Market Analysis

Dan Swinhoe (Global) - Shared Value in Emerging Markets: How IT & LatAm Are Doing It Right

The world is in a bit of a stink. People are poor and hungry, cities are full to the brink of bursting, companies are seen as evil money grabbers, while at the same time having no money. Wouldn't it be nice if there was a way to address these problems all in one go?

Turns out there might be - Shared Value.

First seen a couple of years ago under the title, "How to fix capitalism", the concept is fairly simple. Instead of simply giving money away to charity to improve your image, it's about identifying a social need, and supplying a solution that helps the people/environment and creates profit for the company.

It's a fairly new idea, not too dissimilar from Blended Value, and has been talked about it by both Forbes and the Economist. There have been supporters and naysayers, but in theory it's a perfectly good approach; improving people's lives in a sustainable way that the business can profit from.

Though similar to corporate social responsibility, there are subtle but important differences. Where CSR is often about donating to charity seemingly at random, meeting social obligations and improving the brand image, "creating shared value is about driving profitability and competitive advantage by finding sustainable business models to address social problems." In essence, a business strategy for philanthropy. How you create shared value is entirely down to your company: Work in industry? Go green. Retail? Be fairtrade.

FSG, the company behind the concept, see Shared Value as a way of changing emerging markets. As well as a report on Shared Value in the BRICS, they recently published a paper on how CSV can be applied specifically in India, especially in areas such as Healthcare & Sanitation, Agriculture and Financial Services. In many ways, the emerging markets are providing more markets with a model they can follow.

FSG's director wrote in the Guardian that Latin America is leading the charge. From billion dollar Mexican housing companies building houses specifically with low income families in mind, to agriculture companies refining training programs and natural pesticides companies have embracing ways to beat social ills. Brazilian industry is often described as the "Third Sector," complementing government and NGOs to address social ills. Grupo Martins, Brazil's largest wholesaler, created a bank to help finance the many small businesses it supplies.

As well as local companies, large multinationals have started embracing the concept in the region. Nestle have been firm supporters of the cause. By improving their direct relationships with the coffee bean farmers, they were able to ensure a better supply chain; higher quality produce for Nestle, more money for the farmers themselves. Small businesses such as farmers make up some 97% of the business population, responsible for around 70% of formal employment and contribute a huge amount the region's GDP, so the importance of pairing up with larger companies cannot be understated.

IT can be a big part of shared value. Whether it's aiming to help create Latin ‘Silicon Valleys' that help educate the locals, improve working conditions and breed innovation; providing cheap laptops; or government efforts to bridge the digital divide through One Laptop Per Child programmes; the modern ages relies on technology, so it only makes sense that IT companies get involved.

Several tech companies are already getting in on the shared valuation action. Verizon have got on board with commitments to reducing carbon and improving healthcare - linking doctors and patients remotely through telehealth services. Likewise Intel have embraced education; benefitting the children with better equipment and standards, benefitting the company with sales and a better workforce. IBM's Smarter Cities scheme can be seen as a good example of shared value. In Rio for example, a massive datacenter was built to help aide the city's responsiveness to accidents and emergencies.

While simply embracing a new concept won't fix all the ills of the world and business, it might help a little, at least on a small scale. The emerging markets have got in on the action, and IT is waking up the potential. Shouldn't you too?

By Dan Swinhoe, Editorial Assistant, IDG Connect


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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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