The corporate social conscience will soon be on full display in Davos, Switzerland, where global leaders from business, government, and civil society will assemble for the annual meeting of the World Economic Forum. Hundreds of millions of dollars will be committed to public-private partnerships that address the world’s most urgent challenges: climate change, poverty, chronic disease, illiteracy, plastic waste in the oceans, and much more. Unfortunately, after the initial splashy public announcement, most of these sincere and well-intentioned global partnerships are almost certain to quietly fail.
The idea that global companies can take a leading role in social progress is not wrong; the question is how they can do so in a way that realistically achieves social impact and delivers value to their shareholders. High-level global partnerships do serve a useful purpose by garnering resources, generating knowledge, and focusing attention on the urgency and importance of the issue at stake. Unfortunately, the one thing these partnerships rarely do is actually solve these problems. Instead, these initiatives collapse under their own weight as partners become discouraged by the lack of meaningful progress for society or economic benefit to the company. The only way to avoid this fate is for a company to have a clear strategy about when, where, and how to develop highly targeted coalitions that advance progress on the specific issues and in the particular regions that connect most closely to their business.
Translation: Local solutions are the essential to tackling global problems.
It begins by recognizing that there is money to be made in meeting the world’s challenges — an estimated $12 trillion in new business opportunities from advancing the United Nations’ Sustainable Development Goals. And there is money to be lost from not tackling them because societal failures can suppress corporate growth and profitability: Failing educational systems increase training costs and employee turnover; the poverty of smallholder farmers leads to unreliable supplies of agricultural products; and climate change has spawned frequent and costly weather catastrophes. Addressing social needs is no longer merely about protecting a company’s reputation and license to operate; it has become core to a company’s future business performance and competitive advantage. Firms that generate value for society also generate value for shareholders. We call achieving this win-win “creating shared value.”
Firms that generate value for society also generate value for shareholders. We call achieving this win-win “creating shared value.”
Despite a growing recognition of these opportunities, very few companies have figured out how to meaningfully address them. One reason is while executives know how to manage their corporate ecosystem of suppliers, distributors, and related businesses, those approaches do not work for the social ecosystem of governments, NGOs, and local communities over which the company has little control.
As we have learned from studying more than a dozen examples of companies achieving economic success and social impact, the collaboration must happen at a local level, where all relevant actors in business, government, and civil society must be brought together to create systemic change. Getting everyone to work together effectively requires an approach, which we describe in this HBR article. Such an approach is far more work and far less glamorous than joining a global partnership, but it does generate tangible social and economic results.
However global the problem, the economic opportunities and consequences for any given company are concentrated in specific regions and markets. A case in point is the way Novo Nordisk, a leading provider of insulin, is fighting diabetes. It recognized that achieving a positive global social impact — one that would really benefit the company and its shareholders — meant concentrating its efforts in the specific regions where the company’s ability to provide insulin is constrained by a dysfunctional health care system.
When the company entered the Indonesian market in 2003, for example, its sales were stymied by the lack of health care infrastructure, inadequate training of care providers, and limited patient awareness of the disease. A decade later, rates of diabetes were growing, but less than half of the nearly 8 million Indonesian diabetics received any treatment at all, and fewer than 1% of patients actually adhered to the appropriate regimen and achieved their treatment targets. Improved diagnosis and patient adherence could increase the insulin market fourfold by 2020, saving 4.6 million life-years, reducing government health care costs by $5.8 billion, and increasing the country’s GDP by $2.14 trillion. Yet little progress was being made by the government, social sector organizations, or global coalitions.
Novo Nordisk estimated that the company could capture up to half the market increase and determined that the potential sales justified an eight-figure investment to launch a regional public-private partnership. Working with the country’s Ministry of Health, the Indonesian Society of Endocrinology, and the Indonesian Diabetes Association, the company’s local leadership and funding catalyzed a new level of cross-sector engagement and alignment that has begun to improve patient care and awareness. Diagnostic rates have already improved by 10%, generating increased sales for the company as well as improved health for tens of thousands of Indonesians.
Or consider U.S. health insurer Humana, which insured one-third of the population in San Antonio, Texas. Rising rates of diabetes, obesity, and cardiovascular disease were driving up health care costs. Humana’s local team brought together health care providers, government agencies, community organizations, and other major employers to improve social determinants of health such as exercise, diet, and social isolation. Within five years, these coordinated efforts had reduced the average number of unhealthy days per month by 10%, saving Humana tens of millions of dollars annually.
Our forthcoming research across different industries and countries that explores the global challenges of health care, recycling, poverty alleviation, agricultural productivity, and carbon emissions has consistently shown that companies who adopt an approach similar to Novo Nordisk’s can also successfully lead social progress in ways that deliver improved economic performance for shareholders. That entails working at a local level with the specific partners who can orchestrate change given the unique circumstances of a particular region.
The first step is to identify specific regions where social or environmental conditions significantly affect the company’s strategy and economic performance. The second is to appoint a team drawn from the leadership of the local business unit to determine whether the situation is ripe for change by considering the political and economic climate in the region. If the situation seems promising, the team can identify and engage other necessary local business, NGO, and government partners to participate in developing a collaborative blueprint for change that defines appropriate roles for each actor to play. The final step is to establish and fund the necessary governance and staffing structure to guide, facilitate, and monitor progress, drawing lessons from the Collective Impact framework to drive ecosystem change.
The final step is to establish and fund the necessary governance and staffing structure to guide, facilitate, and monitor progress, drawing lessons from the Collective Impact framework to drive ecosystem change.
Companies that follow these steps will find that they not only create value for their shareholders but also become respected leaders in social progress. They may also want to join a global partnership at Davos, but they know that actual solutions require far more targeted interventions.