Development Roast Giving international development a proper roasting
By Tim Gieseke
“Give me a lever long enough and a place to stand, and I will move the world.” Archimedes, 230 BC
Nothing seems to loom larger than the degradation of the environment at the hand of the growing global economy. This antagonistic relationship has been recognized for centuries and was made famous by Garrett Hardin’s 1967 essay of the “Tragedy of the Commons”.Hardin used the example of communally-owned pasture where individuals grazed cattle. Each individual recognized it was in their short-term economic interest to stock additional cattle and reap the gains despite the longer-term problem of a degraded pasture and a lessened overall production capacity. In a less populous time, this scenario could go on as long as individuals could move onto new pastures, but, if they could not, the land would be irreversibly degraded so that no longer could anyone benefit from it.
This same concept is also applied to those individuals and companies that discharge pollutants. The effect of the pollution is shared by many people subjected to it downstream, while the immediate financial benefit of not treating or not reducing the pollution is gained by the individual or entity.
With a growing population of seven billion people on the planet, we have moved past the option of moving onto greener pastures or bluer waters. We must also move past the paradigm that the economy is the justification for environmental degradation and must shift forward to the paradigm that the economy is a tool we can use to improve the environment. Our economic and ecological goals must be mutually beneficial and achieving these goals must be done symbiotically.
Incorporating these ecological values of cleaner water, habitat and air and improved quality of soil and, thus, people’s health—these so-called ecosystem services to human beings and the global economy—seems to be a feat as great as the Greek mathematician Archimedes’ claim that he could move the world. The caveat, of course, was having a fulcrum and a lever long enough. To move the economic world, the fulcrum to use is ecocommerce and the long lever is symbiotic demand.
The Ecocommerce®Framework—a market-driven mechanism used to help sustain and improve the environment instead of destroy it—evolved from an environmental quality assurance project supported by the Minnesota Department of Agriculture (MDAg) in the United States to create a means for farmers to provide “reasonable assurance” that they met state water quality goals. Using land management metrics—such as a soil conditioning index (SCI) that predicts the consequences of farm cropping and tillage practices on soil organic matter or a water quality index (WQI) made up of several land characteristics and management practices—as the method to describe standards, an environmental market signal is created. No longer are farmers’ decisions made purely on how much corn, wheat or pork they can produce and sell, but, because they know their SCI and WQI values, they can take into consideration the environmental quality they sustain if there are those willing to reward them for it. To generate such supply-and-demand market forces, using natural resource metrics associated with geospatial data, ecocommerce creates a second tier of value called landscape intelligence. For example, the MDAg project provided pioneering watershed intelligence by using WQI ratings to quantify how much clean water is supplied by different farmers as an ecosystem service to their surroundings—their watershed sustainability value.
It did so with several hundred farms with a total of 50,000 acres in a dozen watersheds in Minnesota, a process that at a few dollars per acre turned out to be relatively cost-effective. The goal was to use this information in order to attract other actors who had a vested interest in a clean watershed to support the farmers through financial and in-kind rewards. But before this could be done, the demand for a clean watershed ecosystem service from such “sustainability stakeholders” had to be established too and this was done in three phases. First, potential environmental market signals were gleaned from the long list of land management metrics developed by the United States Department of Agriculture (USDA), land grant universities, industries and institutions. Secondly, these dozen or so metrics were aligned on a scale of 0 – 100. Thirdly, sustainability stakeholders such as food processors, corporations, governments, utilities, insurers and NGOs were asked to identify the numerical watershed cleanliness goal that they consider meets their sustainability claim and the value they are willing to exchange for it. This allowed unique entities to define sustainability within their own “public arena of commerce” based on their stakeholders’ and stockholders’ input without disrupting or imposing their values on other entities. In addition to monetary payments, there are other economic values such as gaining market access to supply a sustainably-produced commodity, reduced insurance costs, lessened land tax rate, and compliance assurance that the farmer is meeting the state or federal government’s water quality standards.
By applying this concept on Minnesota farms, it was shown that the WQI value of 75 that met the goal of the state government were related to, but not identical to the sustainability values, of say, a cheese processor that desired a WQI value of 85, while a bio-refinery required a WQI of 65. It was also evident that a farmer was not just located in a watershed, but also a cheese-shed, beef-shed, duck-shed, carbon-shed, environmental liability-shed, ecological conservation-shed and more. It was learned that farmers can simultaneously deliver multiple “sustainability values” from the perspective of multiple sustainability-sheds to numerous stakeholders. This was vital and central to the entire process because even at the relatively low price that the project was carried out, any one of the sustainability stakeholders could not afford to carry all the “sustainability values” on their own. Therefore, the identification of multiple sustainability-sheds of value to several stakeholders meant that a symbiotic relationship could be possible between them to share in the cost of maintenance of the watershed for all.
This long lever of symbiotic demand has the unique economic result of reducing the cost for individual sustainability stakeholders as the number of fellow demanders increases. In other words, if five different entities are demanding sustainability via a WQI of 75 from Farmer Kimball, then Farmer Kimball produces the one WQI “product” of 75 and the costs and values are shared. Since economies of scale cannot exist when only one unique product is offered, any reduction in cost for the demander must occur by “sharing” the sustainability cost and value.
Perhaps the greatest value of the symbiotic demand process is reducing the transaction costs associated with environmental markets. Transaction costs include all the assessment, monitoring and assurance processes that are needed to ensure that the “purchased” quantity of environmental goods is accurate. These costs are inherently high for these types of markets, costs much greater than the value of the goods produced. In these cases, markets and governmental efforts are stymied. Lowering this transaction hurdle provides the opportunity for such sustainability value transactions to be considered.
Ecocommerce captures the value of public goods—such as ecosystem services like clean water, air, and habitat and soil fertility—that have traditionally been seen by economists as “external” to the economy, partly due to their ability to elude measurement, and that are often regarded as too sacred by environmentalists to be priced. At the moment, ecocommerce and its symbiotic demand are in their infantile stages—the theory has been applied to five projects since 2006 and a sixth project is planned to kick off in early 2013—but it holds the promise of firmly rooting environmental concerns at the heart of many commercial and non-commercial operations.
Two of the greatest biological forces on earth are symbiosis and self-interest and when combined, they have sufficient strength to pull on the symbiotic demand lever and move the global economy.
Do you know of other unique economic mechanisms that are successfully encouraging sustainability? Leave a reply below.
Tim Gieseke is president of Ag Resource Strategies, LLC, a business developing economic models to integrate agro-ecological and economic values at the farm level and through the food web. He is also author of EcoCommerce 101, a book describing how these values can flow within the current economic system. In addition to speaking, he currently consults on related efforts for the UN Foundation, US Water Alliance, Chesapeake Bay Program, USDA Natural Resource Conservation Service and local, on-the-ground implementation projects. He, his wife and three boys reside at and manage a farm operation in southern Minnesota, USA. He can be contacted at tgieseke@agresourcestrategies.com
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