Entries in sustainability (10)


Looking at smallholder farmers and sustainable productivity

Modern agricultural practices and new technologies in many cases have yet to reach small and very small farmers for various reasons, according to a recent Next Billion blog post. Among other issues, these smallholder farmers are faced with a lack of cash, unpredictable personal circumstances or a lack of safety net, should a harvest fail. There are certain companies and organizations that are making efforts to increase the livelihood of these smallholder farmers, by sourcing produce from them or selling products to them.

A recent study by consulting firm Hystra, “Smallholder Farmers and Business: 15 Pioneering Collaborations for Improved Productivity and Sustainability,” compares the performance of 15 companies and organizations worldwide who are pioneering this movement. Key findings from the report include:

  • Farmers can increase their net yearly incomes by 80% to 140% when they have access to productivity-enhancing technologies, including improved seeds, micro-irrigation systems or improved cow breeds. Notably, other interventions, which focused solely on “fixing” dysfunctional markets and redistributing value in the supply chain, only resulted in a 20% to 60% increase in income for farmers;
  • Smallholder farmers, commonly thought to be risk averse to new practices and technologies, in reality, aren’t. What is important to them is being able to reverse their decision, should they change their mind;
  • Early adopters of such development programs are found within the “enlightened” middle – farmers resilient enough to invest in new advancements, but not prosperous enough to be satisfied with the status quo;
  • Offering a wide range of benefits, becoming essential to farmers’ success allows the organization to become irreplaceable, creating a cycle whereby year after year organizations and farmers alike continue to invest in each other; and
  • The decision to work directly with farmers, rather than through an intermediary, can lead to greater success. While not always the case, some intermediaries can lack control and poor proximity.

Sustainability and poverty alleviation: focus on market-based solutions

I enjoyed a collection of recent articles in the New York Times focusing on the role of the private sector in sustainability and market based solutions to poverty, and recommend them to those interested in the topic. (Click on the headlines for the full articles).

Saving the World, Startup Style

The author notes that over the past 10 years, there has been a "quiet revolution" in the way many scholars and advocates think about aid. The revolutionary shift is the central philosophy that rich countries shouldn’t see themselves as responsible for coming up with theories about how poor countries can become richer. Rather, he says, "the rich countries allow the poor ones to determine what they think needs to happen — more girls in school, more vaccination, better access to global markets for farmers — and then pay money to whoever comes up with an actual solution. Governments, nonprofits and private-sector companies can compete on who can do this best."

Buffett's Grandson Seeks Own Investment Route: Social Change

Howard Warren Buffett, the grandson of the Berkshire Hathaway founder Warren E. Buffett has co-founded an operating company with big ambitions — essentially mimicking the structure of Berkshire Hathaway, but with a major difference in strategy. The plan is for the new company, called i(x) Investments, to invest in early-stage and undervalued companies that are working on issues such as clean energy, sustainable agriculture and water scarcity. “We’re looking at the long-term horizon and investments that are doing more than avoiding bad, but are actually trying to improve the world,” Mr. Buffett said. “It’s about taking the potential for capitalism to the next level.”

Unilver Finds that Shrinking Its Footprint Is A Giant Task

Unilever CEO Paul Polman has made sustainable production — of Hellmann’s, Lipton tea, Dove soap, Axe body spray and all the other products Unilever makes — the company’s top priority. Detergents are being reformulated, packaging is being reduced, and the company is taking steps to find more more eco-friendly food ingredients. But the transformation is not a simple one, and the article notes that before Unilever can "transform the world," it must focus on changes within the company.

Image source: New York Times

-- Clara Shen


Trial run for sustainable capitalism?

The investment strategy behind Al Gore’s Generation Investment Management is a simple one centering on sustainability as the key to long-term success. Far from rejecting capitalism, the company is touting a new version of it; one where socially responsible practices enhance, rather than hinder, long-term prospects. 

