1. 1Creating Value by Doing Good
Creating Value
by Doing Good
If achieving the twin goals of helping society
and making profits is not on your 2016 agenda,
it should be. There are strong forces at play—
changing the rules, the strategies, and how
corporations conduct business.
2. 1Creating Value by Doing Good
Introduction
Over the past decade, corporations have come a long way in creating shared value.1
There
is more momentum toward investing corporate talent, time, and resources on shared value
initiatives, partly because of business returns and partly because of changing expectations
of employees, shareholders, and others who want to “do good” for the communities in which
they operate.
Yet, many of the initiatives lack sustained focus, remain largely experimental, and fail to
contribute to a cohesive social impact narrative. Achieving successful, sustainable, and
scalable shared value requires significant shifts in how corporations do business. For example,
to mainstream the shared value concept throughout the organization requires skilled leaders
and a top-down strategy; and shared value will never “take” unless certain aspects of the
business are restructured.
The good news: There are forces in motion that are changing how corporations do business,
and how they can make a positive impact on society. These forces provide a unique window
of opportunity to integrate social impact into the business—from the leadership agenda and
purpose to strategy and processes—and do so in a way that is sustainable and at the appro-
priate scale.
This paper is the first in a series on the topic of shared value. In successive papers we examine
how first movers create shared value, highlight the top corporate leaders in this space, discuss
why top-down conscious capitalism and bottom-up design thinking are paramount to delivering
social impact, review the ins and outs of measuring shared value, and share powerful ways
to attract executive sponsorship and support.
This paper begins the conversation with a discussion of the key forces driving change.
1Creating Value by Doing Good
1
The term shared value was introduced in 2006 in an Harvard Business Review article by Harvard professors Michael Porter and Mark Kramer.
3. 2Creating Value by Doing Good
Global Expansion
The shared value concept has expanded rapidly in recent years as more companies invested
in more resources, creativity, and new collaborations. Globalization has played its part as com-
panies have deepened partnerships with local communities in developing markets, both to
create new channels and new products specifically for these markets. Shared value has also
accelerated as those in the public and private sectors developed ideas and confirmed a desire
to support people and communities in greatest need. For example, in the aftermath of Typhoon
Haiyan, Visa partnered with Oxfam to provide banking services and prepaid Visa cards to the
poor in disaster-affected areas of the Philippines.2
It was a win-win for both: The locals received
a Visa card with a PIN, which was less likely to be stolen than cash, and Visa brought previously
unbanked segments of the community into financial services. In general, addressing people
at the Bottom of the Pyramid in developing countries has been a key way for corporations to
create shared value.
Achieving successful, sustainable, and
scalable shared value requires significant
shifts in how corporations do business.
Additionally, entry into developing markets often involves extending the ambit of social impact
initiatives through skill-building within local communities. In rural India, pharmaceutical giant
Novartis launched Arogya Parivar to provide locals in remote villages with healthcare services
and to train others in the community to be health educators. More than 10 million people
benefited from health education and more than 750,000 received direct healthcare. Novartis
created a new market segment for its products and replicated the concept in three more
markets: Vietnam, Kenya, and Indonesia.
These and similar initiatives illustrate the ways in which corporations are becoming more active
in developing markets—whether through products, as service providers, or by building capacity
and raising living standards in communities in which they operate.
Developed countries are also benefiting as more corporations lead social change. However, in
developed markets the focus is less on poverty and more on areas such as education, income
inequality, health and wellness, and environment and sustainability. Silicon Valley’s high-tech
leaders invest in educational programs and technical training for the local community, and
R&D to help solve broader social challenges. Norway’s Novo Nordisk launched 90 shared value
initiatives in the United States to stem a type 2 diabetes epidemic. The company partnered with
the Diabetes Advocacy Alliance to drive change in federal policies, with communities to promote
early screenings, and with Wells Fargo to provide diabetes training for Native Americans.
