Businesses can simultaneously create socioeconomic impact and business value. For instance, a materiality assessment might identify that crucial suppliers in a particular region are not earning a living wage, while a risk assessment might note instability in that same part of the supply chain. Generating positive impacts for those suppliers could also reduce business risk.
2 min read | Last updated 28 October 2020
Creating shared value (CSV) is a strategic approach that aims to meet the socioeconomic needs of a target group and return value to the business in the form of competitive advantage (Porter and Kramer, 2011 (pdf)). It seeks synergies from new partnerships with communities, governments, NGOs and competitors. Companies that use a CSV approach include Nestlé, Anheuser-Busch (SmartBarley) and Stockland.
Example: Coca Cola
The Coca-Cola Company is the world’s largest beverage company, owning more than 500 brands. In 2010, the company sought to double its servings per day by the end of the decade. In line with this vision, it aimed to triple its global juice business.
The growing middle class in Kenya offered the company a market opportunity to increase sales of its Minute Maid range of fruit drinks. Searching for fruit supplies in the region, Coca Cola realised that small scale farmers in Uganda and Kenya had optimum growing conditions but faced production barriers and market challenges.
Partnering with nonprofit TechnoServe and the Bill & Melinda Gates Foundation, Coca-Cola launched Project Nurture at a cost of US$11.5 million with the goal of doubling the average income of 50,000 small-scale mango and passion fruit farmers in Uganda and Kenya and helping them connect into the supply chain.
Mars is one of the world’s largest purchasers of cocoa, buying 400,000 tonnes of cocoa bean annually. Mars estimates that most cocoa is “grown on farms of less than four hectares of land, by as many as 350,000 cocoa farming families, many of whom, particularly in West Africa, live in poverty, without access to basic social or commercial structures.” The company recognised that sustainable development interventions would create shared value, being (i) a more resilient supply chain for Mars and (ii) improved outcomes for farmers.
Cocoa certification schemes, eg UTZ, Fairtrade and Rainforest Alliance, support farmer cooperatives with cash or in-kind payments for implementing more sustainable farming practices and provides access to human rights training, community development programs, shade trees and planting materials to improve yields. Mars felt that more could be achieved through even stronger certification and worked with FSG, a consulting firm founded by Porter and Kramer, to launch Cocoa for Generations in 2018.
Placing the needs of the smallholder farmer at the centre, it aims to increase farmer income through productivity gains, safeguard human rights and protect forests. It also includes and initiatives to modernise smallholder farming, empower women and diversify incomes. Mars welcomes collaboration from NGOs, local government and other industry players. This strategy is helping Mars meet both its sustainability and its growth goals.