Michael The Business of Rural Development Nov 2012


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Dr. D. Michael Shafer trained in Government (PhD Harvard) and spent 25 years teaching political science at Rutgers University and consulting in the areas of international development, community re-creation after conflict, and higher education reform. He is a member of the Council on Foreign Relations and a 21st Century Fellow.

In 2008, he and his wife started Warm Heart, a community development organization serving northern Thailand. He is particularly interested in attracting investment to rural communities in order to establish dynamic, sustainable, income generating, social wealth creating centers of community growth. Dr. Shafer is also the founder and president of Second Harvest Power Co. (Thailand), Ltd., a start-up green power company which will soon build its first agricultural waste fired community power plant.

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Michael The Business of Rural Development Nov 2012

  1. 1. CSR: Why Waste a Golden Opportunity? Making CSR profitable for you and the community Dr. D. Michael Shafer, Director Warm Heart Foundation A.Phrao, Chiang Mai, Thailand www.warmheartworldwide.org d.michael.shafer@gmail.com
  2. 2. Please don’t waste your money• My name is Michael Shafer and I am a do- gooder who runs an NGO.• So pay attention to what I am about to say. − CSR is an investment, not charity. − Invest in what you know. − If it’s not profitable, it’s not a good idea. − Invest in your own future.• Down at the base of the pyramid, we need innovative, strategic investments by companies with a long-term profit motivation to stay engaged in our communities.
  3. 3. Phrao is beautiful
  4. 4. The mountains are beautiful
  5. 5. The view from themountains is beautiful
  6. 6. Most adults leave to find work
  7. 7. The women, children and elderlyleft behind suffer the poverty
  8. 8. Phrao is typical of north Thailand• Poor − Average income 72% of the national average − Average monthly wage less than $70 − 30% live on less than $1.65/day − More than 1/3 of people own no land• Illiterate − 13% never went to school; another 69% went no further than 4th grade• Underserved − Highest infant mortality rate in Thailand
  9. 9. There is nothing special aboutPhrao • Or about northern Thailand • Or about Thailand • We are where you work, too. − Worldwide three billion people live in the rural periphery • So what do we want and need? • And what do we not want and need?
  10. 10. What we don’t need• Most charitable donations• Nice, but seldom costless or easily deployed − Computers – without a network admin or provisions for repair and replacement − Toys – without batteries − Software – to perform unheard of tasks• This stuff is nice and often useful – but donations alone do nothing to increase a community’s capacity to sustain itself.
  11. 11. What we don’t want • CSR that’s all about you: − Reusing your grey water − Switching to high-efficiency florescent bulbs − Reducing packaging • These are all great for global welfare • But they are just smart business decisions − Spend less on water, electricity and packaging • They don’t do anything for us. • They aren’t social.
  12. 12. What do we want?• We want CSR that provides sustained improvements in community quality of life.• We want you to define CSR as: Investment in innovation that improves your bottom line by reducing costs and/or improving supply and/or expanding markets and/or increasing customer loyalty AND provides training, creates jobs, opens access to markets and to goods, improves community quality of life and the environment.• Why? Because: − CSR programs that are not profit-driven are at risk; − CSR programs that are profit-driven create social wealth, not just social value.
  13. 13. Today’s plan• Talk about what you want.• Talk about what we want.• Talk about how innovative CSR investments can work for both of us.