The result: 16 percent more screenings and an 8 percent reduction in people who move from
at-risk to full diabetes. For Novo Nordisk, the returns manifested in greater market presence
and brand equity.
2
Oxfam is an international confederation of 17 organizations working together with partners and local communities in more than 90
countries to mobilize the power of people against poverty.
4. 3Creating Value by Doing Good
Different Models of Corporate Social Investment
Figure 1 illustrates a framework on corporate responsibility and social investment. Profits are
a top priority for corporations, as is maintaining responsible internal practices, including
ethical corporate behavior, culture and norms, health and safety practices, and workforce
diversity. A closer look into corporate social investments reveals a spectrum of potential
approaches and ways in which social value could have an impact on the bottom line. Specifically,
traditional approaches such as pure philanthropy, while well-intentioned, provide compara-
tively minimal return on the corporate bottom line and lack transparency in translating invest-
ments to social impact.
Earlier this year, we took a closer look at shared value, conducting a study of more than 200
social impact initiatives at United Nations Global Compact LEAD companies (see sidebar:
About the Study on page 4). Approximately 40 percent of the initiatives fall into the shared
value category, 35 percent in philanthropy, and 25 percent in community investments. This
is a significant departure from similar work done in 2011 that found that more than 75 percent
of corporate social investments were essentially philanthropy (both traditional and venture).
Within the sample of initiatives analyzed, the shift from philanthropy to shared value appears
largely driven by an increased focus on minimizing environmental impact and expanding
employment and educational opportunities. The ability to operationalize and measure tangible
environmental impact has propelled this focus area to the forefront of current shared value
Source: A.T. Kearney analysis
Figure 1
Corporate responsibility framework
Corporate responsibility
Social investment continuum
Social
investment
Ethical internal
practices
Traditional
philanthropy
Venture
philanthropy
Community
investment
Shared
value
Impact
investment
Purely commercial
activities
Internal-focused actions impacting
company resources (for example,
diversity, health and safety initiatives,
and equal opportunity)
Pure charity or aid
featuring no or low
investor involvement
Philanthropy featuring
highly involved investor
Social investing with
long-term, indirect
benefit to investor
Value chain or
operations approach
to social value and
direct business value
Financial investment
as a primary vehicle
for creating social
impact
Broad spectrum of corporate actions
that create positive social value, but
differ in intent, involvement, and
expected return
Profit-generation activities without any
explicit or implicit focus on creating
social value (Milton Friedman approach)
Expected impact on corporate bottom lineLow High
5. 4Creating Value by Doing Good
work. The environment is the focus of approximately 60 percent of total shared value activities,
and often motivated by increased scrutiny on supply chain efficiency and supplier standards.
Further, a rise in environmental regulations has heightened the business imperative for sustainable
innovation. For example, Daimler AG, owner and shareholder of brands such as Mercedes-Benz
and Maybach, is making green R&D a top priority. The company’s 2014 statement on sustain-
ability declares: “For a premium manufacturer, simply building small cars with low engine
displacement is not a viable option. That’s why we will focus on the most efficient technology
and bring about a breakthrough for plug-in hybrids.”
Companies are also making great strides in fostering a more inclusive supply base and workforce
to better harness local production capabilities. Women-owned businesses, small-scale entrepre-
neurs, and indigenous communities are among the groups benefiting as corporations reach local
communities, foster brand equity, and drive sustainability. Recognizing this, companies have
not only sought out minority and local producers, but also are actively training these commu-
nities to increase productivity, minimize waste, and become more competitive in the market-
place. Unilever, for example, trained thousands of rural women to become entrepreneurs in their
local communities through programs such as Project Shakti in India and Guddi Baji in Pakistan.
These efforts are supported by ongoing work in education and community enhancements
through venture philanthropy and community investment. Across the board, companies provide
educational grants, programs, and services to expand their role in local communities. Some
offer services in their core competencies, such as SK Telecom’s launch of a mobile app to match
volunteer workers with opportunities, while others invest in local infrastructure to generate
goodwill, such as the oil and gas companies that build roads, schools, and markets.
