Feeds:
Posts
Comments

Archive for the ‘commodities’ Category

Sustainability should be much simpler than what we make it out to be. It’s not very complicated – take actions today that leaves the world in a better or no worse place for future generations. But the devil is always in the details. And this made me think a little of what are the different levels of sustainability. And how the concept of sustainability and the current trends influence business in the future. I’m sure this is way too simple so feel free to chip in and help define the levels of sustainability. These are rough thoughts that was hatched during my daily commute on public transport and therefore very rough…

Why make these distinctions? Because it helps us know how to work with and help each company. They are all very different and needs to be treated differently. Many moons ago I had a client who asked me to help them become “like Timberland”. My response was pretty straight forward – “You know you are an extractive company, right?”

More importantly, it helps us think of the future of sustainability. We know what a sustainable future should or could look like – what role does business play in this future?

1. I don’t do sustainability

There are many companies out there who just plain do not believe in sustainability. They believe in one thing and one thing only – increasing their ROI for the next few days. Even a quarter is a long-term vision for them. They will campaign against anything that asks them to take their impact into consideration – climate change, labor rights, equality in the workplace etc. They will comply to local laws because they have to and not always because they want to. That’s why they lobby and fight against so many of these laws. They will take subsidies without thinking of their own responsibility. They will cut corners where they can – and in most cases stick within the law. They will sell you snake oil and call it green. They’ll do the minimum and think that is the actions of a responsible company. They will use meaningless words and phrases that sound cute but mean nothing like “the business of business is business“. I won’t spend too much time on these companies. Arguing with them is a losing fight. They see what they want to see and nothing we can say or do will make them change their ways. I won’t invest in them and I won’t work with them. There are just too many other companies trying their best and who needs counsel, help and support. Let’s rather focus on those who see the sustainability of their company and the world as linked to their business bottom line. In any case, I don’t believe these companies will survive for long. History shows us that companies that think this way eventually just die a slow death. Eventually society will see them for who they are – in it for themselves and not really part of society.

2. I act responsibly

Of course there are a range of companies who just aren’t sustainable. The nature of their business and/or their current business model means that they can act responsibly but the company itself cannot be seen as sustainable. They must change how they source or manufacture over time to become sustainable. It doesn’t mean that they can’t be good corporate citizens. Many if them are good citizens who act with great responsibility. I see them as the CSR group rather than the sustainability group – a small but important distinction. Let me use an industry as an example. Most companies in the extractive industry just cannot be seen as practicing sustainability. They take stuff from the grounds and can’t replace it. They can’t leave that specific world in the same or better place. It’s a stretch for them to claim that. I worked with a very well respected luxury goods company and they refused to use the word sustainability. When I asked them why their response was “Because we mine diamonds and can’t put it back. And eventually we will run out of diamonds.” When will they run out of diamonds? Who knows! But the principle is right. But they do incredible work – one of my top 5 companies when it comes to CSR. Incredible work. They do everything right when it comes to sourcing their diamonds, adding value in developing countries where they source from, refuse to buy rubies from Burma, lobby against unsustainable mining practices – they tick all the boxes. But the nature of their business means they take full responsibility of their impact and are incredible corporate citizens – just not sustainable. This is in no way knocking them. Many of these companies do incredible work in difficult circumstances and delivers a product we desperately need today (and tomorrow) – we can’t live without them. I am proud to be associated with them and to work with them. So many of them are shining examples of what responsible businesses could and should be doing. Those in the group who practice sustainability can learn from these companies on what true responsibility in communities and supply chains mean and how to measure and reduce your impact in the world.

3. I am sustainable

Sustainability is slowly but surely becoming mainstream. More and more companies are embracing the discipline of sustainability to build a better business for the future. They have practices that highlight what can be done to make business work and help secure our joint future. They source in ways that do not deplete these resources. They take action on their energy use and tackle climate change in action and voice. They treat workers with respect and speak out against injustices. They will help their suppliers to become more sustainable themselves. They will take responsibility for their products and empower consumers to take responsiblity where they have a joint responsibility – such as driving recycling with consumers. These are the companies who are the leaders of today. They believe in values adding value. They know their future business success is tied to the sustainability of the world around them. The way they operate, source and manufacture, ensures they still have the ability to operate this way in future – the resources are replenished to ensure a better or same tomorrow. The world will be a poorer place without them. In so many ways.

