79999 v2 WORKSHOP ON CREATING SHARED VALUE THROUGH CORPORATE SOCIAL RESPONSIBILITY IN INDIA India’s Public Sector | November 8th, 2012 THE WORLD BANK TASK TEAM Shabnam Sinha, Senior Education and Institutional Development Specialist (Task Team Leader) John Blomquist, Lead Social Protection Specialist Dorota Nowak, Senior Program Officer, SACIN, Country Management Unit, India Sudha Seshadri, Freelance Consultant Guidance: Amit Dar, Sector Manager, SASED c 2013 The World Bank, 1818 H Street, NW, Washington, D.C. 20433 USA Rights and Permissions The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission promptly. Photographs courtesy of Ivar Foss, Quality Management AS. CONTENTS AGENDA 9 BACKGROUND 11 OBJECTIVES OF THE WORKSHOP 12 INAUGURAL SESSION 13 INTRODUCTION TO CSR AND SHARED VALUE 17 STRATEGY EVOLVING SESSION 22 CLOSING REMARKS AND WAY FORWARD 24 APPENDIX I: MEASURING SHARED VALUE: HOW TO UNLOCK VALUE BY LINKING SOCIAL AND BUSINESS RESULTS 28 APPENDIX II: CREATING SHARED VALUE IN INDIA: CASE STUDIES 54 APPENDIX III: CREATING SHARED VALUE WORKSHOP: Z&/E/E'd,ZK>K&h^/E^^/E^K/dzͳͳ INDIA’S PUBLIC SECTOR 71 WORKSHOP ON CREATING SHARED VALUE THROUGH CORPORATE SOCIAL RESPONSIBILITY IN INDIA India’s Public Sector | November 8th, 2012 10:00AM – 4:00PM 1st Floor, Mantra Hall, Park Hotel, New Delhi, India AGENDA Time ƵƌĂƟŽŶ WƌŽÅ?ƌĂŵ Speaker 10:00-10:45 45 mins /ŶĂƵÅ?ƵƌĂů^ÄžÆ?Æ?Å?ŽŶ Ä‚Ä?ŬÅ?ƌŽƵŶĚĂŶĚKÄ?Å©ÄžÄ?ƟǀĞÆ?ŽĨƚŚĞ ^ŚĂÄ?ŶĂŵ^Å?ŶŚĂ͕^ĞŶÅ?Žƌ ŽŶĨĞƌĞŶÄ?Äž ĚƵÄ?ĂƟŽŶĂŶĚ/ŶÆ?ƟƚƵƟŽŶĂů ĞǀĞůŽƉŵĞŶƚ^ƉĞÄ?Å?ĂůÅ?Æ?ƚ͕dŚĞ tŽƌůĚĂŶŬ͕/ŶĚÅ?Ä‚ <ĞLJŶŽƚĞĚĚƌĞÆ?Æ? KŶŶŽZƵŚů͕ŽƵŶƚƌLJÅ?ƌĞÄ?ƚŽƌ͕ dŚĞtŽƌůĚĂŶŬ͕/ŶĚÅ?Ä‚ /ŶĂƵÅ?ƵƌĂůĚĚƌĞÆ?Æ? 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ŽŶƚŚĞÅ?ŵƉŽƌƚĂŶÄ?ÄžŽĨÆ?ŚĂƌĞĚǀĂůƵĞ͘ 25 APPENDIX I DĞĂÆ?ƵƌÅ?ŶÅ?^ŚĂƌĞĚsĂůƵĞ͗,ŽÇ?ƚŽhŶůŽÄ?ŬsĂůƵĞÄ?LJ>Å?ŶŬÅ?ŶÅ?^ŽÄ?Å?ĂůĂŶĚƵÆ?Å?ŶĞÆ?Æ?ZÄžÆ?ƵůƚÆ? Measuring Shared Value How to Unlock Value by Linking Social and Business Results Michael E. Porter, Greg Hills, Marc Pï¬?tzer, Sonja Patscheke, and Elizabeth Hawkins 28 ABOUT THIS REPORT The genesis of this article occurred at the FSG-hosted Shared Value Summit in Cambridge, Massachusetts in June 2011 where sixty company representatives and co-authors of the Harvard Business Review article “Creating Shared Value,â€? Michael E. Porter and Mark Kramer, identiï¬?ed measurement as a key driver of shared value adoption. Nestlé, Intel, InterContinental Hotels Group, and the Rockefeller Foundation committed to work with and support FSG in developing this article on measuring shared value. Insights were drawn from a systematic literature review, in-depth interviews with featured companies, and FSG’s work on shared value with dozens of corporations. AUTHORS Michael E. Porter Professor, Harvard Business School Greg Hills Managing Director, FSG Marc Pï¬?tzer Managing Director, FSG Sonja Patscheke Senior Consultant, FSG Elizabeth Hawkins Associate, FSG For more information, please contact: Greg Hills: Greg.Hills@fsg.org Marc Pï¬?tzer: Marc.Pï¬?tzer@fsg.org Measuring Shared Value: How to Unlock Value by Linking Social and Business Results by FSG is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License. Permissions beyond the scope of this license may be available at www.fsg.org. 29 Measuring Shared Value How to Unlock Value by Linking Social and Business Results M ore and more, companies are creating shared value by developing proï¬?table business strategies that deliver tangible social beneï¬?ts. This thinking is creating major new opportunities for proï¬?t and competitive advantage at the same time as it beneï¬?ts society by unleashing the power of business to help solve fundamental global problems. Despite the wide- spread embrace of the shared value concept, however, the tools to put this concept into practice are still in their infancy. In particular, a new framework for measurement that focuses on the interaction between business and social results is among the most important tools to drive shared value in practice. 30                                                                                                                               !                     "                            #    When companies do not understand or           rigorously track the interdependency between      social and business results, they miss important   !    opportunities for innovation, growth, and        sustainable social impact at scale          $                                 !          %    &                                          #                            '                                      !         %  (                                       %               )                )                                &    %   *+ ) )   , -  .),-/                               0                                                 31 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results Anchoring Shared Value Measurement in Strategy Companies Pursue Shared Value at Three       (redeï¬?ning produc- Levels tivity in the value chain(                                                         Harvard Business Review                            )                     !                  "         (enabling local cluster               development  (          #      $   (          %&                       %  '       (   %             %                              (reconceiving prod-  (         * ucts and markets (        %          (       "     (        +            $                 "      '     (  , -  ./    LEVELS OF SHARED VALUE BUSINESS RESULTS SOCIAL RESULTS TABLE 1: Reconceiving product ! Increased revenue ! Improved patient care Illustrative Business and markets: ! Increased market share ! Reduced carbon footprint and Social Results by How targeting unmet needs drives ! Increased market growth ! Improved nutrition Level of Shared Value incremental revenue and proï¬?ts ! Improved proï¬?tability ! Improved education Redeï¬?ning productivity ! Improved productivity ! Reduced energy use in the value chain: ! Reduced logistical and ! Reduced water use How better management of operating costs ! Reduced raw materials internal operations increases ! Secured supply productivity and reduces risks ! Improved job skills ! Improved quality ! Improved employee incomes ! Improved proï¬?tability Enabling cluster development: ! Reduced costs ! Improved education How changing societal conditions ! Secured supply ! Increased job creation outside the company unleashes ! Improved distribution ! Improved health new growth and productivity gains infrastructure ! Improved incomes ! Improved workforce access ! Improved proï¬?tability 32 Identify the social issues to target Track progress FIGURE 1: Strategy 1 3 Integrating Shared Value Strategy and Measurement Measurement 4 2 Measure results and use Make the business case insights to unlock new value The Shared Value Measurement Process Step 2: Make the business case.                      "                                                       %                                     !             "                   #            !  &         $    *      %   &          '    Step 3: Track progress.+        $ (             &    &                 %      Step 1: Identify the social issues to target.% &                       $          ! )  $        ,           %           Step 4: Measure results and use insights to             unlock new value.%$                  &        %                )                  ,   -                    & 4 33 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results                                  #      !                       $                                                                         #                  !                   !                               !             "          "                     Unlocking New Value from Measurement While shared value measurement is still in its infancy, leading companies are employing each of these four steps to unlock new value from measurement. They are also piloting a range of shared value measurement approaches. % $% !%        &     2. Make the business case Coca-Cola and           *          Youth Employment             % $%         !           !   +%                % $%      ,-.            $        $                              "            1. Identify the social issues to target % $%       #'(()                    &  !                       % $%        % $%         $                     &                                 3. Track progress        "    %                                        34          ! )                                                     4      *3 1 2     !    !     !                       *%      "#$   % &      &   $    2 !  "'   "("   2-   )       * (   !            4. Measure results and use insights to    *    unlock new value   !     * ! 5   *   +", -  .,  !.        678 #,   ./,              (    2    678   )    0 1 #              2 -         !                "      !    !            3               2      Novo Nordisk and 6  6 *      0   6   Diabetes Care 99       ! 6 *2                  !       * 2. Make the business case 1. Identify the social issues to target <  6  6 * ! : ) &  !        *       ;   !   (        (  +     "/              !  -             9   1"$       6 35 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results              %!                  )                                        /!0  *#0                      $    1       3. Track progress                        2                           1                  3               ! !!!       1              "" !!!       1             #!     $ 2           !!%      & ' (      4            )!!             3     *! !!!        5                               4. Measure results and use insights to   unlock new value +         ,-   .           Measuring by Level of Shared Value: Measurement considerations differ at each level of creating shared value, requiring different approaches to understand how to unlock greater value, as indicated in the following examples. Intel’s Education Transformation strategy 2          Reconceiving focuses on improving student outcomes   :    ;    6 Products and while also increasing sales of classroom            Markets: Intel technology.                 