Such activities not only benefit the community and generate goodwill and brand equity for the
business, they are also closely monitored. A recent Morgan Stanley report finds that $1 out of
every $6 in 2014 was invested sustainably, to a total of $6.57 trillion in professionally managed
assets. This is a 50 percent increase over 2012 when sustainable investments represented $1 out
of every $9. Generally, sustainable investments either meet or exceed the performance of
About the Study
A.T. Kearney’s 2015 Corporate
Social Investment study is an
evaluation of 206 social impact
initiatives underway at corpora-
tions that are part of the United
Nations Global Compact, and
recognized as LEAD companies.
As part of this mandate, LEAD
companies commit to imple-
mentingaBlueprintforCorporate
Sustainability Leadership and to
sharing related outcomes and
lessons learned.
The company sample represents
10 industry sectors: alternative
energy, chemicals, food pro-
duction, industrial metals and
mining, mobile telecommun-
ications, oil and gas production,
pharmaceuticals and bio-
technology, software and
computer services, support
services, and automotive
manufacturers and parts
suppliers. The primary focus
of the research relates to corpo-
rations’ investment activities
in four categories:
• Traditional philanthropy:
5%-10% (across provision of
health products and services;
community-driven donations,
drives, and volunteering;
disaster relief)
• Venture philanthropy: 30%-35%
(across educational programs
and sponsorship; career
readiness; environmental
impact reduction)
• Community: 20%-25% (across
local communities enhance-
ment; minority and local job
creation; environmental impact
reduction)
• Shared value: 35%-40%
(across environmental impact
reduction; minority and local
job creation; supply chain
integrity and supplier
standards)
6. 5Creating Value by Doing Good
comparable traditional investments. For example, sustainable equity mutual funds enjoyed
equal or higher median returns and equal or lower volatility than traditional funds for 64 percent
of the periods examined.
Making Shared Value Mainstream
While shared value has gained momentum, it still remains largely experimental and short-term.
Very few organizations have maintained a sustained focus on shared value or embedded it into
their corporate purpose or core strategies. There are many reasons for this. Companies often
suffer from organizational inertia, lack of understanding, and what some call “CSR fatigue.”
Adopting a shared value approach requires top-down leadership commitment, as well as a
bottom-up overhaul of the operating model to reflect this commitment. Not surprisingly, it also
requires a significant investment in time, which often makes philanthropy an easier, more
familiar path. But philanthropy does little to enhance the collaborative creation and flow of
value from the investment.
Successful companies change their outlook. Rather than looking at shared value as “CSR
version 3.0,” it is positioned at the center of the corporate vision and purpose. The objective
is to change the underlying operating model, including leadership style, capabilities, culture,
processes, metrics and performance management, and ways of working. Rather than an “arms-
length” tactic, shared value is at the heart of a corporation’s business strategy and linked to its
core competencies (see sidebar: Danone Takes on the Bottom of the Pyramid).
In their recent book, Scaling up Business Solutions to Social Problems: A Practical Guide for
Social and Corporate Entrepreneurs, Olivier Kayser and Valeria Budinich of Ashoka discuss ways
Danone Takes on the Bottom of the Pyramid
It was 2000, and the health-
nutrition-fitness craze was taking
off. Danone CEO Franck Riboud
was preparing a “refocus” cam-
paign at the behest of corporate
shareholders. Franck and the
leadership team had settled on a
mission statement: “Bring health
through food to as many people as
possible.” Now they had to main-
stream the idea, refocusing the
company on nutrition—nutrition
in product development, in a
sustainablefoodchain,inmarket-
ing, essentially in everything the
company did.
Theplanwastoinvestinselect
projectswithanutritionand
healthfocus.Toachievethis,
Danonejoined forces with
Grameen bank founder and
microfinancier MuhammadYunus
inBangladesh.Thepartnership
identifiedanumberofspecific
projectswithanutritionand
healthfocus. Fromthecompany’s
firstfactoryin Bogra came a new
fortified yogurt called Shokti Doi
containing essential nutrients for
undernourished children in
Bangladesh.