4. I help make the world sustainable

This fourth category is the one that bugs me the most. It’s the most challenging and most complex. Maybe I should break it up into more levels of sustainable businesses, but for now I will keep the three distinctions of this group here.

The easy part is identifying those social innovators and entrepreneurs who focus on developing a business solution to a social problem. They are different from group 3 mentioned above because the nature of the products and services of group 3 is not aimed at a social problem but more about the “wants” of people. Most of the purchases of today are not because we need it but because we want it. We think we need a tablet but we don’t really need it, we just want it. A smartphone is a luxury and not a need. How many pairs of shoes do you need versus how many you want? Companies who are in group 3 still sells products in the “want” category but do so by taking responsibility for their actions and impact by making sustainability part of how they source, manufacture and take responsibility for their final product (waste etc). The social innovators focus on creating products and services society needs – new ways to get clean water to the poor, medicine people need to survive, nutritional products aimed specifically at groups in need, renewable energy solutions in challenging environments, energy-efficient cars (it’s more of a need than want if you only have one car!) – and much much more. They link the need of society to new product or service development and build a business around that. In some cases they might be a non-profit but the principle is still providing a tradeable solution to societal needs – micro-financing is a classic example.

Some of the companies in this category falls outside of this social innovation group though. They are still innovators but they actually focus on the want and not on the need. They develop new products and services that still deal with the current consumer behaviour of buying more stuff that is cool. They tap into the pop culture and fashion of the day and gives it a unique spin by giving it a social value over and above the hip new product. Think of TOMS. The product they sell isn’t unique and neither did they bring a product to life that deals with a specific societal need. They tapped into the mainstream consumer market by creating a cool new “I-want-that” product that has a huge societal benefit attached to it. The business model is very unique but the product itself is not. The concept itself is not that unique either. It is a logical evolution of cause marketing coming into maturity. From attaching a cause to a product to the cause becoming central to the product concept development itself.

The 3rd and last group in this category is the one I struggle with the most and my ideas are still only half-baked here so please feel free to rip it apart. But humor me for a moment.

All of these businesses in this group and the other categories still work within the system we know – sell more products and services to consumers. It operates within the current system. The challenges we face as a society today is challenging this system though. The question being asked is whether we can continue to expect these levels of consumption and be a sustainable world? I’m not talking about a narrow definition of sustainable consumption. Sustainable consumption debates have focused on selling more sustainable products and taking responsibility for your product post-consumer- whether it is how they are manufactured or used. The premise remains the same – sell more stuff. Sell stuff to increase ROI by creating new markets or pushing market share.

Is this system itself sustainable though? Can we really expect to build a more sustainable future by maintaining the same credit levels and expecting people to continue to buy more things? Let me give you an example… Are we any closer to sustainability if every single pair of shoes sold in the world now and in the future is made by TOMS? If we buy TOMS at the same rate of growth – does that make the world sustainable? TOMS might have a great business model but the world can’t handle buying at the same level we’ve had over the last 10-30 years – even if it is TOMS…

That is the essence of the challenge for companies – how to change the business model to remain profitable in a world that needs lower consumption levels and somehow keep investors happy. This would be the next level of business and sustainability. But this is a balancing act that is asking a lot…

The honest truth is that I have no clue how we can do this. Like I said, it’s just something that is bugging me at the moment. Somewhere the answer lies and I believe that good businesses, and society in general, will come up with an answer. We don’t have much of a choice as the runaway levels of consumption is not sustainable. And neither is the continuous pressure on the business bottom line via squeezed margins and market share. We’re close to a tipping point.

This goes way beyond the “Shared Value” concept. Shared Value argues we look at where business and society intersects and finding the joint value in that relationship to drive business and societal benefits. But what if the real value is to share less?

I don’t have the answer. But it’s worth exploring the options as doing nothing might not be an option for much longer.

Advertisements

Read Full Post »

We used to have a saying back in my university days – Activists are like Trotskyist, put more than one in a meeting and you immediately have a split. The fight between activists are not new. They are passionate about changing the world and each one have their own passionate idea of what is best. Values are more difficult to bundle together than value because one deals with passion and the other with the pocket. I’ve written about the number of charities before (So many causes… Too little caring?) but there is something new brewing and it really shouldn’t be much of a surprise. Activists are tackling other activists because of the partnerships some have with companies.

