What is shared value?
Shared value is a powerful concept first described by Prof. Michael E. Porter of Harvard Business School and Mark Kramer, co-founder and managing director of FSG, in 2011. It guides companies to think differently about their approach to business, social, and environmental issues.
Shared value is not philanthropy or sustainability, but a new way to achieve economic success.-Michael E. Porter and Mark R. Kramer
The Shared Value Initiative is a global platform for leaders seeking to solve societal challenges through business solutions and help companies fulfill a purpose beyond profits alone. The Shared Value Africa Initiative (SVAI), Africa’s most powerful Shared Value business network, enables businesses to collaborate and form partnerships across borderlines to drive collective social impact at scale. Shared Value Initiative and FSG recently launched a guidebook, The Purpose Playbook, to help companies better understand what it means to become a purpose-led organization. With this approach, businesses transform their corporate purpose into a business strategy that creates a lasting, scalable impact for both society and business.
The pandemic in 2020 woke us up. Businesses are forced to rethink and move away from a shareholder-centric approach to stakeholder engagement. It is not because this is a nice thing to do but because their survival depends on it.
What is Creating Shared Value (CSV)?
Creating Shared Value (CSV) is a business strategy focused on generating profit while simultaneously benefiting society. It diverges from Corporate Social Responsibility (CSR) by integrating social good into core business practices. CSV can be achieved through three approaches:
1) Innovating products and exploring new markets,
2) Enhancing productivity throughout the value chain, and
3) Fostering local community development.
The shift from CSR to CSV is driven by CSR's limited impact on societal change, prompting corporations to embrace a more integrated and impactful approach.
(Image credit: Profitable Good)
ESG vs. Shared Measurement
This article is not designed for external reporting. Instead, the main focus is to provide business and social impact results to internal management.
Due to strong demand, many public and private equity are rushing to rebrand their investment as ESG investments. The traditional ESG assessment approach is based on crowd-sourcing data from publicly available sources applied through a machine learning approach by leading sustainability data feeds like Sustainalytics (Morningstar), TrueValue (aligned to SASB), Refinitiv, etc. Sustainability data feeds often scrap companies' annual reports based on standards such as GRI, SASB, CDP, GRESB, etc. They are also aligned with the UN Global Compact.
While ESG is one marker to communicate sustainability, ESG scores cannot be equated to impact. Many asset managers are trying to build a proprietary framework to align ESG with popular impact accounting frameworks such as sustainable development goals and impact management projects.
These proprietary models rushing to align sustainability to social impact will likely create a flawed model and mislead investors.
The most effective way to create social impact is through a stakeholder-driven approach led by impact management projects. The impact ecosystem is illustrated in the diagram below, which shows the relationships between various stakeholders in a business, including employees, beneficiaries, supply chain partners, and volunteers.
Challenges- Lack of Measurement Framework
While many early adopters have been starting to build an internal approach to the shared value, it still lacks measurement standards.
While Shared Value does not recommend measurement standards (not just yet!). Lack of measurement standards in our opinion does not impede measuring impact.
Important and mature impact accounting standards are emerging from the impact investment space, especially impact management projects, GIIN IRIS+ framework, and other sustainability standards that we referred to earlier.
There is no reason to rebuild standards, frameworks, and principles for the "Shared Value" measurement. What is lacking, however, is that lack of understanding of what impact measurement means, The company can effectively understand where they stand with different effects (as defined by the Impact Management Project), how to measure data effectively, and understand what is impact in the most effective manner.
Measure the Social Impact of Shared Value
If companies are not measuring their shared value by connecting social and business results, they can miss important opportunities for innovation, growth, and social impact at scale. "Measuring Shared Value" is an integrated business strategy with social strategy.
An integrated shared value strategy and measurement process includes four steps.
Step 1: Identify the social issues to target.
The starting point for shared value is identifying and prioritizing specific social issues representing opportunities to increase revenue or reduce costs. This requires systematically screening unmet social needs and gaps and analyzing how they overlap with the business across the three levels of shared value. This step results in a list of prioritized social issues that a shared value strategy can target.
Step 2: Link Business and Social Results
The next step would be to align business results with social results. While there is traditional thinking is that businesses should measure internal business goals. Let's look at an example from the Shared Value Initiative.
Step 3: Track Program
Using the business case as a roadmap, companies track progress against the desired targets, as with any performance improvement process. This step includes tracking inputs, business activities, outputs, and financial performance (revenues and costs) relative to projections.
Step 4: Measure results and use insights to unlock new value.
The final step focuses on validating the anticipated link between social and business results and determining whether the outlay of corporate resources and efforts produced a good joint return. Insights and lessons from this analysis will inform opportunities to unlock further value creation through refining the shared value strategy and execution.
Available Solutions-Framework, Technology, Process
Alternatively, companies can track progress against the desired targets of all their initiatives, including ESG and social impact targets. There are a couple of common frameworks.
1) One is an outcome-driven approach, such as the theory of change (or logic model, log frames, and results-based accounting). Also,
2) Impact Management Project. It adds five dimensions businesses would love to understand, such as What, How Much, Who, impact risk, and contributions (see five dimensions of impact from Impact Management Project). While businesses have always understood measurement, an outcome-oriented approach may be new.
