Measuring Shared Value HBS PDF
Measuring Shared Value HBS PDF
Michael E. Porter, Greg Hills, Marc Pfitzer, Sonja Patscheke, and Elizabeth Hawkins
ABOUT THIS REPORT
The genesis of this article occurred at the FSG-hosted Shared Value Summit in Cambridge,
Massachusetts in June 2011 where sixty company representatives and co-authors of the
Harvard Business Review article “Creating Shared Value,” Michael E. Porter and Mark
Kramer, identified measurement as a key driver of shared value adoption. Nestlé, Intel,
InterContinental Hotels Group, and the Rockefeller Foundation committed to work
with and support FSG in developing this article on measuring shared value. Insights
were drawn from a systematic literature review, in-depth interviews with featured
companies, and FSG’s work on shared value with dozens of corporations.
AUTHORS
Michael E. Porter
Professor, Harvard Business School
Greg Hills
Managing Director, FSG
Marc Pfitzer
Managing Director, FSG
Sonja Patscheke
Senior Consultant, FSG
Elizabeth Hawkins
Associate, FSG
Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
by FSG is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Permissions beyond the scope of this license may be available at www.fsg.org.
Measuring Shared Value
How to Unlock Value by Linking Social
and Business Results
M
ore and more, companies are creating shared value by developing profitable business
strategies that deliver tangible social benefits. This thinking is creating major new
opportunities for profit and competitive advantage at the same time as it benefits society
by unleashing the power of business to help solve fundamental global problems. Despite the wide-
spread embrace of the shared value concept, however, the tools to put this concept into practice are
still in their infancy. In particular, a new framework for measurement that focuses on the interaction
between business and social results is among the most important tools to drive shared value in practice.
1
Even the companies that are most advanced in pursuing shared value today lack the data they need
to optimize its results. Companies cannot know the extent to which they are creating shared value
if they do not measure their progress on social objectives and, importantly, the degree to which
social performance improves economic value for the business. When companies do not understand
or rigorously track the interdependency between social and business results, they miss important
opportunities for innovation, growth, and social impact at scale.
Companies today track and report myriad financial, social, and environmental metrics, drawing in
part on efforts by the social sector to develop more sophisticated methods for evaluating social impact.
There is also a nascent integrated reporting movement that aims to add sustainability measures
to financial statements. Still missing,
When companies do not understand or
however, is a framework to link social
rigorously track the interdependency between progress directly to business success,
social and business results, they miss important and vice versa. Efforts to understand the
opportunities for innovation, growth, and link between business performance and
sustainable social impact at scale social value creation are just beginning.
Measurement approaches that link social and business results are vital to unlocking shared value for
companies and scalable solutions to social problems. Effectively measuring shared value starts with a
well-developed shared value strategy. To develop such a strategy, companies must identify key social
issues to focus on, plan the relevant business activities involved, and model anticipated business and
social benefits relative to projected costs. Shared value measurement, in turn, assesses progress and
results, generating actionable data and insights to refine shared value strategies.
Data and insights from measuring shared value enable companies to scale shared value initiatives
while also providing an indispensable basis for effective communication with the investment commu-
nity. By illuminating the direct connection between tackling social issues and achieving economic
value creation, shared value measurement will diminish investor skepticism and ultimately trans-
form how the investment community rewards companies that create shared value. In other words,
measurement makes shared value strategies tangible for investors.
In preparing this report, we examined emerging measurement practices in more than a dozen leading
companies that are pursuing shared value strategies. The process included in-depth research at Nestlé,
Intel, and InterContinental Hotels Group (IHG). Each of these organizations opened its doors and
provided information on existing systems and approaches to inform this work. Our research revealed
that shared value measurement is distinct from other existing measurement approaches, is practical
and achievable, and powerfully informs improvement and innovation in shared value strategies.
