This blog is reprinted from my autumn 2013 newsletter.

Michael Porter has been speaking of "shared value" for a few years now. Shared value refers to the idea of creating economic value in a way that also creates value for society. This is a subject that is at the center of much of my work, albeit largely indirectly. This is an important topic that is unfolding and will reshape how businesses operate, how communities accelerate change, and how this benefits us all.

During a January 2011 Harvard Business Review (HBR) interview, Porter explains how shared value is the next evolution of capitalism. He makes a compelling argument for why businesses can no longer succeed by being profitable at the expense of society. Porter also points out that businesses are beginning to understand how they are mutually dependent on the communities in which they operate, and on the well being of their customers.     

Porter believes that the pressures on businesses to be profitable should be for the benefit - not at the expense - of their local communities and society at large. Simply obeying the law is no longer sufficient. As brands try to better understand and then address the impacts associated with their products, they may need to reconfigure value chains (i.e. where their operations are located and what relationship they have with - and the impacts they have on - those communities) and redesign products that offer new value to customers. Evidence suggests that companies can improve profits, enhance their brand, and enter new markets by doing so (e.g. Nestlé creating a successful product line of nutrient-reinforced spices in malnourished communities in India or Vodafone expanding mobile banking to rural areas of Africa).

Porter does caution businesses not to simply go out and do good things. He believes that a company should not be doing good or developing a new philanthropic agenda as a trade-off for their impacts. Instead, they should embed shared value into their business strategies and decisions. Doing good things and looking at the impacts of decision making must be an integral way of doing business rather than an afterthought. Businesses that identify and seize existing opportunities to create economic profit by creating products and services that provide social, community and environmental benefits will succeed.  

A recent HBR article expands on shared value by outlining Porter's common-sense steps that businesses should take to embed a strategic social mission into the corporate culture and to direct resources and intellectual capacity toward innovations that positively impact social problems. Porter contends that five elements must be present:

1. Social purpose - Companies must focus on a social mission that is relevant to the business and then embed it into the business strategy. Shared value only works when businesses obtain value in return for their investments over some period of time. A strong connection with core business is essential.
2. Defined need - Companies should go deeper in their analysis of conditions necessary for profitable business (e.g. local workforce, logistics) to include underlying social problems that could enhance the business if properly addressed. Solutions to such issues often require a partnership with multiple stakeholders (e.g. local NGOs, government, industry associations). Businesses will find it helpful to develop a better understanding of their stakeholders' capabilities and offerings.
3. Measurement - Efforts are underway to create industry-based standards to measure and evaluate environmental impacts. Whether these potential standards include "value creation" remains to be seen. Companies would be wise to identify and track key performance indicators for their value creation initiatives. Linking these metrics to business profits, savings and indirect financial benefits (e.g. brand enhancement, recruitment or retention of talent) will be important. The company should also measure the benefits to other stakeholders (e.g. profitability of suppliers, skills, business acumen, self-esteem).
4. The correct innovation structure - Porter proposes options for developing a framework for implementing shared value initiatives. Integrating values that align with a company's legacy or mission (e.g. nutrition for a food company) will leverage supporting talent and understanding of issues. Shielding the new social ventures from strict business requirements (e.g. profitability timeline) will allow for the additional time needed to start them up. Partnering with external funders (e.g. governments, foundations) will help to pilot an initiative until it is profitable and can be integrated into the business. Companies should also partner with external entrepreneurs to fill gaps in expertise when needed.
5. Co-creation - Social problems are complex, including many subtle influences and underlying conditions. Companies should leverage the insights and capabilities of various stakeholders. Gaining the perspective and support of a wide range of stakeholders can provide a company with a better overall understanding of - and the capability to address - the issues and conditions that must be considered as solutions are designed and implemented. Community leaders or NGOs that are well respected by local communities can enhance a brand's image, while local businesses may be able to provide needed services.

Creating a new paradigm in which businesses offer shared value will require each of us to incorporate the five elements outlined above in our thinking of and in our approach to projects. For many of us, the idea of shared value also requires us to reinvent ourselves to improve our position for this new reality. I am excited about integrating shared value as I assist companies, industry associations and organizations design and implement strategies to succeed in this new frontier.

This blog is reprinted from my autumn 2013 newsletter.

