"creación de valor compartido"

prepared for:

Creating Shared Value:

Redefining the Role of Business in Society

Mark KramerFounder & Managing Director, FSG

Senior Fellow, Harvard University

XI Encuentro Internacional de RSE

August 30, 2011

®Todos los derechos reservados

© 2010 FSG2

FSG.ORG

Chile CSV August 29, 2011

• The long-term competitiveness of companies depends on social conditions

− Improving education and skills

− Safe working conditions

− A sense of fairness and equal opportunity

− A transparent business environment

• 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 sustainable and scalable solutions to many social problems in ways that governments and NGOs cannot

− Businesses can relax the constraints that limit their growth

Chile Cannot Continue Its Remarkable Economic Growth

Without Corresponding Improvements in Social Conditions

Past thinking about sustainability has focused too much on the frictionbetween business and society rather than their interdependence

• Cisco’s growth is limited by the number of trained network administrators worldwide

• As a result, Cisco established the Networking Academy

• Developed a distance learning program that combines a web-based curriculum with local instructors and lab facilities

• Partnered with industry peers, schools, governments and universities

• Focused on economically deprived regions around the world

Business Problem and Innovation

•Over 10,000 Academies established in all 50 states and 165 countries

•Over 4,000,000 students have been trained

•More than 70% have attained a new job, a better job, increased responsibility, or higher salary

Social Impact

Business Impact

•Alleviates a key labor constraint for Cisco customers

•Students become familiar with Cisco products

•Strengthened relationships with key suppliers, local businesses and government

Cisco Networking Academy: Skills Training

© 2010 FSG4

FSG.ORG


Novartis Arogya Parivar: Creating New Markets in Rural India

Products

Portfolio:

• 79 pharmaceuticalproducts in 12 therapeutic areas

Affordable:

• Sandoz generics

• Over-the-counter (OTC) medications & nutrients

• Custom small packs branded in local dialect

Services

Community health

education:

• ~300 health educators

• Focus on prevention, child & maternal health, symptom awareness

Healthcare provider

education:

• Address low level of medical training

Supply chain management:

• Ensure continuity of supply in village pharmacies

Results & next steps

Improved access to health education and medicines for 42 million patients in 28,000 villages

Partnering with ~50 000pharmacists and clinics

Portfolio expansion in 2011: vaccines, generics, diagnostics and more

Will pilot in Indonesia, Vietnam and Kenya (2011)

Partnering to expand access to health infrastructure financing

© 2010 FSG5

FSG.ORG


Nestlé’s Farmer Programs: Building Incomes that Build Customers

• 950 agronomists and 15,036 extension workers offeredassistance to farmers in 2009

• 144,926 farmers around the world were trained in 2010

• Nestlé operates 63 farmer programs acrossAfrica, Asia, Latin America and Europe

• The main commodities Nestlé sources are milk, coffee and cocoa.

• Nestlé extended approximately $60 million in financial assistance to farmers in 2010.

• Farmer programs combine microfinance, technical skills training, education in sustainable farming methods and improvedwater management, and new opportunitiesfor women.

As farmer incomes rise, they purchase more Nestle products --creating a self-reinforcing cycle

© 2010 FSG6

FSG.ORG


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

Shared Value goes beyond traditional CSR:• CSR practices such as ethical behavior, transparency, sustainable use of

natural resources, and fair labor conditions are essential requirements for any successful business

• Shared Value adds additional opportunities to improve social and environmental conditions beyond CSR

© 2010 FSG7

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Creating Shared Value Redefines the Role of Business in Society

• Business must create economic value by creating societal value

• All profit is not equal

• Profit involving shared value enables society to advance more rapidly and

allows companies to grow faster

• The pursuit of shared value represents the next evolution of capitalism

Incorporating societal issues into strategy and operations

is the next major transformation in management thinking

© 2010 FSG8

FSG.ORG


Redefining the Value Chain:

So-Called “Externalities” Have Internal Effects

Company

Productivity

Quality

Education

& SkillsRegulatory

Environ-

ment

Poor

Infrastruc-

ture

Health and

Nutrition

Water Use

Energy

Use

Environ-

mental

Impact

Poverty in

Company’s

Communty

© 2010 FSG9

FSG.ORG


Companies Can Create Shared Value at Three Levels

Enabling Local Cluster Development

Redefining Productivity in the Value Chain

Reconceiving Products and Markets

© 2010 FSG10

FSG.ORG


Urbi: Reconceiving affordable housing in Mexico

• One of the largest housing developers in Mexico, Urbi focuses on developing

environmentally sustainable, social housing.