SoPact Impact Cloud adds value by helping corporations define,
- Impact Strategy (Theory Of Change or Impact Management Based)
- Track Results from different sources by providing a flexible data collection and aggregation approach
- Define and continuously keep an eye on the business targets
- Get impact and business result insight for internal decision-making and communicate with external stakeholders when necessary.
Creating Shared Value ❇️ Social Impact ❇️ ESG Data for Business
Creating shared value is about creating new policies and operating procedures that allow your company to maximize its revenues, whilst also offering benefits that add to the local community.
Barriers to Measuring Shared Value
Measuring Shared Value, "How to Unlock Value by Linking Business and Social Results"
Michael E. Porter, Greg Hills, Marc Pfitzer, Sonja Patscheke, and Elizabeth Hawkins identify six challenges to shared value. We demonstrate how Impact Cloud is uniquely positioned to address each of them.
Challenge #1. Untangle the mess of a wide range of social issues that could be measured
Impact Cloud is a robust impact knowledge graph-based framework that allows you to simplify impact strategy based on critical social and environmental programs. Designed based on leading industry frameworks, standards, and principles, Impact Cloud can help you build a unique impact strategy quickly. The best part is that this strategy becomes the foundation for data collection, aggregation, and reporting.
Challenge #2: Measuring Social Outcomes for Large Populations
Determine social outcomes early in the product development process and select measurable results. By aligning with impact management, the company can address critical questions about the outcome they plan to achieve and WHO will benefit from it. Impact Cloud is a unique technology that allows you to build an active stakeholder survey that can address these impact dimensions.
Challenge #3: Business Value Accrues on a Different Timeline Than Social Value
Measure intermediate social outcomes.
Shared value measurement must address the fact that business and social results can have different time horizons. This can be done through a step-by-step understanding of short-term outcomes, mid-term outcomes, and long-term impact. The theory of change-based framework can help design an effective impact chain for your organization. Once you have developed your framework, you can use different impact measurement and management techniques to track performance.
Challenge #4: Measuring Business Value for Cluster Investments
Use proxy indicators to track business results.
Changes in various conditions in the communities in which a company operates can be difficult to measure because their impact on business value is indirect and can sometimes be slow to develop. Often, we recommend a publicly evidence-based approach to defining proxy indicators to measure progress. While this approach can provide a robust understanding, care must be taken to ensure the right context and assumptions from the publicly available evidence.
Challenge #5: Determining a Company's Attribution When Strategies and Activities Require the Efforts of Many Partners
Focus measurement of social results on contribution, not attribution
While most social and environmental projects have many partners, philanthropy and impact-based investments have historically created a trap of trying to attribute social results solely to company actions. This is quite a backward-looking approach that does not add much value and can add unnecessary costs and confusion. Impact Management's Project-based approach often focuses on contribution instead. Contribution tells us whether an enterprise's and/or investor's efforts resulted in outcomes that were likely better than what would have occurred otherwise.
Challenge #6: Management Desires an Aggregation of Social Impact Data
Aggregate results selectively and only for the same social outcomes
This is perhaps the most complex but beneficial part of the shared value. Different investments or effects can be compared to answers to more complex social benefits.
A few hurdles to data aggregation are -
- Data can come from different sources (offline, online, real-time, or other external systems)
- Data collection can be challenging based on stakeholder and governance requirements.
Impact Cloud is an innovative Swiss-army knife-like data collection and data warehouse solution that allows you to collect and aggregate resources from stakeholders based on the stakeholder's most appropriate approach. It supports many data collection approaches, such as
- Metrics Results (often necessary when you want to collect results from different departments and locations with varying levels of IT data control process)
- Stakeholder Results (for collecting results about topics such as employee satisfaction, beneficiary household survey, and feedback survey)
It also supports different types of data collection based on stakeholders outside company boundaries, such as
- Offline data collection: for remote beneficiaries, often in rural or where the internet is not reliable
- An online survey, SMS based Phone-based
- Data collected in different systems
- Continuous data collection
Flexible data analytics is a need for continuous improvement through dynamics and dashboards to learn more about -
- Different dimensions or questions based on a stakeholder survey
- Attributes such as demography (WHO), location (WHERE), and external benchmarks
- Longitudinal reporting based on date or stages such as baseline, midline, and exit.
To drive meaningful change, you will identify the key initiatives or outcomes that hold significance to you from the Purpose Playbook exercise. Achieving indicator alignment is crucial for corporations seeking to ambitiously align with Sustainable Development Goals (SDGs) without engaging in mere tokenism. By embracing transformative change, businesses can unlock value, enhance business resilience, and foster long-term growth within a single integrated system. Streamline your impact and sustainability data management by housing it all within a unified system. This allows for seamless data collection and aggregation from stakeholders, partners, programs, and investments (grantees). By connecting all relevant stakeholders, you gain a comprehensive understanding of the real impact being achieved. Gain valuable and continuous insights into the impact being generated through dynamic dashboards and impact scorecards. These insights empower you to make informed internal decisions, manage your reputation, mitigate risks, and effectively communicate with external stakeholders.
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