There's no question that the world needs more sustainable habits of developing and consuming products. But in emerging economies, whose role is it to make this happen? This was one of the topics we focused on at the recent International Business Forum (click here for a summary). We heard success stories like those of Tambul Leaf Plates, producing sustainable ecological products such as natural arecanut leaf plates that are used across India.
But it's not easy. There are challenges associated with supply chains and products themselves. There is a lack of finance for green start-ups. There is a lack of awareness among consumers about consumption patterns and environmental impacts.
All sectors have a role to play. Businesses can innovate around more sustainable methods of production. NGOs can work with business to help them become more sustainable, and can also help educate consumers. Governments can promote green business, and help develop markets for sustainable production and consumption.
What are your views on how we can make our production and consumption habits more sustainable?
Thanks Martin- appreciate you checking it out! We haven't yet had any requests from customers about certification- all of the designers we work with are small and certification is often expensive. That's why I guess trust is important within the supply chain- that we have the relationship with them to know they produce how they say they do, and our customers trust us. Developing a label system is something we've thought of though!
Kiran - you raise an important point about certification costs. It's something I've heard before from small businesses and small-scale farmer associations. As you say trust is the critical ingredient in any labelling system. With social media, I guess you can generate the transparency needed to build that trust.
I think Kiran's and Martin's discussion raises a good question: When is it worth it to go for certification or labelling. If you have close relationships within your supply chain, a high level of trust and transparency and if your brand already communicates social and environmental responsibility in a credible way, there is no need to go for certification (which is costly).
However, Martin, you touched on the question of larger brands (or brands which want to scale their businesses). If you suddenly have to source from multiple additional suppliers and you want to maintain quality AND sustainability, certification might be very well an (economically) viable option.
Kiran, I'd like to join the kudos from Martin, your company looks amazing!
Building on what Zahid mentioned: Social media has proven that sometimes peer-to-peer reviews, ratings by users, are more efficient than all certifications a company could purchase and collect like badges. Customer satisfaction speaks for itself, of course your reputation as a sustainable brand can be strengthened by having the labels, yet is this what your consumers are looking for?
This is a great example of how to influence lifestyles and it would be great if you could share this nice promising practice through the Global Network on Sustainable Lifestyles (www.vision2050.net) as certainly many other people would like to learn from your experience and support you on this process.
To let them see their business and their decisions in the context of the society and environment in which they operate and upon which they are totally dependent. As long as people in business do not operate with these connections in mind they will at best produce short-term success at the cost of the long-term.
One of the points that was raised during the International Business Forum was around finance. Let's turn to this issue now:
Q2: How can the apparent finance gap of sustainable producers be overcome? What is needed to make sustainable production more bankable?
I think this is a sector-specific question. In some sectors such as textile and apparel, there is no real finance gap. In others such as agriculture, tailored solutions especially for SME seem to be required. In this context, costs for rating credit worthiness appares to be one challenge impeding access to finance.
Also, improving social and environmental conditions will simply incur costs, at least in the short or medium term. It is important to illustrate this as an investment which pays out in the long-run both to consumers and producers alike.
I think it is really difficult to attract institutional sources of finance at a startup phase atleast in our part of the world. So the initial source has to be self or the promoting group, then private circle of supporters...friends, family, well wishers etc. At each stage you should be able to provide a little more evidence of the proof of concept and some success. Then only at a much advanced stage you can access institutional sources either for debt or equity.
No we have not tried it. We went exactly the way I mentioned above and now we are in the process of raising equity investments and speaking to various investors. We won a few competitions like Artha Venture Challenge, SEED Low Carbon Awards and Finalists for Changing Markets Award. These are helping us in attracting the investors.
you probably know the saying around "family, friends and fools" that finance young businesses, and it's not only valid the developing world. Still, it makes sense, as founder personality is super-important in early starting phase, more important than market characteristics, also as founders can change their business model and thus target market quite rapidly.
There's some really interesting work from the Entrepreneurial Finance Lab at Harvard (http://www.eflglobal.com/), mainly across africa, to assess credit scores through interviews (rather then credit history). maybe you should invite them over for a meeting with banks in your country.
I guess for this its crucial to distangle "real financing" issues vs. "subsidies" around the risk-performance of new, sustainable ventures.
In cases where this is a "pure" financing issues, i.e. financing a profitable investment, I'd see the strongest role for the private sector (i.e. banking, microcredit or rural, non-banking finance institutions). In some cases, we might need public investments to make the financial system work better, e.g. in remote rural areas or for clients lacking formal registration. Clearning houses and credit bureaus are one example.
For subsidiy issues, we'll probably wait for the private sector in vain, and it would even be irresponsible to push banks. Still, development actors and foundations might sometimes give the critical "push" to new models, especially in the face of big uncertainty and risks in early phases.