Sunday, May 5, 2013

Measuring Shared Value

There are many challenges for corporates in implementing successful CSV projects. All the good causes and relevancy the business can embrace in shared value creating activities aside, how are they going to proof what they have done means something and persuade shareholders to let them continue on those activities? Even before getting there, how can a company itself be sure if the activity is creating different values compared to previous philanthropic or charitable projects? 

"As long as companies fail to link their sustainability activities to core business metrics such as revenue growth, cost reduction, and profitability, they are unlikely to have the full value of their actions recognized by more mainstream investment professionals."

Corporates, aiming to create community value through activities that government or NGOs has been doing and simultaneously make investments to their complementary assets and increase profits and benefits of their own, perhaps are facing humongous challenges. How much social impact a company targets to make, and how much the result contributes to the company? FSG, a social impact consulting company, believes that the interaction between business and social results is among the most important tools to drive shared value in practice. It also says that “shared value measurement requires an iterative process that is integrated with business strategy, not a one-time or periodic effort separate from measuring business performance.”

FSG introduces 4 steps of integrating shared value strategy and measurement. 
First, drive prioritized social issues shared value strategy can target. And then make decision on those as go-/no-go, and then track all the inputs, outputs, activities, and financial performances. Finally, validate linkage between social and business results and refine further value creation strategy or execution. 

There are even more challenges in this planning and executing measurement system; The measurement covers larger population and needs to make sure the outcome is measurable; Carefully determine measurement focus on social results, not the attribution itself; Needs to use proxy indicators to track business results; and so forth. In order to achieve this, companies should also increase internal roles to measure social performance and cultivate cross-sector partnerships, which is new to them, to implement necessary process and planning. 

Finally, the report says, currently shared value concept is in infant stage and the business world remain unaware of the opportunities. Some of the companies are, they say, ill-prepared to incorporate the practices. Shared value measurement will support shareholders/decision makers to determine their capital allocation and it will provide better way to achieve sustainablity to the societal issues and problems that needs aid/help from global corporates .

Reference :

1) Measuring Shared Value by FSG

2) Nestle CSV KPI by Nestle

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