Advancing an Integrated Value Strategy at Merck
Merck is a leading global biopharmaceutical company (known as MSD outside of the United States and Canada) with a portfolio of prescription medicines, vaccines, biologic therapies and animal health products. Merck also has a historically strong commitment to corporate responsibility (CR). Recently, FSG sat down for an interview with leaders from Merck, including Carmen Villar, Vice-President of Social Business Innovation, Brenda Colatrella, Associate Vice-President of Corporate Responsibility, and Ken Gustavsen, Chief of Staff, Social Business Innovation, to speak about Merck’s CR efforts in the field of shared value. In the interview, they discussed the many ways business can embed shared value throughout its processes and operations. At Merck, they have adopted the term “integrated value” to reflect this approach.
“A portfolio approach has integrated value embedded throughout the business and allows us to both address social challenges and differentiate ourselves from other companies. Social challenges, then, become a thought provoker for our business.”
— Brenda Colatrella, Associate Vice-President of Corporate Responsibility
Four Insights from Merck on Creating Shared Value
1. Merck is pursuing shared value simultaneously through both internal processes and market-facing initiatives: Carmen, Brenda, and Ken are leading a process to embed integrated value within various parts of the company, from product teams to HR, using a range of approaches, including partnerships and impact investing. The core of the approach is “inventing responsibly” –being intentional in identifying integrated value opportunities rather than relying on chance.
2. Educating a colleague you want to buy into the idea of shared value is an essential first step: We spent a good amount of time educating folks in the business on the concept. It’s important not to assume that everyone knows what you’re talking about when you use a term like integrated or shared value…
3. Tying shared value to a global framework can encourage deeper conversation about the idea: To further drive understanding of this concept we invited senior leaders from different geographies and different parts of the business to identify which sustainable development goal (SDG) most closely related to Merck’s business in their eyes, and share how we were advancing that SDG through Merck’s operations. That really opened the door to some great conversations because people knew the issue but, at the same time, they weren’t sure how that issue related to integrated value.
4. The principles of shared value are of particular interest to those newly entering the job market: The new workforce is much more interested than their predecessors in how businesses address social issues, not just through philanthropy, but through their core activities.
Adeeb Mahmud (Managing Director, FSG): The concept of shared value is that corporations can be more profitable by solving social problems. Our relationship with Merck goes back many years, from our first project with you in 2007 to review your philanthropy strategy, to our most recent partnership in 2017 to explore how Merck can continue to be intentional about shared value. Over the years we’ve talked about how a company like Merck moves more deliberately into shared value, which you call integrated value. How do you think about this at Merck?
Carmen Villar (Vice President, Social Business Innovation, Merck): Pursuing shared value, or integrated value, means that we really have to bring value to our shareholders while maintaining our commitment to society and the communities that we serve. This drives our thinking on sustainable impact — what is the impact that the company has on society around us, keeping long-term business goals in mind.
Brenda Colatrella (Associate Vice-President of Corporate Responsibility, Merck): Our corporate responsibility approach advances our global strategy, our environmental work, and our philanthropic activities. Currently, the corporate responsibility team is leading a shift from traditional philanthropy to a more strategic approach where we better align our corporate responsibility initiatives with our company mission and business expertise. One project that highlighted the power of this approach for me, Project Penny, was a commercial program focused on providing access to needed medicines, through microfinancing, for patients who may be in need of one of our hepatitis C drugs in India. This project directly showed how we could advance business goals and create social impact, and was a lightbulb for me that we could use more of a portfolio approach to our work in social impact. A portfolio approach has integrated value embedded throughout the business and allows us to both aid social challenges and differentiate ourselves from other companies. Social challenges, then, become a thought provoker for our business. The Project Penny example told us that if we wanted to engage in more of that type of work as a company we have to be intentional about identifying those opportunities and having the business embrace them commercially.
Kathy Lynch (Director of Global Partnerships, Shared Value initiative): I love the idea of using social issues as a thought provoker. Did this idea originally come from the CR team? Are you starting to see more momentum for the idea in other parts of the company?
BC: The business was sometimes already engaging in integrated value activities but didn’t really recognize that it was doing so, and wasn’t calling it by that name. There wasn’t a robust, intentional approach to look at the social challenges and identify how we could advance the company’s products and expertise by addressing social challenges. The Corporate Responsibility (CR) team is working to make that process more intentional for the company. And that leads to one of the challenges we’ve had discussing integrated value: when we go out and talk about the idea, one of the responses we get is “Wait, we’re already doing that as part of our business, so what’s different in this approach?” And we always go back to discussing the power of a proactive approach — as opposed to it emerging by chance — to pursuing integrated value.
