Nespresso's robust social brew

Corporate social responsibility is a well-established concept in today's business environment. Enlightened corporations recognise they have a responsibility to do more than simply deliver profits to satisfy shareholders, and they accept their responsibility to contribute to the communities they operate within.

Unfortunately, CSR is up against some fundamental challenges: in today's corporate landscape, it's easy to cut, hard to measure and difficult to control the end result. And that's just the companies who practice it; the majority of commercial enterprises simply don't view CSR as relevant to their business.

The concept of Operational Shared Value addresses these challenges by delivering direct benefits to both business and the community. AT Kearney's recent whitepaper, 'Operational Shared Value: taking social investment to the next stage', developed in consultation with the Australian Secretariat of the United Nations Global Compact Principles for Social Investment, outlines a three-stage methodology which companies can use to create robust and successful OSV initiatives.

Stage one: Value chain assessment

Every business has a value chain, which describes its activities at each stage. This value chain can be broken into an exhaustive list, mapping each basic element under four broad categories:

- Input stage (e.g. raw material supply)

- Development stage (e.g. manufacturing process)

- Distribution (e.g. transport and logistics)

- Delivery (e.g. retail store operations)

Stage two: Identification of specific OSV initiatives

During stage two, we test each identified business element for its potential to create shared value, in the specific context of the company's business and environment. The successful elements create a shortlist of possible OSV ‘levers', which are then mapped to corresponding social and corporate impact areas. The outcome is a series of statements which guide the development process.

Example: Nestl Nespresso

- Nespresso realised that obtaining a reliable supply of specialised coffee was challenging (the Input Stage of their value chain), since most coffee is grown by small farmers in impoverished rural areas of Africa and Latin America, where they suffer from low productivity, poor quality and environmental degradation.

- Nespresso decided to redesign its procurement systems by working intensively with growers, providing advice on farming practices, guaranteeing bank loans and helping secure inputs such as plant stock, pesticides and fertilisers.

- Nespresso also established local facilities to measure the quality of the coffee at the point of purchase, which allowed it to pay a premium for better beans directly to the growers. This also created incentives for growers to improve productivity and quality.

Stage three: Impact measurement

The third stage of AT Kearney's OSV workshops is dedicated to measurement. Traditional CSR programs are largely unmeasured in terms of impact, meaning they're likely to slip down the corporate agenda. Our OSV methodology builds in metrics at the beginning of the initiative, to quantify the benefit to both the company and the community. It's a powerful tool for embedding rigour and accountability into the OSV program form the very outset, increasing the likelihood of its expansion and longevity in the business. However, our approach can also be used to measure existing social media investment programs, regardless of their origin.

Where to from here?

We believe that OSV offers huge opportunities for businesses that have previously considered social investment too hard. For those that see social investment as fluffy and irrelevant, or as a costly add-on that doesn't make economic sense, OSV methodology overcomes these hurdles.

By structuring programs according to the principles of OSV, companies can deliver direct benefits to both the community and the business, creating a win-win for both.

Phil Harkness is a vice-president at global management consultancy AT Kearney.