6          6             <:=  :    7  1    8   4    5                         6   9   :          3                                             :   1 Refers to Disability Adjusted Life Years (DALYs), a common measure in the global health ï¬?eld, which represents the sum of the years of potential life lost due to premature mortality and the years of productive life lost due to disability. 36             ,  !                        -               .               / 0                              !      !                                  !    !     !    !      “What we found at Intel was just because you           have the data, it isn’t everything. It’s more about how you’re using that data and how you're )                1          changing your decision making with that data.â€?           Shelly Esque, Intel     !                    !                      ,  !  ) !2 "!            $      )!      "      #           3            !                  !         !           ) !                4     %&&5     !     $            !    %&'%       )    !)+.6)    '(          + .  7                 #  %&     4       !     $   6  !  !   7  %&&8       )       $ %&&9 *   +    !       !  !   !    *                                                                  !                  !                             !        Insights from measuring technology            effectiveness in the classroom are            informing Intel's product and program               improvements, resulting in better learning           and increased business.         37 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results              %!                  )                                        /!0  *#0                      $    1       3. Track progress                        2                           1                  3               ! !!!       1              "" !!!       1             #!     $ 2           !!%      & ' (      4            )!!             3     *! !!!        5                               4. Measure results and use insights to   unlock new value +         ,-   .           Measuring by Level of Shared Value: Measurement considerations differ at each level of creating shared value, requiring different approaches to understand how to unlock greater value, as indicated in the following examples. Intel’s Education Transformation strategy 2          Reconceiving focuses on improving student outcomes   :    ;    6 Products and while also increasing sales of classroom            Markets: Intel technology.                 6          6             <:=  :    7  1    8   4    5                         6   9   :          3                                             :   1 Refers to Disability Adjusted Life Years (DALYs), a common measure in the global health ï¬?eld, which represents the sum of the years of potential life lost due to premature mortality and the years of productive life lost due to disability. 38             ,  !                        -               .               / 0                              !      !                                  !    !     !    !      “What we found at Intel was just because you           have the data, it isn’t everything. It’s more about how you’re using that data and how you're )                1          changing your decision making with that data.â€?           Shelly Esque, Intel     !                    !                      ,  !  ) !2 "!            $      )!      "      #           3            !                  !         !           ) !                4     %&&5     !     $            !    %&'%       )    !)+.6)    '(          + .  7                 #  %&     4       !     $   6  !  !   7  %&&8       )       $ %&&9 *   +    !       !  !   !    *                                                                  !                  !                             !        Insights from measuring technology            effectiveness in the classroom are            informing Intel's product and program               improvements, resulting in better learning           and increased business.         39 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results InterContinental Hotels Group tested Insights from measurement drive ongoing Redeï¬?ning dozens of options for reducing energy, improvements. Productivity in the water, and waste to lower its environmental +       $   Value Chain: footprint while also driving down hotel          ,* InterContinental operating costs.         Hotels Group           %                             *                                       -#""                                        $    * $                   %               !""# $     $                            !.                  %      &               “When measurement is done right, you can start     % $'       to develop theories around how these targets  (   $       impact your business. Measurement leads to real              reï¬?nements not only of the things you measure, )                $     but even in how you run your business.â€?      $     David Jerome, IHG         *      Nestlé trains and assists smallholder -"5""   4        Enabling Cluster farmers to foster rural development while       $   Development: ensuring a reliable supply of high quality          * Nestlé raw materials.  '  )   /     $    0  1     $      2  Insights and data from shared value             $ measurement have helped identify where       *   and how Nestlé’s agronomists should 3     0  1      focus their time to optimize farmer yields,         quality, and quantity.         3    0  1         $ $       ( $       $     0  1    --""     (     6   + !""7    4  (               40                                                   %  & '                       *(((                  +                                “Improving farmers’ lives is only !"#!    ,   & '      possible when measuring progress   $             % & '    at a farm and rural community level.â€?   !-     .((*        Janet Voûte, Nestlé       / & '       0 !!( (((   )                           1   )                                           Existing Social Impact Measurement Approaches Serve Different Purposes 2           85        0        3                  1  4                    /         0    5    4  3                   6                 9  5            %.:2                      )      )                            0           Sustainability                     -;(( ,    #(               5  <  7            9<:         5                        intersection      987<:  7                0   %                   10 41 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results                )                  !     *                     )                  +                                                  ,                         '                                      #                    !  "                                                                             Impact Assessments             %    - -   -                   . $                           !    #              - -               %      - -                                          -                $       #    %*/  /                0                                     %       &                            %*/                      1      &         )        /  0                                        Compliance         !                     Reputation   '                     (                                                          2      '                +      "        )                                      42 TABLE 2: MEASUREMENT WHAT TO MEASURE? WHY MEASURE? FOR WHOM? FOCUS Understanding the Purpose of Shared Value Joint business and $ Grow the total shared $ Primarily for Measurement social value creation value created management $ Targeted communication to external stakeholders Sustainability Efï¬?ciency in the use $ Minimize negative $ Management of input factors (e.g., externalities and $ Communication to natural resources and augment positive external stakeholders labor) and improved impacts product and community $ Maintain a license to impacts operate Impact The long term social and $ Track progress on $ Communication to Assessment economic development social and economic external stakeholders impacts of operations development impact and/or philanthropy $ Maintain a license to operate Reputation How societal impacts $ Manage reputation $ Primarily for contribute to company management reputation Compliance Compliance with laws $ Ensure adoption and $ Management and voluntary policies, compliance $ Communication to standards, and codes $ Maintain a license to external stakeholders operate                "                         #                                                    #                                                                             !    43 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results Shared Value Measurement and Investors                   0                                                                                                                                                                         !                        Correlating ESG (Environmental, Social,              and Governance) Performance     to Market Value "            1                               !                   * +       # $        %           !  &          !                  '  (')         * +                            2                                                                  3    !                      * +         45                  6 $       * +                              ,   -                                                                  .      -                                       .   ! * +      '  7                  '                         ,                                                                     /                2 While precise global data on socially responsible investment (SRI) are not available, this ï¬?gure represents an assumption based on publicly available estimates for SRI in the United States, Europe, and Canada. 44             '         redeï¬?ning productivity in the   +        value chain,                                +                   Monetizing ESG Performance and Creating Shared Value Measurement’s Role with Notional Financial Statements Investors             3   %  direct connection                  '                       1      !                                      )                 !     4  %     " #                       $       3                          %          $5      +    &                       ' (                                        )           *                  +                   63                 ' ) , !  +     "    ,-' .    /                                                   +      0     1 5,'     637                  +                       ,-'    !      8         " ,-'                               $9-:         1             ;         +    #                1    2            # *         45 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results Pragmatic Approaches for Measuring Shared Value Measuring shared value builds on well-established practices in business that connect strategy to execution and performance management. The need to capture social results and their impact on business results, however, adds new complications and challenges. Companies are ï¬?nding pragmatic approaches to tackle these challenges. The following six measurement challenges illuminate some ways companies are innovating in their shared value measurement practices. As in any other area, resources committed to measuring shared value must yield a positive return. Challenge #1: A Wide Range of Social       & '    Issues Could Be Addressed and Measured            Identify and measure the few high-priority  & (        social results that the shared value strategy        )      seeks to address   !     !  !                             *                                                                                                   + "          ! " ,  !   !                                              !     #    !                   $     -       ! +           ! "                                     "$            ./0    " !         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Challenge #3: Business Value Accrues on Challenge #5: Determining a Company’s a Different Timeline Than Social Value Attribution When Strategies and Activities Measure intermediate social outcomes Require the Efforts of Many Partners Focus measurement of social results on            contribution, not attribution                                         !    !attribute      ! !          !"     .       !   !     #         contribute    /     $                   !   !       %     !     ,    !  #              #                !            0   (      #           !                     #       !               1 /   23 433562  &      !  !4372  !               Challenge #4: Measuring Business Value 8            for Cluster Investments        !     Use proxy indicators to track business             results                     '  (        9: 0  0          !    )                                      &   (!       Challenge #6: Management Desires an             Aggregation of Social Impact Data        "      Aggregate results selectively and only for      *+  the same social outcomes     !, - ! !       (     (  # 8              )           $           +             %;    !  47 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results           Creating performance incentives aligned      with shared value objectives        '        !            "        8        # 0-40        #    0 6       $%&      #%         %      !90"    '          %           %   1:    #    12;:'     <  0--) =  Organizing for Shared Value Measurement      (              ) *      40     +   0 690 Increasing the role of business units in Building cross-sector partnerships to measuring social performance execute and measure shared value ,      strategies     -   -        &                        =)        .   *                                 #               % . ,(      <      /  0  1223      /    %       %    * %               # 45)/  6   %               7                  /  0    7                     . %           48                                                    &       !                "    #                                                     $   %          The Future of Shared Value Measurement '            (         (                     )                   *                   *     #                    #+                    "   5                 *  6   7-  *     ,      2                    - *- .. ./+          1   * + -    !                                  0           +                                         2                              *  "                     *           *     1        1                                  &                                             2         "          3   8    (       3    4     18 49 Measuring Shared Value: How to Unlock Value by Linking Social and Business Results REFERENCES Accenture and Committee Encouraging Corporate European Commission, “Communication from the Philanthropy (CECP), “Business at its Best: Driving Commission to the European Parliament, the Council, Sustainable Value Creation: Five Imperatives for Corporate the European Economic and Social Committee and the CEOs,â€? 2011. Committee of the Regions: Renewed EU Strategy 2011–2014 for Corporate Social Responsibility,â€? October 2011. Bonini, Sheila, Timothy M. Koller, and Philip H. Mirvis, “Valuing Social Responsibility Programs,â€? McKinsey on Faupel, Christian and Susanne Schwach, “Measuring Finance, July 2009. Corporate Sustainability, Maximizing Shareholder Value,â€? Ernst & Young, May 2011. CECP and McKinsey, “Shaping the Future: Solving Social Problems through Business Strategy: Pathways to FutureSource Consulting, “EMPG Global Market Sizing and Sustainable Value Creation in 2020,â€? 2010. Penetration,â€? July 2011. Clay, Jason, “Exploring the Links Between International Generation Investment Management, “Sustainable Business and Poverty Reduction: A Case Study of Unilever Capitalism,â€? February 2012. in Indonesia,â€? Oxfam and Unilever, 2005. Global Reporting Initiative (GRI), “The Amsterdam Global Corporate Knights, http://www.corporateknights.com/. Conference on Sustainability and Transparency: Rethink. Rebuild. Report,â€? May 2010. Deloitte and International Finance Corporation (IFC), “User Guide, Financial Valuation Tool for Sustainability GRI, KPMG, United Nations Environment Program (UNEP), Investments,â€? June 2011. and Unit for Corporate Governance in Africa, “Carrots and Sticks—Promoting Transparency and Sustainability: An Eccles, Robert and Michael Krzus, “A Chronology of Update on Trends in Voluntary and Mandatory Approaches Integrated Reporting,â€? Harvard Business Review, to Sustainability Reporting,â€? 2010. September 2010. Goldberg, Ray, Carin-Isabel Knoop, and Matthew Preble, Eccles, Robert G., Ioannis Ioannou, and George Serafeim, “Jain Irrigation Systems Limited: Inclusive Growth for India’s “Is Sustainability Now the Key to Corporate Success?â€? The Farmers,â€? Harvard Business Review, November 2011. Guardian Sustainability Leadership Hub, January 6, 2012. Goldman Sachs Global Investment Research, “Introducing Eccles, Robert G., Ioannis Ioannou, and George Serafeim, GS Sustain,â€? June 2007. “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance,â€? Harvard Business Govindarajan, Vijay, Jeffrey R. Immelt, and Chris Trimble, School Working Paper Series 12-035, May 2012. “How GE Is Disrupting Itself,â€? Harvard Business Review, October 2009. European Academy of Business In Society, “Sustainable Value: Corporate Responsibility, Market Valuation and International Federation of Accountants, “Investor Measuring the Financial and Non-Financial Performance of Demand for Environmental, Social and Governance (ESG) the Firm,â€? September 2009. Disclosures: Implications for Professional Accountants in Business,â€? June 2012. 50 REFERENCES Integrated Reporting, “Towards Integrated Reporting: Porter, Michael and Mark Kramer, “Strategy and Society: The Communicating Value in the 21st Century,â€? September 2011. Link Between Competitive Advantage and Corporate Social Responsibility,â€? Harvard Business Review, December 2006. IFC and World Business Council for Sustainable Development (WBCSD), “Measuring Impact Framework Principles for Responsible Investment (PRI), “Annual Report Methodology: Understanding the Business Contribution to of the PRI Initiative,â€? 2011. Society,â€? April 2008. PwC, “Responsible Investment: Creating Value from Impact Reporting and Investment Standards, Environmental, Social, and Governance Issues,â€? March 2012. http://iris.thegiin.org/. PwC, “Do Investors Care About Sustainability? Seven Trends Lim, Terence, “Measuring the Value of Corporate Provide Clues,â€? March 2012. Philanthropy: Social Impact, Business Beneï¬?ts, and Investor RCM, “Sustainability: Opportunity or Opportunity Cost?â€? Returns,â€? CECP, 2010. July 2011. Kramer, Mark and Sarah Cooch, “Investing for Impact: Schwarz, Friedhelm, Peter Brabeck-Letmathe and Nestlé - Managing and Measuring Proactive Social Investments,â€? FSG A Portrait: Creating Shared Value, (Zurich: Stämpfli, 2010). Report Prepared for the Shell Foundation, January 2006. Social Investment Forum Foundation, “Report on Socially Managi, Shunsuke, Tatsuyoshi Okimoto, and Akimi Matsuda, Responsible Investment Trends in the United States,â€? 2010. “Do Socially Responsible Investment Indexes Outperform Conventional Indexes?â€? 