Csv 102012 Final

Creating Shared ValueSharing Michael Porter and others

October 20, 2012

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This document intends to share author’s learning, ideas and personal reflection on the topic. If you intend to quote or replicate any part of this presentation, acknowledgement of this document and other authors cited in this document as your sources would be greatly appreciated

Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011

Healthy business needs a healthy community

• Only business can create Prosperity• Healthy business needs a healthy community• There is a growing awareness of major societal challenges• Government and NGOs lack sufficient resources and capabilities to fully

meet these challenges• Legitimacy of businesses are falling and have fallen

2Source: World Business Forum New York 2012 – Session given by Michael Porter

Creating shared value is NOT CSR / CR

PhilanthropyCorporate

Responsibility (CSR)

Creating Shared Value

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Small impact Good citizenship, ethical, sustainability

Integrate social and environmental improvement into economic value creation

Source: World Business Forum New York 2012 – Session given by Michael Porter

The principles of shared value

• “Shared value creation cuts across the traditional divide between the responsibilities of business and those of government or civil society. From society’s perspective, it does not matter what types of organizations created the value. What matters is that benefits are delivered by those organizations—or combinations of organizations—that are best positioned to achieve the most impact for the least cost.” – PORTER, M E and KRAMER, M R (2011) 'CREATING SHARED VALUE'.

Harvard Business Review, 89 (1/2): 62-77.

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“Not all profit is equal. Profits involving a social purpose represent a higher form of capitalism, one that creates a positive cycle of company and community prosperity”

PORTER and KRAMER, M R (2011) 'CREATING SHARED VALUE'. Harvard Business Review, 89 (1/2): 62-77.

According to Michael Porter…There are three levels of shared value

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1. Reconceiving customer needs, products and markets

2. Redefining productivity in the value chain

3. Enabling local cluster development


1. Reconceiving products and markets

• Around unresolved customer problems / concerns, not traditional products

• Not just meeting consumer needs but improving lives• Customer groups that are poorly served or overlooked – often seen as

unattractive groups• Start with no pre-conceived constraints about product attribution, channel

configuration or economic model of the business

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2. Redefining productivity in the value chain

8Slide copied from Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011

3. Shared value through local cluster development

• Strong local clusters with capable local suppliers and institutions improves company productivity

• Companies / institutions working together collaborative can stimulate more significant improvements or progression

• Local cluster development can strengthen the link between a company’s success and the community success

9Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011

Unilever’s Water Purification

• Safe drinking water is a problem in India• Everyone tried – no scalable solution• Produces safe water at a cost of ½ cent per litre• Does not need electric power• Portable • Switches off automatically when replaceable processor is

depleted• Innovation comes – collaborating with external / internal

resources • Leverage 100 Unilever scientists worldwide• Unilever brought in supply chain and retail distribution

expertise• NGOs for access to schools and consumers

http://www.youtube.com/watch?v=zmVJhf6rqlc

10New products and markets




Nestlé’s CSV – diary sector in Pakistan

Nestlé - sources milk locally, tests the quality of the milk, and by using cooling stations and collection points, Nestlé has helped to prevent adulteration and unhygienic milk handling. By offering higher quality milk, Nestlé has responded to growing consumers’ expectations. It has also fortified its products with iron to help to prevent anemia.

• Consumers – value exceeded price, pay much cheaper than competitors’ milk• Suppliers – local sourcing from 150,000 local farmers (each farmer sells

approximately the milk from 1 buffalo)• Industry – success of Nestlé in the milk district, draws in local competition,

increases efficiency, lower price premium etc• Employees – created over 2000 jobs with better wages, training, and

Sheikupura milk processing factory is ISO certified – safer work environment • Communities - Over 80K jobs created total (direct and indirect), pay local taxes• Shareholders – higher return from better shareprice improvement (28 %

return) 2003 – 2008

11http://www.nestle.com/csv/CreatingSharedValueCaseStudies/AllCaseStudies/Pages/CSV-dairy-Pakistan.aspx

Productivity in Value chain

Shared value created when all parties win

12Source: yahoo finance

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http://www.nestle.ca/NR/rdonlyres/9F537C54-FF8D-466B-803F-5C580AD76479/0/E_CreatingSharedValue.pdf

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Nestlé 10 yr CAGR 28% in share price appreciation

Unilever plc10 yr CAGR 9.7% in share price appreciation

General Mills10 yr CAGR 9.1% in share price appreciation

Source: google finance

CSV is a paradigm shift for businesses in how they perceive market opportunities, determine investments, and build capabilities…

15Chart copied from Source: Porter and Kramer, Harvard Business Review, 2011

Shared value creates strategic positioning

16Source: www.wholefoodsmarket.com

Whole Foods vs The Kroger

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WFM 311 Stores10 yr CAGR 15.8% in share price appreciation

KR - 2435 supermarkets10 yr CAGR 6.2% in share price appreciation Source: yahoo finance

Maximize purpose, maximize profits?

18Source: yahoo finance

John Mackey Co Founder & Co- CEO Whole Foods ‐ ‐Market on the topic of Conscious Capitalism

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https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/UBS_Conference_NYC_October2012.pdf

What is Conscious Capitalism

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Slide copied from: https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/UBS_Conference_NYC_October2012.pdf

Conscious business is beyond CSR

21Slide copied from: https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/UBS_Conference_NYC_October2012.pdf

Final words from Porter – my takeaways

• Shared value enables a more holistic and creative approaches to economic value creation

• Shared value thinking will spur innovation, productivity improvement and economic growth

• Businesses are not charities, and can be a very powerful force for tackling many issues facing our society

• Businesses need to transform their thinking beyond how their current business model is formed

• Shared value allows businesses to rethink and redefine their purpose beyond profit maximization

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Csv 102012 Final

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