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Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
Companies Pursue Shared Value at Three Creating shared value from redefining produc-
Levels tivity in the value chain focuses on improvements
Much like any business strategy, shared value in internal operations that improve cost, input
strategies are unique and tailored to an individual access, quality, and productivity achieved through
company. As the Harvard Business Review article environmental improvements, better resource
“Creating Shared Value” explains, companies can utilization, investment in employees, supplier
pursue shared value opportunities on three levels: capability, and other areas.
reconceiving products and markets, redefining Creating shared value from enabling local cluster
productivity in the value chain, and enabling development derives from improving the external
cluster development. The shared value opportuni- environment for the company through community
ties at each level will differ by industry, company, investments and strengthening local suppliers,
and geography, depending on how a company’s local institutions, and local infrastructure in ways
particular business and strategy intersect with that also enhance business productivity.
social issues.
Measuring shared value aims to track the progress
Creating shared value from reconceiving prod- and results of tailored shared value strategies. For
ucts and markets focuses on revenue growth, each shared value opportunity, companies identify
market share, and profitability that arise from and track both social and business results; their
the environmental, social, or economic develop- parallel goals are to address a social problem and
ment benefits delivered by a company’s products improve business performance (see Table 1).
and services.
3
Identify the social issues
to target Track progress
FIGURE 1: Strategy 1
3
Integrating Shared
Value Strategy and
Measurement
Measurement
4 2
The Shared Value Measurement Process Step 2: Make the business case. After identifying
potential social impact at one or more of the three
Shared value measurement requires an iterative
levels, the next step is to develop a solid business
process that is integrated with business strategy,
case based on research and analysis of how social
not a one-time or periodic effort separate from
improvement will directly improve business perfor-
measuring business performance. An integrated
mance. This step includes identifying the targets
shared value strategy and measurement process
and specifying the activities and costs involved
includes four steps (see Figure 1). Strategic priori-
for each shared value opportunity, modeling the
ties inform the focus and extent of shared value
potential business and social results relative to the
measurement; the data and insights from shared
costs (i.e., value creation potential), and making
value measurement inform refinement of the
a go/no-go decision.
shared value strategy. This ongoing feedback loop
is one of shared value measurement’s central Step 3: Track progress. Using the business case
benefits—providing a roadmap for understanding as a roadmap, companies then track progress
and unlocking further shared value creation. against the desired targets, as with any perfor-
mance improvement process. This step includes
Step 1: Identify the social issues to target. The
tracking inputs and business activities, outputs,
starting point for shared value is identifying and
and financial performance (revenues and costs)
prioritizing specific social issues that represent
relative to projections.
opportunities to increase revenue or reduce costs.
This requires a systematic screening of unmet Step 4: Measure results and use insights to
social needs and gaps and an analysis of how unlock new value. The final step focuses on vali-
they overlap with the business across the three dating the anticipated link between social and
levels of shared value. The result of this step is a business results and determining whether the
list of prioritized social issues that a shared value outlay of corporate resources and efforts produced
strategy can target. a good joint return. Insights and lessons from
this analysis will inform opportunities to unlock
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Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
further value creation through refining the shared ask how it could expand those strong program
value strategy and execution. elements to further benefit the company and other
communities. If a pharmaceutical company’s
While some companies track progress on social
training of health professionals yields inconsis-
and business results separately, few companies
tent health worker capacity across locations, and
yet understand how the linkage of social and
thus inconsistent drug sales, it should ask what
business results can create new opportunities for
changes it needs to make to optimize health
value creation. Unlocking shared value through
outcomes and business results. If a company
measurement requires understanding the social
works successfully to improve a farmer’s yield and
results from business investments and analyzing
therefore increases the company’s raw material
and improving the business result from social
supply, it should consider ways to transfer that
outcomes. For example, if a company’s community
successful approach to other farmers in the same
jobs skills program results in simultaneous job
crop or in other crops.
creation and expansion of its market, it should
Coca-Cola’s Coletivo initiative in Brazil creates 2. Make the business case Coca-Cola and
shared value by increasing the employability To improve the skills and employability of these Youth Employment
of low income youth while strengthening the young people, Coca-Cola sought to use the
company’s retail distribution channels and brand company’s value chain. The Coletivo initiative,
strength to increase local product sales. Coca-Cola in partnership with local NGOs, trains local youth
has integrated shared value strategy and measure- for two months in retailing, business develop-
ment steps and uses data and insights to unlock ment, and entrepreneurship while also pairing
new value creation. youth with a local retailer to get their first job
experience and recommend ideas for improvement.
