Creating Shared Value, a Measured Approach to Business
Tags: Shared Value
Posted by John Holm on December 3, 2013.
As illustrated by the Coca-Cola Coletivo initiative (highlighted in our September 30 newsletter), innovating on a platform of ‘good’ to create tangible social impact and profitable financial returns in a competitive context is being adopted by companies with the purpose of gaining a first-mover advantage. Coca Cola’s selection of youth unemployment among recent high school graduates is an ‘outside-the-box’ social issue to identify that requires an innovative approach to structure a business initiative on.
While creating strategy on youth unemployment is highly complex and differentiates a company from the competition, how does a company innovate on a social issue that is directly linked to a company’s business model and already generates a great deal of publicity?
In recent years, the hotel industry has come under a great deal of scrutiny for their positioning on helping the environment. “Help us save the planet,” “Save the environment,” and other similar slogans often times do not have the desired effect specifically because they do not define exactly how a company simultaneously is making a difference and saving money through its efforts.
One hotel chain in particular, InterContinental Hotels Group (IHG), turned this perceived negative impression into a competitive advantage by developing a platform that specifically measures their total water consumption, waste disposal, and energy use.
In one case study highlighted in a FSG report from earlier this year, it was shown how IHG transparently communicates to its customers the true value of how they are “saving the planet” by quantitatively measuring environmental performance:
InterContinental Hotels Group tested dozens of options for reducing energy, water, and waste to lower its environmental footprint while also driving down hotel operating costs.
InterContinental Hotels Group (IHG), the largest hotel company in the world, launched its Green Engage program when the company assessed its environmental footprint and realized that energy represented its second largest cost. IHG also identified water and waste as environmental and social issues with significant shared value potential. Green Engage started in 2009 by testing dozens of options for reducing energy use, water consumption, and waste disposal in pilot hotels. These included new cooling/warming systems, solar panels, and automatic computer shutdown applications. The objective was to provide a detailed ranking of all possible shared value opportunities in terms of returns to IHG as well as its franchises. Areas with high environmental impact and return were clearly distinguishable from other areas popular with the general public, such as solar energy, which yielded fewer reductions in emissions or economic value.
Insights from measurement drive ongoing improvements.
Shared value measurement has been instrumental in driving Green Engage to achieve resource efficiencies and cost reductions across hundreds of hotels. Through measurement, IHG gained a rich understanding of the relative shared value poten¬tial of a wide range of practices. Green Engage was rolled out to more than 1,900 hotels using an online tool that continues to update actual shared value returns based on the ever-growing base of program adopters. The program has helped to create substantial reductions in hotel operating costs, including energy savings of up to 25 percent at individual sites1.
1 Porter, M. E., Hills, G., Pfitzer, M., Patscheke, S., & Hawkins, E. (2012). Measuring Shared Value. How to unlock value by linking social and business results. FSG.
John Holm is the Senior Director of Business Development, Marketing & Communications at CAF America. In 2012, John founded and served as Director of the Center for Shared Value and Social Impact in Bucharest, Romania. In the same year, he initiated and authored the Shared Value Action Learning Project at Maastricht School of Management in both The Netherlands and Romania, where he also serves as a Senior Adjunct Lecturer.