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Firms urged to fuse corporate, social interests

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Sustainable value creation

Sustainable value creation

Corporations need to do a better job building social change into their business strategies in ways that benefit both their business and society, a new report says.

Using a strategy known as “sustainable value creation,” says the report by Accenture and the Committee Encouraging Corporate Philanthropy, or CECP, companies should develop their philanthropy with the same approach they use to developing their business.

That will require finding “new, scalable sources of competitive advantage that generate measureable profit and community benefit,” it says.

The report says that “a business at its best is a company that has overcome traditional strategic and operational divisions between advancing the performance of the enterprise and promoting the well-being of citizens and communities.”

In a poll conducted at the 2011 Board of Boards CEO Conference hosted by the CECP, 91 percent of CEOs responding said they “face difficulties in identifying an initial set of societal issues that link to competitive advantage, scaling the strategy across the company, or measuring the societal and business performance of these initiatives.”

And 70 percent saw a need to evaluate sustainable-value-creation strategies with “different criteria than traditional opportunities because this approach requires a longer time horizon to generate returns.”

Based on CEO interviews and polling, along with analysis by Accenture and CECP, the report identifies five key “imperatives” for planning, managing and scaling a strategy for sustainable value creation.

Companies that are successful, the report says, “already have proven mechanisms in place to generate profitable ideas both in the short- and long-term, yet the business opportunities within fundamental societal issues are often overlooked.”

If companies rigorously analyze “the root causes of existing core business challenges,” it says, they “often uncover underlying societal problems that, if addressed, may lead to new sources of competitive advantage.”

Once a company identifies those social issues, it should look for the “optimal role” it can play in helping to address them.

“To accomplish this, organizations must invest in a deeper level of understanding of their future growth path as it relates to community needs,” the report says.

Executives, in turn, must adopt a management philosophy akin to the way a research-and-development department runs, including a “hands-on approach to conducting the local market research needed to understand societal needs and to accommodating a more iterative development cycle,” the report says.

Leaders, it says, ‘Must be comfortable with the idea of trying as well as failing and applying lessons to refine the program over time.”

Companies also should aim to “scale” their sustainable-value-creation programs across the business, the report says.

That requires big organizational changes, it says, including “embedding incentive programs, governance structures, and measurement practices across the company in support of the strategy.”

Those strategies also will require “distinctive executive leadership capabilities,” the report says.

“CEOs, in particular, must set the tone and pace of the program and reinforce the value with key stakeholders,” it says, including employees, consumers, investors and partners.

Sustainable value creation in many ways represents “an extension of the same capabilities at which leading businesses already excel,” the report says, including “understanding consumer needs, investing in innovation, mobilizing around change, creating markets, and managing a complex ecosystem of stakeholders.”

The strategy also has “enormous transformative potential for an enterprise beyond ‘business as usual,” it says. “Traditional either/or mindsets – assumptions that companies must choose between competitiveness and sustainability – must be overcome.”

And the strategy requires immediate action, the report says.

“Business is under increasing pressure to rise to stakeholder expectations, increase transparency, and identify new sources of growth,” it says. “At the same time, the severity and complexity of societal problems – issues that can hamper a company’s ability to thrive – are rapidly increasing.”

So “whenever and wherever possible,” the report says, companies should “fuse corporate interests with society’s interests.”

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