Shared Value: It's more than Philanthropy

When Mark Kramer and Michael Porter began advocating for more companies to change their approach to doing business, their concept of Shared Value was mistaken for a fancier-sounding philanthropy. But it’s more than that, and it’s taking root in Africa.

24 Jun 2019 . 2,980 Views

Societal challenges: human rights violations, lack of access to affordable healthcare, low literacy levels and food insecurity, have long been viewed by businesses as a threat to profits.

But what if these problems weren’t seen as threats, but as business opportunities to make the world a better place, impact society positively and increase profit? What if embracing them meant companies would rate ahead of their peers, and ignoring them would put the future of business at risk?

Believing that this is true requires a radical shift in traditional mindsets from business as usual and just earning profits to a long term vision and focus on creating shared value.

Shared value. It seems to be the latest buzzword in corporate circles, but what is it? Shared value is about creating constructive value for society while simultaneously generating returns for business. It’s a concept based on the premise that doing business purely for the sake of business – profit-making – without adding value to the communities in which these businesses operate, is not only unacceptable, it’s unsustainable.

So shared value is not a fancier term for Corporate Social Responsibility (CSR) or philanthropy; it’s about ensuring that everybody within a business’ ecosystem, from investors and customers to the surrounding community, derives value from the business’ operations

Mark Kramer, co-founder and co-author of the Shared Value Principle (together with Michael Porter), , believes that addressing societal needs offers new areas of differentiation for businesses.  It also creates new products and services, new markets, and new business models that can achieve superior profitability and new avenues for competitive strategy.  This creates much needed synergy between great business opportunities and greater opportunities for society to prosper.

It is this concept that Kramer shared recently when he joined delegates from 18 countries at the 2019 Africa Shared Value Summit, which took place in May in Nairobi under the theme: Africa’s Business Growth.

According to Kramer, Safaricom stands out for its creation of shared value, thanks to what is perhaps its most popular product: M-PESA.

“M-PESA at Safaricom is one of the world’s best examples of creating shared value. It’s not a charitable effort. It’s rethinking financial services for people without access to traditional banking who can absolutely benefit from savings and credit, which can improve their lives and the lives of their families. It has been a tremendously successful and profitable business that has really transformed the economy of this country,” says Kramer.

Unfortunately, achieving the synergy that Kramer talks about proves difficult because most businesses, he says, operate on models that were developed decades or centuries ago, and were designed to serve well-off people in developed markets. These are models that aren’t inclusive in nature.

Kramer is adamant that those old models won’t work if businesses want to contribute to, and take advantage of the business opportunities within the  Sustainable Development Goals. Why? Because nobody thought of today’s societal issues when developing the business models of the past.

Kramer also believes that there is a deep divide between the social and business sectors, and this division is holding back progress for both. The result: a widening gap between the world’s richest and poorest.

According to Oxfam, the richest 10 per cent in Kenya earned on average 23 times more than the poorest 10 per cent. Less than 0.1 per cent of the population owns more wealth than the bottom 99.9 per cent, and it’s predicted that the number of millionaires will grow by 80 per cent in the next 10 years.

This widening wealth gap  is crippling access to the most basic of services, including healthcare and education. In fact, it’s estimated that close to one million primary school-aged children are still out of school – the ninth highest number of any country in the world. Yet the country’s spending on education has been on the increase each year since the early 2000s.

The situation is not any better in South Africa, Africa’s second largest economy after Nigeria. Time magazine reports that the World Bank last year deemed South Africa the world’s most unequal society, estimating that as of 2015, the top 10 percent owned 70 percent of the nation’s assets. Four years ago, the bottom 60 percent controlled only 7 percent of the country’s net worth, and not much has changed since then.

“The number of economically disenfranchised people is growing rapidly around the world. The reality today is that our global economy is broken, hundreds of millions of people live in extreme poverty, while huge rewards go to the very top. This state of affairs is not sustainable,” said Safaricom CEO, Bob Collymore, while speaking at the Summit.

He also highlighted the fact that existing models of business are not generating enough constructive value to contribute sustainably to positive societal change. And where societies fail, businesses can’t succeed.

There’s a clear call to action to business: that business must exist to do more than just business. One may ask though: if the private sector takes care of societal problems, what then will the role of government be?

“Issues such as climate change and inequality are increasingly becoming crucial challenges that we will have to tackle as the private sector if business is to succeed in the long term. No public sector, private sector or NGO has the capacity to address fundamental business and societal challenges, and that is why a collaborative and inclusive approach to business and cross sectoral partnerships are critical,” Collymore adds.

Safaricom’s response to addressing societal needs has been through the integration of 9 of the 17 Sustainable Development Goals (SDGs) into its core business strategy, including goals on Health (SDG3), Education (SDG4), Clean Energy (SDG7), Decent Work and Economic Growth (SDG8) and others.

Through platforms like DigiFarm, which was launched in 2017, Safaricom is leveraging the power of mobile technology to address Kenya’s food security challenge and provide sustainable livelihoods

Agriculture, long known as the “backbone” of Kenya’s economy, contributes close to 25 percent of the country’s GDP. About 80 per cent of the population derives all or part of its livelihood from farming, yet it’s estimated that 65 per cent of farmers earn less than KES 125 a day.

To uplift smallholder farmers and improve food security, DigiFarm aims to address four challenges: knowledge gaps, lack of access to high quality inputs, affordable credit and insurance, and poor access to market (an estimated 68 per cent of produce value goes to middlemen, and 28 per cent of produce perishes before getting to the market).

The platform, which is operated in partnership with Arifu, iProcure and FarmDrive, has over one million registered farmers so far, who are able to access inputs and other services from 144 depots around the country.

It’s expected that through Safaricom’s partnerships with county governments, DigiFarm will be able to reach an estimated market of 20 million farmers across the country, increasing food production, generating wealth for farmers and reducing the cost of food especially for low income households.

This approach is also catching on in other sub-Saharan African countries.

In Nigeria for example, through the Mother’s Delivery Kit, Brown Button Foundation is tackling the challenge of access to affordable maternal and child health services using the shared value model.

The Lagos-based social enterprise creates a simple pack containing sterile lifesaving supplies like delivery mats, disinfectant, sterile gloves, scalpel, receivers and mucus extractor for expectant mothers in rural areas. Through this simple kit, the company is promoting safe birth, instigating behavioural change and empowering women.

According to the founder, Adepeju Jaiyeoba, more than 50 million women in Nigeria live and work in these rural communities, and are of child bearing age.

“Women in these communities act as our agents and sell the kits, supplying them to healthcare centres and traditional birthing clinics. Out of the sales, they are able to get an income, gain financial independence and send their children to school,” Adepeju says.

In partnership with United States African Development Foundation (USADF), Mother’s Delivery Kit has automated its production process, scaled into conflict and post-conflict areas and started customizing the kit.

Adepeju says the company focuses on collaboration instead of competition, because they realise they cannot solve maternal and child healthcare challenges alone. In the past four years, Mother’s Delivery Kit has penetrated more than 300 communities, selling more than half a million kits.

M-PESA, DigiFarm, and the Mother’s Delivery Kit stand out as a few powerful examples of how businesses can deliver value to the societies in which they operate, while at the same time generating sustainable returns for everyone within a broader ecosystem. It’s not just about doing good business; it’s about doing good. And that can make all the difference to achieving the Sustainable Development Goals and solving some of the world’s most pressing challenges, while delivering purpose and profit for business.

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