2012. Sullivan, Ruth, “No Proof SRI Outperforms Traditionals,â€? Financial Times, September 2010. Novo Nordisk, “The Blueprint for Change Programme: Changing Diabetes in China,â€? February 2011. UBS Investment Research, “Q-Series: What Is ‘Integrated Reporting’,â€? June 2012. Peterson, Kyle, Mike Stamp, and Sam Kim, “Competing By Saving Lives: How Pharmaceutical and Medical Device UNEP Finance Initiative and Mercer, “Demystifying Companies Create Shared Value in Global Health,â€? FSG, Responsible Investment Performance: A Review of Key March 2012. Academic and Broker Research on ESG Factors,â€? October 2007. Porter, Michael and Mark Kramer, “Creating Shared Value: How to Fix Capitalism and Unleash a New Wave of Growth,â€? WBCSD, “Measuring Impact, Beyond the Bottom Line: Harvard Business Review, January 2011. Why Measuring Impacts on Society Makes Business Sense,â€? March 2008. Porter, Michael and Mark Kramer, “Philanthropy’s New Agenda: Creating Value,â€? Harvard Business Review, November 1999. 51 We thank Nestlé, Intel, InterContinental Hotels Group, and the Rockefeller Foundation for supporting this important research and for serving as founding members of FSG's Shared Value Initiative, a ï¬?eld-building platform designed to drive adoption and improve implementation of shared value strategies. The Initiative provides the research, tools, and interactive forums necessary to build a strong and engaged community around shared value knowledge and practice. The Shared Value Initiative's strategy is guided by a Leadership Council, comprised of a select group of leading shared value organizations. For more information on the Shared Value Initiative, please contact: Justin Bakule, Executive Director of the Shared Value Initiative at justin.bakule@fsg.org or visit www.fsg.org/sharedvalue. LEADERSHIP COUNCIL Nestlé | Rockefeller Foundation | Verizon SUPPORTERS Arauco | Intel | InterContinental Hotels Group AFFILIATES BD | The Coca-Cola Company | Eli Lilly | Medtronic | Western Union 52 FSG is a nonproï¬?t consulting ï¬?rm specializing in strategy, evaluation, and research, founded in 2000 as Foundation Strategy Group. Today, FSG works across sectors in every region of the world—partnering with corporations, foundations, nonproï¬?ts, and governments to develop more effective solutions to the world’s most challenging issues. www.fsg.org Boston | Geneva | Mumbai | San Francisco | Seattle | Washington 53 APPENDIX II ƌĞĂƟŶÅ?^ŚĂƌĞĚsĂůƵĞÅ?Ŷ/ŶĚÅ?Ä‚Í—Ä‚Æ?Äž^ƚƵĚÅ?ÄžÆ?    ”‡ƒ–‹Â?‰Šƒ”‡†ƒŽ—‡‹Â? Â?†‹ƒǣƒ•‡–—†‹‡• ”‡’ƒ”‡†ˆ‘”Šƒ”‡†ƒŽ—‡‘”Â?•Š‘’ƒ”–‹…‹’ƒÂ?–• ‘˜‡Â?„‡”ǡ͸Ͷͷ͸         ͳ  54 Shared Value Case Studies November 2012 Introduction India has experienced immense economic growth in recent years. However, this growth has been far from inclusive. Despite the work of many stakeholders, including the public sector, private sector, non-profit organizations, multilaterals, and the others, India continues to face enormous social, economic, and environmental challenges at scale. It is clear that a fundamentally different approach to solving social problems is required in order to provide innovative, sustainable, and scalable solutions. Companies in India are uniquely positioned to play an active role to catalyze social progress at scale. Companies increasingly recognize that addressing the needs of poor or vulnerable population can bring new opportunities for business to increase their competitive advantage – this is the concept of shared value. Shared value is about creating new economic and social value for business and society. It offers a different worldview from corporate philanthropy; rather than considering how a portion of their profits can be used to address social issues, shared value business leaders ask how they can use their business strategies to find solutions to social problems that, if successful, will simultaneously advance their economic interests. Companies can create shared value in three different ways: 1. Reconceiving products and markets: Companies can meet social needs by better serving existing markets, accessing new ones, or developing innovative products that serve social needs 2. Redefining productivity in the value chain: Companies can improve the quality, quantity, cost, and reliability of inputs production processes, and distribution systems, while simultaneously acting as a steward for essential natural resources and driving economic and social development 3. Enabling local cluster development: Companies do not operate in isolation from their surroundings. To compete and thrive, they need a strong competitive context that includes reliable local suppliers, functioning infrastructure of roads and telecommunications, access to talent, and an effective and predictable legal system Creating shared value requires companies to intentionally and directly link business success to social impact. Only by linking business and social goals will shared value strategies be measurable and sustainable; social implications cannot be an afterthought. Companies within the same sector are likely to share similar business goals and social challenges. For this reason, the rigorous analysis of the intersection of social issues and business strategy may identify similar opportunities to generate new sources of revenue or reduce cost across players within an industry. As with the development of traditional business strategies, the context in which a company operates drives strategic choices. However, when filtered by the unique corporate assets available to address these opportunities, distinct shared value strategies emerge. The operating context of a specific industry or geography paired with the unique assets a company can bring to solve a social problem begins the formation of a shared value strategy. The following case studies illustrate the ways companies can create shared value in the healthcare, consumer goods, manufacturing, extractive and IT/telecom industries. The appendix also includes a list of additional resources such as case studies from other industries. 55 Shared Value Case Studies November 2012 Healthcare Healthcare represents an industry closely linked to social wellbeing yet inherently has huge divides between developed and developing countries. Several barriers exist to healthcare companies delivering services to low-income populations including lack of health-seeking behavior, limited market information, limited ability of patients to pay, inefficient regulation, and inadequate health systems. However, these barriers also represent market opportunities for companies that find innovative ways to overcome them. Healthcare companies can create shared value in three ways: 1. Developing new products or refining existing products to respond to local health needs 2. Innovating within distribution channels to ensure that quality products reach underserved patients 3. Investing resources to create health-seeking behavior among poor or vulnerable populations The following two case studies illustrate these opportunities for creating shared value in healthcare. Ç£‘˜ƒ”–‹•‹Â? Â?†‹ƒǦ”‘‰›ƒƒ”‹˜ƒ”È‹ÈŒ Novartis is a Swiss pharmaceutical company with annual global revenue of USD$51B. Their core business includes pharmaceuticals, vaccines, consumer goods, eye care, and animal health.  Situation: About 75 percent of health infrastructure, medical workforce, and other health resources in India are concentrated in urban areas where only 27 percent of the population resides. Infectious diseases such as diarrhea, typhoid, measles, malaria, tuberculosis, whooping cough, pneumonia, and reproductive tract infections are significant causes of morbidity, especially in rural areas. Leaders at Novartis saw an opportunity in the lack of health care services available to rural Indian and grew determined to find a solution.  Approach: in 2007, Novartis launched Arogya Parivar to increase access to medicine in rural India. The program’s portfolio includes a range of health products, from low-cost generics to branded drugs that are repackaged into smaller doses to make purchases more affordable for patients with low and irregular incomes. Novartis also established new distribution networks to facilitate product delivery to remote locations, developing a network of local sales team to uncover market insights and gain consumer trust. The company found partnering with the Indian health system to be particularly critical to getting products into patients’ hands. To bridge the infrastructure gap in the short term, Arogya Parivar organized frequent health camps to bring physicians into rural areas. In addition to expanded health care access, these camps provided an additional sales channel for Arogya Parivar’s portfolio of products (doctors retain a choice of medicines and are not limited to Novartis products), as well as a small source of income for the doctors who participate. Â?’Ž‡Â?‡Â?–ƒ–‹‘Â?‡••‘Â?‡ƒ”Â?‡†ǣ Novartis orchestrated many stakeholders and partners to effectively execute the AP model. It leveraged its generics manufacturer, Sandoz, to produce generic drugs at low cost and smaller package sizes to be more appropriate for rural patients. The company also partnered closely with village leaders and local NGOs to identify, train, and employ local “health educatorsâ€? to educate patients about the benefits of healthy lifestyles to raise awareness about the benefits of health- seeking behavior (often a barrier in the Indian context) while increasing demand for effective medicine. Finally, it relied on sales teams who understood local cultures and language to gain trust among patients. ͵ 56 Shared Value Case Studies November 2012 “[Aogya Parivar] empowers villagers, provides employment, and improves rural healthcare. Ultimately, it will dramatically enhance the well-being of families, as main income earners benefit from chronic disease prevention and treatment.