1. Identify the social issues to target Coca-Cola hypothesized that the small retailers
In 2008, after six months of studying the needs of could significantly improve their operations with
Brazil’s growing lower middle class population, trainee assistance, resulting in increased sales
Coca-Cola identified skills development among of Coca-Cola products and higher penetration of
low-income youth as a core social issue for strategic consumers among the emerging lower middle
focus. While the Brazilian government was rather class segment.
successful at providing primary education for all
kids, most young people at low income levels had 3. Track progress
little or no opportunity to find jobs due to their Coletivo supervisors in each community measure
lack of relevant skills and limited employment and report progress on a monthly basis, tracking
opportunities in their communities.
5
the number of youth participating, the number of Coca-Cola’s rigorous measurement by region,
retailers involved, and the performance of retailers community, and model during the pilot phase
over time. The company also closely monitors the allowed the company to identify and focus on the
costs associated with the effort to ensure its cost most effective approaches and interventions—ways
effectiveness and efficiency. Since launching the to unlock new value. For example, in the first year,
initiative in 2009, Coca-Cola has trained thousands Coca-Cola focused its training sessions on the tech-
of youth in retailing, business operations, and nical aspects of retailing, such as merchandising
basic entrepreneurship concepts. The company or stock management. Based on measurement
now operates 135 Coletivos across Brazil, each data, however, the managers realized that the
with an average of 500 students, and plans to students faced significant self-esteem challenges
be running 170 by the end of 2012. In 2012, the that prevented them from finding a job and being
program’s budget was several millions of dollars. effective workers. In response, Coca-Cola revised
the content of the training program to put more
4. Measure results and use insights to emphasis on soft skills, including leadership
unlock new value and presence.
Coca-Cola measures results using four key indica-
Measurement data also revealed that a key success
tors: 1) youth job placement; 2) youth self-esteem;
factor was the strength of the local NGO that
3) company sales; and 4) brand connection.
acted as an implementing partner. The company
The Coletivo Initiative has been highly successful modified its approach to bolster the NGO partners’
so far. Approximately 30 percent of the young management and leadership capabilities, and
people trained immediately land their first job helped them build sustainable sources of funding.
with Coca-Cola or one of its partners, and at least This support led to better retailer performance and
10 percent set up their own business with micro- a stronger Coca-Cola brand connection across the
credit support from the company. From a business community, both of which improved product sales.
perspective, an investment in a Coletivo site is
profitable in only two years.
Novo Nordisk and Novo Nordisk, a global healthcare company with As a global leader in insulin medications, Novo
Diabetes Care 88 years of leadership in diabetes care, has demon- Nordisk identified improving the health system
strated the power of measuring shared value and diabetes care in China as a core social issue
through its long-term growth strategy in the for its business.
Chinese insulin market.
2. Make the business case
1. Identify the social issues to target Two decades ago, Novo Nordisk initiated a long-
With China’s urbanization, fast-growing economy, term China market growth strategy centered on
and increasing affluence, residents are increas- improving diabetes care. Its shared value strategy
ingly prone to chronic disease such as diabetes. In was clear: by investing in physician training,
2010, an estimated 40 million people in China had patient education, and local production, the
type-2 diabetes, and that number was projected company believed it would dramatically improve
to double to 80 million over the next 15 years. the diagnosis of diabetes, a disease that was often
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Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
unrecognized, and increase the demand for its an estimated 80 percent improvement in total
insulin products. Helping to improve diabetes patient life years1 because of improved products
diagnosis, care, and treatment would not only and services, while increasing the company’s
improve the lives of millions of Chinese citizens market share from below 40% to 63% in the second
but would also improve the company’s bottom line. largest insulin market in the world. Surveys
indicate significantly increased diabetes control
3. Track progress rates, which reduce overall health system costs.
Novo Nordisk tracks several key indicators, such At the same time overall insulin sales increased,
as the number of physicians trained and patients providing direct business benefits to Novo Nordisk.
