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Executive Perspectives

EXECUTIVE PERSPECTIVE: Can Shared Value Really Change the World?

Tim Hunter

16 Oct 2018

16 October 2018

“Unfortunately for people at the very bottom of the global pyramid, the economic and structural realities of daily life are often too complex – and the challenges too daunting – for any single company to address on its own.”

Tim Hunter is the Deputy Director of Private Sector Partnerships at the World Food Programme. To mark World Food Day (16 October), in this piece, he discusses the significance of shared value and how this concept can play a critical role in global hunger.  ‘WFP’s Farm to Market Alliance creates shared value by helping smallholder farmers to unlock new opportunities and transition to commercial farming and is working toward both eliminating global hunger and changing business as usual.’ Sherah Beckley, Editor Thomson Reuters Sustainability

In the wake of the Great Recession a decade ago, economists Michael Porter and Mark Kramer proposed a different way for businesses to think about their role in a society that had lost significant trust in global markets.

This new approach to prosperity was called creating shared value, a strategic means of enhancing corporate competitiveness while advancing the public interest at the same time. This, they said, has the power to redefine capitalism, unleash the next wave of global growth and save the planet.

Seven years on, we have seen companies across sectors embrace the idea. They have reconceived products and markets, revamped value chains and developed cluster networks in ways that have brought tangible benefits to many communities around the world. But can this approach be trusted to reconcile the trade-offs between higher returns and the highest social benefit? And can it create sufficient value that is shared widely enough to truly deliver for the poorest among us?

I believe it can, but not when pursued alone.

The World Food Programme has a unique insight into this question. We work in 80 countries around the globe with people who are the furthest behind in terms of income and opportunity. These are the children, women and men who are hungry and most vulnerable to the negative effects of our global system, such as climate change. They often lack clean water and access to education, and they are the ones who have the most to gain from the transformational promise of creating shared value.

Unfortunately for people at the very bottom of the global pyramid, the economic and structural realities of daily life are often too complex – and the challenges too daunting – for any single company to address on its own. Our food system is a good example of this.

About half of the 821 million people who go to bed hungry are smallholder farmers. They work small plots of land that, for many interconnected reasons, cannot meet their basic needs.

For starters, poor farmers often have no credit history, formal land titles or hard assets. This makes obtaining loans – particularly at a fair price – extremely difficult. With little to no cash flow, they are unable to purchase the tools or inputs needed to improve yields, particularly since seeds and fertilizers are rarely sold in quantities appropriate for just a few hectares of land – the average plot size of a smallholder farmer. And they cannot buy insurance or storage devices needed to protect their crops and harvests. Combined with a general lack of infrastructure connecting their farms to markets, this puts stable contracts from trustworthy buyers out of reach. Taken together, this means far too many farmers around the world end up reaping small harvests of poor quality crops that they cannot save – forcing them to sell quickly to local buyers for whatever price is offered.

Smallholder farmers, many caught in difficult situations like those described above, produce about 80 percent of the developing world’s food.

Creating shared value for them would change our world in profound ways.

Yet, given these interconnected challenges, the large scale of small investments needed to make a difference, and the fact that higher returns and lower risks are often found elsewhere, it is no surprise that individual companies have yet to make transformative investments that can fundamentally change the lives of those furthest behind.

Addressing these challenges, particularly at scale, requires collaboration, dedication and iteration. To do it in a way that is both profitable and beneficial to the most vulnerable means rethinking cluster development and investing in a way that one company is not likely to do on its own.

That is why the World Food Programme convened the Farm to Market Alliance in 2015, a consortium of public and private institutions brought together to help smallholder farmers unlock new opportunities and transition to commercial farming.

At its core, the alliance works as a catalysis for market development. It aligns members’ operations, shares risk and draws on resources, expertise and market presence to help build local structures, gain government buy-in and address farmers’ needs. For participating farmers, it means gaining access to predictable markets for their produce as well as fair financing for inputs and working capital. And it means benefiting from crop-loss insurance, post-harvest storage solutions and quality inputs that are appropriate for small plots.

While this alliance was created to help farmers, it is not charity. The companies and organizations that take part are investing in a stronger future for us all with the expectation that when the farmers profit, so will they.

Through the alliance, local financial institutions and input and equipment providers are rethinking how their products can work for a new and extremely large group of potential customers. And the commodity buyers, who represent a stable income source for farmers, are looking to build a deeper bench of suppliers and strengthen new value chains. In the communities that need their investments the most, these sellers and buyers cannot create shared value alone. This is because, while the idea is simple, the execution is difficult.

Over the past three years of working with smallholder farmers through the alliance and the many companies they interact with, we continually find new challenges that need to be addressed. For example, because each farmer is working on such a small scale, local credit providers are slow to process what are essentially micro-loans.

This delays farmers from buying needed inputs to plant on time, if indeed they manage to plant at all. Birds, pests and weather shocks such as drought continue to threaten entire harvests, and the costs farmers incur in protecting against them take a significant toll on profits. And in remote regions without adequate electricity, many communities lack the ability to weigh crops before sale, which complicates the relationship between farmers and buyers.

But the benefits for farmers are clear. We are working with 150,000 farmers in Tanzania, Rwanda, Zambia and Kenya. And by 2022, that number is expected to rise to 1.5 million. In these pilot countries, the alliance engages more than 50 local companies across the value chain. In Rwanda, for example, maize farmers have seen a 69 percent increase in income over the first two seasons working with us.

And one farmer in Kenya told us that her harvest of soybeans went from two to 14 bags a year because of the support the alliance provides.

Today, the Farm to Market Alliance is still in its infancy. And we face several challenges that need to be addressed before it can scale up to empower farmers and provide support to the 2 billion people who depend on small farms around the world. But with the alliance, we see a framework for multi-stakeholder cluster development that can redefine business and truly create shared value widely, even in exceedingly difficult circumstances over long windows. Done right, it just might change the world.

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