Section – C Group 10Ankit Goel (13P124) Avijeet Rathore (13P134)Dheeraj Maken (13P139) Nikhil Jain (13P152)Raghavender Sridhar(13P157) Sohan Shetty(13P175)Versha Mangla(13P179)

Idea in Brief

• Company leaders recognize that social problem present constraints as well as opportunities

• But, companies still struggling to deliver both social and business benefits

The Problem

• Firms are not guided by social mission and don’t know how to research social problems

• CFOs lack experience in measuring and linking social and business results

• Building a network of external shareholders can be challenging

The Reason

• Firms need a tested framework to create profitable social enterprise

• It consists of five mutually reinforcing elementsThe Solution

The 5 Mutually Reinforcing Elements

Embedding a Social Purpose

Measuring Shared Value

Creating Optimal Innovation Structure

Defining the Social Need

Co-creating with External Stakeholders

1.Embedding A Social Purpose

• Creating Shared Value entails

– channeling resources to develop innovations that can solve social problems– embedding a social mission in the corporate culture– involving the social purpose in core processes like

strategic planning and budgeting– re-emphasizing a firm’s founding social obligations

“ A leader can draw on a different legacy to direct the organization towards a social purpose ”

Innovation, nature, people and “Danone for All”

• Franck Riboud, the CEO of Danone, realized that the company had drifted away from its origins as a health food manufacturer

• Stakeholders were increasingly concerned about nutrition

• In 2000, he sold off beer, meat and cheese units• Refocused on other dairy products, water and

acquired baby food and medical nutrition businesses

2. Defining the Social Need• Firms need to understand the underlying social conditions and how best to change them• Conduct extensive research to:– Develop a comprehensive view of the problem– People affected and their numbers– Barriers to progress– Options for driving change– Parties that can help

“ If a company does not devote time and resources in research process to develop a deep understanding of a social problem, it

risks pursuing ineffective solutions”

Focus on Malnutrition “Maggi Masala-ae-Magic”

• Maggi Masala-ae-Magic is a micronutrient-reinforced spice product for low-income consumers in India priced at Rs.3

• Researchers studied the most prevalant nutritional deficiencies in India

• Found that 70% children under age of 3yrs and 57% women suffered from anemia

• Spices – an optimal vehicle for hiding bad taste of crucial micronutrients: iron, iodine and vitamin A

• In 3 yrs, Nestle sold 138 mn servings and reached to the most remote & affected areas

3. Measuring Shared Value

• No universal system to monitor the progress of social and business benefits exists as of now

• Sustainability Accounting Standards Board • Trying to create industry based standards • Stakeholders could compare firm’s environmental and social impact

• International Integrated Reporting Council• Developing a common framework for submitting integrated reports • Covers financial, environmental, social and governance performance

The 3-Step Process to Measure Shared Value

1. Estimate business & social value

• Anticipate the degree of change in social condition that will drive profits• Strategy for achieving that change and getting investors

2. Establish intermediate measures and track progress

• Validate the link b/w social & business initiatives• See which approaches don’t work and refine the strategy

3. Assess the shared value produced

• Measure the ultimate benefits produced based on some parameters• Helps in expansion to new areas and justify additional investment

4. Creating the Optimal Innovation Structure• Riskiness of new projects can threaten a firm’s established business• Firms have the following options:

• Integrate with a legacy business – core business should develop and launch the initiative if

• Firm already has a clear social purpose• Understands the targeted social problems• Possesses competencies to solve them• Can build a strong business case for the social enterprise

Finland’s Kemira is a diversified producer of chemicals with expertise in water chemistry. It restructured its R&D deptt. and forged alliances with other companies to pursue ideas for new water treatment solutions. Proposals that got a go-ahead were managed by Kemira’s core business functions

• Create a semi-autonomous unit – if a new social venture isn’t likely to satisfy the company’s normal financial requirements i.e. it might take very long to become profitable, it should be shielded from established business.– Novartis founded Arogya Parivar, to reach millions of poor people in

emerging markets who couldn’t afford or gain access to healthcare. – It estimated that the profit margins would be lower than expected. – So, Novartis placed it in its social business group which operates with seed

funding from corporates and has its own management team and processes.

• Obtain philanthropic or government support – useful when a company sees an opportunity to address social needs but the path to profitability isn’t clear.

Vodafone M-Pesa started in this way. Vodafone obtained a grant from British govt. to cover initial R&D costs. Once M-Pesa demonstrated its commercial viability, local units of established business financed its scale-up

• Finance external entrepreneurs – if the company lacks the expertise to develop an in-depth understanding of and a cost effective solution to a social problem of interest:– fund independent entrepreneurs to tackle the challenge– learn from their efforts and acquire their solutions

GE decided to tackle India’s high infant mortality, which is due in part to the lack of incubators:

•R&D engineers spent months in reinventing and reducing costs for the incubator – but still had to charge $2000

•‘Embrace’, a social enterprise had created a $200 incubator that could keep a baby warm for 6 hrs

•GE partnered with Embrace to distribute the product in India

5. Co-Creating with External Stakeholders• Deeply involving stakeholders in identifying all the dimensions

of a problem and designing & implementing solutions

• Enlist a wide range of stakeholders – may include government, foundations, universities, NGOs and other companies.– Mars chocolates mobilized 2 dozen organizations in its work to

reform cocoa farming in Ivory Coast– Hired expert staffer from World bank to lead the initiative – Secured expertise of World Agroforestry Centre to deliver innovations to farmers

• Leverage others’ capabilities – sometimes companies have to partner with other enterprises for enhancing their delivery capabilities.– Nestle engaged Drishtee Foundation which had already

established a distribution system for supplying remote retail shops in Uttar Pradesh to help distribute its Masala-ae-Magic spices

– Novartis did not consider financing as its core competency decided to partner with a local microfinance enterprise to fund its Arogya Parivar unit.

Conclusion To create social and business value all 5 ingredients are essential as

they reinforce one another

• Social purpose helps the firm to identify the need it wants to address• As company understands social problem more thoroughly,

employees’ commitment to its social purpose will increase• A deeply held social purpose is also important for co-creation and

forms a basis for trusted relationships• Understanding region specific needs helps define what can be

improved and by how much• Degree to which potential shared value can be anticipated and

aligned with company’s finances determines the optimal innovation structure for the venture

• Requirements for delivering both business and social value, in turn, establish which capabilities are needed from new hires or partners

Who’s Creating Shared Value

Removed 600 mn tons of trans fats and saturated fats from the U.S. diet and created a major business with its Nexera sunflower & canola seeds

Helped millions of malnourished families in India and other countries by providing inexpensive, micronutrient-reinforced spices.

Provided essential medicines & health services to 42 mn people in 33,000 rural villages in India.

In order to avoid cocoa shortage in Ivory Coast, it catalyzed a cross-sector coalition to transform farms & surrounding communities.

Who’s Creating Shared Value

Trained more than 10 mn teachers in the use of technology to improve educational outcomes.

Extended mobile banking services to 14 mn people in East Africa through M-Pesa.

Protected millions of health workers by creating needleless injection systems – now a $2 billion business for BD.