educated. To date, Novo Nordisk’s programs have
Through robust measurement, Novo Nordisk has
facilitated more than 220,000 physician training
also identified ways to unlock additional shared
sessions for more than 55,000 physicians who
value by refining its physician training approach.
treat, on average, 230 patients annually. Since
Analysis revealed that training physicians in
2008, Novo Nordisk’s Changing Diabetes® World
smaller cities is more effective in improving patient
Tour has visited more than 100 cities in China
outcomes than training them in big cities. The
and attracted over 60,000 patients for diabetes
company consequently rechanneled a greater
screening and free education sessions.
portion of its physician training toward second
and third tier cities, unlocking incremental shared
4. Measure results and use insights to
value.
unlock new value
Over the last decade, Novo Nordisk’s “Blueprint
for China” shared value strategy has resulted in
Intel’s Education Transformation strategy As one of the leading technology companies in Reconceiving
focuses on improving student outcomes the world, Intel launched the Education Trans- Products and
while also increasing sales of classroom formation strategy to help close this gap while Markets: Intel
technology. simultaneously growing business opportunities
Technology has great potential to improve educa- for the entire global information and communica-
tion results, provided it is integrated in a holistic tions technology (ICT) ecosystem. Intel supports
manner. Yet only five percent of the approximately government efforts to improve the quality of their
one billion students worldwide currently have education systems with a holistic model for educa-
access to a PC or the Internet at school and teachers tion transformation. The model combines advocacy
lack professional development, curricula, and for policy reform and leadership, curriculum
1
Refers to Disability Adjusted Life Years (DALYs), a common measure in the global health field, which represents the sum of
the years of potential life lost due to premature mortality and the years of productive life lost due to disability.
7
support of research and evaluation. The ultimate For Intel, shared value measurement is an essential
goal is to improve students’ learning and outcomes component of its product/solutions development
and the development of twenty-first century skills. and sales process. A key to business success is to
The model also offers business opportunities for understand “what works” for students and teachers
the entire ICT ecosystem by increasing sales of and to incorporate that knowledge into product
classroom technology and, in the long term, design and deployment. Intel tracks product
helping to prepare the future workforce. performance on characteristics important to
kids’ classroom usage, such as ruggedness, water
resistance, and battery life, as well as levels of
“What we found at Intel was just because you
teacher engagement and student performance.
have the data, it isn’t everything. It’s more about
how you’re using that data and how you're Post-sales measurement creates a virtuous cycle of
innovation; better understanding of educational
changing your decision making with that data.”
needs and the impact of Intel’s education tech-
Shelly Esque, Intel nology solutions improves the product, ultimately
leading to additional sales and greater market
To inform this strategy, Intel researchers studied share for Intel.
how students and teachers interact to understand
For instance, teachers in Pirai, Brazil, using the
how a technology solution could support and
Intel®-powered classmate PC, scored above the
optimize the learning experience and outcomes.
national average for quality of lesson plans and
Together with governments, education institu-
delivery of materials for the three years measured
tions, and regional training agencies, Intel teams
after implementation of the pilot. In Portugal,
designed and implemented teacher professional
where a national project was launched in 2007
development programs, including the Intel® Teach
to provide every primary school student with a
program, which through mid-2012 had trained
classmate PC for home and school, PISA (Program
more than 10 million teachers worldwide. Intel
for International Student Assessment) scores rose
also engaged national governments and educators
by approximately 20 points in all three subjects
to develop tailored solutions, such as the Intel®-
tested (reading, science, and math) between 2006
powered classmate PC and the broader Intel®
and 2009.
Learning Series family of products, including
infrastructure, software, content, and services Linking educational outcomes to the effective
such as training and support in addition to hard- application of technology and other elements
ware. These innovations were designed to meet of the education transformation model can help
the country’s education needs, to support the school systems understand the importance of the
growth of the local ecosystem, and to grow Intel’s integration of ICT in education. This can lead to
own business. further adoption of new technology in the class-
room, thus driving Intel’s business. The strong
Insights from measuring technology focus on continuous product improvement based
effectiveness in the classroom are on the insights from measurement has also led
informing Intel's product and program the company to achieve market leadership in the
improvements, resulting in better learning growing global education technology market with
and increased business. an increased market share.
