The 'Shared Value' supply chain
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The 'Shared Value' supply chain

One of the biggest challenges the world faces over the next half-century is how to create a better quality of life for a global population that is expected to top out at 9 billion by 2050. As populations expand, finite resources such as land, water and energy as well as biological resources get divided among increasing numbers of people, with the distinct possibility some will be left with no resources at all, posing a serious global humanitarian threat.

Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and building wealth. But a narrow conception of capitalism has prevented businesses from harnessing their full potential to meet society's broader challenges.

The idea that companies exist to maximise profits for their shareholders is not attractive any more. When benefits are lost, jobs limited and salaries cut, society begins to question corporations. So the corporate world has to change its mentality, establish new frames of reference to better understand problems, and be aware of what is going on internally and externally. The guru of strategy, Harvard's Michael Porter, has made a contribution to this change, promoting the concept of "Shared Value".

Shared Value focuses on a social need such as water, nutrition or health and links solutions with profit drivers to ensure any initiative enjoys economic success. In corporate social responsibility efforts, resources are invested not only to improve corporate reputation. In the case of Shared Value creation, a company integrates social and environmental impacts as a direct challenge to gain more economic value. The greatest opportunity for growth is found in discovering new markets, new needs that have yet to be met and new ways to operate as a business with a better understanding of the impact on the environment and community.

From a supply chain standpoint, the true essence of Shared Value resides in the products, clients and suppliers that make up the entire chain of value as well as the institutions and companies within the company's "ecosystem". By thoroughly understanding all these links, Porter suggests companies can create Shared Value strategies in three ways:

- By reconceiving products and markets or improving access to products and services that meet pressing societal needs, thereby create new market and revenue opportunities.

- By enhancing productivity in the value chain or improving company operations to enhance quality, improve efficiency or decrease risk while addressing a social issue.

- By building clusters and framework conditions to improve the operating environment affecting business and alleviate social problems.

To execute the above strategies, companies may need first to identify points of leverage, prioritising social issues that affect its core business. Some companies may choose a particular social issue they wish to affect and then apply their strategy development process. Others may start by looking for significant business opportunities and apply social initiatives later. In both cases, it is the context within which a company operates that matters most, as it opens up new opportunities and resulting strategic choices. In this regard, geography and sector each play a role in shaping shared-value strategies.

The geographical context is quite relevant for companies that are charting strategy for the Asean Economic Community. In the context of Asean Vision 2020, which calls for a "clean and green Asean", companies have to craft tailor-made shared-value solutions to match the different development stages of each of the 10 countries. Nearly all have great potential to develop shared-value innovation. Indonesia and Vietnam offer the scale and reach to make a considerable social and economic impact due to large home-based markets, while Cambodia, Laos and Myanmar are ripe for labour-intensive shared-value solutions.

Similarly, a number of sectors show promising sustainability opportunities for companies to engage poor or vulnerable individuals as consumers, employees, producers, suppliers, distributors, retailers or entrepreneurs. For example:

- Food and beverages: Companies such as Nestle{aac} are innovating new products such as low-cost staple foods that address nutritional deficiency through additives. In Brazil, Coca-Cola enables local cluster development through training young unemployed youths to be retailers in poor areas to expand product access.

- Health care: In Thailand, the pharmaceutical company GlaxoSmithKline (GSK) in partnership with the Thai Red Cross developed the Medicine Bank to provide health education and vaccines for illnesses that are the main causes of death among young children including infant diarrhoea, influenza and pneumonia. This helped GSK to enhance productivity within the value chain via new distribution channels.

- Housing and construction: Siam Cement Group (SCG) has long been at the forefront of building trust and confidence among all stakeholders to create Shared Value through cluster development. It has championed many programmes ranging from the expansion of the Community Partnership Association in Rayong's Map Ta Phut Industrial Estate to the Cement Partnership Initiative in Saraburi's Kaeng Khoi district. The facilities help each other to become more environmentally friendly and strengthen communities in terms of health, education and livelihood.

For a sustainable business leader such as SCG, the future lies in being a core entity in a Green Business Society.

A company starts by setting guidelines that yield acceptable and measurable results and then expands them to its upstream and downstream business partners and finally to a wider array of other businesses with which it interacts.

(The author acknowledges the FSG Report "Shared Value in Emerging Markets", sponsored by the Rockefeller Foundation, published in 2012, for knowledge and insights.)

Kanishka Ghosh is a supply chain professional and independent writer. The Link is coordinated by Barry Elliott and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand. It is intended to be an interactive forum for industry professionals. We welcome all input, questions, feedback and news at:

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