21 August 2009

Some of the Reasoning Behind the Program Investment Fund

Posted by Admin under: Evolution; Future; History; Science; Story; Sustainability .

As we enter a new age devoted to the achievement of sustainability on this planet, I believe we need a statement of principles, of fundamental truths, and of ideals. The great swirl of voices that we call “the media,” and that in some sense we inhabit, reflects the assumptions of our culture, the issues we are currently debating – and the ones we are avoiding. This conversation then spills over from the media into our social conversations, with colleagues and with our fellow citizens. Yet it is most often superficial, misinformed, and misguided, so we need to return to some fundamental considerations.

To begin with, if our business is “saving the planet,” then it is in large measure saving the planet from us. The damage that we are doing to our own habitat is widespread, generally understood, and fully documented. This is not about gloom and doom. It is about recognizing reality. Unless we understand what we are up against, how can we know if we are taking relevant action? The idea that we should focus only on the opportunities misses the point, that we won’t know what the opportunities are unless we understand the problems. Humans are quite adept at taking action, and Americans in particular are inclined to rush into things – like corn ethanol – only to find that they have made things worse or caused other problems.

So we need to address the real issues: climate change; loss of biodiversity; pollution and the accumulation of toxic and other “wastes”; damage to our ecosystems and natural resource depletion;poverty, hunger and widespread but curable disease; war, conflict, and oppression; and any other unsustainable practices that we are currently, as a species, engaged in. Some of the scientists studying the effects of climate change, including rising sea levels, more violent hurricanes, more frequent droughts and monsoons, and other impacts believe that up to half the world’s citizens could become environmental refugees. But the reality is that many of them already are. If they are caught up in wars, famines, epidemics, and genocides that are not of their own instigation, then they are effectively victims of their environment, and in some sense need to be rescued from this condition, while doing so without further damage to the planet.

This is a situation of enormous unfairness, and is in the long run not merely unsustainable but fundamentally immoral and inhuman. Yet it is one that for the most part lives below the level of our everyday consciousness, even as we go about trying to do things more sustainably. What is our responsibility for the state of affairs in the world? Should we accept the fact of population overshoot, and recognize that at some point there will likely be a significant collapse? What are the catastrophes we are seeking to avoid, and what are the goals we are seeking to achieve? What are, under these circumstances, the truths that should guide our lives, and the facts that we should pay attention to?

Answering these questions is made all the more difficult by the inherent complexities of the situation that we find ourselves in. There are more of us humans living today than ever in history, more events occurring, more stories, and more knowledge created than in the sum total of previous eras. Under these circumstances, how can we generalize about the needs and the challenges that we are facing as a species, when so many individuals are experiencing immediate crises of their own? But while it is difficult, we must try to take a much wider view: to see things as they are – in the world, on our continent, in our region, and locally.

The truth, then, is that about half the world’s population, perhaps more, lives in highly deprived and bitterly devalued circumstances. In a recent posting at the Financial Times web site, FT.com, Tim Johnston reports that

Muhammad Yunus, the Nobel laureate and founder of the microcredit pioneering Grameen Bank, has called for an overhaul of the global financial system to make services available to the very poor.

Problems such as poverty and food security could be tackled using a non-profit business model, the Bangladeshi economist told an audience in Bangkok.

“We can build a new kind of financial system – that is the challenge of the day,” he said.

“This would be a good opportunity to create an inclusive financial system, where nobody would be excluded, including even street beggars and homeless people, in a system so that he or she could access the service to change their lives.”

In an impassioned speech, Professor Yunus said two-thirds of the world’s population had no access to the formal financial system.

“Poverty is not created by poor people – it is not their fault,” he said. “They are as good human beings as anyone else, they are as creative as anyone else, they are as enterprising as anyone else. Simply, they never get a chance to discover their own talent.”

For the rest of the article, please see http://www.ft.com/cms/s/0/da66319c-8ccf-11de-a540-00144feabdc0,_i_email=y.html.

The point is, a large percentage of humanity is already experiencing unsustainability, and is actively seeking to do something about it. Humans will work their way up the Maslow hierarchy of needs, from survival and physiological needs such as breathing, homeostasis (maintaining one’s internal conditions), water, sleep, food, sex, clothing, and shelter, through safety and security, love and belonging, and esteem, to self-actualization and ultimately self-transcendence. But if two-thirds of them are stuck on the first rung, then we are already in big trouble. At some level, everyone knows this, but few people (other than Yunus) really talk about it.

Yunus goes on to recommend that we create a different business model, which he calls “social business”:

The solution, he said, was a new business model – “social business” – which he defined as “a non-loss non-dividend company for addressing a social problem”.

He explained: “What I am suggesting is that you create businesses exclusively for changing a situation that exists, of poverty, or environment or so on.

“This is an exclusive arrangement and you invest there not to make any profit out of it, personally or companywise, but to dedicate yourself to solve the problem, and you can bring your own technology, which you command, to make it happen.”

A “non-loss, non-dividend company” is essentially a nonprofit: it covers its costs, and pays its workers, but it does not return a profit to its investors. In reality, however, if it is to repay its capital it must generate a surplus over and above its operating costs, which means that it could at some point create a “yield” over and above its total cost to get established. The question is, how do we create and sustain such things?

This is one of the things our Fund is about. We want to demonstrate, and to create and sustain, some of these “social businesses.”

By way of examples, the FT story reports that

A number of companies, including BASF, the German chemicals group, and Danone, the French food conglomerate, have already set up social business joint ventures with the Grameen Bank.

BASF Grameen is selling mosquito nets and nutrient packages through the bank’s distribution network, and Danone is selling a nutrient-rich yoghurt, in enterprises that are self-sustaining and designed to repay the initial investment.

These are examples of the “bottom of the pyramid” approach – but of course it’s important not just to think of those at the bottom of the pyramid as consumers but also as producers. In fact, the goal is sustainable economic development, not simply the expansion of markets for big companies like BASF and Danone. But as long as we have big multinational companies, isn’t a better idea to have them doing socially-beneficial businesses than merely pursuing the greatest profit for their shareholders? I frankly have little patience for the old Marxist arguments that “capitalism” is the problem; in some ways it is, but it also needs to be part of the solution.

3 Comments so far...

The Sustainable Leadership Forum » Latest News Says:

21 August 2009 at 8:37 pm.

[…] Toward A Sustainable Leadership Manifesto | Home […]

The Sustainable Leadership Forum » Latest News Says:

24 September 2009 at 10:51 pm.

[…] New posting: Some of the Reasoning Behind the Program Investment Fund (8/21/09) […]

The Sustainable Leadership Forum » Sat. Feb. 19, 1-4: Changing Paradigms Says:

5 February 2011 at 3:18 pm.

[…] and we invite your participation in that at whatever level you are willing to contribute. Our Program Investment Fund is set up to allow members to create a revolving loan pool for sustainable projects. Our Membership […]

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