Smaller green activists groups and individuals have banded together to start a campaign to Stop Green Groups From Taking Corporate Cash and are increasingly getting all worked up about the role of  better known environmental NGOs and their relationships with companies. Their main argument is that the relationships these bigger environmental NGOs (called Big Green) have with companies compromises their position and action on environmental issues. They are especially targeting the Environmental Defense Fund because of trustees and some of the relationships they have. However, they are targeting other generally well respected activist groups such as the National Resource Defense Council and the National Wildlife Fund.

The arguments between activist groups who would generally be seen as friendly with each other in public and partners in many alliances are not new. For example, Fairtrade have struggled to keep everyone happy as they expand their influence and partnerships with larger companies. Those smaller companies who have been part of the movement since the start believe that these new partnerships undermine their own legacy of commitment, threatens their business and believe that the larger companies really don’t share their common view of a more ethical trade system. Sometimes it bubbles over into a public debate. For instance, many Fairtrade organizations refused to allow Nestlé to sell Fairtrade products in their markets when Nestlé developed their Fairtrade certified Partnership Blend. But this new development of activists targeting other activists goes to a much more fundamental struggle going for the heart of activism.

Let me give you another example that explains the struggle a bit better. Earth Day…

The NY Times had an interesting piece on how Earth Day has now become a big business. Back when Earth Day started it was all about change and no money was excepted from any company. Today we have almost every company pushing products or messages to tell us how they too are green and that you should join in the fun by buying their product. Instead of red to show your love on Valentine’s Day you can use Earth Day green to show your love for earth – even if it is just for one day a year. Anyway, I digress as this is not about Earth Day and what it means. It is about the fight for the soul of activism.

The article in the NY Times ends with a quote from Robert Stone (independent filmmaker) who said, “Every Earth Day is a reflection of where we are as a culture,” he said. “If it has become commoditized, about green consumerism instead of systemic change, then it is a reflection of our society.” So true. And that is what this fight amongst activists are really about.

It’s about the kind of change activists want. Some activists sees the partnerships with companies as an opportunity to use existing consumer behaviour to drive environmental conciousness and awareness. Use what is in the system to your advantage. Show alternative environmentally friendly products and services that are just as sexy, functional, loveable etc as the regular products that consumers will buy in any case. Use the consumer thirst for more products to get them to buy green products. Use the commoditized world to the advantage of the environment. This way we can have a positive environmental impact through consumer behaviour by tweaking what they buy. To put it bluntly – Use their own greed and want against them. It’s using the system to improve impact.

The old style activists don’t like this approach as it doesn’t ask consumers or companies to make any dramatic changes to their behaviour. It does not ask them to produce any less – only to produce it in a more environmentally friendly way. It’s not asking consumers to stop consuming so much crap – only to consume products that are more environmentally friendly. (And yes, I do believe that we are consuming too much crap in the name of fashion or whatever they are selling us in marketing and advertising.)

These activists want real change in behaviour. Real change in the system that runs the market. They want companies who produce wasteful products that harm the environment to go out of business – not just produce a greener version of that product. They want a trade system that puts the environment and society at the heart of how it operates – and not just as a footnote. They want systemic change. A world that operates on a different set of rules and in a fundamentally different way from how it operates today.

Those two views are fundamentally different. One wants the world to change and the other want to use the way the world operates to have a better impact. It’s not going to go away. The world is becoming more of a consumer society each and every day. The choices activists face on how they try to change or influence this world will increase each day. The fight for the soul of activism is here to stay.

The question is – which group can package and sell it to us best?

Read Full Post »

Most people know that I am not the biggest Fairtrade fan. Heck, just read My beef with Fairtrade for more of my rantings on Fairtrade. But Brendan May (good guy also in the sustainability field – his Twitter feed is bmay) made me think a bit more about Fairtrade. He had a series of Twitter arguments to tackle Fairtrade and some of the claims they make. Brendan made a few good arguments that highlighted some of the flaws of Fairtrade compared to other certification system and the seriously flawed misunderstood claims most consumers have around Fairtrade. Especially some of the marketing claims made by Fairtrade and the assumption by Fairtrade and their supporters that they are the best out there to help farmers. Show some hard facts please Fairtrade and less unsubstantiated claims. A premium is no reflection on the “wealth” of farmers – we need a bit more on agreeing on measurements and then do a comparative study.

