Can a company claim shared value to society if its business model is rooted in a harmful product?
By John Elkington
Cognitive Dissonance or Paradigm Shift
The test of a first rate intelligence, said F. Scott Fitzgerald, is the ability to hold two opposed ideas in the mind at the same time, yet still retain the ability to function.
So try this for size: Proposition 1 is that capitalism is helping to drive the Sixth Great Extinction, sending species and ecosystems to the wall – and undermining our climate into the bargain. Now set that against Proposition 2, which asserts that capitalism will save the world for future generations.
So how is your brain coping? The missing fact, of course, is that capitalism – like life itself – is almost infinitely flexible, having gone through many profound transformations. Proposition 2 is thus perfectly possible, but only if we achieve a paradigm shift that moves us away from growth-at-any-cost mindsets, technologies and business models.
But how could you tell whether a given company, industry or economy was on the right path? This question re-surfaced when two companies recently spoke about their latest sustainability initiatives.
British American Tobacco – "Shared Value?"
The first was British American Tobacco, or BAT, launching its report, Value Shared: A tobacco company for the 21st century. This spotlights harm reduction, sustainable agriculture and responsible corporate behavior. Nicandro Durante, BAT’s chief executive, embraces the concept of shared value.
First introduced by Nestlé, later championed by Michael Porter and Mark Kramer, shared value has been riding a wave since a 2011 Harvard Business Review article. The challenge for business, according to Durante, is “about creating shared value and making sure that what we do as a business doesn’t just benefit our shareholders, but can also have a much wider, positive impact for society.”
Is Sustainability Possible When the Core Product is Unsustainable?
Fine, but – not to beat about the tobacco bush, BAT is a leader in an industry whose main product (even when used as the manufacturers instruct) kills a significant proportion of users—and kills more effectively the longer people smoke.
Yes, you could argue that human numbers are a problem and that cigarette smoking helps keep population numbers down, but it’s unlikely the tobacco industry will use that sort of logic any time soon. Instead, a key topic covered in the BAT report is harm reduction. It discusses progress in developing tobacco and nicotine products that are safer than conventional cigarettes.
This is an area of future growth, BAT believes, and could also have a big positive impact on public health. The company launched its first e-cigarette, Vype, in the UK last year. “Of course, emphasizing harm reduction is the responsible thing to do,” Durante says, “but if it helps to meet genuine consumer demand, it also makes commercial sense. It’s what any sustainable business would do.”
Sustainable Agriculture as Smokescreen
Another example of the conflation of shared value as a win-win management approach with the sustainability agenda, which calls for wider system change. But with tobacco growing being a key part of BAT’s supply chain, more sustainable forms of agriculture are another important focus of the report.
By working directly with over 100,000 farmers on sustainable farming practices, the company stresses that it can “protect the long-term security of its leaf supply, as well as helping to improve the social and environmental impact tobacco growing can have.” It has planted over 170 million trees in the last six years, for example, and invested over £25 million in community projects focused on sustainable agriculture.
Real value is being created and shared at many points in BAT’s supply chain, no doubt, but this use of shared value seems something of a smokescreen.
Novo Nordisk Tackles Diabetes
In contrast, within days of the BAT announcements, the Danish health care company Novo Nordisk announced plans that spoke more powerfully both to the shared value agenda and to the wider sustainability challenge.
As the Financial Times reported, Novo Nordisk is:
“…teaming up with some of the world’s biggest cities to find ways of tackling diabetes, amid warnings that the disease threatens a global ‘emergency’ among growing urban populations. The move illustrates how the Danish insulin maker is attempting to work with policymakers to fight diabetes, even as its business benefits from rising incidence of the disease.”
Lars Sørensen, Novo Nordisk’s chief executive, warned “the global diabetes epidemic is an emergency in slow motion.” He explained the global shift towards urban living is accelerating the diabetes epidemic. There are now an estimated 382 million diabetics worldwide—more than the population of the US—and two in three of them live in cities.
That number is forecast to rise to more than half a billion by 2035, with much of the growth in developing countries such as China and India.
Both BAT and Novo Nordisk are being transparent in ways that would have been unthinkable a decade or two back. But BAT’s story still strikes me as part of a Proposition 1 world, involving creating and sharing value on a road lined with hundreds of thousands of early graves. By contrast, Novo Nordisk’s approach seems less directly self-serving, speaking of a commitment to longer-term system health.
A Modest Proposal for BAT
My own recipe for a sustainable tobacco company, incidentally, would involve BAT, or a competitor, teaming up with a pharmaceutical company to do two things:
The first would be to radically cut back on the use of tobacco in that long-standing drug delivery device, the cigarette. But that would massively hit poor farmers, so a parallel step might be to genetically engineer new types of tobacco plants to produce novel, life-enhancing biopharmaceutical compounds.
At the extreme, these might even include new types of recreational drugs, helping satisfy the inexorable growth in demand for such things. In the process, we might ensure greater levels of quality than the street corner market provides and, in the process, hammer another nail into the coffin of the illegal drugs trade.