June 17, 2019

What is shared value and how can you incorporate it?

It’s possible to make money and a difference, if your business incorporates shared value into its strategy.

Shared valued is about doing something valuable for society or the planet while improving your bottom line at the same time. It’s a clear win-win for all sorts of different businesses throughout Australia.

Developed in 2011 by Harvard Business School’s Michael Porter and Mark Kramer, shared value – in simple terminology – is a chance to make money while doing good.

Essentially a business strategy, it can span any number of industries, from education to professional services and even agriculture. It differs from philanthropy in that it aims to expand the creation of both social and economic value, rather than redistributing economic value that’s already been created. Consequently, the more resources a company devotes to shared-value programs, the more revenue it potentially stands to generate and the greater the impact it can have on critical environmental and social issues.

Though shared value isn’t considered a replacement to philanthropy, it does enable companies to extend their impact beyond the limits of what they’re prepared to give away.

A popular option

The number of shared value proponents is growing all the time and includes none other than former President of the United States Bill Clinton (via his Clinton Global Initiative). They see the potential for the concept to change the very heart of business, moving its role to that of actually solving social problems.

The question of just how you can identify an opportunity for shared value isn’t cut and dried, however. Should you start with a social challenge and work out how to address it profitably? Or should you work backwards, starting with a business challenge and looking for a way to ‘do good’ that tackles it? The answer is that both can work, although the former would seem the most logical.

Either way, for an organisation to embrace shared value, it really needs to incorporate it into its corporate strategy, rather than simply treat it as an add-on. One way to do this, as ‘corporate idealist’ and shared value advocate Christine Bader suggests, is for businesses to focus on managing their impact rather than their reputation.

Addressing an unmet educational need while generating economic benefit is a great way for businesses to cultivate shared value in education, and there are many educational needs in regional Australian communities, including impoverished regions’ lack of access to good facilities and resources, as well as web access issues and limited educational opportunities generally.

Globally, examples in this field abound. In Kenya, Arifu has negotiated the obstacle of vocational training in areas with a lack of internet access by providing an SMS-based training platform and educational content marketplace. Using mobile phone technology – and thus not having to rely on wifi (rare in impoverished areas) – users can access educational content covering a huge variety of subjects and industries.

The service is completely free for users, with no subscription fees, thanks to a business model providing profit through such substantial sponsoring partners as a major Kenyan bank and an agri-food giant. For their money, the partners are rewarded with increased demand for products or financing solutions after people have been educated on how to grow their businesses.

Similarly, in Brazil the issue of students struggling with entrance exams for university was tackled by Geekie, which has provided training in an online platform that adapts to students’ needs and goals.

By improving study efficiency among the nation’s youth, the platform is believed to have improved exam scores by as much as 30 per cent, with many of the beneficiaries residing in Brazil’s poorest regions. The return for Geekie has been handsome – its strategy was to go into new and underserved markets where competitors weren’t looking and, as a result, it’s created a strong competitive advantage. Licensing and registration deals have been struck with governments across the country and estimated revenue in 2018 was US$32 million.

Offering one free state school licence for every private school licence purchased guaranteed huge exposure and, as long ago as 2016, the software was present in 4,000 public and 650 private schools. Consequently, the company has significantly enlarged its database (which is constantly updated with students’ progress), which helps it capitalise on the exponential properties of the algorithms – the more data it’s able to compile, the better product it has to offer.

Massive cost savings

Over in the US, global learning company Houghton Miffin Harcourt (HMH) produced a business idea that’s on course to help significantly reduce the $50 billion spent each year on convicted prisoners reoffending after release. Its comprehensive Reentry Prerelease Program curriculum for prisoners about to re-enter society, originally based in the state of Louisiana, addressed a vast social need while opening the door to a whole new business opportunity for the provider – even a modest share of the country’s nine million incarcerated individuals represents the chance for impressive annual growth. The modular curriculum is highly adaptable for a mobile prison population while offering valuable standardisation at the same time and governments are therefore enthusiastic about signing up.

STEM, the flow

Technology giant Intel, also in the US, spotted an opportunity in the country’s need for improved science, technology, engineering and maths (STEM) disciplines. Facing a chronic shortage of talent in these subjects that constrained its own business growth, it embarked on an initiative to transform STEM education across the nation, an effort that helped boost its own talent pool at the same time as providing superior education programs for Americans across the country.

British supermarket chain Tesco, on the other hand, recognised a largely untapped talent source in disabled people – having a large proportion of disabled workers on its checkouts helps reduce the problem of unemployment in this group while simultaneously reducing its own staff turnover issues and encouraging staff and customer loyalty.

Of course, there’s still plenty of room for corporate philanthropy – shared value isn’t about eliminating the potential for companies to have a positive impact without profit as a motivator. But if there are opportunities for giving something back while also keeping shareholders happy, what’s not to love? Keep an eye open for potential shared value initiatives and you could see your own bottom line – as well as your brand’s reputation – reach unprecedented new heights.

How NAB incorporates shared value By Sasha Courville, General Manager, Corporate Responsibility, NAB. Giving a TEDx talk in Melbourne a couple of years ago, I began by asking the audience, “What if I told you that banks held the key to addressing our societal challenges?”. I accept that’s currently a counter-intuitive proposition, but it’s one I believe. I’ve worked at universities, for NGOs and as an international consultant and achieved many worthwhile things, but I’ve always been frustrated at not being able to deliver impact at scale. So, when a major commercial bank appeared serious about shared value and offered me a job in 2012, I jumped at the opportunity. In recent years, NAB’s shared-value specialists have focused on the environment and, more specifically, natural capital. Natural capital consists of those things on which society depends – clean water, fertile soil, biodiversity – but that can be difficult to value in monetary terms. In 2011, we signed the Natural Capital Declaration, agreeing to consider the value of natural capital in our business decisions. This meant the quality of a farmer’s soil, for example, or the abundance of their water would be taken into account when their loan application was being processed. In 2013, we launched the NAB Natural Value strategy, with the intention of putting shared-value theory into agribusiness banking practice. SOIL, ENERGY AND WATER NAB surveyed thousands of farmers about the natural capital issues they believed were most important in terms of their business operations. We found 91 per cent viewed soil health as a key business risk while about 85 per cent pointed to energy prices and water scarcity. We also educated our bankers about natural capital, providing training from leading scientists and agribusiness customers. We’ve partnered with CSIRO to explore the link between the management of natural capital assets and financial performance. Ultimately, this will enable clients to better demonstrate that they represent a lower financial risk over the long term because they’re managing their natural capital well. This recognition of the role natural capital plays in supporting agribusiness means it will be easier for customers to invest in best-practice management. Critically, this will have flow-on benefits for the environment, improve the resilience of Australian agriculture and reduce the financial risk to the bank. We know that leading customers have long been investing in their sustainability. What is changing is the need to collect and communicate robust and consistent data. SUSTAINABLE AGRICULTURE While sustainable land management is good for farmers and the environment, it’s also good for NAB. Our customers’ risk is our risk and as agribusiness banking is a long-term business, it’s in our best interests to support sustainable agricultural models that recognise and reward resilience. We’ve also pioneered a broader industry conversation about natural capital. For instance, the National Farmers Federation Talking 2030 Discussion Paper emphasised the need to nurture natural capital to get to $100 billion in farm gate output. I’m optimistic NAB’s natural value approach will lead to other significant improvements in the nation’s stock of natural capital and the resilience, productivity and profitability of Australian farmers.

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