The Atlantic’s James Fallows thus explains Generation’s philosophy in practical terms: “Warren Buffett considers Coca-Cola a wonderful long-term value proposition, because of its decades-long track record of worldwide success. By Generation’s standards, it is distinctly unsustainable, since obesity problems in all of its leading market countries will, in the firm’s view, inevitably do to the soda industry what public-health concerns have done to Big Tobacco.”

According to Gore, the sustainable-capitalism model not only reduces the environmental and social damages caused by modern capitalism, but it does so while yielding healthy profits.

That part of the equation is at odds with the conventional wisdom that “the highest returns go to those who are unencumbered by sustainability or other environmental and social constraints,” as Carlyle co-founder David Rubenstein puts it. Yet the numbers seem to be telling a different story: Generation’s 10-year average ranked as No. 2 in a Mercer survey of more than 200 global-equity managers, and its global-equity fund was found to be among the least volatile. Academic research is also lending credence to the model’s viability, with a large-scale Oxford University study recently concluding - based on its assessment of 190 academic studies and news reports - that “it is in the best economic interest for corporate managers and investors to incorporate sustainability considerations into decision-making processes.”

Where attention to long-term social and environmental outlook has traditionally been viewed as a strain to the bottom-line, the people at Generation contend that their approach actually works “in the service of long-term greed.” Or as Gore explains it: “Our goal is to show that sustainability is a ‘best practice’ for doing this, and thus for changing the culture of the investment marketplace. I know that sounds pretty grandiose, but it’s our aim.”

-- Clara Shen


Sustainability and the art of the deal

For an insightful look at one of the ways in which sustainability is becoming a more tangible factor in business deals, I recommend a recent report in the Financial Times on Mitsubishi's acquisition of a 20% stake in Olam International.

Based in Singapore, Olam is a global integrated supply chain manager, processor and trader of soft commodities that has developed some expertise in sustainable agricultural products. The company fosters the notion of sustainability within its workforce from the very start, sending new employees to remote rural locations to foster a sense of "Olam's place in the community and ecosystem," according to Sunny Verghese, Olam's CEO.

This emphasis on sustainability is producing tangible results that can be measured--among other ways--financially. Mitsubishi's $1.1 billion investment was driven in substantial part by its desire for access to Olam's expertise in sustainable and traceable agricultural products. The FT report indicates that Mitsubishi paid a premium for this, and further, that the deal is evidence that the concept of food production based around caring for the environment, efficient use of non-renewable resources and quality of life for farmers and society — is starting to affect deals further up the agricultural supply chain.

-- Graphics source: Financial Times and the International Institute for Sustainable Development

-- Clara Shen


Another view on sustainable social business

We are very interested in the work that Erik Simanis is doing in the sphere of social business and new business models. Erik is passionate about social impact, and with an MBA and PhD in business strategy and sustainability, he has guided start-ups, green-field ventures, and product teams in Eastern Europe, Africa, India, and South America over the past 20 years.

As his work makes clear, he is not interested in vague notions of social responsibility or “shared value” that have no foundation in real-world business principles. We recommend two papers (both published in the Harvard Business Review) for an overview of Semanis' outlook and approach (click on titles for the full text):

  • Reality Check at the Bottom of the Pyramid -- "If companies wish to launch flourishing ventures capable of transforming the lives of millions of low-income people across the developing world, they must get back to basic business tenets. However laudable its mission, a business built on unrealistic expectations will fail just as surely at the bottom of the pyramid as in a developed market."
  • Profits at the Bottom of the Pyramid -- "Blinded by devotion to social missions, too many companies with grand ambitions overlook profitable opportunities that match their resources and skills and jump into ventures that overwhelm their capabilities. A more realistic assessment of the challenges at the bottom of the pyramid can help companies generate the profits that will make socially beneficial businesses sustainable over the long term."

While we may approach some of the practical challenges from a different direction, we share a commitment to rigorous measurement and building an approach to social business that is sustainable for the long term.

-- Bruno Roche and Clara Shen