From a supply chain perspective,
the company faced a key
challenge. In Bangladesh,
refrigeration is unpredictable and
farmers often travel long
distances to market. To help the
farmers and to ensure a reliable
supply of quality input, Danone
identified an enzyme to keep milk
fresh on the way to market.
In addition, production costs
were cut by building a smaller,
less complex mini factory and
hiring local, less costly workers.
"The day we engineered that
factory, a mental barrier was
broken," Danone co-COO
Emmanuel Faber told Time
magazine. “What the factory
lacks in size, it makes up for in
ease of use; workers simply don't
have to be as skilled.”
The partnership continues today
and has become a template for
howDanonemightpushintoother
developing markets, including
Africa. In 2015, Grameen Bank
and Danone ranked 12 and 14
respectively on Fortune’s Change
the World list, recognized for
creating new economic opportu-
nities for those in poverty.
7. 6Creating Value by Doing Good
to help companies tackle their social challenges by closing gaps in their awareness, abilities,
and willingness to address the challenges. They talk about entrepreneurship within and outside
the organization, establishing a protected space for experimentation, and embedding a social
mission within the organizational culture. In our experience, success also demands full
integration—incorporating social impact and shared value into key elements of the business.
This requires commitment and investment at all levels of the organization.
Figure 2 illustrates our shared value operating model. The model begins at the top—with
a CEO and leadership team defining the vision, purpose, and path to implementation. From
the beginning, the focus is on gaining the support of leaders and the workforce in order to
“mainstream” shared value into the corporate culture, drawing people in by instilling purpose
and passion and offering incentives as needed.
A few years ago, Australian developer WorleyParsons recommitted to its corporate responsi-
bility policy by assigning “grass roots” champions at its operations in 43 countries. These
champions became on-the-ground envoys, ensuring global consistency and that commitments
made to their communities would actually materialize.
A true shared value model also restructures the way business is conducted. It is built on a
foundation of processes, measurement, and technology: processes to drive shared value,
measurement to track performance and impact, and technology to increase agility and provide
real-time collaboration.
Source: A.T. Kearney analysis
Figure 2
Shared value operating model
Norms and behaviors to support social impact and shared value
• Clear social vision and mission articulated in a strategy
• Path to implement strategy
Vision
and
purpose
Leadership
and people
Measurement TechnologyProcesses
• Visionary leaders who understand and
bridge vision and execution
• Structure and capabilities to drive
the agenda
• Incentives for employees to
contribute to social outcomes
• Socially conscious
employees
• Processes and spaces
to facilitate innovation
in shared value
• Adjustment of exist-
ing processes to
align with shared
value goals
• Agreed measure-
ment mechanism to
track, improve, and
optimize shared
value initiatives
• Management report-
ing for clear visibility
of outcomes
• Scalable technology that
allows business agility
and enables a “win-quick,
fail-fast” environment
• Collaboration technology
8. 7Creating Value by Doing Good
Forces of Change: Stakeholder Expectations
If ever there was a time to launch a shared value strategy, it’s now. Consumers are demanding
more socially responsible products and services. Employees want to be part of a company that
cares about society. Investors, partners, and stakeholders are considering more than economic
value; they are also monitoring a company’s social contribution. (To this last point, there is
growing evidence that in shareholder value creation, companies with strong shared value
programs outdo those without such programs.)
According to the 2015 Edelman Trust Barometer, trust in business is 9 points higher than in
government. Not only do communities trust business more than government, but also 84
percent of respondents believe that business can pursue its self-interests while doing good
work for society. With greater trust, however, comes greater expectations from the community.
The following are the main aspects of the stakeholder push, followed by the enablers that are
changing how companies look at shared value (see figure 3).
