1. Social Progress Imperative#socialprogress Professor Michael E. Porter Sao Paulo, Brazil September 4, 2013 THE SOCIAL PROGRESS INDEX AND THE CHALLENGE TO BRAZIL

2. Social Progress Imperative#socialprogress HOW DO WE MEASURE A NATION’S DEVELOPMENT? 2

3. Social Progress Imperative#socialprogress In both economic and business development our understanding of success has been incomplete There is a powerful connection between economic and social development, both positive and negative Separating business and competitiveness from social progress and societal issues is a serious mistake THE DUAL CHALLENGES OF DEVELOPMENT Economic Development Social Development 3

4. Social Progress Imperative#socialprogress MEASURING NATIONAL DEVELOPMENT There has been a growing recognition of the need to go beyond GDP in measuring a nation’s performance A series of indexes have been introduced to do so: - Human Development Index - Millennium Development Indicators - Happy Planet Index - OECD Better Life Indicators - Legatum Prosperity Index 4

5. Social Progress Imperative#socialprogress SOCIAL PROGRESS INDEX: DESIGN PRINCIPLES Separate from economic indicators Holistic framework Outcomes rather than inputs Relevant to all countries 5

6. Social Progress Imperative#socialprogress WHAT IS SOCIAL PROGRESS? Social progress is the capacity of a society to meet the basic human needs of its citizens, establish the building blocks that allow citizens and communities to enhance and sustain the quality of their lives, and create the conditions for all individuals to reach their full potential. 6

7. Social Progress Imperative#socialprogress SOCIAL PROGRESS INDEX MODEL 7 Social Progress Index Nutrition and Basic Medical Care Air, Water, and Sanitation Shelter Personal Safety Access to Basic Knowledge Access to Information and Communications Health and Wellness Ecosystem Sustainability Personal Rights Access to Higher Education Personal Freedom and Choice Inclusion and Equity of Opportunity Does a country provide for its people’s most essential needs? Are the building blocks in place for individuals and communities to enhance and sustain wellbeing? Is there opportunity for all individuals to reach their full potential? Opportunity Foundations of WellbeingBasic Human Needs

8. Social Progress Imperative#socialprogress SPI RANKINGS: 2013 8 1.Sweden 2.United Kingdom 3.Switzerland 4.Canada 5.Germany 6.United States 7.Australia 8.Japan 9.France 10.Spain 11.Korea, Rep. 12.Costa Rica 13.Poland 14.Chile 15.Argentina 16.Israel 17.Bulgaria 18.Brazil 19.United Arab Emirates 20.Turkey 21.Dominican Republic 22.Colombia 23.Thailand 24.Peru 25.Mexico 26.Philippines 27.Paraguay 28.Tunisia 29.Georgia 30.Viet Nam 31.Jordan 32.China 33.Russian Federation 34.Kazakhstan 35.Botswana 36.Sri Lanka 37.Morocco 38.Indonesia 39.South Africa 40.Egypt, Arab Rep. 41.Ghana 42.Bangladesh 43.India 44.Senegal 45.Kenya 46.Rwanda 47.Mozambique 48.Uganda 49.Nigeria 50.Ethiopia

9. Social Progress Imperative#socialprogress 9 SPI RANKINGS: 2013 1.Sweden 2.United Kingdom 3.Switzerland 4.Canada 5.Germany 6.United States 7.Australia 8.Japan 9.France 10.Spain 11.Korea, Rep. 12.Costa Rica 13.Poland 14.Chile 15.Argentina 16.Israel 17.Bulgaria 18.Brazil 19.United Arab Emirates 20.Turkey 21.Dominican Republic 22.Colombia 23.Thailand 24.Peru 25.Mexico 26.Philippines 27.Paraguay 28.Tunisia 29.Georgia 30.Viet Nam 31.Jordan 32.China 33.Russian Federation 34.Kazakhstan 35.Botswana 36.Sri Lanka 37.Morocco 38.Indonesia 39.South Africa 40.Egypt, Arab Rep. 41.Ghana 42.Bangladesh 43.India 44.Senegal 45.Kenya 46.Rwanda 47.Mozambique 48.Uganda 49.Nigeria 50.Ethiopia