â€? - 1 Incanus Public Affairs (a global public relations and communications firm  Results: As of 2011, the Arogya Parivar product portfolio offered 79 products in 12 therapeutic areas, and Novartis planned to add more health product to its line. From 2007 to 2011, the program doubled in size, improving access to health education and medicine for 42 million patients in 28,000 villages. Rural patients, who might otherwise have delayed or discontinued treatment, received access to complete treatment at an affordable, fixed price through a st dependable network of health service providers. Arogya Parivar broke even in its 31 month of operations and is not generating profits. Novartis’s leaders are planning to expand the program to cover 100 million rural Indian who earn $1 to $5 per day and are considering expanding into other developing countries as well. Â?’Ž‡Â?‡Â?–ƒ–‹‘Â?‡••‘Â?‡ƒ”Â?‡†ǣ Arogya Parivar is run as a separate, social business group which allows it to innovate with respect to shared value. Free from the usual constraints of short-term returns that make some customer segments unattractive, AP experimented with different business models and incentive structures in order to meet local demands in a modestly profitable way. Source: “Shared Value in Emerging Markets.â€? FSG and the Rockefeller Foundation. September 2012. Source: “Measuring Shared Value.â€? FSG. October 2012. Source: “Creating Shared Value in Indiaâ€?. FSG. October 2011. Ç£‘˜‘‘”†‹•Â?Š‹Â?ƒ Novo Nordisk is a Danish company with annual sales of USD$11B and more than 88 years of global leadership in diabetes care.  Situation: The increase in GDP per capita in China has unfortunately brought about an increase in lifestyle-related chronic disease. In 2010, the incidence rate for Type 2 diabetes was estimated at 40 million people and experts expected that number to double over the following 15 years. Novo Nordisk suspected that patient diagnoses were lower in second- and third-tier cities, where sales volumes had traditionally been much lower.  Approach: Careful market research confirmed that inaccurate diagnoses were indeed a problem in those cities. One hypothesis suggested that continuing education was more readily available in bigger cities due to higher concentrations of pharmaceutical representatives. Novo Nordisk thus invested in improving diabetes awareness among local Chinese communities (including patients, physicians, and public officials). The company partnered with the World Diabetes Foundation and the Chinese Ministry of Health to develop and update national standard treatment guidelines for diabetes care. Novo Nordisk also engaged in a physician training program to improve diagnosis rates and conducted a broad-based behavior change campaign to increase consumer awareness, encourage health-seeking behaviors, and improve patient management. In addition to investing in human capital in the Chinese market, Novo also invested in a local R&D facility in order to capitalize on Chinese market knowledge to develop more locally-appropriate insulin products. Further, a local production facility allowed Novo production efficiency and responsiveness to market needs.  1 “Novartis India’s Arogya Parivar Reaches 42 Million,â€? Incanus Public Affairs. Accessed August 3, 2011, at http://www.incanuspublicaffairs.com/publications/novartis-india%E2%80%99s-arogya-parivar-reaches-42-million. Ͷ 57 Shared Value Case Studies November 2012 Â?’Ž‡Â?‡Â?–ƒ–‹‘Â?‡••‘Â?‡ƒ”Â?‡†ǣ Many of Novo’s shared value activities focused on cluster building to increase diabetes awareness and ultimately the diabetes market, which may concern some companies that competitors would later enter the market and capitalize on this pre-competitive market building effort. However, Novo’s case illustrates the power of first mover advantage translating into market leadership.  Results: Today, Novo Nordisk’s share of the Chinese insulin market exceeds 60 percent. The disproportionate driver of the company’s tremendous growth has been new patients who otherwise may have remained unaware of their treatment needs and options. The company also discovered that training physicians in small cities had a 9 percent greater effect on treatment management than training their counterparts in larger cities. Novo Nordisk has estimated the value of better disease management in diabetic patients for both its company and Chinese society. The company calculates that improving patient control over diabetes – through better diagnosis, appropriate treatment, and ongoing disease management – creates a value to Chinese society of $2,350 per patient. Novo Nordisk has also determined that increased sales are worth approximately $3,400 per patient to the company. The company estimates that if the nearly 16 million people with diabetes in large urban centers are able to exercise greater control over their disease, the resulting value could be worth $37 billion to China. And if Novo Nordisk maintains a 60 percent market share, the net present value to its business of such an improvement could reach as high as $30 billion. In terms of social impact, Novo’s “Blueprint for Chinaâ€? shared value strategy has resulted in an estimated 80 percent improvement in total patient life years due to improved products and services. Surveys also indicate significantly improved diabetes control, which results in lower healthcare system costs and longer, healthier lives for diabetics. Â?’Ž‡Â?‡Â?–ƒ–‹‘Â?‡••‘Â?‡ƒ”Â?‡†ǣ By measuring the impact of physician training on patient management across geographies, Novo was able to re-allocate funds to those areas that had the greatest impact in terms of improved patient outcomes and increased sales. Only by linking social outcomes with business performance can companies continue to unlock value through shared value strategies. Source: “Shared Value in Emerging Markets.â€? FSG and the Rockefeller Foundation. September 2012. Source: “Measuring Shared Value.â€? FSG. October 2012. Í· 58 Shared Value Case Studies November 2012 Consumer Goods Consumer goods, especially those in the food and beverage category, represent some of the most relevant industries to address the needs of the poor. Malnourishment alone represents one of the world’s largest problems that clearly intersects with business strategy. Consumer goods companies also represent large employers of citizens from poorer populations and can contribute to the skills development of these populations. Consumer goods companies also can immensely impact the value chain through innovative distribution models, supplier knowledge building, and infrastructure improvement. The points of leverage to create shared value in consumer goods, specifically with respect to food, beverage, and agriculture include:  Addressing nutritional deficiency through additives to low-cost, staple products  Improving smallholder farmers’ access to information, inputs, and technical assistance to create a more reliable and higher-quality supply of inputs  Supporting infrastructure development, increased access to financing, and improved knowledge/skills of consumers, retailers, and suppliers to enhance competitive context The following two case studies illustrate these opportunities for creating shared value in consumer goods. Ç£”‹–ƒÂ?Â?‹ƒǯ• ‹‰‡”‹•…—‹–• Britannia is an Indian manufacturer of biscuits and other food products with annual turnover of USD$805M.  Situation: estimates indicate that nearly two out of every three Indian children suffer from anemia, diminishing their energy and limiting their ability to focus in school. Because iron deficiency is not a visible ailment, parents and educators are often unaware of the problem, enabling it to persist undiagnosed and untreated. Malnutrition, along with vitamin and mineral deficiencies, can become costly to India – leading to healthcare costs of 2-3% of GDP and costs 2 of low productivity of 3% of GDP .  Shared value approach: In response to this health issue, Britannia created its Tiger product line. Tiger biscuits are low-cost, designed to appeal to children, and fortified with iron. Britannia complements the product line with advertising and public health campaigns to improve awareness and increase the social and business performance of Tiger products. Rural villages often lack access to mass media, so Britannia supports local efforts to educate rural populations on childhood iron deficiency. Additionally, Britannia’s mass-media advertising is more weighted toward issue awareness than brand promotion. Â?’Ž‡Â?‡Â?–ƒ–‹‘Â?‡••‘Â?‡ƒ”Â?‡†ǣ Britannia conducted the R&D and initial launch of Tiger fortified biscuits through a partnership model with the Naandi Foundation and the Global Alliance for Improved Nutrition (GAIN). These organizations partnered together to first bring iron-fortified biscuits to 150,000 children in the state of Andhra Pradesh through Naandi’s midday meal program. The pilot required sixteen attempts before 3 achieving fortification without losing product taste.  2 GAIN Website, www.gainhealth.org/economic-costs 3 Britannia, Naandi and GAIN: A Public-Private Partnership for Delivering Nutrition through Fortification in India http://www.naandi.org/strategy_papers/PDfs/Naandi%20Case.pdf ͸ 59 Shared Value Case Studies November 2012  Results: Tiger has been Britannia’s largest product line since 1997, and it is India’s second most popular biscuit brand. Although Tiger products yield lower margins than other Britannia offerings, they are profitable and high volume. Britannia accepts lower margins to achieve higher volume, increase access to Tiger products, and enhance its market penetration. During a 2009 pilot study in North Delhi, Britannia and the Navjyoti India Foundation found that consumption of fortified Tiger biscuits, in conjunction with treatment for hookworms, raised the iron levels more of more than 300 anemic children by an average of more than 25 percent in 90 days. “For us, corporate social responsibility is best achieved through our business, not as a separate activity. It has to be embedded in what we do, what is the sustainable modelâ€? – Vinita Bali, Britannia CEO Source: “Shared Value in Emerging Markets.â€? FSG and the Rockefeller Foundation. September 2012. Ç£Š‡‘…ƒǦ‘Žƒ‘Â?’ƒÂ?›ǯ•‘Ž‡–‹˜‘‹Â?”