"Do Good" Businesses Must Be Sustainable

This post was recently submitted to the Next4Billion and is re-posted below.

It was with keen interest that I read the Atlantic Monthly article “Scents & Sensibility” published in December 2007. Being a fellow importer--with the mission of providing economic opportunity to artisans in developing countries--it was great to read of the efforts of the author, Sarah Chayes, to give Afghan men and women viable employment opportunities creating handmade soaps from local materials. In addition to being relevant to my work, the article itself was an entertaining account of one woman’s passion to “scour this harried land for its (licit) bounties and turn them into beauty products.”

A theme throughout the piece was the difficulty in working with the local consulting firm that administers USAID’s alternative income generation program. While I can appreciate the frustration in dealing with a bureaucracy like USAID (or in this case the consulting firm managing its contract), something else tugged at me when reading this article. Namely, that when it comes to companies trying to do “good,” as well as do well financially, people often assume that an unsophisticated business approach is acceptable.

There is no doubt in my mind that Ms. Chayes works very hard and that her motivations are certainly commendable. I'm also confident that the consulting firm could likely have made things a lot clearer and helped her through the process in a less convoluted way. However, if we had been reading an article about a traditional company looking for investment dollars and the future CEO said the following: “And with zero experience, I was going to try to create a product for which conventional wisdom said the market was saturated. To launch this venture, I had $25,000 from a private foundation in Chicago, and a single collaborator back in the United States—a 16-year-old high-school student from outside Boston...,” no one would be outraged when a potential investor said, put a business plan together and then went on to ask for more numbers.

Again, I commend Ms. Chayes for her perseverance in the face of many difficult hurdles. My point is not so much aimed at this particular instance, rather I believe that fair trade, environmental or otherwise mission-based companies need to start acting more like businesses and less like nonprofits if they are going to be taken seriously by investors or customers. The world needs more people like Sarah Chayes, but it also needs more “traditional” business people to partner with her to build sustainable organizations that deliver on their missions as well as their bottom lines. This is the combination that will lead to real, lasting change.

Stop The Madness

The situation in Kenya has not seemed to improve much since my last post. Interestingly, just days after the election, I heard from my friends and colleagues in Kenya that things might not be as bad as the media had made it out. Now, however, a couple weeks later, the media coverage has really diminished (at least in the US) and it seems like things continue to get worse. Inside Kibera slum members of the Kikuyu tribe have been driven from their homes and shops, which in many cases were burned to the ground, and these people are now living in a makeshift tent city inside a national park. The World Food Programme has even had to step in to provide basis food stuffs to people who only weeks ago had small but thriving businesses inside Kibera.

It's unclear what will set things back on a course of normalcy in Kenya as power-sharing negotiations seem to have limited support from the opposition. With Kenya previously thought of as a model pro-business stability, prolonged uncertainly will not only be devastating to Kenya, it could have a ripple effect throughout the Great Lakes region as investors lose confidence. Let's hope this madness stops sooner, rather than later!

A Rocky Start to 2008

Personally, I was quite fortunate to ring in the new year with friends while on a short but sweet holiday. Unfortunately, when I came back most of the international news I saw was terrible. First Benazir Bhutto was assassinated and then I heard about all the crazy rioting and killing in Kenya as a result of disputed elections.

Although we don't purchase from any groups in Pakistan, I have visited the country and encountered incredibly friendly people and Ms. Bhutto was my commencement day speaker in college so I have a warm place in my heart for this nation. As for Kenya, I've been fortunate to visit many times both for work and pleasure and have made good friends there. It is a country that over the past four years I have found relatively easy to work in, and I always had the feeling that people took pride in the progress Kenya has made in working to reduce corruption and increase individual opportunity.

Let's hope these two sad crises can somehow shock people into positive action and make 2008 a truly great year, and not one full of even more destruction.

Do the statistics tell the whole story?

Well, after making the last post about the correlation between the Human Development Index (HDI) and GDP a good friend who works at the UN pointed out that while the statistical relationship may be there, measuring GDP can distort the whole picture when much of the growth is concentrated with the elite. It would be interesting to see if there are instances where GDP is growing dramatically but HDI is not keeping pace. That said, I still think more money, time and energy should be spent working to solve the problems of poverty rather than on determining the best way to measure its alleviation.

Is measuring "human development" redundant?

An interesting perspective from FLOW hit my in-box today that talked about the correlation between GDP and the Human Development Index (HDI), a measure of child mortality, literacy, education, and standard of living. As FLOW pointed out, "economist Miles Cahill shows that progress on human development, as measured by the HDI, is statistically indistinguishable from growth of Gross Domestic Product per capita. "

Since populations in developing countries are growing rather than declining the only way to increase per capita GDP is expanded economic growth. In other words, more growth will mean less poverty. When you factor in the fact that more women in the workforce leads to lower birth rates you have an additional positive contributing factor. I don't want to put any HDI researchers out of business, but maybe more money and effort should be put into building businesses than into measuring poverty statistics?

Powerful Peace Weapon: Free-Market Prosperity

This headline is the title of a new article by Steve Forbes that is available in his online newsletter. He uses the example of Northern Ireland and how three centuries of violence have given way to peace and prosperity after about three decades of economic reform. As Mr. Forbes points out: "Things started to change dramatically in the 1970s. Dublin aggressively courted foreign investment, using tax cuts and tax holidays as bait. Other tax and regulatory changes were made. Result: Ireland today is the most vigorous economy in western Europe. Its per capita income is now larger than that of Britain, France or Germany. The great boom in Ireland did not go unnoticed in the North, and in fact that region has benefited greatly from the Republic's prosperity. A vigorous, new middle class is rising in all of Ireland. As people become more prosperous they tend to focus on bettering their lives more than on blowing up their neighbors." (Emphasis added.)

At Economic Development Imports and at our partner company One World Projects, we've made a point of sourcing products from conflict and post conflict countries as a way of building peace. Our baskets from Rwanda, made by genocide survivors, and Phil's current trip to Afghanistan where he is sourcing jewelry and textiles are two examples of our peace through business approach.

The dominant architecture in Kabul is Early 21st Century War

This headline is pulled from the blog of my partner, Phil Smith, at One World Projects. He's in Kabul looking for new groups from whom he can purchase fair trade goods. While the buildings are uniformly bombed out and the security situation is "tense" to put it mildly, he has only positive things to report about the people and products he's finding. One such item I am looking forward to learning more about is this necklace from Medina Handicrafts, made from lapis and carnelian.

Medina’s mission is to empower vulnerable and disabled women through building their professional skills, providing literacy, health training and capacity building to help themselves and their families to reach self sustainability. To see other products and learn more about Phil's trip check back on his blog throughout the week.