• Partnering with government and financial institutions, Urbi has developed

subsidized housing for hundreds of thousands of low income Mexicans,

traditionally have been excluded from home ownership.

• Business Impact:

– Utilizing innovative construction practices and linking its construction

projects to enhanced social services, Urbi has created a differentiated

product with enhanced attractiveness to the Mexican consumer

– Urbi’s strategy has allowed it to become the most profitable company in its

industry in Mexico

• Social Impact:

– Increasing supply of affordable housing for low income Mexicans

– Strengthening social fabric by increasing access to education, recreation,

business services

– Protecting environment

© 2010 FSG11

FSG.ORG


Shared Value Profile

• Zero Trans Fat

• High in heart-healthy monounsaturated fat

• Lowest saturated fat of typical cooking oils and half the saturated fat of olive oil

• Since 2005 Omega-9 Oils have eliminated nearly a Billion pounds of trans fat and 250 million pounds of saturated fat from North American foods

• Studies show people prefer the taste of foods fried in Omega-9 Canola Oil over common oils

Dow Chemical: Omega-9 Healthy Oils

http://dastechtran.intranet.dow.com/vil/image_detail.asp?imageID=3263&SearchedFor=sunflower

© 2010 FSG12

FSG.ORG


The Fibria Pulp Value Chain

• Fibria in Brazil is the world’s largest manufacturer of pulp for paper

• All production is based on planted eucalyptus -- No tropical native trees– A mosaic of 170,000 hectares of preserved native reserves are interspersed with 286,000 hectares of eucalyptus plantations to insure biodiversity

• Advanced soil science, forestry management and state-of-the-art technologies control pollution in the mills

• Small-scale farmers are permitted to grow maize, beans and manioc in areas belonging to the company to increase biodiversity

• Over 4,000 households currently obtain income from eucalyptus production

• 1 hectare of eucalyptus can produce the same volume of wood as 30 hectare of native forest

© 2010 FSG13

FSG.ORG


Minera Yanacocha – Latin America’s largest goldmine:

Newmont Creating Shared Value in Peru

• Newmont has invested hundreds of millions of dollars into the development of

Yanacocha, the largest goldmine in Latin America

• Newmont’s SME Linkages Program was created strengthen SMEs within

Yanacocha’s value system, with a principal focus on transportation,

maintenance, construction

• The company also supported training of government officials to improve the

utilization of Newmont tax revenues to strengthen the infrastructure

Social Impact

• SMEs bidding for contracts with the mine increased their sales by over 60%

• Created 6,000 new jobs

Business Impact

• 10-15% decreased costs in maintenance, transportation, and other support services

• Improved relations with local business and government leaders

© 2010 FSG14

FSG.ORG


• There is an opportunity to transform thinking and practice about the role of

the corporation in society

• Shared value gives rise to far broader approaches to economic value

creation

• Shared value thinking will drive the next wave of innovation, productivity

enhancement, and economic growth

• Businesses acting as businesses, not as charitable givers, are arguably the

most powerful force for addressing many of the pressing issues facing our

society

• A transformation of business practice around shared value will give purpose

to the corporation and represents our best chance to legitimize business

again

The Purpose of Business

© 2010 FSG15

FSG.ORG


How to Begin:

• Redefine the business around unsolved customer problems or

concerns, not traditional product definitions

• Think in terms of improving lives and strengthening the competitive

context, not just meeting consumer needs

• Identify customer groups that have been poorly served or

overlooked by the industry’s products and societal needs that would

strengthen the business

• Identify constraints on the business that the company has the

expertise and resources to fix

• Start with no preconceived ideas about product attributes, channel

configuration, or the economic model of the business (e.g., small loans

are unprofitable)

© 2010 FSG16

FSG.ORG


Conclusion

• Strengthening the educational system and creating new opportunities for

economic growth in rural areas are critical to Chile

– CSV offers opportunities for companies to help address these issues

• The private sector can re-assert its legitimacy by developing authentic

programs to simultaneously generate profit and address social challenges

• Chile has the opportunity to establish itself as the leader of CSV in Latin

America

• Business, government and civil society must work together around shared

objectives to achieve collective impact

Every company, nonprofit and government agency has a role to play in

creating shared value