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Social Development is Good for Business

 

An article in the latest issue of Harvard Business Review introduces the crazy idea that for-profit companies can actually best address society’s needs and challenges and drive social progress…and I happen to agree with them.

The innovative idea behind this article is called creating shared value (CSV) and suggests that by “creating economic value in a way that also creates value for society by addressing its needs and challenges,” businesses can not only contribute to social progress but actually increase profits. Sound too good to be true? Well it’s not.

According to the article, many businesses have already created or changed their business models to incorporate shared value and have seen impressive results. By adjusting their business practices to address social needs related to issues such as health, safety, and the environment, companies have been able to save money and increase profits while actually improving their communities.

Below are two interesting examples of how for-profit companies have made this work.

Revolution Foods provides 60,000 fresh, healthful, and nutritious meals to students daily at a higher gross margin than traditional competitors. Meanwhile, 3% of the net revenue of their box lunch sales goes to their School Lunch Program that helps feed kids in underserved schools across the US, further promoting better nutrition.

Marks & Spencer has overhauled its supply chain to reduce carbon emissions by taking steps such as stopping the purchase of supplies from one hemisphere to ship to another and is expected to save £175 million annually by fiscal 2016. This is part of their eco and ethical programme to become the world’s most sustainable local retailer by 2015.
 

Corporate Social Responsibility vs. Creating Shared Value
The article contends that based on these and many other examples of success, creating shared value (CSV) needs to replace corporate social responsibility (CSR) for the benefit of society as well as businesses. Currently, CSR is a separate component of a businesses’ core model and is a voluntary action they take to address societal interests, such as holding a yearly food drive or making a large contribution to a local charity.

Although this involvement is generous and commendable, one could argue that these gestures are largely publicity stunts to improve the public image of the company. And still, the company likely receives little economic benefit from these minimal societal interactions.

The chart below clearly illustrates the differences between CSV and CSR and ultimately the advantages of choosing shared value.

 

Fair Trade vs. Creating Shared Value
As mentioned in the chart, fair trade is actually an example of CSR. You may be asking yourself, “but isn’t fair trade good?” The answer to that is “yes, but we could do better.”

The article describes how fair trade aims to increase the amount of money going directly to impoverished farmers by paying them higher prices for the same crops. This is achieved by redistributing where the money goes, not by creating more value for the crops.

On the other hand, the shared value model aims to improve growing techniques and strengthen their local cluster of supporting suppliers to ultimately increase the farmers’ efficiency, yields, product quality, and sustainability. This model creates larger revenue and profits that benefit both the farmer and the companies that buy their crops from them.

If you’re still not convinced, the article explains how one study shows that cocoa farmers in Côte d’Ivoire received an income increase of 10%-20% through fair trade, but those participating in a shared value system saw their income increase by more than 300%. Through these methods, CSV could be a huge step in helping end extreme poverty.


So what do we do now?
It could be awhile before companies warm up to the idea of adopting shared value as the core model of their business. I think the best we can do to promote this idea of creating economic value in a way that also creates value for society is to spread the word and share these thoughts and ideas with business owners.

Until shared value is more universally adopted, fair trade is still the best way to support impoverished farmers and ensure they receive fair wages that will help them pull themselves out of poverty. You can read our previous blogs or visit the Fairtrade Foundation to see how companies are making huge impacts on lives every day through fair trade.

The video below is a short clip of one of the authors of the article further describing shared value and how businesses can earn the respect of society again by helping their community while they also help themselves.

Posted by Ashli Alberty in Fairtrade & Ethical Purchasing for column Business In Action on Feb 4th 2011, 07:42

The Co-Operative: Fighting Global Poverty?

 



The above short film from the Co-Operative was launched just before Christmas alongside the Co-Op’s commitment to put fighting poverty at the centre of their work. Not just the centre of their social responsibility program, but at the centre of their business, as their below diagram shows.

This is a welcome change from making corporate responsibility work a small side project for a business, but it's also a challenge as pressures of profit-making bump against a commitment to values that might not always agree.

You can learn more about the Co-Operative’s work on poverty at their website, or by liking their page on Facebook.

What do you think – are the Co-Op serious about fighting global poverty?

GPP Supporter Questions to Nestle - Responses 2

 

Recently we met with the team at Nestle UK, and they offered to answer some of your questions about how they work. After gathering your suggestions on Facebook, we passed the five most liked questions onto Nestle. These are the answers from Nestle's Corporate Affairs team for questions 3, 4 and 5. The answers to the first two questions are published here. Our thanks to Alison and Sam at Nestle for being open to such dialogue.