Okay, so Fairtrade make claims they shouldn’t and push their luck on a few things such as helping the poorest farmers (no they don’t, only those organized in cooperatives), strong environmental claims (there are others out there with much better environmental criteria) etc. But there is one area where I believe Fairtrade is fundamentally different from anyone else out there. They might have forgotten this basic principle over the years – especially since they have grown so big and started operating more like a traditional business. The foundation of Fairtrade is one that is very different from any of the other certification schemes out there and one that asks a much more fundamental question about the world trade system than any other system… And it comes down to the premium that Fairtrade pays.

Why pay this premium? Why did they start off with this idea of a premium in the first place? The figure is so artificial so why have it in there in the first place? To answer this you have to start with the world trade system and everything that is wrong with it in the agricultural commodities field.

Activists like Oxfam (a Fairtrade founder and supporter) have long argued that the global trade system is one of imbalance. The rich nations in Europe and the US have all the freedom in the world to pretty much do what they want. More importantly, they subsidize their agricultural sector to the hilt. Corn, sugar – you name it and they subsidize it. Don’t argue that subsidies are gone – that is a technicality as these countries spend billions of dollars each year on agricultural support where semantics rule. Call it research support but anything over a few billion dollars ending up in the pockets of large commercial farmers are subsidies dressed as research.

But back when the Fairtrade idea started the subsidies were even more blatant. The EU and US were happy to call it subsidies back then. So here you have a global agricultural commodity trade system where the rich countries support their farmers with subsidies because they can’t compete with farmers in emerging markets and developing countries – of course hidden as food security, national security, national interests, etc. The poorer countries? How did they fare on the subsidies front? Not so well…

Not only could they not support their farmers but the WTO rules (that they stupidly agreed to) stipulated that they couldn’t give their farmers subsidies in any case. Great trade system isn’t it? The rich can get richer thanks to the subsidies and the poor will remain poor – or get poorer.

This was where Oxfam and mates stepped in and created Fairtrade. Not to just give farmers a premium for their products but to address the fundamental injustice in the world trade system. The premium they pay and guarantee is a non-government subsidy. It helps farmers from poorer countries to compete against richer nations through a subsidy system that completely passes the WTO system by and is paid for by the people who also pay for the subsidies in their own system – richer nations. Pure genius.

The Fairtrade system has major flaws and I am not always that impressed with the work they do or the claims they make. But do not misunderstand their claims and the true benefit of this system. You need a system that undermines the global trade system if the trade system is so unjust as it is. Fairtrade is needed as long as the world trade system, in especially agricultural commodities, benefit the rich nations over the poor nations. There is no level playing field and the free market is a myth when it comes to argiculture – and Fairtrade plays a key role in trying to level the playing field a bit more. Not perfect but fundamental in trying to address something that is outside of the control of farmers in poorer markets.

No other system can claim the same. They might be better in helping farmers become more efficient or improve their environmental impact but none of the other systems actually addresses the much bigger challenge of a fundamentally flawed and imbalanced world trade regime. We need Fairtrade in a world where free trade does not exist in any other place but empty words and the worthless pages of world trade agreements.

So what about companies that argue against Fairtrade? Maybe they should look a little bit closer to their own supply chain. Do you sell food stuff? Anywhere in the US or EU? Do you by any agricultural products in any of these countries in the US or EU? I can guarantee you that your company benefit from subsidies being handed out to farmers in corn if you sell one single soda or chocolate in the US. Sip your subsidized wine Europe. Spread those subsidized jam and dairy products on those subsidized breads. Slap another subsidies steak on the bbq. The list goes on and on. Almost every single food and beverage company in the US and EU indirectly benefit from some form of subsidy through their subsidized supply chain. Why are they not arguing against subsidies of these farmers a little harder? It sounds like double standards to me that companies are against Fairtrade because of the subsidies but willing to take the subsidized products in Europe and the US and sell that to us. Another slice of double standards anyone?

I think Fairtrade was a genius idea. I just wish they would go back to their roots and remember why they were started in the first place – to take on a fundamentally flawed world trade regime. No other system can claim the same.

Read Full Post »