  14. 14. What you want• Supply − Increase supply. improve supply chain, ensure future supply• Cost reduction − Reduce production, distribution, waste disposal costs − Reduce human capital costs. access trained manpower• Demand − Enable/access base of the pyramid market• Customers − Improve brand image and customer loyalty in existing markets − Build good will with potential/future customers• Governments − Improve government relations − Create opportunities for government contracts
  15. 15. What communities want• Meaningful training − Training geared to specific, real jobs• Quality jobs − Jobs that offer good pay and benefits• Access to markets − Escape from middlemen, access to market data• Access to goods − Ability to buy and use broader range of products• Better quality of life − Electricity, access to basic medical services, TV
  16. 16. What Phrao has• No real world vocational-technical training• No quality jobs• 90 mountainous km to markets, crippling transportation costs• High potential demand for consumer goods and entry level consumer durables• High under-served demand for basic services − 20% of population has no electrical service
  17. 17. How can CSR marry wants andneeds?• Invest in your own needs and future in ways that meet community needs.• For example, invest to: − Diversify supply and ensure future supply security; − Cut training costs by making training programs profitable − Expand your market by enabling consumers − Show customers your engagement in the community and win the goodwill of future customers by delivering value − Improve access to government by solving a key problem with cost savings − Build a new product line while reducing green house gases
  18. 18. Securing future supply: the snackfood industry• Problem: Rising demand, uncertain supply, global warming threats to current production methods and sources of supply for corn and rice• CSR investment: Develop ag extension capacity to teach farmers low water, minimal fertilizer, herbicide, pesticide production techniques• Your pay-off: Bigger, more stable supply, risk mitigation, existing and future customer loyalty, environmental improvement• Community benefit: Meaningful training, quality jobs, market access, risk mitigation
  19. 19. Reducing training costs:the hospitality industry• Problem: Lack of and/or high cost of training qualified house, garden, front desk and wait staff• CSR investment: Build small eco-lodges that combine training facility with profit-making operation• Your pay-off: Reduce net cost of training, provide new, in-house destination to guests, earn customer loyalty through customer participation in program• Community benefit: Meaningful training with follow-on jobs, local jobs for suppliers
  20. 20. Creating new customers: theconsumer durables industry• Problem: Huge rural market cannot be tapped because potential customers do not have electricity to run refrigerators, TVs, DVD players• CSR investment: Design and build village scale ag waste fired biomass power plant and install in rural communities• Your pay-off: New product for government and private buyers, large, newly enabled customer base, and tremendous goodwill• Community benefit: Meaningful training with follow-on jobs, enabled access to goods and improved quality of life.
  21. 21. Winning hearts and minds:packaging• Problem: Packaging is costly, environmentally unfriendly & provokes protest; poor consumers pay more for small packages & buy less; small shop keepers under-stock• CSR investment: Develop and distribute branded, re-usable bulk and retail packaging system• Your pay-off: Lower packaging costs, higher sales, goodwill among new customers and loyalty among existing customers; major environmental impact• Community benefit: Better access to goods, lower costs; reduced air pollution from trash burning
  22. 22. Opening Ministry doors: themedical devices industry• Problem: Poverty and geography limit patient access; health focus on urban areas; ministry purchasing departments notoriously hard to access• CSR investment: Develop automated, cell- phone connected, village deployable patient vitals taking instrument packages• Your pay-off: New product for Ministries of Public Health that fills critical gap in health coverage at lower cost than alternatives• Community benefit: Improved quality of life through remote monitoring of infants’ progress, hypertension, diabetes, COPD and other chronic conditions
  23. 23. Cleaning up the environment: the electrical power industry• Problem: Oil, gas & coal identified as primary sources green house gases, public resistance to old & new facilities, target of environmentalists• CSR investment: Build community-based, ag waste fired biomass power plants in peripheral areas• Your pay-off: Low cost, carbon neutral additions to generation capacity, current and future customer support, response to environmentalist attacks• Community benefit: Meaningful training, quality jobs, valorization of ag waste, access to electricity, ability to buy household durables, improved quality of life
  24. 24. Second Harvest Power: HowCSR Ought to WorkInvesting profitably in biomass power, grass-roots development and a cooler worldModeling a replicable and profitable solutionfor the developing worldMaking a profit from a sustainable CSRinvestment in community development
