Is business the cause of social ills?
In his First Apostolic Exhortation in 2013, Pope Francis said that the three challenges confronting the world today are: (1) “economy of exclusion,” (2) “the idolatry of money,” and (3) “the financial system which rules rather than serve.”
The Pope then exhorted business and businessmen to do something about the issues, especially poverty.
Pope Francis suggested that business can do something “by increasing the goods of this world and make them more accessible to all.”
Two years earlier in 2011, Professor Michael Porter wrote in the Harvard Business Review (HBR) that “business has been criticized as a major cause of social problems. Companies are widely thought as prospering at the expense of their communities.”
Professor Porter concluded that “the capitalist system is under siege.”
Fortunately, some business companies were quick to respond.
Following Professor Porter’s HBR article about “creating shared value” (CSV), Fortune published the “Change the World” List of companies who were committed to CSV.
The List aimed to qualify companies “that have made significant progress addressing major social problems as a core part of their business strategy.”
Being a core part of strategy is key in differentiating this initiative from most of the past Corporate Social Responsibility (CSR) efforts.
It took a while but by 2015, Fortune said “the concept of aligning business opportunity and social impact is moving into the mainstream.”
Nestle in Top 10
In introducing Fortune’s 2015 “Change the World List,” Fortune editor, Alan Murray, referred to the companies on the List as those “that are doing well by doing good.” So these are not companies that did well so that they can do good. The direction of causation is clear. The advocated business philosophy said “do good so that you can do well.”
Nestle is one such company and ranked 5th. But it is the List’s highest ranked food and beverage company. In qualifying Nestle for the honor, Fortune found Nestle to be doing good first via its food fortification program.
The country’s public health problem that the fortification program addressed was the serious undernutrition of children, especially among the lower class families.
According to the Food Nutrition Research Institute (FNRI), some 31 percent of Filipino children are undernourished. Over the last two decades, FNRI noted that the number of malnourished children had gone down. However, the decline is not fast enough to reach the UN Millennium Development Goal of reducing the number by half in 2015.
It remains a huge social and public health issue.
Being the world’s leading nutrition and health company, Nestle’s distribution and marketing reach put it into a position to make a difference.
The quantification of this “good” and how the Nestle did well in the process came from Nestle’s market tracking system accessible to all in its annual “Creating Shared Value Report.”
According to Paolo Mercado, Nestle Philippines’ SVP for Communication and Marketing Services, Nestle was already into the shared value strategy as early as 2000.
That was when its CEO, Paul Bulcke and Chair, Peter Brabeck-Letnathe, spoke of Nestle’s responsibility of “contributing value back to society.”
In Asia, there were three areas designated for this CSV contribution. These were in: (1) nutrition, (2) rural development for coffee and dairy, and (3) water conservation.
We will focus on Nestle Philippines’ program of micro-nutrient fortification.
But according to Ernie Mascenon, Nestle Philippines’ Head of Corporate Affairs that is handling the broader CSV Nestle agenda, the company’s “banner CSV” is “The Nescafe Plan.”
This is an inclusive program that trains farmers to grow high yield coffee which raises their income status.
It is meant “to support responsible farming, production and consumption.”
We return to micro-nutrient fortification. Several brand and product options were evaluated for this program—Bear Brand, Nido, condensed milk and soya.
Nestle considered: (1) affordability for the buying market, (2) current sales volume and growth, and (3) the market’s milk drinking habits and practices.
Bear Brand won over the three other options on all three criteria. Bear Brand is Nestle’s flagship brand for the lower class mass market. As a full cream milk, Nido is a premium brand. It failed in the affordability test. Condensed milk is in a declining market and technologically difficult and expensive for micro-nutrient fortification. The market also still finds the Soya milk taste far from the more acceptable taste of cow’s milk.
For long-term growth, Mercado says the challenge is in the consumer’s milk drinking habits. After a certain age, the practice of daily milk drinking stops for practically every children and therefore among adults as well.
Most people point to lactose intolerance as the culprit. When mothers hear their kids complain of tummy ache, gas or bloating after drinking milk, most assume lactose intolerance. And so they stop giving milk. That daily milk drinking has become a widespread practice in other Asian countries including China and India suggests that the problem can be treated and is not serious. This is not to deny lactose intolerance for those drinking milk. It is a reality but it is not that serious and it can be treated.
It has to be said that the Bear Brand CSV strategy has gone beyond the brand’s “supply side,” i.e., its production and micro-nutrient fortification. It is also into the “demand side.” Bear Brand ambassadors conduct continuing grassroots educational campaigns on what micro-nutrient deficiency. The aim is to heighten the awareness of mothers on what the deficiency is and what they can do about it.
So then what?
As to Nestle Philippines, Mercado and Mascenon shared the company’s thoughts on the future of its CSV agenda.
The first is to extend the CSV business-growing model to the marketing of other brands and products that can pass or can be made to pass its criteria for eligibility as a CSV product or brand. Mention has already been made of the Nescafe Plan for “responsible high yield coffee farming, production and consumption.
The second idea is to extend the CSV strategy so Nestle can participate in other blue-ocean market segments of Bear Brand like the adult drinkers and the out-of-home beverage drinkers.
A third proposition is to get into campaigns to promote milk drinking.
CSV or creating share value is here to stay. As a strategy, CSV makes business more of a social problem solver and less a problem maker.
It is not the final word in corporate citizenship but it will do the world good to see more companies investing in shared value.
(Interested readers may contact Dr. Ned Roberto at email@example.com)
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