On September 5, 2013, Social Progress Imperative Chair Professor Michael E. Porter of Harvard Business School introduced the Social Progress Index and discussed national competitiveness to a standing room-only crowd of over 1,200 in Asunción.

1. Social Progress Imperative #socialprogress
Professor Michael E. Porter
Asunción, Paraguay
September 5, 2013
DEVELOPMENT STRATEGIES
FOR THE 21ST CENTURY:
SOCIAL PROGRESS AND
COMPETITIVE GROWTH

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

3. Social Progress Imperative #socialprogress
THE DUAL CHALLENGES OF DEVELOPMENT
3
Economic
Development
Social
Development
• 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
3

4. Social Progress Imperative #socialprogress4
ECONOMIC DEVELOPMENT DEPENDS ON COMPETITIVENESS
• Competitiveness depends on the long-run productivity of a location as a
place to do business
- Productivity of existing firms and workers
- Ability to achieve high participation of working age citizens in the
workforce
• Competitiveness is not:
- Low wages
- A weak currency
- Jobs per se
A nation (or state) is competitive to the extent that firms operating there are able
to compete successfully in the regional and global economy while supporting
high and rising wages and living standards for the average citizen

5. Social Progress Imperative #socialprogress
Endowments
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the
use of endowments
WHAT DETERMINES COMPETITIVENESS?

6. Social Progress Imperative #socialprogress6
WHAT DETERMINES COMPETITIVENESS?
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness

7. Social Progress Imperative #socialprogress7
WHAT DETERMINES COMPETITIVENESS?
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies

8. Social Progress Imperative #socialprogress8
WHAT DETERMINES COMPETITIVENESS?
• Productivity ultimately depends on improving the microeconomic capability of the economy
and the sophistication of local competition revealed at the level of firms, clusters, and
regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Microeconomic Competitiveness

9. Social Progress Imperative #socialprogress9
WHAT DETERMINES COMPETITIVENESS?
• Productivity ultimately depends on improving the microeconomic capability of the economy
and the sophistication of local competition revealed at the level of firms, clusters, and
regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Microeconomic Competitiveness
Sophistication
of Company
Operations and
Strategy

10. Social Progress Imperative #socialprogress10
WHAT DETERMINES COMPETITIVENESS?
• Productivity ultimately depends on improving the microeconomic capability of the economy
and the sophistication of local competition revealed at the level of firms, clusters, and
regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Microeconomic Competitiveness
Quality of the
Business
Environment
Sophistication
of Company
Operations and
Strategy

11. Social Progress Imperative #socialprogress
IMPROVING THE QUALITY OF THE BUSINESS ENVIRONMENT
11
Context for
Firm
Strategy
and Rivalry
Related and
Supporting
Industries
Factor
(Input)
Conditions
Demand
Conditions
• Sophisticated and demanding local
needs
– e.g., Strict quality, safety, and
environmental standards
• Many things matter for competitiveness
• Successful economic development is a process of successive upgrading, in which the business environment
improves to enable increasingly sophisticated ways of competing
• Access to high quality business
inputs
– Qualified human resources
– Capital availability
– Physical infrastructure
– Scientific and technological
infrastructure
• Availability and quality of suppliers and
supporting industries
• Local rules and incentives that
encourage investment and productivity
– e.g. incentives for capital investments,
IP protection, sound corporate
governance standards
• Open and vigorous local competition
− Openness to foreign competition
− Strict competition laws

12. Social Progress Imperative #socialprogress12
WHAT DETERMINES COMPETITIVENESS?
• Productivity ultimately depends on improving the microeconomic capability of the economy
and the sophistication of local competition revealed at the level of firms, clusters, and
regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Microeconomic Competitiveness
Quality of the
Business
Environment
Sophistication
of Company
Operations and
Strategy

13. Social Progress Imperative #socialprogress13
WHAT DETERMINES COMPETITIVENESS?
• Productivity ultimately depends on improving the microeconomic capability of the economy
and the sophistication of local competition revealed at the level of firms, clusters, and
regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Microeconomic Competitiveness
Quality of the
Business
Environment
Sophistication
of Company
Operations and
Strategy
State of Cluster
Development

14. Social Progress Imperative #socialprogress
DEVELOPING CLUSTERS: TOURISM IN CAIRNS, AUSTRALIA
14
Restaurants
Attractions and
Activities
e.g., theme parks,
casinos, sports
Airlines,
Cruise Ships
Travel Agents Tour Operators
Hotels
Property
Services
Maintenance
Services
Government Agencies
e.g., Australian Tourism
Commission,
Great Barrier Reef Authority
Educational Institutions
e.g., James Cook University,
Cairns College of TAFE
Industry Groups
e.g., Queensland Tourism
Industry Council
Food
Suppliers
Public Relations &
Market Research
Services
Local Retail,
Health Care, and
Other Services
Souvenirs,
Duty Free
Banks,
Foreign
Exchange
Local
Transportation
Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden

15. Social Progress Imperative #socialprogress
GEOGRAPHIC INFLUENCES ON COMPETITIVENESS
Nation

16. Social Progress Imperative #socialprogress
GEOGRAPHIC INFLUENCES ON COMPETITIVENESS
Regions and Cities
Nation
• Regions are the most important economic unit for competitiveness in larger
countries, especially countries beyond subsistence development

17. Social Progress Imperative #socialprogress
GEOGRAPHIC INFLUENCES ON COMPETITIVENESS
Neighboring Countries
Regions and Cities
Nation
• Regions are the most important economic unit for competitiveness in larger countries,
especially countries beyond subsistence development
“The
Neighborhood”

18. Social Progress Imperative #socialprogress
WHAT DETERMINES COMPETITIVENESS?
18
• Productivity ultimately depends on improving the microeconomic capability of the economy
and the sophistication of local competition revealed at the level of firms, clusters, and
regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Microeconomic Competitiveness
Sophistication
of Company
Operations and
Strategy
Quality of the
Business
Environment
State of Cluster
Development

19. Social Progress Imperative #socialprogress
WHAT DETERMINES COMPETITIVENESS?
19
• Productivity ultimately depends on improving the microeconomic capability of the economy
and the sophistication of local competition revealed at the level of firms, clusters, and
regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but
is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country
size, create a foundation for prosperity, but true prosperity arises from productivity in the use
of endowments
Endowments
Macroeconomic Competitiveness
Human Development
and Effective
Political Institutions
Sound Monetary
and Fiscal Policies
Microeconomic Competitiveness
Sophistication
of Company
Operations and
Strategy
Quality of the
Business
Environment
State of Cluster
Development

20. 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
20

21. Social Progress Imperative #socialprogress
SOCIAL PROGRESS INDEX: DESIGN PRINCIPLES
• Separate from economic indicators
• Holistic framework
• Outcomes rather than inputs
• Relevant to all countries
21

22. 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.
22

23. Social Progress Imperative #socialprogress
SOCIAL PROGRESS INDEX MODEL
23
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?
OpportunityFoundations of WellbeingBasic Human Needs

24. Social Progress Imperative #socialprogress
SPI RANKINGS: 2013
24
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

25. Social Progress Imperative #socialprogress25
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

26. Social Progress Imperative #socialprogress
SOCIAL PROGRESS INDEX VS. GDP PER CAPITA
26

27. Social Progress Imperative #socialprogress
SOCIAL PROGRESS INDEX VS. GDP PER CAPITA
27

28. Social Progress Imperative #socialprogress28
SOCIAL PROGRESS INDEX VS. GDP PER CAPITA

29. Social Progress Imperative #socialprogress
SOCIAL PROGRESS INDEX VS. GDP PER CAPITA
29

30. Social Progress Imperative #socialprogress30
OVERALL SPI VS. GOVERNMENT EXPENDITURE (% OF GDP)
Government expenditure source: 2013 Index of Economic Freedom

31. 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
31

32. Social Progress Imperative #socialprogress
SOCIAL PROGRESS INDEX VS. GDP PER CAPITA
32
Paraguay

33. Social Progress Imperative #socialprogress
SOCIAL PROGRESS PARAGUAY SCORECARD
OVERALL RANK 27
*Safety net and tolerance and respect for minorities, women, and disadvantaged
Paraguay GDP per capita rank is 35th
among sample of 50 countries
Basic Human Needs 32 Foundations of Wellbeing 32 Opportunity 19
Nutrition and Basic Medical Care 36 Access to Basic Knowledge 37 Personal Rights 22
Undernourishment 44 Adult literacy rate 23 Political rights 26
Depth of food deficit 42 Primary school enrollment 46 Freedom of speech 12
Maternal mortality rate 34 Secondary school enrollment 36 Freedom of assembly/association 1
Stillbirth rate 38 Women's mean years in school 29 Private property rights 35
Child mortality rate 32 Women's property rights 1
Prevalence of tuberculosis 25
Air, Water and Sanitation 38 Access to Information and Communications 34 Personal Freedom and Choice 27
Indoor air pollution attributable deaths 28 Mobile telephone subscriptions 29 Basic religious freedoms 1
Outdoor air pollution attributable deaths 5 Internet users 37 Contraceptive prevalence rate 9
Access to piped water 31 Fixed broadband subscriptions 38 Access to childcare 43
Rural/urban access to improved water source 45 Press Freedom Index 17 Freedom over life choices 36
Access to improved sanitation facilities 34
Access to wastewater treatment 36
Shelter 17 Health and Wellness 24 Inclusion and Equity of Opportunity 13
Availability of affordable housing 20 Life Expectancy 33 Equity of opportunity for ethnic minorities 48
Access to electricity 25 Obesity 26 Women treated with respect 43
Cancer death rate 27 Community safety net 20
Deaths from cardiovascular disease & diabetes 19 Tolerance of immigrants 2
Deaths from HIV 30 Tolerance for homosexuals 13
Availability of quality healthcare 22
Ecosystem Sustainability 30 Access to Higher Education 27
Ecological footprint of consumption 31 Tertiary school enrollment 25
CO2 emissions per capita 11 Female tertiary enrollment 27
Energy efficiency (use per $1,000 GDP) 49
Water withdrawals per capita 8
*
Personal Safety 34
Homicide rate 37
Level of violent crime 24
Perceived criminality 16
Political terror 23

