Book review – Ecopreneurship: Business practices for a sustainable future

As my colleague Dr Niels Schneider will tell you, it has taken me rather a long time to write this review (sorry Niels!) It’s often hard to find the time to sit down and do some proper thinking, and trifling matters like global pandemics are rather inconvenient, too. Actually, I’m glad it took me longer than I’d hoped to tackle Dr Schneider’s book ‘Ecopreneurship: Business Practices for a Sustainable Future’, because it meant that by the time I sat down to write this review, I’d also read half of Mariana Mazzucato’s excellent ‘The Value of Everything: Making and Taking in the Global Economy‘.

Reading the two together was, in many ways, like looking at a problem through the two different ends of the telescope. Professor Mazzucato’s book deals with the difference between value extraction and value creation, and how the way we measure and manage our economy often conflates the two. This means we end up in the nonsensical position where people who accumulate large amounts of wealth by doing not very much, and then sit on it, are regarded as providing great value to our economy and country even if they do great damage to the environment or society along the way. Dr Schneider’s book looks at people at the grass-roots, community level doing the exact opposite: entrepreneurs who have as their principal objectives the building of environmentally sustainable businesses, rather than necessarily the accumulation of wealth.

Entrepreneurship has always fascinated me: from the reasons why people start a business to how it feels to be an entrepreneur, from how innovation happens in practice to government policy around innovation and entrepreneurship. But it’s also a slippery concept, hard to define and even harder to write about clearly. What I found interesting about Dr Schneider’s book is his combination of an economic view of the case study organisations (small firms in the food industry) with an interest in the narratives of the ecopreneurs themselves, and crucially, an analysis of how they work with their supply chains. This allows him to view the firms as existing in three dimensions: the motivation of the entrepreneur, from altruism to money-making; the orientation towards traditional business aims such as growth and profit as opposed to maintaining values; and where the opportunities for creating value arise for ecopreneurial firms, whether through correcting market failures or by product or service innovation. His analysis of their supply chains also means he examines what these ecopreneurial firms actually DO rather than what they say, and how their day to day business practices and their interactions with their suppliers and customers have an effect on their sustainability and the sustainability of the whole supply chain.

Dr Schneider uses John Elkington’s Triple Bottom Line as a guiding principle, looking at how firms aim to maximise value in economic, social and environmental areas. This is an interesting choice, as John Elkington withdrew the Triple Bottom Line in 2018 on the grounds that it had become too much used as an accounting tool, rather than a way of provoking deeper thought about the place firms occupy in society, and a means of bringing about genuine system change. He also felt that too many organisations viewed the tool as a balancing act, to be used to broker trade-offs between profit and the three arenas of economic, social and environmental value. However, Dr Schneider uses the Triple Bottom Line more as an organising principle rather than an accounting tool, identifying along the way that it is very difficult for the firms he examines to measure their social or environmental impact in any meaningful manner.

What we measure is at the heart of some of Professor Mazzucato’s discussions of value: as she points outs “there is no point to the economy unless it helps people to lead better lives” 1 but our current ways of measuring what is good, such as GDP, are flawed. “In essence, we behave as economic actors according to the vision of the world of those who devise the accounting conventions” 2. So it is heartening to see that Dr Schneider’s ecopreneurs are pursuing a better world according to their own values, despite the difficulties in measuring impact.

The firms in the research have a number of objectives, broadly organised into themes: challenging the status quo in the food industry, improving the environment, selling local produce, and making good food available to all. One element they all had in common was how they used their profits: none of the firms examined used a shareholder dividend model or had profit maximisation as an objective. The two most common approaches were either to pay a real living wage to the founder and all employees and re-invest profits into the firm to continue its social and environmental contribution; or to use the profits from the firm to support a separate social mission. (It is important to note that these are all businesses rather than social enterprises.) Some received grant funding for their social missions as well as revenue, and some also took a circular economy approach by creating revenue from waste. All seemed to be quite complex in the way they juggled pricing, revenue streams and their social and environmental missions.

Interestingly, paying employees a fair wage and treating them well was counted by these entrepreneurs as being as important as their other environmental and social responsibilities. (In this way, these firms differ from some of the philanthropic activities of high profile entrepreneurs, where the model seems to be to accumulate wealth as a priority, and then consider doing some good with it. Next on my reading list is Anand Giridharadas’ book on exactly this topic, Winners Take All.)

“The organisations’ goal is thus not increasing shareholder value, but social and ecologic value. The profit for the ecopreneurs is a means of pursuing their sustainability mission, as opposed to using sustainability to pursue their profit mission, which is often seen as the motivation behind sustainability in conventional businesses.” 3

But does it make a difference?

If Dr Schneider’s analysis had stopped there, it would have been an interesting look at the concept of purpose- or mission-driven businesses, with some useful case studies. But where it becomes really fascinating is when he looks at how these business work with their supply chains, and the impact their aims and values have on the networks around them.

This feels like a more useful analysis than simply focusing on purpose and motivation (which can in some cases be all talk but no action, or worse, a form of greenwash). Similarly, innovative products with a sustainability focus cannot be considered in isolation, but should be examined in the context of the system in which they operate. (On a side note, when writing about sustainability recently for the World International Patent Organisation, I found myself pondering the lack of any organising strategy on environmental innovation. Trusting the market to provide feels like a gamble in the current circumstances.)