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Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
InterContinental Hotels Group tested Insights from measurement drive ongoing Redefining
dozens of options for reducing energy, improvements. Productivity in the
water, and waste to lower its environmental Shared value measurement has been instrumental
Value Chain:
footprint while also driving down hotel in driving Green Engage to achieve resource effi-
InterContinental
operating costs. ciencies and cost reductions across hundreds of
Hotels Group
InterContinental Hotels Group (IHG), the largest hotels. Through measurement, IHG gained a rich
hotel company in the world, launched its Green understanding of the relative shared value poten-
Engage program when the company assessed tial of a wide range of practices. Green Engage
its environmental footprint and realized that was rolled out to more than 1,900 hotels using an
energy represented its second largest cost. IHG online tool that continues to update actual shared
also identified water and waste as environmental value returns based on the ever-growing base of
and social issues with significant shared value program adopters. The program has helped to
potential. Green Engage started in 2009 by testing create substantial reductions in hotel operating
dozens of options for reducing energy use, water costs, including energy savings of up to 25 percent
consumption, and waste disposal in pilot hotels. at individual sites.
These included new cooling/warming systems,
solar panels, and automatic computer shutdown “When measurement is done right, you can start
applications. The objective was to provide a detailed to develop theories around how these targets
ranking of all possible shared value opportunities impact your business. Measurement leads to real
in terms of returns to IHG as well as its franchises.
refinements not only of the things you measure,
Areas with high environmental impact and return
were clearly distinguishable from other areas
but even in how you run your business.”
popular with the general public, such as solar David Jerome, IHG
energy, which yielded fewer reductions in emis-
sions or economic value.
Nestlé trains and assists smallholder 10,600 support staff across the world to trainEnabling Cluster
farmers to foster rural development while farmers, provide them with better technology, Development:
ensuring a reliable supply of high quality and assist farm communities in local develop- Nestlé
raw materials. ment projects.
9
a new milk district in Rajasthan to satisfy the free agricultural advice, veterinary services, and
increasing demand for milk. This initiative builds other essential infrastructure.
on the company’s long history of helping Indian
To date, Nestlé has worked directly with more than
dairy farmers increase the productivity of their
8,000 farmers in Rajasthan. The company’s rural
cattle, starting with the establishment of the first
officers monitor progress through regular farm
milk district in Moga
visits and they track specific indicators such as herd
“Improving farmers’ lives is only in 1961 and later in
size and cattle health. Nestlé also measures the
possible when measuring progress the state of Haryana.
increased volume of milk it sources, which in this
Today, Nestlé assures
at a farm and rural community level.” region has grown 13 percent per year since 2008.
purchase at declared
Janet Voûte, Nestlé prices to more than As Nestlé’s agronomists gain a deeper under-
110,000 farmers— standing of the performance of individual farmers,
many of whom depend on milk production for their they are able to better allocate their efforts to
living—and supports their development through those farmers who have the most improvement
the establishment of collection and chilling centers, potential and can therefore increase the shared
value created.
10
Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
meaningful improvements in social and environ- some of which may be influenced by a company’s
mental performance. Their emphasis, however, specific societal engagement activities. However,
has been on comprehensiveness (covering all a range of other factors also influence reputation,
possible impacts) and on demonstrating progress such as product quality, marketing, and execu-
against these issues to stakeholders. tive leadership. Attributing an overall reputation
rating to any single company action is challenging,
A subset of sustainability measures, such as
so it remains difficult to ascribe a direct linkage
tracking the reduction of water or energy use,
between social responsibility efforts and business
for example, can form the basis for shared value
value accrued from reputation enhancements.
measurement in businesses where these areas are
Shared value measurement, in contrast, focuses
material to the company’s financials. Which areas
on measuring how social outcomes directly drive
to measure for shared value, however, depend
tangible business value creation.
