Unlocking the Value Chain for Global Development

October 11, 2012

In his 1985 book, “Competitive Advantage: Creating and Sustaining Superior Performance,” Michael Porter introduced the concept of the value chain. He saw it as a fundamental issue for business—how to influence every facet of business operations in such a way that they create more value than the cost of creating those outputs and maximize profit margin.

During its CSR: Business Solutions for Emerging Markets Conference, the Business Civic Leadership Center convened a panel of corporate, government, and nonprofit leaders to explore the intriguing idea of including corporate citizenship engagements as part of the value chain. As panel moderator Jeff Richardson, vice president of the Abbott Fund put it, “To expand the definition of value chain to doing what’s good for business and what’s good for society.”

 For DSM, the world’s leading producer of vitamins and other nutritional ingredients, sustainability is a core value that’s integral to all facets of its value chain. “We ask our suppliers, vendors, and even our customers to join us on our journey,” said Sheetal Bhadekar, senior manager of corporate affairs at DSM. “We bring that same approach when selecting NGO partners.”

In its work with the World Food Programme, for example, DSM provides its unique health and nutrition science expertise to develop micronutrient innovations that meet WFP needs. So far, more than 10 million people in countries such as Afghanistan, Bangladesh, Kenya, and Nepal have been impacted by DSM’s work with WFP.

Paula Davis, the president of Alcoa Foundation, introduced an interesting example of her company’s shared value creation model. At a mine site in Brazil’s Amazon region, the company worked side-by-side with the public sector, environmental groups, and the local community to ensure the mine location remained sustainable long after operations there ceased.

According to Davis, every tree in the area was tagged, cassava farming was introduced, and the company invested in community infrastructure—helping construct a new police station and working with local educators to create stronger schools. Alcoa also created a community advisory board that provided guidance on how it should invest in the region and ensure stronger community ties in the area.

“We created a true partnership with the board,” said Davis. “We don’t want to impose unnecessary things.”

The decision to view CSR as part of the value change is really a competitive advantage, according to Mike Calvert, international trade specialist, Office of the Western Hemisphere, U.S. Department of Commerce. “I believe that CSR is central to the growth of exports from the U.S., especially in the Latin American markets I focus on,” he said. “Consumers in these markets are becoming more aware of sustainable practices and we’re seeing a changing mentality from ‘Buyer beware’ to ‘Buyer be aware.’”

Companies, too, should be aware of the true value that NGOs can provide in emerging markets. “Too often, I think, companies view NGOs as simply ‘takers,’” said Bob Goodwin, CEO of Executives Without Borders. “But more often than not, they have strong local knowledge that can be leveraged to a company’s benefit and create a real advantage in that market.”

Goodwin concedes that not all NGOs may have the necessary capacity to launch straight into a major corporate engagement. But he encouraged companies to view their NGO partners as a business unit and determine how to best “bring them up to our level” in order to maximize the value of any partnership.

Across the board, the panelists agreed that the key to strong, sustainable, and effective global development requires a corporate commitment much broader than mere compliance or altruism. In an economic climate where every business decision is an important one, unlocking the value chain to include an organization’s global development activities may open the door to new opportunities in developing markets.