ƒœ‹Ž The global beverage company has invested heavily in emerging markets such as India, China, and Brazil in recent years, oftentimes using different approaches to these markets as compared to developing countries to focus on serving low-income customers in order to unlock much of the market’s unrealized value.  Situation: with a strong brand in Brazil, Coca-Cola wanted to find ways to better serve its low- income customers. It conducted a six-month study in 2008 that revealed the greatest need among this customer segment was employability and skills development. While primary education was provided by the Government, young adults faced challenges with employability due to lack of relevant skills and employment opportunities. At the same time, Coca-Cola faced a business constraint among these customers: the retailers within the Brazilian favelas, poor areas on the outskirts of major cities, were highly ineffective. Coca-Cola recognized that by improving the skills of retailers in these areas, it could grow its volume while promoting economic development and employment in some of the poorest areas of Brazil.  Shared value approach: to improve the skills and employability of the young adults in favelas, Coca-Cola sought to use the company’s value chain. The Coletivo program was developed to improve the level of customer service offered by retailers in favelas and prepare youth living in these Brazilian slums to succeed in entry-level jobs. In partnership with local NGOs, the program enrolls youth in courses teaching retailing techniques and includes modules on behavioral training. Students of the program provide consulting to retailers in their local communities, increasing sales of fast-moving consumer goods (including, but not limited to Coca-Cola products). Upon completion of the Coletivo program, students are placed in entry-level jobs outside of the retail sector. Coca-Cola now operates more than 120 Coletivos in approximately 69 Brazilian cities and trains more than 50,000 people per year.  Results: Coca-Cola carefully measures both social and business value created by the program. The program currently operates 135 Coletivos, each with an average of 500 students, and the goal is to run 170 by the end of 2012. Coca-Cola currently monitors: o The number of youth participating o The number of retailers involved o The performance of retailers over time o The total costs of running the effort to ensure effectiveness and efficiency ͹ 60 Shared Value Case Studies November 2012 In addition to these output measures, Coca-Cola also measures four key indicators: o Youth job placement o Youth self-esteem o Company sales o Brand connection In terms of job placement, initial results show that approximately 30 percent of the youth trained immediately land a job with Coca-Cola or one of its partners, and an additional 10 percent set up their own business with microcredit support from the company. Graduates of the program increase their family income by an average of approximately 50 percent and demonstrate greater self-esteem and optimism than their peers. From a business perspective, an investment in a Coletivo site becomes profitable within two years. Additionally, pilot tests and evaluations have shown that Coca-Cola brand relevance in areas targeted by the Coletivo program was more than twice as high as in control areas, leading to revenue growth. Coca-Cola believes that the program also helps improve its long-term competitive positioning. Â?’Ž‡Â?‡Â?–ƒ–‹‘Â?‡••‘Â?‡ƒ”Â?‡†ǣ Coca-Cola’s rigorous measurement and evaluation of the Coletivo program has allowed it to adjust the program for greater impact. For example, the first year of the training sessions focused heavily on the technical aspects of retailing, such as merchandising or stock management. Based on measurement data, however, the managers realized that the students faced self-esteem challenges that prevented them from finding a job and being effective workers. In response, Coca-Cola revised the content of the training program to put more emphasis on soft skills, including leadership and presence. Source: “Shared Value in Emerging Markets.â€? FSG and the Rockefeller Foundation. September 2012. Source: “Measuring Shared Value.â€? FSG. October 2012. ͺ 61 Shared Value Case Studies November 2012 Manufacturing Manufacturing is a driving sector of most economies – both in terms of GDP creation and, more importantly, in terms of employment. For India specifically, the manufacturing sector holds great potential for growth both in absolute terms and in its sophistication. With increased investment and innovation, more highly skilled jobs will be in demand and finding skilled labor will become a point of competitive advantage for many companies. Further, as the sustainable development agenda moves forward, companies will have to find new ways to manufacture in more sustainable ways that bring less impact to the environment. Companies in manufacturing industries can create shared value along the following points of leverage: 1. Developing the technical and life skills among low-income, unskilled populations and equipping such people to be employed by the industry 2. Cultivating local supplier networks to support operations in developing nations 3. Innovating in the value chain to reduce carbon emissions from operations The following two case studies illustrate these opportunities for creating shared value in manufacturing. Ç£ƒ–ƒ‘–‘”• Tata Motors Limited is India’s largest automobile company, with annual consolidated revenues of USD$32B (2011-12). It is the market leader in the commercial vehicle segments and represents the fourth largest truck and bus manufacturer worldwide.  Situation: Similar to many industries across India, the trucking industry faces immense challenges in finding and retaining reliable, skilled labor. The National Skills Development Corporation (NSDC) predicts the supply-demand gap to worsen in coming years: while there are currently 20 lakh vehicles sitting idle due to lack of drivers, the trucking industry will demand over 4 50 lakh drivers from 2010-20 to fulfill the requirements of the industry’s growth . Today, all the 5 Industrial Training Institutes (ITIs) across India only produce 20,000 drivers per year. In addition to facing a supply shortage, the industry also faces challenges with safety. Undertrained drivers can lead to accidents, which are oftentimes fatal: India has the highest road fatalities in the world with 120,000 deaths annually. Seventy-eight percent of these deaths occur 6 due to driver error, with the largest number of fatalities (24%) involving commercial trucks . Tata Motors identified the supply of trained drivers as a vital link in their value chain as their customers’ future growth will be limited by the ability to find qualified drivers and thus will not purchase additional trucks. One estimate by Tata indicates that the driver shortage could slow 7 growth in commercial vehicle sales from 25% to 20% - at a time when expanded, improved highways systems should bring booming growth to the industry. Further, improving the quality and safety of drivers will positively impact society by reducing road accidents and fatalities. To meet the need for better trained drivers, Tata set the aggressive target to train 3.4 million drivers in ten years.  Approach: In order to improve the safety of truck drivers and initiate roadside safety awareness across India, Tata designed and implemented a fee-based driver training course. This initiative  ͶDz –ǯ•”—…Â?”‹˜‡”•ǯ—”Â?–‘„‡ƒÂ?’‡”‡†ǤdzŠ‡ ‹Â?†—•—•‹Â?॥‹Â?‡ǤͳͶ…–‘„‡”ʹͲͳʹǤ Š––’ǣȀȀ™™™Ǥ–Š‡Š‹Â?†—„—•‹Â?‡••Ž‹Â?‡Ǥ…‘Â?Ȁ‹Â?†—•–”›ǦƒÂ?†Ǧ‡…‘Â?‘Â?›ȀŽ‘‰‹•–‹…•Ȁ‹–•Ǧ–”—…Â?Ǧ†”‹˜‡”•Ǧ–—”Â?Ǧ–‘Ǧ„‡Ǧ’ƒÂ?’‡”‡†Ȁƒ”–‹…Ž‡͵ͻͻͶ͸ͳ͵Ǥ‡…‡ Í·Dzƒ–ƒ‘–‘”•–‘”ƒ‹Â?”—…Â?”‹˜‡”•‹Â?ƒŽ‡•—•ŠǤdzƒ‹Ž›થƒÂ?†Â?ƒŽ›•‹•Ǥ͵—‰—•–ʹͲͳͳǤ Š––’ǣȀȀ™™™Ǥ†Â?ƒ‹Â?†‹ƒǤ…‘Â?È€Â?‘Â?‡›Ȁ”‡’‘”–̴–ƒ–ƒǦÂ?‘–‘”•Ǧ–‘Ǧ–”ƒ‹Â?Ǧ–”—…Â?Ǧ†”‹˜‡”•Ǧ‹Â?Ǧ•ƒŽ‡•Ǧ’—•Š̴ͳͷ͹ʹͲͶʹ ͸Ž—Â?Ç¡Â?†”‡ƒ•ǤDz‡˜‡Ž‘’Â?‡Â?–‘ˆ—•–ƒ‹Â?ƒ„Ž‡—•‹Â?॥‘†‡Žˆ‘””—…Â?”‹˜‡””ƒ‹Â?‹Â?‰Ǥ Š––’ǣȀȀ™™™Ǥ‹Â?†‹ƒǤŒ„•Ǥ…ƒÂ?Ǥƒ…Ǥ—Â?Ȁ‡Â?‰ƒ‰‡Â?‡Â?–Ȁ–ƒ–ƒ‹•‡•Ȁ†‘™Â?Ž‘ƒ†•Ȁ”‡’‘”–̴„Ž—Â?Ǥ’†ˆ ͹DzŠ‘”–ƒ‰‡‘ˆ”—…Â?”‹˜‡”•ƒ›—”Â?’‡‡†—Â?Â’ˆ‘”…‘Â?‘Â?›ǤdzŠ‡‹Â?–ǤʹͶ ‡„”—ƒ”›ʹͲͳͳǤ Š––’ǣȀȀ™™™ǤŽ‹˜‡Â?‹Â?–Ǥ…‘Â?È€‘Ž‹–‹…•ȀͲͳŽ‘Â?›ƒ••Â?–ͻͻ„œšͲͺÈ€Š‘”–ƒ‰‡Ǧ‘ˆǦ–”—…Â?Ǧ†”‹˜‡”•ǦÂ?ƒ›Ǧ–—”Â?Ǧ•’‡‡†Ǧ„—Â?’Ǧˆ‘”Ǧ‡…‘Â?‘Â?›ǤŠ–Â?ÂŽ Í» 62 Shared Value Case Studies November 2012 was the first CSR program that was closely aligned with Tata’s business of manufacturing trucks and built the cluster surrounding the industry of truck manufacturing, shipping, and logistics. The course was designed as part-time across 45 days’ time to allow trainees to maintain employment during training. Tata developed the course content and deployed it in a train the trainer format. In order to scale and achieve the 3.4 million trainees in a decade, Tata partnered with its dealers, the government, and non-profits to implement the program across co-branded training centers. This has worked particularly well with the 21 government ITIs Tata adopted and provided trainer trainings to improve the program quality; the company has targeted an additional 100 ITIs for adoption in the coming years. Â?’Ž‡Â?‡Â?–ƒ–‹‘Â?‡••‘Â?‡ƒ”Â?‡†ǣ One of the private sector’s largest contributions to skills development is relevant, quality training program content. However, private companies oftentimes lack the resources to scale quality programs on their own. By partnering with the government and NGOs to enhance the program content of existing ITIs, Tata successfully leveraged its core competency of relevant content development and achieved scale by building on the existing ITI infrastructure.  Results: Tata has trained over 500 students in driving and motor mechanics, with capacity being expanded to handle 25,000 students from 2012-2015. Tata’s model illustrates that in order to solve workforce development issues at a national level, efforts must be jointly led by the private sector, government, and NGOs. By providing funding and its industry knowledge to develop a high-quality curriculum, Tata is actively building upon the foundation of existing ITIs to improve the quality and scale of their offerings. As skills shortages are faced across many industries in India, this public-private partnership model for training is becoming a win-win solution: industry gets appropriately trained workers and many defunct ITI centers are successfully turned around or further scaled up.   