Putting the Concept of "Creating Shared Value" to Work

From buzz to business: a concise recipe on how to grow the pie
Putting the Concept of
Publ. date 22 Apr 2013
In one of his interviews on Creating Shared Value (CSV), professor Michael Porter compares CSV to the traditional Fair Trade approach. In his view, Fair Trade is about how to share the pie in an ethical way and CSV is more about how to expand that pie. What's more is that CSV is regarded by professor Porter as one of the greatest (future) differentiators of businesses and as the next chapter in thinking about business strategy.


From tactics to strategy

As many companies have a mishmash of sustainability tactics, a truly embedded sustainability strategy is not an easy feat. Luckily the CSV process is essentially a straightforward one that contains four distinctive steps:

1.       identification of the issues or materialities to target
2.       development of the business case
3.       tracking of progress
4.       measuring results and using insights to unlock new value.
(Source: FSG)

But how to make these four steps work in practice? In what way can companies work towards a more sustainable business model?

Step 1 - Which issues to target

The relevance of social issues for a company could become clear after creating a materiality matrix made up from the relative importance of those issues to the key stakeholders and the impact of those issues on the company's business.

Customized market research can uncover and/or validate the relevance of issues. For instance, in a recent project for a fast food chain, not only its employees, suppliers and customers were asked about the relevant materialities: the franchise-holders were also included in the study. Another, less accurate but more cost effective, approach is to conduct a literature study to determine materialities of the sector that a company is in. In essence, each company is able to distill its key social issues that way. Typically, what remains is a list of 10-15 issues.

Step 2 - How to develop the business case

In order to construct the business case, first the issues need to be narrowed down to 3-5 touch points; those being the issues on which your company or brand wants to excel. In fact, these touch points are nothing else than differentiators of the sustainability strategy. Once the touch points are in place, the ambitions and targets need to be defined and the business case can be developed. For the development of the business case the Business Model Canvas by Osterwalder and Pigneur is a helpful tool.

This Business Model Canvas contains three areas for value creation from sustainability: eco-efficiency, innovation and customer intimacy. To approach the question of the “business case for sustainability” from  a more broad and practical perspective, "revenue streams" can be defined as human capital, intellectual capital, financial capital, social (or community) capital and environmental capital. In a recent supply chain study in the catering sector, the mapping of potential value was facilitated by bringing together both customer and supplier. This enabled the allocation of value to the different players in the supply chain.

Step 3 – Tracking of progress

Once the touch points have been set and the targets and ambitions are defined, progress needs to be tracked through a set of KPI’s. These KPI’s are preferably a mix of both internal and external measurements, as the external measurements provide the “proof” and endorsement of the chosen sustainability strategy. Strong examples are benchmarks such as Dow Jones Sustainability Index and RepTrak – a reputation study that runs in 33 countries. For instance Telenet -supersector leader in the Dow Jones Sustainability Index- uses both to set strategic sustainability goals and track progress along the way.

Step 4 – Measuring results and using insights to unlock new value

To complete the circle of the Creating Shared Value process, the results of the implementation can be used to gain new insights. The repetition of level 6 and level 7 of the GLOBE-US model (see image above) will help unlock new value through evolution (iteration) as well as revolution (redesign of the business model).

Interested?

If you want to know more about creating value from sustainability in your business model, please contact Jan van der Kaaij, managing partner, at jan@finchandbeak.com or call +31 6 28 02 18 80.

About Jan van der Kaaij

Sustainability expert in strategy development, DJSI and sustainable innovation, with a hands-on approach and always committed to go for the max. | jan@finchandbeak.com 

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