  25. 25. Thailand – a good place to start• Middle income country of 65 million with the legal and banking infrastructure to protect investors• National commitment to renewable energy and progressive regulatory environment• Heavily foreign energy dependent• Rapidly rising electricity demand growth• Agricultural economic base susceptible to global warming• Agricultural waste to fire 1,700 MW+
  26. 26. What motivates Thailand?• Energy – Energy accounts for almost 8% of GDP – and demand/cost is rising faster than GDP• Poverty – Rising energy prices and sharp urban-rural divide in quality of access to electricity contribute to income and regional inequality• Global Warming – Rising sea level floods tourist areas, river estuaries, and Bangkok to the Gulf of Thailand – Rising temperatures breed bigger storms & more virulent forms of deadly diseases – malaria, dengue, hemorrhagic & yellow fever – Drought and reduced agricultural production, notably rice, Thailand’s staple export
  27. 27. Thai national energy policyIn direct response to these drivers, Thailand seeks to:“…strengthen energy security of the country by reducing energy imports and promoting indigenous energy resources, competitive energy price for sustained economic growth, and making her contributions in reducing global emission of greenhouse gases.” – Piyasvasti Amranand, Min. of Energy, 2006-08
  28. 28. So Thailand can do it the old way• Untapped biomass potential = 2+ of the coal- fired 750 MW power plants Thailand is building• Two 750 MW power stations = – $2.6 billion national investment costs – $90 million in transmission system upgrades – 3.5 million tons imported coal annually – 310,000 tons of SO2, 21,600 tons of NOx and 1,455,000 tons of CO2 (@ 0.97 mtCO2 per MW) annually – Jobs in the hundreds – $0 to community development
  29. 29. Or Thailand can do it the SecondHarvest way• 1,500 MW = 1,500 1 MW biomass power plants – $0 national investment in generation – $0 investment in transmission – 0 tons of imported energy annually – $0 investment in imported fuel handling facilities – 0 tons of SO2, 0 tons of NOx and 0 tons of net CO2 annually – Jobs in the tens of thousands – Hundreds of millions of dollars invested community developments trusts
  30. 30. Thailand in perspective• If Thailand offers the opportunity: – to prevent the construction of two 750 MW coal- fired power plants – what about the other 143 countries in the developing world? – to relieve the government of billions of dollars of investment – what about the other 143 countries in the developing world? – to provide a permanent source of locally managed development funds to hundreds of communities – what about the 4.5 billion people in the 143 other countries in the developing world? – to electrify rural communities without adding to global green house emissions – what about the 143 other countries in the developing world?
  31. 31. Thailand’s drivers are global drivers• The world’s poor - 5.4 billion people – and the 143 countries they live in – face three challenges• Rising global energy prices – Imperil national security – Swamp export earnings growth – Cannibalize foreign exchange earnings• Rising global energy prices drive global poverty by – Pushing inflation – Dragging on economic growth – Hammering the poorest hardest• Rising global energy consumption drives global warming and – Puts at risk the developing world’s agricultural future – Raises the specter inundation for many countries – Threatens public health• These challenges are not going away.
  32. 32. What’s in it for you the investor:CSR as profit-maker• The market they create isn’t either!• The project we propose offers investors a profitable vehicle for investing in the huge market for addressing these challenges• And the opportunity to do well by doing good.
  33. 33. What’s in it for you the environ-mentalist: CSR the social valuecreator• A project that offers the potential to accomplish large, long-term reductions in green house gas emissions & the damage wrought by the construction of traditional power plants & transmission grids without need for ongoing subsidies, international organization and other donor support.• An environmental improvement project that people want to participate in.
  34. 34. What’s in it for you the communitydeveloper: CSR as social changeagent• A project that provides large, long-term revenue streams to host communities that belong to those communities & that they control.• A project that provides training & large numbers of quality jobs with benefits to community members.• A project that breaks community dependence on donor generosity & frees it from the agendas of donor agencies.
  35. 35. Give your CSR a second thought Are you still burning money?Just a friendly reminder from Second Harvest Power Company, Ltd.
  36. 36. Back to the beginning• Can meaningful CSR be an investment in more than customer loyalty?• Can meaningful CSR be profitable?• Do communities actually want for- profit, investment CSR?• Oh, yes!• So remember: We want you to be strategic − Profits − Innovation − Long-term
  37. 37. Thank you from Warm Heart andthe people of PhraoTo learn more about Warm Heart, please visit: www.warmheartworldwide.org www.facebook.com/warmheart worldwide www.twitter.com/warmheartorg www.youtube.com/warmheartvideo