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Negocios Inclusivos and Valor Compartido. Companies can increase competitiveness and profitability by helping to solve social problems “Creating Shared.

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Presentation on theme: "Negocios Inclusivos and Valor Compartido. Companies can increase competitiveness and profitability by helping to solve social problems “Creating Shared."— Presentation transcript:

1 Negocios Inclusivos and Valor Compartido

2 Companies can increase competitiveness and profitability by helping to solve social problems “Creating Shared Value,” Porter and Kramer Shared Value holds the key to unlocking the next wave of business innovation and growth. [Exploring] societal needs will lead companies to discover new opportunities... and recognize the potential of new markets previously overlooked. ” “ -- Professor Michael Porter

3 Social needs represent enormous markets Business Opportunities Corporate Assets and Expertise Social Needs Social needs can represent enormous markets: Healthcare spending in Latin America is estimated to be $600 billion The BOP market for energy in Latin America is over $30 billion The market for clean water in developing countries is estimated at $13 billion Sources: EIU, WRI

4 FSG.ORG © 2011 FSG 4 CSR = Good PR Damage ControlBlind Eye Thinking about Sustainability and CSR has evolved -Let’s donate money to minimize brand damage “Problems could harm us” -Let’s create dedicated CSR efforts “We should do something” “What problems?” -Let’s ignore the problems New Paradigm -Let’s strengthen our company by solving societal problems relevant to our business “We see opportunity”

5 FSG.ORG © 2011 FSG 5 Shared Value goes beyond compliance and sustainability CREATE Company Specific PROTECT Industry Specific COMPLY with laws, codes of conduct Required from all businesses Shared Value

6 FSG.ORG © 2011 FSG 6 Shared Value is different from traditional CSR Corporate Social ResponsibilityCreating Shared Value Corporate reputation External stakeholders Reactive Spending, standard ESG metrics CSR / Public Affairs Risk reduction and goodwill Successful projects Competitive advantage Corporate strategy Proactive Social and economic value created Across the whole firm New business opportunities Large scale sustainable change Motivation Main Driver Approach Measurement Management Business Benefit Social Benefit

7 FSG.ORG © 2011 FSG 7 How do companies create Shared Value? Enabling Local Cluster Development Redefining Productivity in the Value Chain Reconceiving Products and Markets Shared Value is: Enhancing 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 strategies:

8 FSG.ORG © 2011 FSG 8 Reconceiving Products and Markets Design products and services to address societal challenges –E.g., Health, education, poverty, environment Open new markets by serving unmet needs in underserved communities –Often requires redesigned products or different distribution methods Businesses can be more effective than governments and NGOs in marketing solutions to social problems Shared value offers new opportunities for differentiation, innovation, and growth 1 1

9 FSG.ORG © 2011 FSG 9 Social Goals Products are designed to achieve three goals for healthcare by 2015: Decrease costs by 15% Increase access by 15% Improve quality by 15% Business Goals Create 100 new products by 2015. Forty- three products have been developed to date. Realize revenues and enter new markets with Healthymagination products* GE mobilizes assets across its business to improve healthcare and grow the market for GE’s products. Expertise in R&D and venture funding is leveraged to develop new products (such as Vscan, a lower-cost handheld ultrasound machine, pictured below) while GE’s marketing expertise is used to educate and engage consumers in healthcare improvement. * Sales targets not publically available Source: Company websites and reports, news articles 1 1 Reconceiving Products and Markets

10 FSG.ORG © 2011 FSG 10 Redefining Productivity in the Value Chain: Every activity can be redefined through a social perspective Marketing & Sales Inbound Logistics OperationsOutbound Logistics After Sales Service M a r g i n Firm Infrastructure Procurement Technology Development Human Resource Management 2 2

11 FSG.ORG © 2011 FSG 11 CSV Investment Walmart is reducing transportation costs and helping sustain the livelihoods of small-scale farmers in the US and emerging markets by working to source produce for its stores locally and by providing training and support to farmers near store locations. Source: Company websites and reports, news articles Social Goals Increase income of small and medium farm suppliers by 10 – 15% Reduce waste and carbon emissions Provide low-cost, healthy food for Walmart customers – goal is to sell $1B in locally-grown produce by 2015 Business Goals Reduce transportation costs –in the US Walmart has already cut 100 million miles from delivery routes saving the company $200M in fuel costs Reduce food waste - goal of 15% in emerging markets and 10% in US by 2015 Redefining Productivity in the Value Chain 2 2

12 FSG.ORG © 2011 FSG 12 A strong local cluster with capable local suppliers and institutions improves company productivity –e.g., greater supply chain efficiency, lower environmental impact, and better access to skills Companies, working collaboratively, can catalyze major improvements in the local cluster and the local business environment Local cluster development strengthens the link between a company’s success and community success What suppliers are inefficient or missing locally? What institutional weaknesses or community deficits create internal costs for the firm? Enabling Local Cluster Development 3 3

