How Asian firms compete on society’s most complex challenges

In Asia, as around the world, society faces enormous, complex challenges – climate change, wealth disparities, youth unemployment, and more.

Many countries are feeling the economic and political strains of these challenges.

This month the United Nations and its member governments will commit to the Sustainable Development Goals as a global vision for addressing these challenges.

But government alone cannot achieve these goals; every sector must participate: most importantly, business.

We have a simple yet powerful call to action for the Asian business community at this pivotal moment.

We believe that we live in a world in which business can – and must – compete to change the world.

This is one of the core tenets of shared value, a concept in which companies create measurable business value by addressing social problems through core strategy and operations.

When Harvard Business School’s Professor Michael Porter and I first publicized the concept of shared value in 2011, companies pursuing shared value were the exception rather than the rule.

But we now see the concept of aligning business opportunity and social impact moving into the mainstream.

While shared value can be viewed as a new tool alongside corporate philanthropy and corporate social responsibility (CSR), it is also substantially different from the traditional ways that companies have engaged in society.

Shared value focuses companies on the societal issues which most directly intersect with the value creation mechanisms of the business.

Because of this direct relationship, shared value strategies are scalable in ways that philanthropy and CSR typically are not.

As such, shared value strategies become a source of competitive advantage, as they enable companies to secure sustainable supply chains, improve efficiency of operations and build the competitive context needed to grow new markets and customer segments.

Several Asia-headquartered companies are already competing through shared value. Take Ayala, a Philippines-based holding company.

Back in the 1990s, only a quarter of Manila’s six million homes had reliable access to potable tap water. With disease and corruption rampant, the government in 1995 transferred the responsibility of providing access to water to Ayala’s Manila Water Company.

The company saw an opportunity to improve water delivery and boost its own business. In the 18 years since its entry in 1997, the utility has provided 24-hour supply to 99 percent of residents and replaced almost all the local pipes.

Its Tubig Para Sa Barangay (“Water for the Poor”) program makes sure the area’s 1.8 million low-income households can afford clean and potable water.

There’s also CJ Group, a Korean conglomerate with an entire department dedicated to evaluating and scaling shared value projects across the enterprise.

In Vietnam, the firm identified the Ninh Thuan province as having the ideal climate for sourcing chili peppers, but quickly learned that many rural farmers in this region still lived in poverty, lacking the basic infrastructure and technology to compete with big corporate farms.

CJ set out to better integrate these rural famers into their supply chain—not only to pull them out of poverty, but also to secure more of their high-quality chili products.

Major multinationals are also using shared value as a strategy for competing across the region.

Nestlé took on malnutrition in the Philippines as an opportunity to increase sales of its fortified packaged foods.

The company employed groundbreaking measurement techniques to determine key barriers, the cost-effectiveness of solutions, and impact in the field.

Nestlé is now considering a new pricing strategy that will bring greater access to the people who need fortified products the most.

In each case, there is a common yet powerful formula – aligning the interests of business and society in a way that measurably benefits both.

These examples represent just a handful of companies using the power of profit to change the world. We encourage more Asian business leaders to embrace this approach and redefine how the private sector can help solve society’s challenges.

-ejinsight