on the industry and the company’s strategy and
business model. The positive perception of a successful shared
value strategy can amplify the overall business
Impact Assessments are conducted by companies
value created. In the case of Coca-Cola’s Cole-
to demonstrate to stakeholders that their operations
tivo program in Brazil, for example, engaging
or philanthropic investments have created positive
trainers and trainees in improving the perfor-
benefits for communities. Such studies focus on
mance of retailers directly affects Coca-Cola
social, environmental, or economic development
sales. In addition, however, Coca-Cola’s brand
impacts and changes over time. They are often
perception and consumer engagement improves
retrospective or based on complex (and costly)
markedly in the Coletivo communities, contrib-
evaluation methodologies such as randomized
uting to sales increases. Similarly, in IHG’s Green
control trials, and they typically contain little or
Engage program, the direct business value of the
no connection between the studied impacts and
energy cost savings is supplemented by enhanced
company performance. Impact assessments can
customer engagement. For example, some corpo-
contribute to shared value measurement when
rate customers sign exclusive deals with IHG
the demonstration of impact informs a shared
because of its environmental track record; such
value strategy. For example, a detailed study on
business flows directly from the Green Engage
the health impact of micronutrient products in
shared value program.
diets can be used to anticipate the shared value
potential of a new product designed to meet micro- Compliance measurements indicate how well
nutrient deficiencies. companies meet laws, standards, and policies
throughout the world, and many companies
Reputation measurement differs fundamentally
have well-established systems and externally
from shared value measurement. Many companies
validated measures to track compliance. The
use perception surveys and reputation metrics
primary purpose of such compliance activities
to consider how their philanthropic and social
is to maintain a license to operate. Nonetheless,
responsibility efforts improve their reputation
companies rarely seek to quantify the potential
and brand. While brand value does influence busi-
business value of avoiding adverse events.
ness value, such approaches capture the overall
perception of a company on multiple dimensions,
11
TABLE 2: MEASUREMENT WHAT TO MEASURE? WHY MEASURE? FOR WHOM?
FOCUS
Understanding
the Purpose of Shared Value Joint business and • Grow the total shared • Primarily for
Measurement social value creation value created management
• Targeted
communication to
external stakeholders
Shared value measurement should not displace shared value strategies. The current emphasis
current measurement approaches. Companies on comparability across companies, compre-
will continue to audit their compliance with hensiveness across issues, and corporate social
established laws or voluntary policies, report on responsibility will not replace the need for tailored
the ESG factors that stakeholders expect, conduct measurement of the connection between busi-
impact assessments to demonstrate their positive ness and social value that promises to shift the
impact on society, and track perceptions of the fundamental connection between business and
company’s brand. social progress.
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Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
2
While precise global data on socially responsible investment (SRI) are not available, this figure represents an assumption
based on publicly available estimates for SRI in the United States, Europe, and Canada.
13
industries. For example, they have statistically value to a human life. In contrast, shared value
demonstrated that in redefining productivity in the measurement looks at the actual economic value
value chain, specific issues such as carbon and water accrued to the business from improving social
use do indeed matter most to specific industries outcomes, without making any assumptions
and companies. about the economic value of the social change.
Monetizing ESG Performance and Creating Shared Value Measurement’s Role with
Notional Financial Statements Investors
Some companies have sought to estimate the cost Measuring shared value offers a direct connection
of externalities and incorporate them into shadow between social and business results. It focuses on
profit and loss statements. Puma, for example, has measuring those company activities and invest-
created an “environmental P&L,” which includes ments that drive social change and, through
a notional cost for its greenhouse gas emissions them, business results.
or water use in its supply chain, thus integrating
A way forward for integrated reporting should be to
lost “environmental capital” into its financials.
recognize the difference between what is measured
The objective is to encourage more companies to
to demonstrate impact and what is measured to
adopt such measures. Eventually, governments
capture value creation. Measuring compliance and
could tax these externalities and therefore trigger
progress across a number of important issues as
greater efforts by companies to better manage
captured by ESG indicators, where companies seek
these costs. While understandable, this approach
to improve their impacts on society at extra cost as
faces considerable hurdles. It requires assigning
a matter of responsibility, should be clearly distinct
a value to environmental and social capital, for
from shared value measurement, an approach to
which consensus will be hard to achieve. Also,
capture data and insights on strategies to deliver
financial officers and investors are not prone to
both social and business outcomes.
