Five essentials to understanding shared value

essentials

By Nicola Robins

At a recent GRI conference in Johannesburg, someone remarked that shared value might be going the same way as sustainability: the term is starting to mean anything a person wants it to mean. I hope not. Here are what I consider to be five essentials to understanding shared value.

  1. Shared value is a business strategy

Shared value is neither a sustainability strategy, nor a social responsibility strategy. It is a business strategy that delivers an improved profit formula or creates a tangible new market opportunity by addressing social challenges (local unemployment levels, carbon emissions, inequality, energy use, and so on). For example, Unilever’s business strategy aims to double the size of its business, reduce its environmental footprint and increase its social impact. Its Sustainability Living Plan highlights the social value delivered by this shared value strategy.

  1. Shared value is not business as usual

A company cannot create a shared value strategy by holding up a retrospective, self-validating lens to business-as-usual. Shared value requires innovation in products, processes or value chain relationships. Innovation across two or more of these areas often reformulates the business model, elevating its disruptive potential. Shared value insurer Discovery launched Vitality as a product innovation, using behavioural incentives to make people healthier. However, through ongoing process and value chain innovations, and with the support of actuarial and clinical data, Vitality rapidly evolved into a platform that underpinned the company’s entire business model.

  1. Shared value innovations are variations on about 21 standard patterns

While the context may change, shared value propositions redefine productivity, reconceive products or markets, or create an enabling local environment. By following trends in shared value, we have identified 21 underlying patterns by which companies achieve these innovations. Unilever’s shared value patterns include microfinance (for example, Project Shakti) and behavioural change (for example, the Lifebouy handwashing campaign). Discovery’s primary pattern focused on behavioural change, with subsequent efforts creating an enabling environment through supporting infrastructure for active living; SAB Miller’s patterns focus on local sourcing and inclusive supply chain; while Norwegian fertiliser company Yara is engaging in local economic development by partnering to create agricultural growth corridors in southeast Africa. Technology innovations, such as digitisation and mobile, facilitate the application of multiple innovation patterns to drive business model innovation. As a result, ICT companies are often sought as strategic partners in creating shared value.

  1. Shared value is a scale play

Societal challenges are large-scale and for the most part trending in the wrong direction. As a result, shared value strategies must be scaled or scalable – commensurate to the size of the business. Successful strategies power a business’s growth trajectory by delivering net positive impact in financial and social terms. Fashion retailer TFG employs a developmental supply chain strategy that includes vertical integration into local design and manufacturing. As quick response fashion trends and rising fuel costs put pressure on fashion retailers, this strategy will increasingly dovetail with the group’s growth ambitions.

  1. Shared value is today’s differentiator and tomorrow’s standard practice

The window of opportunity for using shared value to differentiate consumer or investor brands will remain open for a few years longer. Although the term will inevitably be surpassed, seeking opportunities to grow by solving society’s biggest problems is likely to become as commonplace as SWOT analysis. Businesses will not differentiate on whether they deliver shared value, but on how innovatively they do it. Those that moved up the learning curve earlier will already have delivered on the big opportunities and will be well advanced towards unlocking even bigger ones.

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