34. Social Progress Imperative #socialprogress
SOCIAL PROGRESS INDEX VS. GDP PER CAPITA
34

35. Social Progress Imperative #socialprogress35
OVERALL SPI VS. GOVERNMENT EXPENDITURE (% OF GDP)
Government expenditure source: 2013 Index of Economic Freedom

36. 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.
36

37. 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
37

38. 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
38

39. 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
39

40. Social Progress Imperative #socialprogress
SOCIAL NEEDS AND ECONOMIC VALUE CREATION
40
• 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

41. Social Progress Imperative #socialprogress
CREATING SHARED VALUE IN PRODUCTS AND MARKETS
JAIN IRRIGATION SYSTEMS
41
• 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

42. Social Progress Imperative #socialprogress42
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

43. Social Progress Imperative #socialprogress
Government
• Regulate how businesses
operate
• Operate social programs
• Tax businesses
PARTNERING FOR SHARED VALUE
NGOs
• Hold business accountable
• Seek donations
• Partner with business to implement
and scale shared value solutions
• Invest with companies, NGOs and
government to enable shared value
solutions
Foundations
• Donate to charitable causes
• Regulate to encourage market
solutions
• Partner to deliver shared value
solutions to social services
• Jumpstart market solutions through
minimum purchases or subsidies
• Invest in infrastructure to enable
shared value approaches (e.g. roads,
skills)
• Partner on business environment
improvements
Competitors
• “Brand” social initiatives
43

44. Social Progress Imperative #socialprogress
CREATING SHARED VALUE: DECIDING WHERE TO CONCENTRATE
NESTLÉ
Water
Rural
Development
Nutrition
• Opportunities to create shared value are inevitably
tied closely to a company’s particular businesses
44

45. Social Progress Imperative #socialprogress
FROM PRODUCT TO PURPOSE
Traditional Positioning New Positioning
• Food and Beverage
Company
• Nutrition CompanyNestlé
• Footwear Company • Health and Fitness CompanyNike
• Scientific and Laboratory
Instruments Company
• Making the World Healthier,
Cleaner, and Safer
Thermo
Fisher
• A broader sense of social purpose opens up new opportunities for growth and
profitability, while motivating and attracting employees, consumers, business partners,
shareholders, and the public
45

46. Social Progress Imperative #socialprogress
REDEFINING CORPORATE PURPOSE
DANONE
• Danone realized that it had drifted away from its origins as a manufacturer of healthy
foods
• Sold off its beer, meat and cheese units
• Refocused the company on dairy and water
• Acquired medical nutrition and baby foods businesses
• Created Innovation Committees in business units to provide “healthy food for as many
people as possible”
Bringing health through food to as many
people as possible by refocusing on four
complementary business lines and
expanding into fast-growing new regions
Vision Mission
The ‘dual economic and social’ project,
creating economic value by creating
social value
46

47. 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
47

48. Social Progress Imperative #socialprogress
THE SOCIAL PROGRESS COMMITTEE IN PARAGUAY
48
• Paraguay has taken the lead among
countries applying the SPI as a formal
measure of national performance
• The government issued a Presidential
Decree on July 26, 2013, making the SPI
an official measure of national
performance

49. Social Progress Imperative #socialprogress
THE SOCIAL PROGRESS NETWORK: PARAGUAY COMMITTEE
49
• La Asociación de Empresarios Cristianos
(ADEC)
• La Federación de la Producción, la
Industria y el Comercio (FEPRINCO)
• La Fundación Paraguaya
• La Fundación Moisés Bertoni
• La Fundación Desarrollo en Democracia
(DENDE)
• Fundación Avina
• La Universidad Católica- Programa de
Maestría en Administración de Empresas
Paraguay has already organized a local committee to deploy SPI at all levels

50. Social Progress Imperative #socialprogress
THE SOCIAL PROGRESS COMMITTEE IN PARAGUAY
50
• The local social progress committee has
already started work in three priority
areas
• If we get more of you to join the effort, we
could expand and deal with many more.
• These priorities are:
– Nutrition (meet the nutrtional needs of
1,000,000 additional paraguayans)
– Water and sanitation
– Shelter

51. Social Progress Imperative #socialprogress
THE ROLE OF BUSINESS IN SOCIAL PROGRESS
• Now it is time for business leaders in Paraguay to walk
alongside government in fostering social progress, in creating
many instances of shared value, and in developing the
competitive strategies that will lift this country to its full potential
• The new government creates an opportunity for a new public-
private relationship
51

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