Creating Shared Value: Impacts of Nestlé in Moga

The book ‘Creating Shared Value: Impacts of Nestle at Moga, India’ based on a study by the Third World Centre for Water Management and authored by a team under Prof. Asit K Biswas, displays Nestlé’s deep commitment to create a harmonious environment beneficial to both business and the surrounding community and the society.

An interesting feature of the book is the way it differentiates between Corporate Social Responsibility (CSR) and Creating Shared Value (CSV) as practiced by Nestle in the Indian context. While CSR in essence is the practice of giving back to society, not necessarily connected with the enterprise itself, the concept of CSV is involving the society and creating change. CSR does bring positive change though it may not be as powerful as CSV where linkages between society and the economy drives change. This is explained by way of Nestlé’s experience in setting up a dairy factory in Moga in the state of Punjab and how it dealt with the issue of changing mindsets of the people around. More than an economic model, Nestle pursued a business philosophy with a social content. It sought to bring a positive societal impact that not only enhanced the efficiency and productivity of its business operations, but also enriched its stakeholders and the society at large.

The book indeed is a study in behavioural science. It traces the evolution of mindsets of the people in and around Nestlé’s Moga factory. Beginning in an area with abject poverty with subsistence farming the main economic activity, Nestlé faced a myriad of challenges including the need to develop almost nonexistent basic physical and social infrastructure. Its interventions in the form of providing agricultural extension services, creating awareness about ways to improve health of dairy animals and increasing milk yields had significant economic impact.

More importantly, however, it faced regressive response from the local community on account of cultural dogmas and social taboos. To overcome these challenges, Nestle adopted an approach of business involvement in the society and ways of engaging the society to achieve true social change. Despite being a businessman, I was more touched by this aspect of the study. In conventional CSR models, the highlight is philanthropic socially useful investment. Indian business has always given back to society but the manner in which Nestle worked to deal with complex social barriers is a key learning point from the experience.

Nestle persevered to work towards true change that went beyond the economic impact it had in enhancing income generation of the local population or improvement in their standard of living. It recognized social barriers prevalent in the society that were detrimental to the economic progress of the people and at the same time hindered profitable operations of the company. A case in point is how Nestle was able to overcome the cultural issue where farmers considered selling milk to the dodi (milk buyer) a social taboo equivalent to selling their own sons. The pride that Nestle demonstrates in its commitment to sharing value with the society is an important attribute of the study.

I believe that business today is conscious of the need for wider social engagement but their efforts towards commitment to social change have to be recognized. Business too needs to demonstrate patience and perseverance with the belief that means to economic change is through social change. Even the programmes such as Nestlé’s get absorbed in the course of business as their visibility is not directly linked to change or perceived upliftment, but are treated as a normal business activity.

As society transforms disowning superstition and cultural taboos, later generations take such change for granted. It adopts a new set of rules and corporate need to adapt to such changes and evolve different models for social engagement. It is good to see that Nestle is aware of this doctrine and is revisiting its programmes. The initiative of developing ancillaries in line with the case study of Paras Spice highlighted in the book is worth emulation. Prof.

Biswas and his team have done an extremely good job analysing and documenting Nestlé’s experience of setting up its first dairy factory in India. In particular, they have been able to capture the softer aspects of Nestlé’s engagement with the society, such as the negative cultural association with selling milk considered a social taboo at one time. The book lucidly describes how Nestle was able to slice through societal mindsets to arrive at a mutually beneficial economic and social environment.

R.V. Kanoria
Chairman & Managing Director, Kanoria Chemicals & Industries Limited, New Delhi, India; Immediate Past President, Federation of Indian Chamber of Commerce and Industry (FICCI).
Published in New Global Indian
November 2013