ͳͲ  63 Shared Value Case Studies November 2012 Ç£Š‡—†‹ ”‘—’ The Audi Group represents one of the world’s leading carmakers in the premium and supercar segment with EUR44 billion in annual revenues.  Situation: with rising petrol prices and growing environmental concerns, the automobile industry has felt immense pressure to create eco-friendly cars, reducing the future environmental impact of driving. In order to achieve reduced emissions, automobile manufacturers are innovating with alternative fuels including electricity, hydrogen, and methane gas. However, while much of the industry’s focus remains on creating energy-efficient products, there is also greater shared value to be realized by improving the energy efficiency of the car manufacturing process. Audi is going beyond eco-friendly product innovation to reinvent the manufacturing value chain to only use renewable energy.  Approach: in building a car that is carbon-neutral, Audi is not stopping at defining carbon neutrality as merely not creating any new net emissions when driven. Rather, Audi believes that for the car to be truly carbon neutral it needs to be manufactured and run by using only renewable energy sources. Wind energy is the most cost effective among renewable sources and Germany has been a pioneer in building the infrastructure required to generate wind power. In fact, in any given year, Germany has a net excess of wind energy – there is no problem with supply. The challenge lies in wind power’s unpredictability – while one minute of strong winds can generate enough power for 300 KM of CO2-free travel in a vehicle such as Audi’s A1-etron electr ic car, that wind is not continuously available. This unreliability could be overcome if there was a way by which this excess energy could be captured and stored for non-windy days. Currently when there is not wind power supply, the gap is filled by traditional sources of energy. Audi viewed this obstacle in the value chain as an opportunity and is spearheading efforts to develop technology that will capture and store excess wind energy to be later used in the production process and to fuel natural gas powered vehicles. Branded the Audi “e-gas projectâ€?, the process will ultimately synthesize a chain of sustainable fuels by 2013, with end products of hydrogen and the synthetic Audi e-gas. This means that alternative fuels - such as hydrogen for fuel cell vehicles, e-gas for natural gas vehicles, and electricity for electric models - will be created from renewable sources and they will be able to fuel our cars with the CO2 that would have otherwise ended up in the atmosphere. This is being made possible by storing e-gas on the largest available energy-storage system: the public gas network. In other words, energy can be moved from the electricity power grid to the public gas network, held there for several months, and then released from the gas network to the power grid at any time. While this process does not clean up existing problems in the environment, it creates great strides towards a better tomorrow. The process of harnessing wind energy, storing it on the power grid, extracting H2 and finally generating e-gas may sound simple but the underlying technology and process innovation required to accomplish this feat are extremely complex. While pioneering this technology has direct benefit to Audi, it will also benefit Germany (where it is being piloted), and ultimately the entire world, as other industries look to more effectively use renewable energy. “Our technology has the potential to give new direction to the discussion on expanding renewable sources of energy. We ourselves are taking the initiative and are complementing electric mobility with an equally eco-friendly concept for long distances.â€? —Michael Dick, Member of the Board of Management for Technical Development ͳͳ 64 Shared Value Case Studies November 2012 Figure 1. The Audi e-gas Project  Results: Following extensive research, Audi is now implementing this project. Beginning in January 2011, a testing facility was launched. Following these initial tests, Audi partnered with several others to build a multi-million euro e-gas facility. The Audi e-gas project can easily be replicated in any country with an existing natural-gas network. In addition to this value chain innovation and cluster building effort, Audi will also continue to innovate with respect to its products and begin production in 2013 of the Audi A3 TCNG with an engine using Audi's TFSI technology that can operate on e-gas, CNG, or conventional gasoline when neither alternative fuel is available. The development of this novel technology is still in very early stages, so only time will tell how successful this innovation will become. But it is energizing to see that a car company — which in the past could have easily said that helping to solve Germany's energy storage problems was not part of its mandate — has decided to becom e an example of the leadership the private sector can bring in energy innovation. One thing is clear: while Audi may be pioneering this effort, they cannot solve the problem of what our future sources of energy might look like in isolation. The company will need partners and co-pioneers from the auto industry, government, sustainability think-tanks, social enterprises, and so on to bring this innovation to full fruition. Sources: “Audi T3 TCNG e-gas Project.â€? YouTube. 13 May 2011. http://www.youtube.com/watch?v=q7LMjsFK_Y8 “Create Shared Value with a Trampoline Approach.â€? Harvard Business Review Blog. 16 November 2011. http://blogs.hbr.org/cs/2011/11/create_shared_value_with_a_trampoline_approach.html “Audi e-gas Project Combines Hydrogen CO2â€?. Greencar. 15 May 2011. http://www.greencar.com/articles/audi-e-gas-project- combines-hydrogen-co2.php “Green Car Congress: Audi Unveils e-gas Project: synthetic methane from the methanation of green hydrogen.â€? Green Car Congress.13 May 2011. http://www.greencarcongress.com/2011/05/egas-20110513.html ͳʹ 65 Shared Value Case Studies November 2012 Extractives Extractives companies add tremendous value to the world economy, producing essential inputs for products that improve the lives of billions. The sector’s health is essential for the development of resource-rich nations where mining dominates the local economy. Extractives companies also offer large sources of employment, oftentimes in regions without much employment opportunity. However, these companies also face many challenges such as labor relations, negative environmental impacts, and other social ills. While many extractives companies have tried to address social issues through charitable giving or risk mitigation measures, oftentimes these programs end up being short-sighted and don’t achieve the long-lasting impact necessary. Extractives companies can create shared value along the following points of leverage: 1. Addressing social needs in communities surrounding extraction sites to enhance the competitive context of these geographies 2. Cultivating local workforces and supplier networks to support operations in developing nations 3. Working with suppliers to maximize the output of renewable natural resources 4. Using byproducts from production to expand the scope of the business The following two case studies illustrate these opportunities for creating shared value in extractives. Ç£••ƒ”–‡‡Ž…ƒ†‡Â?› Essar Steel is a fully-integrated carbon steel manufacturer, handling the steel process from iron ore to ready-to-market products. The final products are used in industries such as automotive, white goods, construction, engineering, and shipbuilding.  Situation: The Ministry of Mines estimates there will be a shortage of 1600 professionals in geosciences and 300 in mining engineering for 2009-2017 - a factor that will surely hinder mining GDP growth. The industry must also ensure ample training capacity; current estimates indicate that the number of seats in engineering programs must increase 3x to meet 2025 demand. Essar Steel represents just one of the many private sector companies concerned about this lack of supply of well-trained youth, especially in the more impoverished states where extractive operations often take place.  Approach: In 2010 Essar Steel set up a customized training facility to train local youth – the Essar Steel Academy. The two-year training program for Diploma Engineer Trainees (DETs) enhances technical capabilities, teaches communication skills, and fosters leadership development. The program mixes classroom teaching with on-the-job training, site visits, and guest lectures from Essar executives to ensure well-rounded professional development; the mix of plant training vs. classroom training moves from 20% plant / 80% classroom to the inverse (80% plant, 20% classroom) across the students’ four semesters in order to increasingly expose students to hands-on training opportunities. Students are recruited and trained across engineering specializations including: mechanical, electrical, civil, and metallurgy.  Results: The first batch of 174 DETs graduated in 2012 and will be absorbed into the business, ensuring that well-paid jobs are staffed locally and that Essar has the high-quality employees it needs. Essar plans to expand the program in the future; models for expansion are currently being explored and vetted. Source: Essar Academy for Steel Overview. http://www.essarsteel.com/upload/pdf/Essar_academy_for_Steel.pdf ͳ͵ 66 Shared Value Case Studies November 2012 Ç£ƒŽƒŽƒ —„„‡”‘”’‘”ƒ–‹‘Â?‹Â?