3/ Clarice Fell: Hi there, so great what you guys do. I recently took a 4 month trip to Uganda Africa. I saw where coffee is made. Where the beans are grown. Nescafe and other major coffee brands buy their beans from there. They pay next to nothing for it the workers live in extreme poverty. The companies put massive taxes on the coffee and charge us massive prices. I don't know how one of the world’s biggest exports leaves it's workers in poverty. I know that this same senario is like for chocolate the coco beans are sort the same way. If anything ask them to provide better pay and living conditions to the ones who actually grow the coco beans. As without them there wouldn't even be chocolate. Ask them to follow Cadbury’s league and make it fair trade. Thanks any way for all the hard work. Praying for justice for our world. :)

For more than 30 years, we have been working with our coffee suppliers to encourage sustainable farming and improve the living standards of coffee-farming communities. To do this we need to address global issues such as food and water security and work with coffee farmers to improve the quality and quantity of their produce as this is crucial to increasing their income.

In August 2010 Nestlé launched The Nescafé Plan, a global initiative which aims to help guarantee a long term supply of quality coffee produced with a lower environmental impact. The plan will be implemented with the support of Rainforest Alliance, other partners from the Sustainable Agriculture Network (SAN) and the 4C Association (Common Code for the Coffee Community Association).

The plan outlines our commitments in three key areas; coffee farming, coffee production and consumption and is backed by an investment of £213 million until 2020. Similar to The Cocoa Plan, The Nescafé Plan accelerates and expands programmes of support that we have been involved in for decades. We believe it will help us guarantee a long term supply of quality coffee by making coffee farming more attractive to the next generation of farmers and enable them to produce coffee with a lower environmental impact. Information is available for consumers on both www.nestle.com and http://www.nescafe.com/sustainability-uk.

4/ Jenny Jones: I live in Australia and if I see something with Nestle attached to it I deliberately don't buy it. So my question would be: "when will you step up and lead the world in becoming a fair company that puts your fellow humans in front of your massive profit? I'm sure you can afford to do this. That's when I will start supporting your products again."

Nestlé’s basic business principle is that we can only create value for our shareholders if we at the same time create value for society and we have identified three focus areas where, for Nestlé, business and societal value creation can be optimized and these are nutrition, water and rural development. We call this Creating Shared Value (CSV).

About half of our factories are in developing countries and we source about 70% of our raw materials from these rural areas. CSV means that more than just being present in these regions, we are actively leveraging our presence to reduce poverty, improve nutrition and health, and preserve the environment for future generations.

We have recently published a report which outlines over 290 business activities and programmes which support one or more of the United Nations Millennium Development Goals (MDGs) (http://www.community.nestle.com/Pages/mdg-landing.aspx) which you may be interested in looking at. The projects range from supporting female livestock workers in Pakistan to helping farmers in our supply chain reduce the environmental impact of the crops they produce.

5/ Awal Ahmed: I want to know what measures they have in their contract to ensure environmental sustainable production methods at the community level and what they are doing to reduce communities vulnerability to climate change?

Environmental responsibility is a key component of our Corporate Business Principles and Supplier Codes (http://bit.ly/ieh2aB and http://bit.ly/dKZ4TH). As a company our aim is to not just offer products with the lowest environmental impact compared to alternatives but to work throughout our supply chains to reduce the environmental impacts of farming and crop production and promote sustainable agriculture. A key component of our major initiatives such as The Cocoa Plan and The Nescafé Plan is to help farmers produce crops in a way that minimises the environmental impact while maximising yields and to help them deal with challenges such as climate change. For example we supply coffee and cocoa farmers with high potential plantlets which produce earlier and are bred to be disease resistant. We have also highlighted water as a priority issue. Aside from our global commitment as a founding signatory of the CEO Water Mandate an initiative led by the United Nations Global Compact, we are committed to improve our efforts in sustainable water management across the business www.nestle.com/csv/environment. As agriculture uses two thirds of the world’s water we also work with farmers and suppliers to encourage effective water management – in courntries ranging from Italy to Cote d’Ivoire. Our drip irrigation project in Nicaragua is a good example of working collaboratively to develop a low-cost drip irrigation system to be used in plantations where we source coffee as part of a public private partnership between Nestlé, ECOM, the Rainforest Alliance and International Development Enterprises IDE covering 1500 coffee farmers. Through the sustainable use and control of water we can accelerate plant growth and achieve better quality crops even during water-stress periods. You can read more about this and other projects in our MDG Report www.community.nestle.com/mdg7 or on the section on water on www.nestle.com.