According to the United Nations Food and Agriculture Organization's (FAO's) Food Wastage Footprint: Impacts on Natural Resources summary report, one-third of the food produced annually worldwide - 1.3 billion tons - is lost or wasted. The greenhouse gas, water and land footprints associated with this wasted food are significant. The wasted food generates more greenhouse gas emissions than any country except China or the U.S.A., consumes enough water to fill Lake Geneva three times, and accounts for approximately 30 percent of all agricultural land worldwide. This waste also causes biodiversity impacts. None of these figures takes indirect land use (a highly complex issue) into account.

The FAO study aimed to increase understanding of the impacts and causes of food wastage to identify opportunities for reducing the waste and its impacts. Recognizing that regional and crop variation need to be taken into account, the FAO performed its analysis using eight commodity and seven regional categories.  

The study looked at a total of 56 so-called "region*commodity" categories derived from every combination of the eight commodities and seven regions. The FAO study indicated certain "environmental hotspots" where key changes could have real, immediate impact. The data and conclusions gained from the "region*commodity" categories (e.g. starchy roots in South and Southeast Asia, meat in North America) are insightful and can assist stakeholders in evaluating investment and operational enhancements in a more targeted and intentional manner. For example, cereal wastage in Asia is the most significant environmental impact, driven especially by methane emissions from rice paddies. Improvements to this one area could have a positive and measurable impact.  

The information, trends and data throughout the report are worth a read. However, I found myself becoming overwhelmed with data and the need to evaluate - and place a relative value on - water versus climate or land impacts.  

With 56 "region*commodity" categories being analyzed for carbon, blue water[1], land use and biodiversity impacts along all stages of the supply chain (from farm to consumer trash bin), determining which regions and/or commodities have the biggest overall impact becomes quite complicated. Just a few highlights include:

• Cereal - primarily wheat and rice - is a hotspot, with large impacts on carbon, water and arable land. Rice is an especially important commodity, driven by the water- and carbon-intensive production as well as high consumer-level wastage.
• Meat has a high impact due to the high land use and carbon intensity of its production. Higher income regions and Latin America are hotspots for meat, due to higher consumption and waste levels in those areas.
• Fruit impacts blue water  usage the most because of the high requirements for water in production.
• Starchy roots (e.g. rice) provide a good example of how the improved land resource efficiencies associated with higher yields play an important role in reducing overall impacts on a per kilogram basis.

The analysis of and hotspots indicated in the 56 categories is most helpful to practitioners or funders who can prioritize among regions and commodities that have the highest possible impact. Other players may act more readily when they are drawn a clear picture illustrating that higher yields, better handling and product preservation, and improved supply chain efficiencies can improve the industry and reduce its impacts in measurable ways.  

Now let's discuss this kind of data in the context of consumers. We are focusing a lot of attention and resources on making detailed information available to the consumer. But is this information too much of a good thing? I am not opposed to providing that information. It is useful to many, many people - especially to the people who are making the changes on the ground. But consumers should not be expected to fully understand issues this complex.

I would rather see more attention focused on the following areas: helping producers of perishable foods (e.g. highly carbon- and water-intensive meat and dairy) to preserve their goods and schedule their deliveries to meet their customers needs; improving infrastructure; training producers on better farming, handling and preservation techniques; or shifting consumer behavior to become less wasteful.  

Let's take a closer look at that last area. Consumers play important roles (e.g. supporting responsible brands, minimizing their own individual footprints). What information is most helpful to incite positive behavioral shifts in consumers?  Consumers should understand that there are significant environmental impacts embedded in all of our food - and in all of our goods. And, yes, understanding which foods have higher carbon, water or biodiversity intensity is helpful.   

With this said, brands - not consumers - should become the experts in the commodities they process, and in the impacts associated with their supply chains and products, and addressing the impacts in meaningful and measurable ways. The consumers should be able to support responsible brands without having to decipher technical or otherwise complex information and evaluate the trade-offs between different impacts (e.g. water versus climate) at a product level. (See my next article for    more discussion on this topic).  

In the end, I appreciate the value that detailed data helps people in a position to affect change (e.g. buyers, funders) to make informed decisions and allocate resources to have the most positive impacts possible. However, I feel it is best to simplify the myriad of data and calls to action to a few simple and consistent messages that resonate with a wider base of consumers. Clearly, minimizing waste is certainly an example of such a message.