BY KEVIN GARRAHAN
Kevin Garrahan is currently a Latin American Studies student at SAIS. Prior to graduate school, he worked as a Legislative Assistant for a U.S. Congressman in Washington D.C. He is interested in advancing innovative methods that the public and private sectors employ to tackle social and economic challenges.
Conscious Capitalism. Benefit Corporations. Social enterprise. Shared Value. Increased social and environmental engagement by private companies, in one form or another, has been a salient trend of the past decade. Governments and international organizations have furthered it, designing the 2015 UN Sustainable Development Goals and the Paris Climate Agreement specifically to nudge businesses towards such efforts. And consumers across the world, for their part, have increasingly demanded more from the companies they buy from.
It is in this context that Shared Value strategies, which integrate social and environmental engagement within a firm’s core business, have gained prominence. These programs create both social and financial returns within a firm’s particular set of advantages and constraints. If it sounds more like management strategy than anything else, that’s because it is. As the strategy’s developers put it:
“Shared value is not social responsibility, philanthropy, or sustainability, but a new way for companies to achieve economic success”
Global beer behemoth Anheuser Busch InBev’s (AB InBev) Growing World initiative employs a Shared Value approach to strengthen the growers and retailers in its value chain. The two flagship programs are focused on the firm’s Latin American operations which, following the acquisition of competitor SABMiller last year, account for almost 50% of its revenues.
First, for its growers, the company developed the SmartBarley program in 2013 to secure its supply of high-quality malting barley and simultaneously increase productivity for some of the 17,000 farmers in its network (McIntire School of Commerce 2015). The program started as a pilot connecting agronomists with a small group of growers, and has greatly expanded in both size and scope. It has reached 4,500 growers in nine countries, including Mexico, Brazil, Uruguay, and Argentina. It includes an online benchmarking program, access to barley strains and farming technologies, and sharing of best practices to increase crop yields (Anheuser Busch InBev 2016). The program has advanced even further in AB InBev’s Grupo Modelo operations in Mexico. Here, they also organized a pilot to share weather and market information with farmers via mobile applications and partnered with the local government in Zacatecas to offer them 100% financing for modern agricultural equipment (Anheuser Busch InBev 2016).
Second, for retailers of its beers in developing regions, AB InBev operates an innovative program called 4e Camino al Progreso (4e). This is, in fact, a legacy SABMiller program running in six Latin American countries. It is designed to improve business performance and quality of life for the tenderos, small shop owners in low-income areas, as well as enhance the company’s retail network and sales (Jenkins 2015). It is operated with FUNDES, a Latin American non-profit focused on micro, small and medium enterprise development, and the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB). The program’s core intervention is to provide training for the tenderos, which includes 18 hours of business-oriented classroom instruction and 17 hours of tailored, in-store mentoring (Jenkins 2015). The program also seeks to enhance the business ecosystem for its retailers by increasing access to finance and technology. Already, in El Salvador, the partners have created a program whereby Banco Agricola offers loans to 4e graduates for business improvements, which are guaranteed by the IDB (Jenkins, Garcia, & Torres 2015).
Both SmartBarley and 4e are ideal Shared Value programs – they provide both financial and social returns, and are connected to the company’s core business (Boekle 2017). They fit squarely within two of the defined methods of creating Shared Value – ‘redefining productivity in the value chain’ and ‘enabling local cluster development’ (read more on the methods here) The results from 4e have been well documented: “20,000 tenderos have participated in Colombia, Ecuador, El Salvador, Honduras, Panama and Peru and reported a 13% average sales growth rate in the year after their training.” A staggering 70% of store owners in these regions are women, furthering 4e’s social impact (Jenkins 2015). For AB InBev, this increase in sales is a significant one - 40% of all of SABMiller sales in these countries had previously come from small retailers, with the figure being as high as 60% in Colombia. More thorough reporting on business results, family income and wellbeing, community leadership, and the positive social impact’s sustainability is expected to be done by the IDB in the future.
Building on these encouraging results, the company can achieve even greater financial and social returns through three key steps: creating integrated Shared Value reporting, scaling the 4e and SmartBarley programs, and seeking new opportunities in “local cluster development.”
1. The IDB’s external validation has helped make the business and development case for 4e. Similar measurement and reporting on program value creation - direct costs and benefits - should be integrated for 4e and SmartBarley into AB InBev’s annual report to drive management decision-making.
2. The SABMiller acquisition also creates opportunities to scale the innovative Shared Value programs. Such opportunities exist in the Latin American countries where SABMiller had planned to reach 190,000 retailers with 4e by 2020, and in others such as Brazil and those in Africa. The scaling effort could be catalyzed by video-streaming the classroom training and expanding access to technology through easy financing.
3. The firm could seek to identify and pilot innovative ways to enable ‘local cluster development’ in the developing regions it operates in. This could include efforts, with partners in government and non-profits, to improve infrastructure and address the skills gap that persists in Latin American labor markets. Both efforts could enhance competitiveness for the firm, especially by reducing operating costs, in addition to addressing two longstanding socio-economic problems stymieing the region’s growth (Meguizo & Pages-Serra 2017).
AB InBev is at the forefront of private sector engagement in development in the Latin American region. Implementing these additional steps will make Shared Value a driver of new and sustained growth for the company and the region in the coming years.
SOURCES:
Kramer, Mark & Michael Porter. 2011. “Creating Shared Value.” Harvard Business Review, January-February Issue.
McIntire School of Commerce. 2015. “ABInBev’s John Rogers Brings ‘SmartBarley’ to McIntire Finance Students.”
Anheuser Busch InBev. 2016. “Growing Together for a Better World.” Pages 10-14.
Jenkins, Beth. 2015. “Empowering Small Businesses in Corporate Value Chains: The Case of SABMiller’s 4e Camino al Progreso Program.” Pages 10-15.
Jenkins, Beth, Catalina Garcia, and Elfid Torres. 2015. “ How Business can Drive Inclusive Growth and Development: The Case of Empowering Traditional Retailers.”
Boekle, Bettina. 2017. “Opportunities and Risks of large corporate investments.” Page 13.
Meguizo, Angel and Carmen Pages-Serra, 2017. “In Latin America, companies still can’t find the skilled workers they need.”
PHOTO CREDIT: "Two men cheers," licensed under Creative Commons Zero (CCO) License (© Wil Stewart).