Follow Peter Brabeck-Letmathe, Nestlé Chairman, speak live about Creating Shared Value as a new concept of corporate social responsibility at the International Food Policy Research Institute (IFPRI), Washington, USA. The Policy Seminar proposes a new approach, which replaces the more traditional descriptions of corporate social responsibility with Creating Shared Value - a concept initially developed by Harvard's Professor Michael Porter and championed by Nestlé. Using a range of examples from the Nestlé context, Mr Brabeck-Letmathe will also examine the links between the role of business in society and the broader issues surrounding food security. Click here to listen to his speech. You can view his presentation here.

Normative extremism in the shareholder versus stakeholder debate may well be on its way out. If shareholder value was the pre-eminent metric of corporate entity success in the past two decades, in the new decade it will be far less so. The undisputed twenty-plus-year reign of financialization could be drawing to an overdue end.  Similarly, the exclusive rights on do-gooder patents that activist groups, environmental campaigners, social crusaders and community advocates have hitherto laid claim to might be nearer its expiry date than its partisans realize.  After waging an acrimonious war for so long, veterans on both sides have almost failed to notice how close they are to a final settlement. My prognosis is that the fanatical bipolarism of hardliners on either side of the debate will give way to one that vigorously searches for common ground. Responding to questions in a 2006 interview, Peter Brabeck-Letmathe, the former Nestlé chief executive, urged companies to strike a balance between, ‘financial fundamentalists’, stubbornly wedded to the view that a public company’s main mission is to enhance shareholder value at all costs and oversee a steady rise in the stock price, on the one hand, and, on the other, ‘ethical stakeholders’ who are actively sympathetic to the position that the creation of a financial surplus is not the primary goal of companies, but rather the delivery of social benefits. In reality, this either-or conception is an anachronism, at least, within many boardrooms. Most contemporary boards recognize the need to accommodate the interests of a broader set of interests in the formulation and execution of their business strategy. Saddled with multifarious pressures to implement proposals that benefit a basket of diverse constituencies, and not only shareholders, boards have grown quite adept at appraising their responsibilities and integrating its fulfillment in their corporate plans. While ‘ethical shareholders’, who, by the way, do not form a monolithic interest bloc, are content to make demands from vertical silos, boards which are charged with reviewing, analyzing, prioritizing and approving them, are obliged to progress much further to dealing with their implications on the business model, competitiveness, and profitability of the firm. Resolving these dilemmas require delicacy, tact and a firm grasp of the competing arguments. The responses of boards to these demands, under the rubric generally referred to as corporate social responsibility (CSR), have undergone a significant evolution in recent years. From the philanthropy-dense activities of early years, today many companies have learned to distinguish between spontaneous charitable instincts and business-inspired programs. The January 2010 announcement that Goldman Sachs, the investment bank, would require its partners and senior executives to donate to charity falls in the former category. Noble as these gifts may be, their discretionary character and isolation from the investment bank’s value chain disqualifies them as CSR initiatives. Professor Geoffrey Heal’s definition of CSR as ‘a program of actions taken to reduce externalized costs or to avoid distributional conflicts’ brings to the fore the fundamental nature of such activities. Heal’s definition presumes productive activities which generate these costs and a cumulative value chain whose end product ownership is disputed by each link on the assembly line with a legitimate claim on it. In their path-breaking paper, ‘Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility,’ published in the December 2006 edition of the Harvard Business Review, Michael E. Porter and Mark R. Kramer argue that the time has come to stop treating ‘corporate success and social welfare as a zero-sum game.’ According to the researchers, ‘if corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed – it can be a source of opportunity, innovation and competitive advantage.’ Increasingly, many companies are bringing the same dispassionate criteria they use for business decision-making to their CSR agenda setting. In his speech, ‘A Conflict of Interests? Reconciling the Interests of Shareholders and Stakeholders,’ delivered at a 2008 RiskMetrics conference, Sir Stephen Green, chairman of HSBC Group, pointed out that sustainability is about ‘bringing relevant issues together into your own business model.’ CSR has outgrown its humanitarian-moralist origins to assume its proper stature as an integral part of value creation and assurance process at corporations. Undoubtedly, articulating the social contract that binds shareowners and staketenants has grown in importance. In its 2007 Creating Shared Value Report, Nestlé explains that ‘to be successful in the long term it has to create value, not only for its shareholders but also for society . . . not as philanthropy or an add-on, but a fundamental part of our business strategy.’ For corporations whose survival skills are sharply honed, co-opting the new thinking is a clear-headed choice for Darwinian longevity. From building water processing plants in Nigeria to training women in sustainable farming in Pakistan to micro-finance loans for dairy farmers in South America, the company has dovetailed its CSR initiatives with its business goals. In fact, Nestlé has been so successful at establishing and communicating the synthesis of interests between its financial statements and CSR activities that it has won shareholder support for them. This progress presents an historic opportunity for activists and campaigners who have long complained about the indifference and insincerity of companies to socially responsible practices. Will they take the companies up on their word or prefer to keep barking at an uprooted tree? The convergence of values must not go unnoticed. Companies, like individuals, are still far from the ideal in what they aspire to become within their communities. But strident criticism and persistent condemnation of former practices that companies have taken bold steps to correct is counter-productive and undermines the stated goals of these organizations. Around the world, companies are extending the hand of reconciliation. Would the other side accept it? The time to seize the day is now.

