6. Shared Value- Patagonia

Question 1

Is stakeholder engagement always the best strategy to deal with stakeholders?

Answer 1

• Designing a strategy with shareholder engagement is good but it’s not always the best strategy
• Stakeholder engagement can be dangerous if the company is not ready
• Sometimes stakeholder engagement is useless/ E.G. Fiat example

Question 2

The Shell Case

Answer 2

• The Brent Spar Accident = Environmental
• Human rights in Nigeria = Violation of human rights
• Lost legitimacy because of questionable behaviors in both cases
• Decided to conduct a stakeholder engagement program to gain legitimacy

Question 3

The Shell Case- Problems with Stakeholder

Answer 3

• Problem was not environmental and human right violence but Inconsistent values within the stakeholders
• Not a good example for CSR
• Shell was not ready to interact with stakeholders
• Shell was not ready manage stakeholders’ expectations
• Shell was just interested in washing its public

Question 4

Stakeholder management or stakeholder slavery?

Answer 4

• Problems with stakeholder priorities
• Schizophrenia of stakeholders’ expectations
• Engagement is resource consuming
• Accountability issues
• Golden rule = Be truly committed and ready to open the boundaries of the organization!

Question 5

Fiat/Chrysler CEO Case

Answer 5

• Fiat acquired Chrysler to transform it to make is profitable and innovative
• Inefficient cost structure resulted in firing people in his own country
• Sergio Marchionne closed the dialog with the Italian labor unions because of their 1. lack of power and 2. urgency legitimacy as a specific shareholder
• All other stakeholders agreed with him/ E.G. Media, Suppliers
• He had legitimacy because economic responsibility was required by society

Question 6

Caroll’s four-part model of corporate social responsibility

Answer 6

• 1. Philantropie Responsibilities = Desired by society/ Top
• 2. Ethical Responsibilities = Expected by society
• 3. Legal Responsibilities = Required by society
• 4. Economic Responsibilities = Required by society/ Bottom
• True social responsibility requires the meeting of all four levels

Question 7

Shared value creation

Answer 7

• Interface of = Society needs/ Business opportunities/Corporate assets, skill, capabilities
• Company should use society needs to open new business opportunities with its corporate assets, skills, and capabilities!

Question 8

From CSR to Shared Value

Answer 8

• CSR = Companies integrate on a voluntary basis social and environmental concern in their business operations and their interaction with their stakeholders
• CSV = Financial success does not need to come at the expense of society or environment/ Shared value supports a positive impact for all parties involved

Question 9

From CSR to CSV: Strategic implications

Answer 9

• First CSR & Second CSV
• Doing good vs. Doing well and doing good
• Citizenship and Philanthropy vs. Joint Social & Company value
• Discretionary or in response of external pressure vs. Integral competing
• Separate from profit maximization vs. Integrate into profit maximization
• Agenda determined by external reporting and personal preferences/ In every company the same structure vs. Agenda is company specific
• Impact limited by corporate footprint & CSR budget vs. Realigns the entire company budget

Question 10

How can a company create shared value?

Answer 10

• Redefining productivity in value chains (Coca Cola Water Reduction)
• Reconceiving products and markets (Vodafone Africa)
• Building supportive clusters (Nespresso Coffee)

Question 11

Redefining productivity in value chain

Answer 11

• Search for possibilities to scale the economic value created in the value chain by leveraging societal weaknesses?
• Assess economic risk cause by societal & environmental issues
• Identify possible partnerships

Question 12

Coca-Cola- Water Reduction

Answer 12

• Saving water = Restructuring the value chain to reduce cost and raise efficiency
• Strategy has enabled Coca-Cola to obtain 24% reduction of water since 2004
• Partnership with WWF

Question 13

Coca Cola reducing plastic pollution

Answer 13

• Collect back every bottle they put on the market by 2030
• Achieving a specific goal of the company while reducing the environmental footprint
• Partnership with NGOs and governments

Question 14

Reconceiving products and markets

Answer 14

• Addressing all potential customer’s needs
• Evaluate Bottom of the pyramid markets
• Provide appropriate services to lower income and disadvantaged consumers

