Shared value is a concept sometimes summarized as when profit meets purpose, or more academically in a 2011 issue of the Harvard Business Review as ‘policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates’.
But what does this concept mean within the South African context, and how does it relate to the growth of small business?
Small business development specialist, Edge Growth, in the first of their podcast series entitled ‘The Cutting Edge’, unpacks this concept and the fundamental link between shared value and intentionality.
Included in this discussion was Daniel Hatfield, CEO and co-founder of Edge Growth and Heather Lowe, Head of SME Development at FNB Business.
A decade ago, no one was talking about the concept of shared value. Yet today you see it referred to in countless articles about business and corporate development.
Heather, who was at the forefront of SME development when B-BBEE Procurement Spend and Enterprise Development and Supplier codes were first introduced in 2008, says that this challenging field is constantly evolving. There is so much work that has gone into shaping the business space to be more impactful.
Reiterating the many definitions that exist when it comes to shared value, Heather summarises the definition as simply being when everyone in an economy and society can benefit.
More specifically, any entity that is working within an environment that is detracting from that environment whether socially, economically or environmentally, is not sustainable and will not thrive.
Any business today needs to be uplifting and delivering value to the ecosystem within which it operates.
Within this space, intentionality is a word that keeps coming up, and a theory that has become front and centre in these types of discussions. There might be a lot of examples of shared value, but how often is this shared value embedded into the way that business functions?
Heather says that with any new business, new product or new service, the discussion around shared value needs to be included from the very beginning. Shared value cannot be a tick box exercise, but a concept embedded with intention into the core of the business
How does this cascade within the business?
It is an imperative that shared value is accepted and integrated at board and senior management level and needs to be a core feature at CFO level. From a strategic perspective, it needs to be a solid decision and backed by those controlling the finances. “The bottom line is that shared value will not work as an add-on and if not integral to planning and implementation,” she says.
To succeed in shared value as a culture, you want to leverage all your resources, have buy in from senior management and even implement shared value and the measurement of its impact into the company’s score card.
Heather says that driving the achievement of these objectives needs to be top of mind for everybody within the business from the beginning and cannot be diluted. Shared value will fragment if it is not driven with the same rigorous energy as other measurables within an organisation, and unless everyone is held accountable.
The practicality of shared value within business
Daniel says that examples within this context are always helpful, specifically to illustrate that shared value done properly can be an economic win-win and not, as some might perceive it, as a type of tax or burden.
One example of intentional shared value within the financial space could be incentivizing clients to be more socially and environmentally conscious and rewarded these actions with preferential rates.
Shared value and ESD
While many stakeholders may value the concept of shared value, many struggle to see the relationship to the business and how to marry it with Enterprise Supplier Development (ESD).
ESD is a great example of intentional shared value that drives one critical aspect, namely transformation and uplifting the previously disadvantaged.
Supporting and growing small businesses through steps such as access to finance, skills development and new markets is having enormous impact on alleviating unemployment, bridging the gaps when it comes to service delivery issues, which in turn helps the economy and society as a whole.
There is a definite overlay between ESD and creating shared value.
The regulatory framework when it comes to ESD is immense and tricky, and can limit much needed agility and innovation. Heather urges corporates to be more understanding of these challenges and to persevere when it comes to authentically and intentionally assisting and purchasing from these companies.
More and more businesses are serving a socially conscious customer base, who are becoming more aware and seeing the value in what these businesses are doing with the shared value space.
In reality, the shared value space is not linear and comes with multiple pressures and often unintended consequences, which can be positive or negative.
The key is understanding the broad ecosystem and being conscious of all factors.
FNB has been on the cutting edge and was the first financial institution in South Africa to start setting up SME venture financial funds. The first such fund, Vumela, together with Edge Growth, stands out as a catalyzed replicable model for earlier stage SME funding.
Heather says that through this type of shared value SME development, they have been able to grow businesses, enabled vital access to market, created visibility and ultimately benefited the many people supported by these SMEs.
“We have created a standard of what good looks like,” she says.
Listen to the full podcast where Daniel and Heather discuss this topic in depth and unpack how this type of intentionality can be measured.
The Cutting Edge Podcast series includes a new podcast every fortnight, with a range of topics and subject matter experts to unpack solutions to address barriers to SME Development and ESD success.