10. Social Progress Imperative#socialprogress SOCIAL PROGRESS INDEX VS. GDP PER CAPITA 10

11. Social Progress Imperative#socialprogress SOCIAL PROGRESS INDEX VS. GDP PER CAPITA 11

12. Social Progress Imperative#socialprogress 12 SOCIAL PROGRESS INDEX VS. GDP PER CAPITA

13. Social Progress Imperative#socialprogress SOCIAL PROGRESS INDEX VS. GDP PER CAPITA 13

14. Social Progress Imperative#socialprogress THE SOCIAL PROGRESS INDEX: KEY FINDINGS Economic development is necessary but not sufficient as a measure of national performance Some approaches to economic development are less effective than others in advancing social progress, and even counterproductive Just as economic development helps social progress, social progress can enable sustainable economic development The amount of government spending (as a percent GDP) is an incomplete explanation for social progress performance 14

15. Social Progress Imperative#socialprogress 15 OVERALL SPI VS. GOVERNMENT EXPENDITURE (% OF GDP) Government expenditure source: 2013 Index of Economic Freedom

16. Social Progress Imperative#socialprogress 16 Brazil BRAZIL’S SPI PERFORMANCE AGAINST BRICS

17. Social Progress Imperative#socialprogress RECENT SOCIAL PROGRESS TRENDS IN BRAZIL Faster prosperity growth in the recent decade Shift to democracy increased the focus on social inclusion and achieving better opportunities for the poor and disadvantaged citizens Targeted support programs for the very poor (Bolsa Escola/Bolsa Familia) Improved access to basic medical services (Health care reform/Sistema Único de Saude) 17

18. Social Progress Imperative#socialprogress 18 SOCIAL PROGRESS BRAZIL SCORECARD OVERALL RANK 18 Brazil GDP per capita rank is 24th among sample of 50 countries Basic Human Needs30Foundations of Wellbeing20Opportunity16 Nutrition and Basic Medical Care27Access to Basic Knowledge26Personal Rights15 Undernourishment29Adult literacy rate32Political rights17 Depth of food deficit31Primary school enrollment25Freedom of speech12 Maternal mortality rate25Secondary school enrollment19Freedom of assembly/association1 Stillbirth rate23Women's mean years in school30Private property rights18 Child mortality rate24Women's property rights1 Prevalence of tuberculosis24 Air, Water and Sanitation28Access to Information and Communications20Personal Freedom and Choice16 Indoor air pollution attributable deaths31Mobile telephone subscriptions14Basic religious freedoms26 Outdoor air pollution attributable deaths18Internet users20Contraceptive prevalence rate3 Access to piped water16Fixed broadband subscriptions22Access to childcare17 Rural/urban access to improved water source34Press Freedom Index17Freedom over life choices13 Access to improved sanitation facilities29 Access to wastewater treatment24 Shelter23Health and Wellness31Inclusion and Equity of Opportunity2 Availability of affordable housing28Life Expectancy27Equity of opportunity for ethnic minorities1 Access to electricity22Obesity27Women treated with respect43 Cancer death rate27Community safety net9 Deaths from cardiovascular disease & diabetes22Tolerance of immigrants13 Deaths from HIV- Tolerance for homosexuals6 Availability of quality healthcare45 Ecosystem Sustainability21Access to Higher Education33 Ecological footprint of consumption29Tertiary school enrollment33 CO2 emissions per capita20Female tertiary enrollment31 Energy efficiency (use per $1,000 GDP)29 Water withdrawals per capita20 * *Safety net, tolerance and respect for minorities, women, and disadvantaged Personal Safety46 Homicide rate47 Level of violent crime39 Perceived criminality36 Political terror38

19. Social Progress Imperative#socialprogress 19 OVERALL SPI VS. GOVERNMENT EXPENDITURE (% OF GDP ) Government expenditure source: 2013 Index of Economic Freedom