taking fictitious costs seriously. Puma, in fact,
continues to publish its conventional financials DSM, a diversified life sciences and material
for investors. sciences company that releases an “Integrated
Annual Report,” clearly makes this distinction in
The concept of SROI (social return on investment)
how it reports on its shared value creation from
has emerged as another way of considering the
a specific product strategy compared to how it
total value of investing in social or environmental
reports progress on key sustainability indicators,
outcomes. By estimating and assigning a finan-
GRI results, and compliance. DSM’s integrated
cial value to social or environmental outcomes,
report includes its financials and links financial
and then adding that estimated value to actual
and social results where it intended to deliver
economic value, SROI creates a “total” economic
such shared value; for instance, the same report
value. The SROI methodology is problematic for
discloses both the contribution to revenues of its
the investor community because it combines
ECO+ products and their impact on the environ-
notional and actual economic value and hinges
ment. However, the company does not seek to
on a subjective estimate of the monetary value
assign a financial value to its progress on sustain-
of social change—one extreme example of such
ability and compliance objectives.
difficulty is the challenge of assigning a monetary
14
Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
Challenge #1: A Wide Range of Social reaches millions of customers? What is the health
Issues Could Be Addressed and Measured impact of a new medicine for the population as
Identify and measure the few high-priority a whole? Pharmaceutical companies use clinical
social results that the shared value strategy studies to establish the efficacy and safety of
possible benefit for every possible social dimen- be adapted to other social issues. Jain Irrigation
sion affected by their efforts. For example, Intel Systems, for example, tests each irrigation tech-
has outlined specific goals in the areas of teacher nology prototype in the field to determine its impact
professional development and policy change to on agricultural yields and water savings, and it
guide its Education Transformation strategy, and only launches the product if the prototype adds
it links these goals to countries’ socio-economic value. Once it commercializes the product, Jain
development outcomes. For over a decade, Intel continues to collect specific data on the farm-level
engaged third-party research firms to evaluate the impact of its products and uses this to continuously
progress of Intel’s education programs. improve the product through its R&D process.
15
on mapping consumer micronutrient deficiencies go beyond a single community, and tracing the
and tracking Nestlé fortification efforts relative value of milk used in different end products is a
to those gaps. In some cases, Nestlé uses targeted rough science. Instead, Nestlé tracks the overall
studies that track the specific nutritional and volume of milk sourced and milk quality measures
health impact of Nestlé fortified foods. as pragmatic proxy indicators for business value.
16
Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
17
sector expertise to the process and add credibility assessment of products in the pipeline to ensure
to the results. For example, GE works with Oxford that they meet the social and business targets set
Analytica, a global analysis and advisory firm, by GE, especially for social value creation; and it
to measure the impact of Healthymagination, conducts ongoing measurement of products on the
GE’s business strategy to commercialize medical market. On health access, for example, Oxford
technologies that reach underserved and rural has created a formula that estimates how many
populations. Oxford Analytica supports GE in patients per day use a specific product based on
two ways: it conducts and/or validates upfront the number of units sold.
18
Measuring Shared Value: How to Unlock Value by Linking Social and Business Results
REFERENCES
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We thank Nestlé, Intel, InterContinental Hotels Group, and the Rockefeller
Foundation for supporting this important research and for serving as founding
members of FSG's Shared Value Initiative, a field-building platform designed
to drive adoption and improve implementation of shared value strategies. The
Initiative provides the research, tools, and interactive forums necessary to build
a strong and engaged community around shared value knowledge and practice.
The Shared Value Initiative's strategy is guided by a Leadership Council, comprised
of a select group of leading shared value organizations.
LEADERSHIP COUNCIL
Nestlé | Rockefeller Foundation | Verizon
SUPPORTERS
Arauco | Intel | InterContinental Hotels Group
AFFILIATES
BD | The Coca-Cola Company | Eli Lilly | Medtronic | Western Union
FSG is a nonprofit consulting firm specializing in strategy, evaluation,
and research, founded in 2000 as Foundation Strategy Group. Today,
FSG works across sectors in every region of the world—partnering with
corporations, foundations, nonprofits, and governments to develop
more effective solutions to the world’s most challenging issues.
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