Goat Gifts 101

 

A guest blog from Julie Cowdroy: an ambassador for the Global Poverty Project and Opportunity International Australia. This article was first published on ABC 's The Drum on the 21st of December 2010 - you can read the Drum article, here.

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Pictures of goats are popular at this time of year. Cards and e-cards featuring a photograph of a goat usually wearing sunglasses are in circulation representing the fact that somewhere, someone has received a goat, and someone else has received a picture of a goat.

The charity gifts trend is alive and well in Australia and many are jumping on board to purchase goats as well as a plethora of other gifts, spending anywhere from $5 to $10,000. One can choose to buy pencils, poo, piglets, or a taxi service in the Philippines for the world’s poorest people.

TEAR created the first charity gifts catalogue in 1994 while Oxfam launched its first Unwrapped campaign seven years ago, and many poverty driven NGOs have hightailed it to follow in their, er, hoovesteps. An environment of goodwill is a great way to stimulate some Christmas cha-ching for overseas development programs - in 2008, Oxfam alone raised $6 million, even at the height of the GFC - but it’s also what we as consumers want.

According to a 2005 report issued by the Australia Institute, 73 per cent of Australians would be happy to receive a charity gift, although, of course we would answer that way.

Still, a marketing manager of one organisation that only jumped on board the charity gifts bandwagon this year said that they decided to run a Christmas campaign because many of their donors were asking for it. Why? People are sick of buying crap at Christmas. They want something more ‘meaningful’.

Yet how meaningful are goats? There is nothing worse then getting something you don’t need – a universal truth that also applies to those who live below subsistence.

One of the first lessons that purchasers of such gifts learn is that it is not always clearly articulated that paying for a goat does not actually mean that a kid named Billy is bought and shipped off overseas. Often the money is collected and spent on projects and programs according to where an organisation decides the ‘most need’ is.

The method of delivery varies from group to group. For instance, every gift available for purchase at ChildFund Australia has been researched and the number of, say, piglets available for ‘sale’ is the number of piglets required for a particular community. You buy a piglet, a piglet shall be given. World Vision and Oxfam have broader categories. Buy a chicken and they’ll put the money towards their livelihood programs. Buy a bicycle ambulance or a hip-hop microphone and the money will go towards their education programs. Yes, one of the items you can buy is a hip-hop microphone. World to the Vision.

TEAR have a colour-coded system - red for education, green for agricultural and farming gifts, blue for health and so on. By placing gifts within categories as TEAR, World Vision, Oxfam and others do, the donor can see how their gift is a part of a broader development strategy.

Edward Fox, who was Oxfam's Fundraising and Marketing Director until 2007, and is now the CEO of Opportunity International UK says, “When done well, the charity gifts proposition can improve the public’s understanding of the charity and increase the supporters’ affection for the cause. They can be fun and they are a light-hearted way to explain (unwrap) what the charity does.”

The desire to understand more about international development is evident in the many requests to organisations for donors to track specific gifts and get a photo of the actual gift being given. It seems to get on one’s goat not knowing who gets one’s goat. Some are bursting to know if someone will be bursting with gratitude to see the goat that they gave. NGOs do not generally offer this service.

However, a group called Charity:water has an aspect to their campaign called Proving It. Once a donor funds a project, local partners submit reports back to the group about the execution of the project. Charity:water then give donors photos as well as coordinates to plug into Google Maps so one can see the project they funded. A commemorative plaque is uploaded that recognises the donor and community who worked together to make the project possible.

People enjoy this. They want to feel connected to the receiver of the gift. However, it is a very fine line between wanting to know where one’s donation ends up and reinforcing the message that donors are the “Whites in Shining Armour”.

Goats at Christmas time provide the perfect opportunity to reflect on how we approach international aid and development. Archie Law, CEO of ActionAid says, “For the world’s billion hungry people who are marginalised and excluded from basic services, the daily struggle continues long after Christmas. When you buy that goat this Christmas maybe you can spend a moment thinking about what you can do in 2011 to contribute to the long-term changes needed to affect meaningful change in the lives of the most excluded.”