‹„‡”‹ƒ Salala is Liberia’s fourth-largest rubber producer. In addition to its company-owned 8,500 hectares of land, it also sources rubber from private farms and smallholders to supplement its own production capabilities.  Situation: Salala, a Liberian company that grows and processes rubber, received a $10 million loan from the International Finance Corporation (IFC) to expand its processing capacity to ten times its current self-supplied capacity. While this expansion provided Salala with an opportunity to expand its business, it also made the company more dependent on third-party suppliers of raw materials.  Approach: To ensure access to a reliable supply of rubber, Salala partnered with smallholder rubber farmers in Liberia, providing them with technical assistance and inputs to improve the quality and quantity of their rubber output. For example, Salala provides smallholders with 1,000 tree rubber stumps for every 20 metric tons of raw rubber they sell to the company. They also provide critical inputs such as fertilizer, cutting knives, formic acid, rubber tapping containers, wires, and even rice for distribution to laborers – all at cost. To improve the skills of the farmers, Salala has also established a rubber tapping school to help improve the quality of their farming practices. The program teaches farmers how to protect their rubber from external contamination, how and when to tap rubber from a tree for the first time, and how to organize tapping activities on a farm. Salala also provides these farmers with credit to help them expand their operations – the repayment is deducted from the income they receive when selling raw rubber to Salala.  Results: Salala’s efforts provide financial support to an estimated 1,800 smallholder farmers, 4,000 farm workers, and more than 20,000 dependents and family members. By working with smallholder rubber farmers, Salala improves the supply of its most critical raw material while enabling smallholder farmers to increase their output and, as a result, their incomes. Source: “Inclusive Business Models: Guide to the inclusive business models in IFC’s portfolioâ€?. International Finance Corporation. 2011. ͳͶ 67 Shared Value Case Studies November 2012 IT/ Telecom Technology can undoubtedly be a powerful tool for advancing social conditions around the world. It can help society unlock information, communicate, and build social relationships; technology is also often the foundation of innovations in health, education, economic development, and the environment. As such, shared value can offer companies in the sector a powerful way to imbue social purpose into core business activities. In this way, tech companies inspire and engage employees by enabling them to see their work as a means to achieving greater good in the world. In addition, by applying their core technological assets and expertise to solving social problems, tech companies can gain insights into new applications for their products and services that in turn can unleash new sources of business growth and lead to more sustained competitive advantage. Technology companies can create shared value in the following ways: 1. Creating technology solutions for good, such as specialized data management systems that improve efficiencies in agriculture 2. Building capacity of social sector actors and small businesses 3. Redefining productivity in the value chain to lead technology-enabled solutions to environmental challenges 4. Strengthening cluster conditions by training the technology workforce and bridging the digital divide The following two examples highlight shared value in the IT and telecom industries Ç£‹•…‘ǯ•‡–™‘”Â?‹Â?‰…ƒ†‡Â?› Cisco a US-based multinational that designs, manufactures, and sells networking equipment (both hardware and software).  Situation: Finding qualified staff is a challenge faced by many companies and sectors across the st world. Local markets also need talent that is trained in 21 century skills in order to manage the use, integration and adoption of technology; it is a matter of competitiveness and development. These local markets, especially those in developing countries, require investment in education and workforce development beyond scholarships and one-off programs. Seeing this need and opportunity, Cisco developed the Networking Academy to train the next generation of IT managers.  Approach: Cisco began its Networking Academy in 1997 and has now grown the program to have 10,000 academies worldwide. It offers a robust vocational training program in 165 countries to teach students functional IT skills, including how to build, design, and maintain networks, and then further build their career in information technology.  Results: in its 15 years of existence, Cisco’s Networking Academy has trained more than four million students. Students receive certifications that make then more marketable for high- demand, well-paying jobs in the technology sector. More than 70% of the students trained have attained a new job, a better job, increased responsibility or higher salary as a result of the training. Because they are trained on Cisco’s networking systems, a new generation of technology workers are more likely use and buy Cisco’s products and services – an immense business benefit to Cisco in the ever-competitive IT industry.       ͳͷ 68 Shared Value Case Studies November 2012 Ç£ ‹•ƒÂ?ƒÂ?…Šƒ”‹Â?‹–‡†È‹ ÈŒ IKSL is a social enterprise developed via powerful partnerships and use of technology to help farmers overcome challenges they face in accessing accurate and timely information.  Situation: Indian farmers face many challenges and lack of access to accurate and timely agriculture advice is one of the largest. Rajan Sharma hoped to overcome this in 2005 by developing IFFCO Kisan Sanchar Limited (IKSL).  Approach: IKSL sells farmers a “Greenâ€? SIM card and provides them five free daily voice messages that give guidance on agriculture and related issues, including animal husbandry, agro-marketing, dairy farming, poultry, and weather conditions. IKSL also offers a dedicated helpline to answer queries in farmers’ own languages. The creation of IKSL depended on two important partners: the Indian Farmers Fertilizer Cooperative (IFFCO) and telecommunications company Bharti Airtel. IFFCO manages more than 40,000 cooperative societies and a base of 60 million farmers. IFFCO’s network of farmers and high credibility with government institutions helps reduce the costs of distribution and content creation. IKSL also relies on IFFCO’s large network of farmers to sell the co-branded IFFCO/Bharti Green SIM card. The company shares the information that IFFCO provides through Bharti Airtel’s extensive existing mobile network, capitalizing on India’s largest mobile communications company by market share. IKSL’s Green SIMs provide relevant and useful advice to farmers in various agro-climatic zones and have achieved great popularity; in many villages, 100 percent of farmers have adopted the program. Farmers pay a nominal one-time fee of up to Rs. 10 ($.22) to become a mobile customer. They then buy pre-paid top-ups to make calls and send text messages. IKSL’s revenue comes from commissions, paid by Bharti Airtel, on all new Green SIM subscriptions and top-ups made on the SIM. This revenue model allowed IKSL to break even within its first year of operations. In 2010, the venture earned revenues of Rs. 170 crore ($36.9 million, an increase of 110 percent over 2010) and a profit of Rs. 20 crore ($4.3 million).  Results: IKSL has proven to be a win-win venture for all stakeholders. The company documents several success stories every month that suggest crop yield increases between 20 and 60 percent. Most of those increases are the result of tips IKSL provides to farmers on agriculture techniques, disease prevention, and animal husbandry. Moreover, IKSL accounts for nearly half a million of the 3 million new subscribers that Bharti Airtel adds each month, and IFFCO communicates directly with its primary customers (farmers) five times each day, creating an effective marketing channel that the company values highly. Currently, IKSL maintains a presence in all Indian telecom circles except North East and Jammu & Kashmir. Thus far, the company has identified 61 distinct agro-climatic zones based on soil quality, crops grown, and prevailing weather conditions. Looking ahead, IKSL plans to provide more tailored information, such as daily messages related to agriculture and breeding practices for animals and crops selected by the recipient farmer. Over the next three years, IKSL will make its services available to 25 million farmers through 450 agro-climatic zones that provide customized information.  “There is enough space for many players in this industry, but specialization is important. Companies should not presume that the poor will accept any information even if it is free, and need to know that information, unless tailored to suit their specific needs, may not be received well.â€? —Ranjan Sharma Source: Creating Shared Value in India. FSG. October 2011. ͳ͸ 69 Shared Value Case Studies November 2012  ’’‡Â?†‹šǤŠƒ”‡†ƒŽ—‡‡•‘—”…‡• To read more case studies on creating shared value, please visit www.fsg.org. In our knowledge exchange, you will find the following articles helpful to read more about this concept: 1. “Strategy & Society: the Link Between Competitive Advantage and Corporate Social Responsibility.â€? Harvard Business Review. 2006. Š––’ǣȀȀ™™™Ǥˆ•‰Ǥ‘”‰Ȁ–ƒ„‹†ȀͳͻͳȀ”–‹…Ž‡ †ȀͶ͸Ȁ‡ˆƒ—Ž–Ǥƒ•’šǫ•”’—•Šα–”—‡ 2. “Creating Shared Value.â€? Harvard Business Review. January/February 2011. Š––’ǣȀȀ™™™Ǥˆ•‰Ǥ‘”‰Ȁ–ƒ„‹†ȀͳͻͳȀ”–‹…Ž‡ †ȀʹͶͳȀ‡ˆƒ—Ž–Ǥƒ•’šǫ•”’—•Šα–”—‡ 3. “Creating Shared Value in Indiaâ€?. FSG. October 2011. Š––’ǣȀȀ™™™Ǥˆ•‰Ǥ‘”‰Ȁ–ƒ„‹†ȀͳͻͳȀ”–‹…Ž‡ †ȀͶͻ͵Ȁ‡ˆƒ—Ž–Ǥƒ•’šǫ•”’—•Šα–”—‡  4. “Shared Value in Emerging Markets.â€? FSG and the Rockefeller Foundation. September 2012. Š––’ǣȀȀ™™™Ǥˆ•‰Ǥ‘”‰Ȁ–ƒ„‹†ȀͳͻͳȀ”–‹…Ž‡ †Ȁ͹͵͹Ȁ‡ˆƒ—Ž–Ǥƒ•’šǫ•”’—•Šα–”—‡ 5. “Measuring Shared Value: How to Unlock Value by Linking Business and Social Results.â€? FSG. 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