5th International Disaster and Risk Conference IDRC 2014 Integrative Risk Management - The role of science, technology & practice 24-28 August 2014 in Davos, Switzerland

1. Inter-American Development Bank
New approaches to sustainability –
A Shared Value Approach
Dr. Bettina Boekle
Social Sustainability Specialist
Davos, August 26, 2014

2. Structure of presentation
2
1 IDB context
2 Shifting from Business as Usual: Shared Value
3 Shared Value Examples
4 Cost-Benefit Analysis in Jamaica’s Hospitality
5 Key lessons learned and what is next
6 Reactions from our clients

3. Leading regional development bank in LAC
3
Our Clients
 Corporations, private utilities,
infrastructure operators, financial
institutions, and PPPs
 [Public Sector IDB: Governments]
Our Products and Services
 Loans and guarantees
 Senior and subordinated
 Corporate and Project Finance
 Ticket size: US$10-400 million
 Concessional climate finance
 Value creation services

4. 4

5. 5
Our expertise
Infrastructure
Industries
and Services
Social
Infrastructure
Financial
Markets
Syndications

6. Shifting from Business as Usual:
Products to build value and innovate
performance

7. What is Shared Value?
Driving business growth through solutions
that also drive social value creation

8. 8
Shared Value in the Spotlight
 First Multilateral Development Bank to
join global Shared Value Initiative.
 At IDB-Nestle Shared Value Conference
in Cartagena, three case studies were
presented: Nestle, Harvard, and SCF.
 Donor funded TC for Shared Value
Appraisals

9. 9
• Addressing challenges to
more competitive business
• Addressing social needs for
more sustainable impact
• Achieving sustainable
change for the company
and community
If the investment doesn’t produce
higher financial returns for the
company, it’s not Shared Value
Shared Value Appraisal
Identify investments that create business + social value

10. Building a methodology for success
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The Shared Value Appraisal methodology surfaces tangible investments to enhance returns:
• Strategic priorities
• Concrete outcomes
• Criteria for success
• Stakeholder definition
Definition/
Scope
Data
Collection
Lessons
Learned
Investment Analysis
• Literature review
• Stakeholder
engagement
• Shared Value Process
Worksheet
• Quantitative and
qualitative review and
analysis
• Menu of optimal
investments
• Stakeholder interviews
• Cost-benefit analysis
• Action Plan and
Roadmap
• Lessons learned for on-going
shared value
approach at enterprise
level
• Concrete Roadmap for
subsequent
implementation
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2
4 3
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11. Social, Environmental AND
Financial Sustainability as Goal
 We see investments in sustainability as a business opportunity, moving
beyond a pure risk mitigation or compliance strategy (separate ESG
process)
 Our shared value appraisals have to pass the test of:
 Addressing a current and/or future business challenge of our client
 Business and profitability (We are the Private Sector Department of a Bank!)
 Developmental Impact (Social and/or environmental)
 What else is needed to make it happen?
 Innovative leadership with long-term vision and a willingness to commit time and
resources for design AND implementation (sustainability vision)
 The ability to collect the relevant data and establish benchmarks to demonstrate and
measure impact over time (ex-ante and ex-post)
 Motivation of internal clients (investment officers) and change management

12. Project example 1: Subsole Agribusiness Chile
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VVaalluuee PPrrooppoossiittiioonn//NNeeeedd
 Need to increase sustainability and competitiveness of
current labor force due to high seasonal volatility of
exporting Chilean fruit industry
 Gender/Diversity improvement in supply chain
 Supply chain management with contractors and SME
farmers: Improve contracting mechanisms/relationships to
improve quantity, quality and reliability of supplied fruits
 Capacity building/training: Identification of needs for
differentiated capacity building adequate to increase
workers’ productivity, their loyalty and company’s
competitiveness in short-, medium- and long-run
OOppppoorrttuunniittyy ffoorr ssccaallee--uupp//rreepplliiccaattiioonn
 Demonstration effect for fruit exporting industry leading to
scale-up and replication in Chile
 Potential model for other countries in the region struggling
with same problem (work force retention)

13. Project Example 2: Inclusion Programs in Tourism in Jamaica
14
VVaalluuee PPrrooppoossiittiioonn//NNeeeedd
 Opportunity to increase financial and business
sustainability of IDB client (Caribe), Jamaican
construction company and hotel operator (Marriott)
 Component 1: Higher Inclusion of local (women-)
led SMEs in Marriott’s supply chain to reduce its
procurement and operating costs, increase
freshness and uniqueness of products, and provide
Caribe with increased profit-rate
 Component 2: Hire Youth-At-Risk during hotel’s
construction and operation; increase hotel’s
reputation and trust building with local community
OOppppoorrttuunniittyy ffoorr ssccaallee--uupp//rreepplliiccaattiioonn
 Social and environmental demonstration effect for tourism
industry in the Caribbean (first LEED building in Jamaica)
 Potential model to be scaled up/replicated in 3 other
hotels of the IDB Client in LAC