I should probably admit right now that I hold a fairly sceptical view of the power of small green enterprises to effect significant change. Our current challenges in terms of climate change, environmental degradation and pollution feel too urgent and large-scale to be solved or even significantly ameliorated by anything short of widespread system change and regulation. This view is echoed by some of the literature analysed in this book, which points out that small firms have limited impacts on their supply chains due in part to small order sizes. And I have often wondered about whether such firms can even have a negative effect, albeit inadvertently, because of the challenges of assessing sustainability in an accurate and practical manner.

However, Dr Schneider’s analysis shows that in the absence of powerful focal firms who drive their own version of the sustainability agenda through the supply chain, these firms work with their suppliers far more on collaboration, trust and shared values. Their choices are pragmatic but also values-driven: while some of them supply the larger supermarkets, or work with organisations that do not share their values, these decisions are mostly made with clear consideration of whether it would compromise their priorities. (Firms are more likely to work with organisations that don’t share their values downstream rather than upstream, reflecting an emphasis on how food is produced rather than necessarily where it is sold.) These choices are made all the easier by the scale at which they are operating, which means decisions can be made made on an individual case-by-case basis.

These findings provide useful insights about power and influence: as Dr Schneider identifies, large focal firms often wield an enormous amount of power, which means that their version of sustainability will prevail in the supply chain. My thinking about the lack of impact of small businesses is based on an assumption that power is necessary to drive change, but the ecopreneurs’ way of working feels more co-created rather than imposed. Dr Schneider shows that his ecopreneurs are also knowledge-sharing and learning from each other, as well as sharing resources freely even when technically in competition with each other. Community is a strong theme throughout the business practices of these ecopreneurs, whether in terms of their social goals or in practices such as their choices of employees or locations. They are able to achieve some economies of scale through this approach, sharing machinery and equipment with others which would not be cost-effective for one small firm to buy.

This way of working is far closer to Charles Handy’s view of business – “A good business is a community with a purpose. Communities are things you belong to, not things you can own” 4 – than to the current model of shareholder capitalism practiced in the UK and the US. (In the same article for HBR, Handy also paraphrases Arie de Geus on the subject: “companies die because their managers focus on the economic activity of producing goods and services, and forget that their organisation’s true nature is that of a community of humans.” 5)

As a result of his analysis, Dr Schneider argues that the traditional view that activities that maximise social and environmental benefits reduce economic performance is not necessarily true, and instead there is often a circular relationship between the three areas. For example, good social performance increases consumer goodwill and brand reputation, while environmental activities such as finding ways of selling waste increase economic performance and provide increased funds for social spending. He also shows that supply chains where the firms involved are not focused on profit maximisation, but rather on social and environmental aims, mean value is more evenly distributed across all the firms involved. This not only maximises their contribution to sustainable development, but also the survival of all firms. This requires the ecopreneurs to be indifferent to which venture in the chain does what, as long as their survival is not impaired.

What Dr Schneider has uncovered is a network of firms engaged in a delicate symbiosis, working together towards shared goals with a collaborative and co-operative approach. Some of the effects he has found, such as the impact on firms’ reputation, might only hold true at a certain size of business. For example, how many customers take environmental and social reputation into account in buying decisions, and therefore the potential size of the market for these firms, is not discussed. Furthermore, as his ecopreneurs by and large reject growth as an objective, this study does not offer any insights as to how easily this approach might be scaled. But one thing the COVID19 crisis has brought into stark relief is that over-reliance on complex, large-scale global supply chains, whether they are for PPE or flour, can be disastrous in times of crisis. Not being able to feed our country or keep our key workers safe is embarrassing for a supposedly modern nation, and anecdotal information seems to indicate that shops using smaller, more local supply chains often had fewer problems keeping stock of certain items than the large supermarkets.

So perhaps the lesson here, as Dr Schneider points out, is that at the very least we should find ways to encourage these alternative food networks to evolve where they do not exist already, and support those already in place. I recently listened in on a Zoom run by PRASEG (The All Party Parliamentary Renewable and Sustainable Energy Group) where some leading thinkers in public health and economics shared their thoughts with MPs on how we can rebuild better after the COVID19 crisis. In the call, Sir Michael Marmot pointed out that we have to stop thinking of the economy as something separate from society, and of society as something separate from our environment. What this research shows is that at the community level there are successful ecopreneurs already living and breathing this attitude, rejecting the idea that how they do business should be separate from their personal values. Crucially, it shows that these ecopreneurs don’t just talk about their social and environmental objectives, but make choices that seem illogical according to our prevailing view of business, in order to pursue them. And it shows how they go about building networks of like-minded organisations and working with them to create impact, providing a useful guide for any other businesses who want to pursue similar goals. If we are going to bring about lasting change, we need both the high-level strategic discourse of our leading thinkers, and the grass-roots shifting of attitudes and norms that businesses such as these can achieve through their day-to-day practices.

 

References

  1. Mazzucato, M., 2018. The value of everything: Making and taking in the global economy. Hachette UK p99
  2. Mazzucato, M., 2018. The value of everything: Making and taking in the global economy. Hachette UK p100
  3. Schneider, N.R., 2020. Ecopreneurship: Business practices for a sustainable future (Vol. 3). Walter de Gruyter GmbH & Co KG.
  4. Handy, C., 2002. What is a business for?. Harvard Business Review, December p5
  5. Handy, C., 2002. What is a business for?. Harvard Business Review, December p5

 

Photo by Alexander Abero on Unsplash


Also published on Medium.