Question 15

Vodafone Africa

Answer 15

• Increasing use of mobile phones in Africa (Customer need)
• Invention of a mobile banking service to withdraw and send money with mobile device
• Creating value beyond communication = Rose and create new markets and getting a competitive advantage/ E.G. Sending money to Banana farms to increase profitability

Question 16

Building supportive clusters at the company

Answer 16

• Build clusters to improve company and productivity in developing countries
• Build open and transparent market
• Provide partners with skills and capabilities
• Support partners’ efficiency and high quality production

Question 17

Nespresso Coffee

Answer 17

• Objective = Double the amount of coffee bought directly from farmers
• Value for Nestle = More secure supply and better-quality raw materials/ Consumer preferences for Nestle products/ Lower procurement costs
• Value for farmers = Advise and technical assistance/ Increased income/ Employment/ Long-term safe partnership

Question 18

The four cornerstones of shared value

Answer 18

• Clear Purpose = Mission & Values
• Corporate Engagement
• Stakeholder communication
• Collaborative cocreation = Partnerships
• Helps to Identify the key area where to invest

Question 19

Mars

Answer 19

• Making the key source more productive is creating shared value
• Shared outcome = More money for farmers and more income for Mars
• Respecting all 4 cornerstones of shared value
• Motivation could be = Ethics/ Legitimacy/ Profitability

Question 20

Patagonia Four Cornerstones of shared value- Clear purpose (mission & values)

Answer 20

• Best product
• Low environmental harm
• Inspire others

Question 21

Patagonia Four Cornerstones of shared value- Corporate engagement

Answer 21

• HR = Special selection by “dirtbag” characteristics and environmental concern and value fit/ Environmentally benefits as incentives/ Environmentally engineered company buildings
• Marketing/ Sales = No money waste in marketing
• Operation & logistics = Suppliers that are consistent with Patagonia’s values (Bluesign)/ Technologies as an audit measure/ Large R&D department
• In general = 1% Donation/ Top-down approach/ Leadership commitment

Question 22

Patagonia Four Cornerstones of shared value- Collaborative co-creation:

Answer 22

• Competitors = Sharing Innovation/ Education of the issue
• NGO
• Environmental groups
• Ambassadors

Question 23

Patagonia Four Cornerstones of shared value- Stakeholder communication

Answer 23

• Free communication because of their activities
• Value Driven
• Store Design = Consist with the mission
• High accountability positive and negative impacts

Question 24

Business Model of Patagonia

Answer 24

• 3 Pillars of value = Inspire/ Best Product/ No harm
• Business model = Companies ability to create value between WTP and costs
• Customer = Long-term oriented/ Environmentally/ High income/ Outdoor
• Costs = High because of R&D/ Auditing and communication decreasing effects
• Best product = Durability/ Long Product life/ Image/ Emotional connection
• Very consistent strategy starting with the values, engaging to maintain it, collaborate with further institutions and communicate that to the stakeholders

Question 25

Should Patagonia be a listed Company?

Answer 25

• No, because Patagonia would loose 1. Credibility and 2. Control because they would have new shareholders with short-term orientation
• Today Patagonia is not only selecting its supplier it is selecting its customer as well

Question 26

Benefit corporation

Answer 26

• A hybrid corporate that combines characteristics of both for profit and non-profit corporations
• Benefit corporation are empowered to consider societal impact when making corporate decisions in addition to profit maximization
• Considerations may include interests of employees, community, societal and environmental impact

Question 27

B-Corporation

Answer 27

• Certified B corporation are balancing purpose and profit
• Legally required to consider the impact of their decision on their worker, customers, suppliers, community, environment
• Certified by the nonprofit B lab to meet rigorous standards of social and environmental performance, accountability and transparency (Impact Assessment)
• Difference to B-Corp and Benefit Corporation = Certificate that it is working for shared value/ Guarantee profitability while respecting social impact
• A company needs a minimum of 80 points on the 200-point scale
• 1700 B corporations, 130 industries, 42 countries and 1 goal!

Question 28

Socially responsible investing

Answer 28

• Financial return is expected but also social and environmental variables are considered
• Negative screening
• Shareholder activism
• Risk management

Question 29

Social impact investing

Answer 29

• Investments with the intention to generate a positive sociall environmental impact alongside a financial return