20. Social Progress Imperative#socialprogress THE SOCIAL PROGRESS IMPERATIVE: DRIVING TO ACTION The Social Progress Imperative is not just an Index, but a global effort designed to catalyze action at the country level. It aims to form and support National Committees of leaders and stakeholders in each country, and work jointly with them to mobilize policy changes and private sector initiatives. 20

21. Social Progress Imperative#socialprogress THE ROLE OF THE NATIONAL COMMITTEE Interpret and disseminate country level priorities for social progress improvement Pursue policy changes in priority areas for social progress, through cross-sector collaboration Foster improvements in local data collection and relevant research 21

22. Social Progress Imperative#socialprogress THE ROLE OF BUSINESS IN SOCIETY Only business can create wealth and prosperity Business is facing growing scrutiny as the cause or a contributor to many of today’s societal challenges Corporate social responsibility efforts are greater than ever, but the legitimacy of business has fallen Government and NGO’s alone lack sufficient resources and capabilities to fully meet social challenges We need a new approach 22

23. Social Progress Imperative#socialprogress Compliance with community standards Good corporate citizenship “Sustainability” Mitigate risk and harm Corporate Social Responsibility (CSR) Creating Shared Value (CSV) Philanthropy THE ROLE OF BUSINESS IN SOCIAL AND ECONOMIC PROGRESS Donations to worthy social causes Volunteering Address societal needs and challenges with a business model 23

24. Social Progress Imperative#socialprogress SOCIAL NEEDS AND ECONOMIC VALUE CREATION 24 Social deficits create economic costs for companies Social needs represent the largest market opportunities Company Productivity Skills Worker Safety Environmental Improvement Education Water Use Energy Use Health Affordable Housing Community Economic Development

25. Social Progress Imperative#socialprogress CREATING SHARED VALUE IN PRODUCTS AND MARKETS JAIN IRRIGATION SYSTEMS 25 Drip irrigation equipment for small farmers in Africa and India Serves more than 4 million farmers worldwide as of 2012 Reduces water use by over 40% Enables higher crop yields that improve food security while raising farmers’ income Jain is now a $820 million company that is rapidly growing

26. Social Progress Imperative#socialprogress 26 SHARED VALUE IN THE VALUE CHAIN FIBRIA, BRAZIL Fibria, a large manufacturer of pulp for paper, utilizes planted eucalyptus trees rather than native and old growth forests The company supports and encourages small-scale producers near its mills to plant eucalyptus in conjunction with other crops, assisting them with technical training and inputs Fibria achieves far greater resource efficiency versus old growth forest production, with eucalyptus yielding 30 times higher yield per acre of wood pulp Small scale producers contribute 27% of the raw material volume utilized in Fibria mills, improving efficiency 4000 households have significantly increased their income

27. Social Progress Imperative#socialprogress THE PURPOSE OF BUSINESS Our purpose in business is to create shared value for society, not economic value for its own sake Businesses acting as businesses, not as charitable givers, are arguably the most powerful force for addressing many of the pressing issues facing our society Shared value will give rise to far broader opportunities for economic value creation Shared value thinking will drive the next wave of innovation, productivity, and economic growth A transformation of business practice around shared value will give purpose to the corporation and represents our best chance to legitimize business again 27

28. Social Progress Imperative#socialprogress THE SOCIAL PROGRESS COMMITTEE IN BRAZIL A network in Brazil is forming under the leadership of: - Fundación AVINA - Instituto Arapyaú - Instituto Ethos - Deloitte - Coca Cola Other potential partners include: - Vale, SA - Local chapter of WBCSD - CEAL 28

29. Social Progress Imperative#socialprogress THE CHALLENGE TO BRAZIL Is Brazil, as a leading emerging economy and steward of vital natural resources, willing to become a leader in advancing social progress and a role model for the emerging world? Is the business community in Brazil willing to embrace shared value as a way to engage directly in Brazil’s social challenges? Is government ready to move from solely government solutions to collaborating with the private sector to drive social progress through shared value solutions? 29

30. Social Progress Imperative#socialprogress www.socialprogressimperative.org Twitter: @socprogress #socialprogress