Ken Gustavsen (Executive Director of Corporate Responsibility, Merck): To address this question that Brenda mentions, we’ve taken several approaches. First, we’ve done a lot of work to define integrated value and what that means for Merck; that is gaining momentum. A few years ago, we developed a paper that looked at what we are doing as a business and how we could better integrate social impact into what we do. Second, that paper led us to work with you, FSG, to create an integrated value toolkit and the deployment of the toolkit on an internal knowledge-sharing platform so employees can quickly access learning around integrated value. Third, we’ve now shopped the toolkit around to various teams in the business and are starting to see demand for this concept. For example, we’re adding a module on integrated value to our internal education platform, “Access University.”
AM: That’s great that the idea is getting interest and this also seems like a promising way to gauge people’s reactions. How did the conversation come about with the team that manages Access University?
KG: The demand came from our market access colleagues. We initiated a conversation with the Senior Vice-President who leads Merck’s market access function who immediately saw the potential for this and wanted to socialize the idea with other colleagues. The education platform is a combination of in-person and online training to help product and geographic teams scope out new business opportunities.
AM: It’s exciting to hear about the thoughtful approach you’re taking with internal practices and resources. How about externally, with specific projects? How is Merck embodying integrated value?
KG: One example is our implantable family planning contraceptive partnership with the Bill & Melinda Gates Foundation and UNFPA (United Nations Population Fund). We manufacture the product, and our commercial team saw opportunities if the volume was right in certain markets. The Bill & Melinda Gates Foundation provided a volume guarantee for this product which allowed us to lower the cost, enabling UNFPA to create greater access to family planning. The Gates Foundation has never actually had to step in and activate its volume guarantee as UNFPA has been successful in connecting the product to people who need it, thereby generating enough volume. We’re also in the Global Alliance for Vaccines and Immunization (GAVI) collaborative to improve access to vaccines. Through the GAVI partnership, eligible countries can aggregate their demand for vaccines, enabling vaccine manufacturers to more effectively and efficiently supply vaccines through a sustainable commercial model. We’re working on increasing access to our investigational vaccines through a GAVI program as well.
AM: What are other ways you’ve woven integrated value throughout Merck?
BC: I want to highlight work we’ve been doing on the people side. We have a fellowship program where we select 30 employees annually to do 3 months of work with selected partner NGOs. Originally the focus of the program was almost solely on filling an important need for the participating NGOs, but, last year, we re-designed the program to tie directly to our talent development. We realized this was an opportunity to expand the skillset of key talent at the company. Through working with NGOs, these employees learn new skills they then bring back to the company and advance Merck’s business. So we’re trying to move this program to be more closely aligned to our business objectives.
KG: We also have a small but growing set of impact investing activities that help us increase our impact in health around the world. Through impact investing, we can both create social value and financial value for the company. We’re really trying to take a portfolio approach to this effort and see how we can do better in a variety of different ways.
AM: Could you speak about challenges to promoting integrated value and how you’ve overcome them to make these projects happen?
BC: Our biggest challenges in the beginning were awareness and education. We spent a good amount of time educating colleagues in the business on the concept. It’s important not to assume that everyone knows what you’re talking about when you use a term like integrated value and it’s also important to be able to point to examples of integrated value and show the business how this approach benefits them. We also want to ensure people understand that integrated value is not philanthropy and we believe sustainable integrated value must flow from commercial business cases. Our philanthropic giving is separate from our initiatives to embed integrated value principles in the business.
KG: Yes, and you have to respect that accepting a new approach is a process and people have different points of view on this. To further drive understanding of this concept we invited senior leaders from different geographies and different parts of the business identify which sustainable development goal (SDG) most closely related to Merck’s business in their eyes and share how we were advancing that SDG through Merck’s operations. That really opened the door to some great conversations because people knew the issue [reflected in the SDGs] but, at the time, they weren’t sure how that issue related to integrated value. By framing the conversation through the SDGs, they were able to say, “Here’s what I’m doing and here’s what I’d like to do more of.”
CV: Delivering shared value is a long-term effort. Getting alignment internally is an opportunity to bring us together as a company and really try to define what our long-term commitments to society can be, and how we can continually improve the ways in which we deliver on those commitments through our business.
AM: What do you see as the future of integrated value at Merck?
CV: We recognize the need to take informed risks, working as a company and with partners to “invent responsibly” and develop creative shared value solutions.
BC: That’s right, and we’re building momentum to do that. Integrated or shared value has the potential to become a defining feature for our work in a variety of ways. I just spoke with a colleague about this from a recruiting perspective. The new workforce is much more interested than their predecessors in how businesses address social issues, not just through philanthropy, but through their core activities. We’re trying to use one message consistently — that integrated value isn’t about giving things away. While philanthropy will always be important particularly from a social perspective, an integrated value approach helps to build a sustainable business by addressing social goals.
Read more interviews with shared value leaders in global health >
