Firms urged to embrace shared value to drive business longevity

African businesses have been urged to embrace shared value principles to drive the sustainability of the enterprises in the long-run.

Described as the split difference between the pursuit for social impact and profit making by corporations, the stakeholders find the common goal principle, which has roots in the Harvard Business School, as an inevitable element to achieving growth by businesses in the 21^st Century.

“The point is not giving up value and returns for investors but rather, shared value allows businesses to prosper alongside the co-existing ecosystem. Entities that opt for profiteering at the expense of replenishing the every ecosystem they draw from are bound to fail in the long-term,” said Dalberg Advisors Africa Regional Director Edwin Macharia.

Shared value as a business operation model does however have its fair share of criticism from different quarters, on one side, the continued critique of a majority of consumers who view businesses as pure-profit making entities and on the other, business managers who focus on minimizing input while maximizing on output to meet shareholder obligation.

In spite of the real struggle to strike the optimum balance in running businesses which often couples up with a challenging business environment, Absa Group Head of Corporate Citizenship Sazini Mojapelo challenged managers to approach shared value from the stand point of external risks which supersede internal business challenges.

“At some-point it becomes a zero sum game. Internal risks cannot be looked at to the exclusion of the social risks around the business which more often than not, determine the existence of the enterprise 5 or 10 years down the line,” she said.

Mojapelo spoke at the African Shared Value Initiative forum on Wednesday which sought to set the stage for the continent’s upcoming second shared value summit in Nairobi on May 23 and 24, a summit aimed at bringing together African Chief Executive Officers to drive the transformation towards impact investing.

Shared value as a business operation model is a relatively new concept on the globe and differs from philanthropy and corporate social responsibility (CSR) in that, shared value does not necessitate sacrificing profit corporations in the pursuit of social impact.

According to NSE C.E.O Geoffrey Odundo, investors have become receptive to firms’ social impact initiatives and have begun to habour a soft spot for such corporations in their investments decisions.

“For investors, it is no longer about profit making but also sound business practices; we are seeing a lot of interests in firms that are able to combine both elements. In Kenya, for instance, investors have a high affinity for firms which have Environmental and Social Governance (ESG) scorecards,” he said.

Telco operator Safaricom, the firm behind the revolutionary M-pesa platform which from the onset served to deepen financial inclusion by blurring income as an element to the consumption of banking services has for instance paid out a near six-fold return on investment to shareholders in five years to 2017 going by an analysis of the company’s year on year dividend payout.