Consumer demand for socially responsible products and providers
People today want to buy socially responsible products from socially responsible com-
panies and are willing to pay more for the opportunity. A 2014 Nielsen study finds that 55
percent of consumers are more willing to buy products and services from organizations they
consider socially responsible. A Stern School of Business study finds that consumers are
willing to pay an average price premium of 17.3 percent for socially conscious products and
services, and the premium differs depending on the industry and the issue: human rights,
the environment, or labor. For corporations, shared value is a good way to attract and retain
a loyal consumer base.
Source: A.T. Kearney analysis
Figure 3
Forces driving shared value
Intensifying
focus on
shared value
• Consumer
demand
• Employee
aspirations
• The new norm:
“name and
shame”
• Impact-driven
corporate
leadership
• Technology
advancements
• Media spotlight
on corporate
citizenship
Stakeholders Enablers
9. 8Creating Value by Doing Good
Aspirations and requirements of millennials
Millennials in general are not just focused on earning money, they want careers with “purpose.”
A recent Nielsen study finds that 67 percent of millennials strongly consider a company’s
commitment to the community when choosing an employer. A 2012 NetImpact study found
that 45 percent of students about to enter the workforce were willing to take a 15 percent pay
cut for a job that has a social or environmental impact. To attract top talent from a generation
that is increasingly mobile, expressive, and demanding, smart companies are demonstrating
authentic social responsibility and impact—not at the periphery, but at the core of their
businesses.
Corporations can no longer lean on public
relations to fabricate goodwill. Authentic
social responsibility must be at the core
of every company’s operations.
The new norm: “name and shame”
Digital media, especially social media, has given every individual a global voice and makes each
person a potential journalist. This mass democratization of the press severely limits corporate
influence over what is said and heard, written, and read.
Social media and online communities rapidly broadcast news about a company’s failings as well
as amplify the ripple effects on consumer and financial markets. Consider the recent explosions
in Tianjin, China, as Rui Hai International Logistics came under intense international scrutiny for
its meager implementation of safety and environmental guidelines, or the Rana Plaza collapse
in 2013 that exposed worker safety violations in the Bangladesh garment industry.
Corporations can no longer lean on public relations to fabricate goodwill. Authentic social
responsibility must be at the core of every company’s operations. For example, Starbucks’ CEO
Howard Schultz partnered with Conservation International in the early 2000s to develop world-
class standards for ethically sourced coffee. Today the company sources most of its coffee from
producers with environmentally friendly practices. In 2014, to appeal to its large and growing
socially conscious consumer base, Starbucks announced that 96 percent of its coffee is ethically
sourced; in 2015 that number rose to 99 percent.
Shared Value Enablers
Shared value is also being driven by several enablers. Corporate leaders are expected to be
social change agents and deliver social impact. Technology is lowering transaction costs,
disrupting existing business and enabling rapid growth of social innovations. And a brighter
light is shining on corporate citizenship: corporations that fail to live up to their commitments
face significant risk.
10. 9Creating Value by Doing Good
Impact-driven corporate leadership
It is not difficult to look around the world today and identify corporate personalities and role
models driving the agenda of social impact and taking on larger social issues. The most
prominent of these role models demonstrate passionate leadership by making social impact a
personal priority without compromising shareholder value. Whole Foods CEO John Mackey is
well known for the Conscious Capitalism movement and building his company on both social
and economic value. Elon Musk, CEO of Tesla Motors, is also recognized for daring ideas in
sustainable energy. His latest commercial product is Powerwall, battery-powered electricity
for homes and businesses.
Fortunately, CEOs are not alone in advocating the shared value message. There are many
nonprofits looking for partnerships. For example, Ashoka is a global nonprofit that identifies
social entrepreneurs—people with creative and practical ways to solve social issues—and
connects them with business leaders who can turn ideas into reality.
Technology advancements
Propelled by the speed of technological change, companies are now equipped with new
channels and leaner operating models to better reach and serve their target communities.
Coupled with a growing emphasis on “win quick or fail fast,” shared value creation
is being driven with greater speed, scale, and agility.
