Australian corporations, government bodies and not for profits are becoming increasingly sophisticated in their approach to shared value, which will in turn create huge opportunities, says Ramana James, Insurance Australia Group’s head of group shared value.
Mr James is believed to have been the first executive in Australia to have “shared value” in his title when he took on the newly created role at IAG in 2014. Speaking at the Shared Value Forum in Melbourne last week, he said conversations around shared value – addressing social issues in a way that creates measurable commercial value – are changing.
“I think we are seeing other organisations within Australia, and globally, actually seeing the benefits that shared value can bring in the organisation in terms of innovation and in terms of commercial opportunity,” he said. “There is a huge opportunity when organisations start to think strategically and as part of a business plan because what starts to happen is you get the opportunity to use the best capabilities, tools and resources of those organisations and bring them to bear on social issues.”
This year the Shared Value Forum had a particular emphasis on business partnering for change with government and not for profits, along with regional growth and opportunities in the Asia Pacific.
A number of significant international figures spoke at the forum including Mark Kramer, co-author of the original Harvard Business Review article “Creating Shared Value”; Adrian Gore, chief executive of Discovery Group (South Africa); and Mark Tucker, chief executive of AIA Group (Hong Kong).
Shared Value Project executive director Helen Steel said the forum heard many examples of companies implementing shared value and really starting to understand the opportunities.
“There are certainly challenges associated with shared value because we are talking about long-term prosperity, we are not talking about short-term programs,” Ms Steel said. “So companies really have to change their thinking.”
Not for profits are hopeful
Shared value is a concept that will also benefit not for profits and government bodies.
“What was really exciting was to hear someone like Tim Costello, CEO of World Vision, for him to come out and say that shared value provides hope for the not-for-profit sector was really tremendous,” Ms Steel said.
“The Department of Foreign Affairs and Trade gave a great example of shared value in unlocking new policy opportunities with regard to international aid.”
DFAT is running two successful shared value projects:
- Business Partnerships Platform which utilises corporate knowledge and skills
- Seed Pacific, an investment initiative, which builds partnerships between global businesses and local organisations in the Pacific region to forge business solutions to tackle development challenges
Ms Steel said those organisations that were embarking on shared value journeys were clearly undergoing huge changes.
“I think there was a collective view that what needs to happen in the corporate culture is kind of a ‘rewiring of the systems’ for this to happen,” she said. “IAG is a great example of a company that has changed its internal culture enormously over the last few years.”
According to Mr James, IAG undertook shared value for years before the phrase was coined. The company’s vehicle and road safety research centre was established more than 20 years ago and is the only one of its type within Australia’s insurance industry. It enables IAG to combine rich data from accidents with research on test cars to provide manufacturers with “insurance-led car design”.
“Now that benefits society because it reduces the amount of whiplash injuries,” he said. “But it’s actually also very good for our business because it reduces the claims costs.”
Ignore at your peril
IAG joined organisations such as Westpac, Optus, Investa and Red Cross in 2012 to establish the Australian Business Roundtable for Disaster Resilience & Safer Communities to engage in research to better understand natural perils and disasters.
“By 2050, the cost of these disasters or natural perils will be up to about $33 billion per year,” Mr James said. “Now that cost will run across the insurance sector, the property sector, it will go into individual households and will be a significant federal government cost. So if you can spend money in preparedness say, for example, building infrastructure that can better manage floods, cyclones, storms, you actually spend about $1 versus $10 on recovery.
“We have been able to engage in some really great conversations with government and communities about those costs and what the opportunities are to think about preparedness and prevention rather than recovery,” Mr James said.
Last year IAG and the NSW State Emergency Service won an award for their StormSafe program at the annual Resilient Australia Business Awards in Sydney.
“StormSafe engages people with messages about preparedness,” Mr James said, “For example, if you pull the leaves out of your gutters before a storm, it significantly decreases the likelihood that you will have water damage. That is a great thing from a community point of view because people aren’t having their homes flooded but as an insurer that is also good for us because people are less likely to make a claim.”
Post-campaign research showed the messages reached more than three million people across NSW and eight per cent more residents prepared a storm plan than the previous year.
“That is a significant amount of people that are less likely to be making claims. It’s not always easy to quantify in a dollar term. But we can certainly quantify it in terms of behaviour change.”
SMEs can play a role
Ms Steel said shared value won’t suit every business but there was a huge role for SMEs to play in aligning their businesses with social outcomes.
“I think about social enterprises as almost like the incubators for the ideas and if you parent with the corporates and take some of those ideas to scale then we’ll have some pretty exciting outcomes.”
Today’s projects are tip of iceberg
According to Ms Steel, there’s an awful long way to go in helping organisations realise the potential of shared value. However, the aim of the Shared Value Project is to become obsolete.
“We hope that in 15 or 20 years there won’t necessarily be the term ‘shared value’ because all companies will be applying these principles and practices as they go forward because that is what we are going to need to really survive and be sustainable communities, cities and countries.”