The World Economic Forum Annual meeting in Davos brought together leaders from governments, business, civil society, academia and media  to discuss the most pressing issues facing the world today. Nestle at Davos At a session on “Rebuilding Water Management”, Nestlé Chairman Peter Brabeck-Letmathe, part of a panel comprising Tsakhiagiin Elbegdorj (President of Mongolia) Ajit Gulabchand (Chairman and Managing Director, Hindustan Construction Company), Michael Mack (CEO, Syngenta), and Ajay Vashee (President, International Federation of Agricultural Producers) explored the challenges water management will face in the next 20 years, its relevance and impact on issues such as health and security, as well as how best to implement information systems tools to protect and strengthen water management. At a another panel “Global Industry Outlook: Health, Consumers, Tech and Travel”, Chairs of the WEF Governors Meetings each shared their industry's evaluation of the most important challenges and opportunities facing them in 2010. Global Industry Outlook sessions at the WEF provide an update on the state of the telecommunications, travel, health and consumer industries worldwide, map out external and internal growth factors and trend, and recommend practical solutions which will help business and government leaders collaborate most effectively in achieving this vision. Nestlé CEO Paul Bulcke presented the consumer industry’s perspective at the session. The two major issues Mr. Bulcke focused on were water security and food security. In order to increase water security, Mr. Bulcke recommended more appropriate water pricing, efficient irrigation and water use, cultivation of the right crops for the right climate, stopping of biofuel production and lastly, the need for more research in water rights trading. His recommendations to increase food security were sustainable production without western-style agricultural policies and subsidies, generation of reliable incomes for farmers through better  productivity, and added that food must be affordable and accessible and of proper “quality”. He reiterated that the private sector is part of the solution. Mr. Bulcke also outlined Nestlé’s concept of Creating Shared Value (CSV) -- the positive role of business on society. This concept is well grounded in Nestlé’s roots as its very first product, an infant cereal developed in 1866, was both a business opportunity and a response to an urgent societal need – both factors being mutually inclusive. Put simply, business can do business and do good at the same time. Stating that companies should aim to create and share value at all levels of the value chain, Mr. Bulcke added that when value is created and shared, people’s sense of responsibility, of ownership and stewardship increases. Click on Global Industry Outlook: Health, Consumers, Tech and Travel to view video of session. Successful companies can create shared value by identifying desirable outcomes for both shareholders and communities – with the right labor, human rights, development, sustainability and community policies.

An abstract of Nestlé Chairman Peter Brabeck-Letmathe’s speech on why CSR has recently become topical and why we are observing a fundamental change in economic circles towards this issue. The reason is the recent global financial and economic crisis. The last 18 months have made businesses increasingly aware that you can have long-term success only if you create the same value for shareholders and for society or the community in which you operate. There is now a change in attitude with regard to the social responsibilities of businesses, which has been traditionally been limited to philanthropic and charitable activities, often undertaken by companies to enhance their reputation. For Nestlé, the observance of the Business Principles, national laws, and international standards is not only to ensure that our activities are environmentally sound, socially equitable and economically viable, or the role of a good corporate citizen. Our approach of creating shared value, delves deeper. We aim to work with the entire value chain to bring real benefits to business, society, customers and products.  A single company cannot solve all the world’s problems, but every company can have its unique value chain aligned with sustainable positive impact - and in a manner which adds value to its shareholders.

A major factor contributing to poverty and hunger is food insecurity, or the lack of sustainable physical or economic access to sufficient safe and nutritious food for healthy and productive living. The Food and Agricultural Organisation (FAO) of the United Nations has projected that, in 2009, over 1 billion people will go to bed hungry, and estimates that the world will need until 2050 to boost agricultural investment by US$83bn a year to feed a growing population. Speaking on the issue of food security at the Private Sector Forum in Milan, Nestlé Chairman Peter Brabeck-Letmathe stressed the need for and the willingness of the private sector to be actively involved in addressing this issue. He emphasised that reducing food insecurity is not just about taking measures to produce more food, it is also about taking measures that actually change expectations and lead to sound long-term food security and called for bold solutions to tackle this issue. In his presentation, Mr. Brabeck-Letmathe explains that there are five major challenges to overcome long-term global food insecurity: necessary quantities (basic calories and proteins) in a sustainable manner, generating reliable incomes for farmers, affordability of the food for low-income consumers, quality of food (including nutritional value and safety), and access (food at the right time, in the right form, at the right place). It is unfortunate and ironic that most of the people that are under-nourished or malnourished are primarily farmers, and come from rural areas. Click here to view video. I welcome your views on how private sector companies can confront and combat the issue of global food insecurity.