• Newchannelsandcustomersegments.Mobile and Internet access have created new ways
for companies to reach previously inaccessible markets, such as remote rural areas and
customers at the Bottom of the Pyramid. The expanding reach of mobile technology in Africa
has pushed the financial sector to provide broader access to banking and insurance services
through the use of mobile phones. By 2025, it is expected that there will be 360 million smart-
phones on the African continent. Safaricom, a leading Kenya-based telecommunications
company, made “access to mobile payments” a central tenet of its corporate strategy. The
company launched M-PESA, a mobile money transfer service, in 2007 to provide customers
with access to financial services. Today, M-PESA reaches nearly 20 million registered
customers across the continent and drives 23 percent of Safaricom’s incremental annual
revenue growth.3
• Leaner and more inclusive supply chains. By reducing supply chain complexity and refining
supplier standards through the use of technology, companies are harnessing the capacity of
their communities and delivering greater value to end consumers and shareholders. A well-
known example of value chain inclusion is the Last Mile Alliance. This collaborative venture
between Bayer, Yara, Seedco, and Syngenta established an agro-dealer distribution network
in Africa. Alliance members use sophisticated technology to manage complex logistics,
distribution, and supply chains over long distances. The alliance is credited with bringing
high-quality farm inputs (such as feed, seed, fertilizer, and chemicals) to Africa’s small-holder
farmers, as well as much-needed expertise. As Jorgen Ole Haslestad, chief executive of Yara
International, told CNBC Africa, “The expertise is necessary… [to] teach the farmers what to
produce using what sort of seed, the right fertilizer, the right products so [they] can get the
right yield and sell it to the market.”4
3
M-PESA makes up 4.72 billion KSh of 20.38 billion KSh in total revenue growth from 2013 to 2014 at Safaricom. Source: 2014 Safaricom
sustainability report
4
Small-Holder Farmers Essential to Agricultural Growth, CNBC Africa, February 2015
11. 10Creating Value by Doing Good
Media spotlight on corporate citizenship
As people become more interested in corporate-led social impact, media organizations are
fueling a culture of storytelling around responsible business. Companies are either publicly
lauded for their positive social impact or suffer the consequences for their social failings. From
journals (Stanford Social Innovation Review) and social impact indices (Social Progress Index)
to nonprofits (B-Lab), a host of new platforms are giving voice to shared value. Summits and
conferences are other channels sharing viewpoints focused largely on social impact in different
business sectors and regions.
For corporations, the secret to positive coverage is to create a narrative before one is created
for them. A good narrative is rooted in a company’s core products and services and the unique
and major steps taken toward social good. Nike did this in the 1990s, transforming its image
from a heartless company that exploits cheap labor in undeveloped countries, to an environ-
mentally friendly company concerned about waste (creation, usage, and disposal) and
community engagement. In 2015, Nike was at the top of Morgan Stanley’s list of environ-
mentally friendly apparel and footwear companies.
Looking Ahead
Shared value has advanced rapidly from concept to action over the past decade and has earned
a place in strategic decision making and boardroom discussions. As leaders gain a better
understanding of its potential, we expect to see smarter, more commercially-relevant ways to
achieve shared value.
Many leaders are well ahead in this space, defining shared value strategies and leveraging their
core competencies to expand their sphere of influence. They are going beyond commercial
stakeholders to include local communities and the environment—repurposing products,
services, value chains, and partnerships along the way.
Today, with the unique forces of change upon us, how corporations react, and when they react,
will have a massive impact on the opportunities and challenges ahead. It won't be long before
we know the names of the true global leaders and the also rans in this space.
Authors
Naveen Menon, partner, Singapore
naveen.menon@atkearney.com
Aditya Bajaj, principal, Melbourne
aditya.bajaj@atkearney.com
Samira Khan, consultant, Kuala Lumpur
samira.khan@atkearney.com
Peter Munro, partner, Sydney
peter.munro@atkearney.com
Dorcy Chen, consultant, New York
chen.dorcy@atkearney.com
