How Shared Value and Innovation will drive business growth

We don’t always need to be looking for a new angle when it comes to driving growth in our business.  Often slight changes to what we are already doing will lead to improvements and greater efficiencies, thereby driving business growth.  

One of the areas where many organisations contribute to society is supporting charities and not for profit groups who work to fill the gaps that exist in society left by business and government.  With the exception of the mature and large corporate entities, many businesses choose to make their contribution in the form of monetary donations and/or skilled and unskilled volunteering. 

The level of giving to the charity and not for profit sector, also known as the “for purpose” sector by business and government sits around 15%.  The other 85% is made up by individuals.  There is a strong argument that can be made that business is doing it’s bit by employing those who subsequently make the donations.  

“The challenge to those in the “for purpose” sector is not soliciting more donations for the same return, it has to be engineering greater returns to those who are engaging in the for purpose sector. ”

But if the contribution to the for purpose sector was more attractive and provided better returns to business, would we see a change in the level of giving by business?  The challenge to those in the“for purpose” sector is not soliciting more donations for the same return, it has to be engineering greater returns to those who are engaging in the for purpose sector.  The ‘for purpose’ sector can do it’s part by making it more attractive and easier for business to derive a meaningful return. 

Michael Porter a Professor at Harvard Business School and co-author of “Creating Shared Value” suggests “Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face.”

The proponents of shared value suggest there are three ways in which it is created:

• By reconceiving products and markets;
• Redefining productivity in the value chain; and
• Building supportive industry clusters at the company’s locations.

“Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face.”

The proposition of shared value is that business can benefit commercially from tackling societies problems.  In fact the benefit back to business is essential, because without that benefit where lies the incentive? 

For many companies starting out on the path of deepening their engagement strategy with the community, the concept or path to shared value may be indeed too daunting for them and the risk is they do nothing at all.  For some who are starting out the idea of making a donation to a charity partner is seen when compared to what they are currently doing, as progressive.  The concept of shared value is that of a journey.  The time it takes to make that journey, assuming the end destination is the destination of choice, will be varied depending upon the desire, commitment of resources and tolerance for risk. 

The benefits back to business from a strategic approach to their engagement strategy with the for purpose sector will see measurable returns in many areas including:

• Employee Attraction - Research conducted by Cone Millennial Cause group, detailed in The 2020 Workplace Report, found that 80% of a sample of 1,800 13-25 year olds wanted to work for a company that cares about how it impacts and contributes to society. More than half said they would refuse to work for an irresponsible corporation. 
• Staff Retention -  Analysis by the HayGroup suggests that Australia can expect a turn over rate of around 22% over the coming years, with the USA slightly higher and Canada slightly lower at 20%.  The Asian markets pushing towards 30%.  An effective CSR program based upon shared experiences will positively impact your staff retention rates. 
• Increased levels of Employee Engagement - Hewitt Associates, the global human resources consulting and outsourcing firm conducted a study into CSR and found: 

“that it is important to be consistent and sustain a CSR strategy over the long term, in combination with other employee engagement boosters such as competitive compensation, and good management and health and safety practices.  The perception of a decline in CSR performance was said to be a significant threat to engagement for a third of the employees surveyed. Combined initiatives to sustain both employee engagement and support CSR transformation will most likely yield a better return on investment than individual non-coordinated efforts.

• Customer Loyalty - Researchers Kusum L. Ailawadi and Jackie Luan from the Tuck School of Business at Dartmouth set out to quantify how much CSR benefits a company using the consumer goods retail sector as a testing ground and 3,000 grocery shoppers as subjects. The study found inter alia; 

Improving consumer perception on a CSR dimension just a little bit (1 point on a 5 point scale) can result in sales lift of 10-15% on average. There are opportunities to add a price premium for brands/products with CSR benefits – as much as 12-16%. Consumers prefer CSR-oriented retailers because they see personal benefit from the CSR initiatives and the initiatives resonate with their values.

• Brand Enhancement/Differentiation - Lauren Rakowski from the Network for Business Sustainability found in her research paper“Strategic CSR acts as insurance for reputation, which improves financial performance” that “consumers’ purchase intentions were twice as high for products of companies described as having a strong CSR reputation compared with those with a weak CSR reputation following a product recall”.  The benefit of CSR even without a product recall is the investment in the “insurance” of the goodwill that is afforded the company by their commitment to CSR.
• New Markets- Researchers Mark Little and Adam Lane from Business for Social Responsibility found that “When leaders at Novo Nordisk, the world’s largest company focused solely on diabetes, decided to enter the diabetes market in China, they opted to leverage not just products but a long-term CSR strategy focused on health, economic development, and the environment. First, working closely with government officials, physicians, and local community representatives, company leaders launched new diabetes clinics and prevention programs to build systemic capacity to address diabetes in China. Next, to support the local economy, they moved a significant portion of the company’s R&D and production capabilities to Tianjin, with an aim to use local manufacturers to supply the entire Chinese market by 2015.”