There are great projects and programs that poverty-driven NGOs are executing and donors should ensure they are savvy and do their homework to make sure the groups they channel money into have sustainable development strategies. True partnership with the worlds marginalised involves an understanding on our part of the role goats play in global development. And that shouldn’t get on anyone’s goat.

 

GPP Supporter Questions to Nestle - Responses

 

Recently we met with the team at Nestle UK, and they offered to answer some of your questions about how they work. After gathering your suggestions on Facebook, we passed the five most liked questions onto Nestle. These are the answers to the first two questions from Nestle's Corporate Affairs team. The answers to questions 3, 4 and 5 are posted here. Our thanks to Alison and Sam at Nestle for being open to such dialogue.

1/ John Scale: I would like to ask why they continue to aggressively market baby milk formulas in developing countries, even going as far as promoting them as providing protection against illnesses such as diarrhoea despite the mass of evidence showing how this is causing huge harm to children in these countries and continuing breast-feeding could save 1.5 million children a year.

John, you raise a number of important points. Nestlé supports exclusive breastfeeding for the first six months of a baby’s life with continued breastfeeding and the introduction of adequate complementary foods thereafter because as the World Health Organisation (WHO) has stated “… some 1.5 million children die each year because they are not adequately breastfed”. However, the WHO never suggested that ‘not adequately breastfed’ meant ‘fed on infant formula’. The vast majority of women in developing countries breastfeed but exclusive breastfeeding is rare. In those countries, most children who are not exclusively breastfed do not receive infant formula, but are given water, solid foods like sticky rice, or whole cow’s milk which are not considered appropriate substitutes (for more information, see: www.unicef.org/publications/index_51656.html).

We take our responsibility to market infant formula in a responsible manner very seriously and have, since 1982, applied the WHO International Code of Marketing of Breast-milk Substitutes universally and voluntarily in developing countries. Today this means that we do not advertise or promote infant formula to the public; do not donate free samples to mothers or to hospitals; ensure that all our infant formula products state that ‘breastfeeding is best’ with instructions for the safe preparation in the primary languages as well as diagrams to overcome the challenge of low literacy. Also, all our labels comply with local legislation and all health claims we make are scientifically substantiated. If you know of a Code breach, tell us and we will investigate. For more information please follow the link to our website www.babymilk.nestle.com.

2/ Graeme Hodge: Nestle: when are you going to expand your Fairtrade accreditation to all of your products and stop hiding behind the cocoa initiative- an initiative that has made little or no change to the daily reality for over 12,000 trafficked children who produce your cocoa products for you?

Nestlé has been working to address key issues facing cocoa farmers for many years and in 2009 we launched our £65million Cocoa Plan to accelerate programmes that aim to improve the economic, social and environmental issues facing cocoa farming communities. See www.thecocoaplan.com

Focusing predominantly on Cote d’Ivoire the world’s largest cocoa producing country the plan is based around working closely with farming cooperatives, paying a premium for better-quality cocoa, investing in farmer training and providing 12 million high potential cocoa plantlets to improve yields and therefore farmer productivity and income.

Kit Kat is our leading confectionery brand and Fairtrade certification of our most iconic brand is a demonstration of our commitment to bringing The Cocoa Plan to life and improving the lives of cocoa farming communities. We have started with Kit Kat four finger because one of the challenges of certifying a brand as large as Kit Kat is that there is currently insufficient supply of quality Fairtrade certified Ivorian cocoa to certify the whole brand. We will continue to work with Fairtrade to build relationships with additional co-ops to increase the supply of high quality Fairtrade cocoa from the Ivory Coast.

With regard to child labour Nestlé is against all forms of exploitation of children. The company is firmly committed to actions to eradicate unacceptable practices, in line with our commitments in the Nestlé Corporate Business Principles and the Nestlé Supplier Code and you can find out more about these on our website at (http://bit.ly/ieh2aB and http://bit.ly/dKZ4TH). We are also a founding member of the International Cocoa Initiative set up specifically to address child labour issues in cocoa farming. I would also urge you to consult the Fairtrade position on child labour. The Fairtrade Labelling Organisation recognises “child labour is a very complex and intractable issue...” Unfortunately, “no person or organisation can simply guarantee that child labour does not occur in a supply chain, but Fairtrade can provide assurance that its standards, certification, and producer support services all contribute to a solutionhttp://bit.ly/fx20E2.