Value opportunity is to answer four questions:
- Can this create social impact?
- Will it deliver business value?
- Is it feasible for the company to achieve?
- Will it differentiate the company from its competitors?
Let’s look at a great example of Shared Value on our continent. If we look back 10 years ago, access to a financial system were still way above the affordability of most of the Kenyan population of now just over 49 million. Roll in M-Pesa, a mobile phone-based money transfer, financing and microfinancing service was launched in 2007 by Vodaphone for Safaricom and Vodacom. Safaricom is the largest mobile network operator in Kenya.
What did this mean to the ordinary Kenyan? Those that were previously excluded from a financial system could now access a financial system via their cellphone and transfer money to loved ones, pay accounts, and put in requests for microfinancing. A social need was addressed as those previously excluded now had access to a financial system.
What did this mean for Safaricom? In 2018, according to latest results, Safaricom was contributing 6,5% of the Kenyan GDP and servicing more than 25 million customers.
An international example is pharmaceutical giant GSK, which for many years has employed a strategy in emerging markets of pricing its medicines based on local economic conditions. This has provided GSK with greater access to markets, an example of the first pillar of the Shared Value framework pillar – ‘reconceiving products and markets’.
Currently the world’s sixth largest pharmaceutical company, GSK has advanced its business purpose of driving access to better health care through its continued strategic efforts to bring vital medication to those who need it. It has extended this approach to its patent policy, no longer seeking patents for its medicines in the least developed and low-income countries. The decision to abandon patent protection again expanded their market access, allowing generic-producing companies to manufacture lower-cost versions of its drugs without the threat of legal action.
That is creating Shared Value: creating economic value and simultaneously creating value for society.
We need to ensure that we meet the goals set out in Agenda 2030 and using a Shared Value business model can bring purposeful business into alignment with the UN Sustainable Development Goals (SDGs). Shared Value touches on every aspect of business. It is about employee engagement, managing risks, creating operational efficiencies, fostering innovation, optimizing the value chain, gaining access to new markets and much more.
As business, we can address working conditions, climate change, access to healthcare, access to financial services, access for our young entrepreneurs to business opportunities, to name a few – and, through Shared Value strategy, this will build better, more sustainable and profitable businesses. Buying into Shared Value can be transformational for an organization and shows how businesses can lead – not just because it’s in their own long-term self-interest, because it’s in the best interest of society.
Onwards and upwards!
CEO, Shared Value Africa Initiative