14. Shared Value Methodology for Jamaica
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Shared value is understood to be a composite of financial costs and benefits (monetary returns
on investment) and social costs and benefits.
Direct and indirect economic costs
and benefits for each organization
(E.g.: cost for training, benefit from lower
procurement cost, etc.)
Direct and indirect social costs and
benefits for each organization
(E.g.: licence to operate, etc.)
Direct and indirect social/economic
costs and benefits for stakeholders
(E.g.: improvement of well-being of
workers, increase of real estate value,
etc.)
Quantification of economic costs/benefits
List of potential costs/benefits
CBA for each
organization:
-Hotel owner & manager
-Contractor (construction)
-Training organizations
Monetization of social costs/benefits
Costs and benefits listed
but not quantified

15. CBA results summary
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The Net Present Value has been calculated for each category of stakeholders:
Training of youth-at-
risk and inclusion
in the workforce as
laborers
Technical
training of
youth-at-risk
Inclusion of
local SMEs in
the hotel’s
supply chain
Training of youth-at-
risk and
inclusion in the
hospitality
workforce
Positive NPVs
for business
partners

16. Costs & Benefits for youth-at-risk, SMEs and the
community
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Benefits to the community: poverty reduction, reduced criminality, increased public revenues from sales and
revenues tax, reduced public expenditure (security, social benefits)
Benefits to the community: poverty reduction, reduced criminality, increased public revenues from sales and
revenues tax, reduced public expenditure (security, social benefits)

17. Key Performance Indicators
 Program-specific
Youth-at-risk programs
- # of youth-at-risk trained in construction (labourers and
technical workers) disaggregated by male and female
- # of youth-at-risk hired by construction company
(labourer and technical worker) disaggregated by male
and female
- # of contracts completed by youth-at-risk
- Level of performance of youth-at-risk (see baseline and
follow up surveys in Appendix A)
- Level of satisfaction of youth-at-risk working in
construction (economic and social impact)
Local SMEs program
- # of local SMEs included in the hotel’s supply chain
- Share of women-led SMEs
- # of contracts completed by local SMEs (including share
by women-led SMEs
- Amount in $ and share in % of total procurement
purchase from local sourcing (including from women-led
SMEs)
 Business indicators
The inclusion programs are expected to have a
positive impact on the following business indicators
- Level of annual revenue generated by construction
company, hotel and local SMEs
- Amount of costs for hotel’s security
- Amount of expenses for hotel in case of riot or other event
- Amount of costs for logistics and marketing of hotel
- Hotel, construction contractor and SME’s market shares
- Organizations’ (hotel, construction company) brand
perception by stakeholders
See detailed costs and benefits rationale for each program in Appendix B
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Key Lessons Learned and what is next for us?
• Communication and cooperation between all stakeholders is necessary
• Data collection is one of the key processes requiring general collaboration
• Availability, or rather scarcity, of data can however represent a challenge in this process
• Training organizations, local business associations can provide:
• Resources for training and capacity building
• Pool of potential candidates thanks to established networks
• Clear identification of financial mechanisms and incentives necessary to demonstrate
broader social benefits and have support organizations’ buy-in
• Involvement and availability of local “experts” enable to confirm assumptions
during the project design and make informed choices
o CUSO Jamaica provided in-field support
o Interviews with key stakeholders were conducted
• The quantification and monetization phase is crucial to attribute values to costs
and benefits, requiring the use of proxies
Value-chain approach
(where applicable)
Existence of supporting
local organizations
Deep understanding of
the local reality
Translation of non-market
values into market values

19. How our clients react to the appraisal process:
“We would have never taken the time to discuss all this.
Now, we have pressure to deliver a real solution.”
CFO Chilean fruit exporter
“If you support a local, woman-owned bakery, how many
suppliers benefit? How many families? How many children
are then able to go to school and move on to good jobs?
We have always understood this process anecdotally but
are working more diligently on metrics, and the IDB-Deloitte
shared value team was able to show how to do so in
greater detail, including dollar value. This was a great
learning opportunity for us.”
Marriott VP for LAC
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20. www.iadb.org/sharedvalue
Email: bettinab@iadb.org