13 FSG.ORG © 2011 FSG 13 CSV Investment Source: Company websites and reports, news articles Enabling Local Cluster Development: Mars 3 3 CSV Investment Mars is tackling a declining cocoa sector in Cote d’Ivoire by improving smallholder farmer livelihoods and cocoa sustainability. CSV Investment Mars is tackling a declining cocoa sector in Cote d’Ivoire by improving smallholder farmer livelihoods and cocoa sustainability. Business ImpactSocial Impact Cote d’Ivoire produces 40% of the world’s cocoa supply Increased supply sustainability through improved productivity and post- harvest processes Cote d’Ivoire produces 40% of the world’s cocoa supply Increased supply sustainability through improved productivity and post- harvest processes Improved farmer income Access to healthcare and education Protection of biodiversity, reduced deforestation and control of runoff Improved farmer income Access to healthcare and education Protection of biodiversity, reduced deforestation and control of runoff

14 FSG.ORG © 2011 FSG 14 Creating Shared Value: An Integrated Approach Building Clusters and Framework Conditions Redefining Productivity in the Value Chain Reconceiving Products and Services 1 1 3 3 2 2 Jain partnered with the Indian government to help secure access to financing for smallholder farmers seeking working capital and investment loans Jain offered a suite of services to participating farmers including farm management training, soil sampling, and limited financing Jain created new micro-irrigation products and agronomy services specifically designed for the smallholder Indian farmer 1 1 3 3 2 2 Business Impact: Market expansion – 1,800 new contracts due to lower barriers to entry (90% with smallholder farmers) Improved supply chain security – More than 35,000 tons of onions from contract farmers in the first year Business Impact: Market expansion – 1,800 new contracts due to lower barriers to entry (90% with smallholder farmers) Improved supply chain security – More than 35,000 tons of onions from contract farmers in the first year Social Impact: Increased farmer incomes by $300-400 per acre for onion farmers Increased farmer incomes among irrigation users by $100-$1,000 due to efficiency gains Reduced water use by an estimated 500M cubic meters of water/year Social Impact: Increased farmer incomes by $300-400 per acre for onion farmers Increased farmer incomes among irrigation users by $100-$1,000 due to efficiency gains Reduced water use by an estimated 500M cubic meters of water/year

15 15 FSG.ORG © 2012 FSG Shared Value focuses on eliminating trade-offs between business and society “Trade-off Busting Innovations” “New R&D” “Less Product Complexity” “Local Production” “New Partnerships for Sales and Consumer Education”

16 FSG.ORG © 2011 FSG 16 Why is Shared Value important to Latin America? Local companies will miss out on opportunities that MNCs are capturing Social problems will go unaddressed Shared Value represents a rare opportunity to close an ideological divide

17 FSG.ORG © 2011 FSG 17 How can Latin America accelerate the adoption of Shared Value? Change mindset Accelerate learning Governments and Multilaterals can champion

18 Negocios Inclusivos and Valor Compartido

19 FSG.ORG 19 © 2012 FSG FSG has drawn important lessons from its work helping clients implement Shared Value It takes time to embed a shared value approach Companies should work from the inside out and from the top down 12 The process requires change managers more than program managers 3 In any organization, corporate leadership sets the tone – win the hearts and minds of those at the top first Although led from the top, shared value is typically created at the business unit level. Engaging managers from across the company in CSV is therefore essential. Identify and communicate early successes to maintain momentum – such quick wins could be from “legacy” programs Track progress against goals to keep initiatives on track and to demonstrate progress Constantly adapt and update your strategy based on new information – treat shared value implementation as the launch of a new business unit The primary emphasis of the team charged with implementing shared value should be internal facilitation and change management – not external relations (e.g. grant administration) The team will also require a strong link with and oversight from the board and sufficient managerial authority to act

20 A CSV Implementation Story: How Nestlé Began the Journey © 2011 Coinstar, Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of Coinstar, Inc. “Creating Shared Value is the centerpiece of our business strategy.” – Janet Voute, VP, Public Affairs Established a shared value alignment board Embedded shared value in the brands Created plans with key performance indicators Engaged hearts and minds of employees

21 A CSV Implementation Story: How Medtronic Began the Journey Set a specific and ambitious goal “Through alignment of citizenship and business strategy, we leverage all of our corporate assets to strengthen our long-term sustainability” – Omar Ishrak, Chairman and CEO Tested at scale in India Involved multiple parts of the company

22 A Shared Value Case Study: Intuit Fasal © 2011 Coinstar, Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of Coinstar, Inc. “Focus the organization on tackling big problems, and you will have a better shot at getting big results.” - Intuit CEO Scott Cook Social need Rural farmers in India lack access to market data and are forced to sell produce at a steep discount

23 © 2010 FSG 23 FSG.ORG Nestlé Portugal 9/29/11 Novartis “Arogya Parivar” Case Study Products  Portfolio: 79 products in 12 therapeutic areas  Affordable: Sandoz generics Over-the-counter (OTC) medications & nutrients Pharma products 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 Provided directly in villages via health camps Results & next steps  Improved access to health education and medicines for 42 million patients in 28,000 villages  Partnering with ~50 000 pharmacists 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 Enabling Local Cluster Development 3 3

24 FSG.ORG © 2011 FSG 24 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 Local Cluster Development: Cisco Networking Academy 3 3


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