Sustainable business models: Shared value in action

By Nick Topazio

The concept of Shared Value creation, explored in the CGMA report Sustainable business: shared value in practice, is widely being recognised as of growing importance for organisations looking to create a sustainable business model.  However, there does need to be a sharing of value between both the organisation and society.

If the business benefits of shared value business models are not identified then these strategies are unlikely to be maintained in the long-term as commercial realities will almost invariably cause solely philanthropic schemes to be restricted.  Measuring Shared Value: How to Unlock Value by Linking Social and Business Results provides evidence from several leading companies showing how various Shared Value initiatives are creating both social and business benefits.  Companies such as Coca-Cola, Novo Nordisk, Intel, Intercontinental Hotels and Nestle are shown to be following a shared value measurement process that:

  • Identifies the social issues to target;
  • Makes the business case;
  • Tracks progress; and
  • Measure results and uses insights to unlock new value

Adding to these business case examples, is Marks & Spencer (M&S) the UK based retailer.  In January 2007 M&S launched their Plan A initiative, making 100 social and environmental commitments recognising that sustainability is both a moral and commercial imperative.  Self-evident this may seem to some, but to garner widespread buy-in the business case must be not be overlooked.

Reporting at the end of the first five-year phase of Plan A, M&S disclosed that, although the initiatives launched in 2007 initially caused a cash outflow for the company, in 2011/12 the business benefit amounted to £105m and across the five years totalled £180m.  The substantive part of this benefit came from improved resource efficiency, although more recently extra benefits are starting to be derived from initiatives that drive existing business and from new revenue streams. 

The challenge to create an even more sustainable business model has spurred M&S to add a further 80 commitments to its Plan A.  M&S and many others firmly believe that unless commercial organisations respond to the social, environmental and economic pressures of the future, not only will they struggle to compete, they may also struggle to survive.