Eco-Biz Executive Summary


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This Eco-BIz business case is prepared by us (YLP Program participants) of Global Institute For Tomorrow (GIFT).

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Eco-Biz Executive Summary

  1. 1. Mission Statement Fulfilling economic, social, and environmental goals at the same time Eco-Biz is a social enterprise seeking to simultaneously promote sustainable forestry practices and sustainable rural livelihoods in Cambodia. It will market and distribute products created through socially-uplifting and environmentally-friendly practices and technologies developed by GERES Cambodia and other organizations. Altogether, Eco-Biz’s initiatives will be designed to fulfill a triple bottom line: economic, social, and environmental. Country Background Poverty is driving unsustainable pressure on the environment Cambodia has a population of 14 million, of which 36.1% live below the national poverty line of US$0.45 per day. It is one of the poorest countries in the world with a per capita GDP of US$350 in 2006. Yet it is growing rapidly—with an average annual GDP growth rate of 9.3% during 1997-2007. This has led to severe deforestation, with an annual loss of 140,000 hectares of forest, a 1% annual deforestation rate. Deforestation has been chiefly driven by illegal logging for domestic use, land clearing for agriculture, and weak enforcement of forestry laws. This creates a pressing need for sustainable forestry management, which would involve alleviating rural poverty and raising rural incomes, creating incentives for sustainable forestry practices, and providing access to renewable energy sources. Company Overview Leveraging energy-efficient technologies and entrepreneurship Operating in Cambodia since 1994, the Groupe Energies Renouvelables, Environnement et Solidarités (GERES) is a France-based, international NGO with the fundamental goals of “preserving the environment and improving the living conditions of the Cambodian people”. It has developed various energy-efficient technologies (kilns and stoves) which have improved rural incomes while reducing pressures on the environment. In May 2009, GERES launched Eco-Biz, a private limited company to market and distribute products created with GERES-developed energy-efficient Eco-Biz Co. Ltd. Executive Summary
  2. 2. technologies. Initial human resource requirements are 5 full-time employees (CEO, three sales managers, and one administrative assistant) and contract staff as necessary. Value Proposition Saving Cambodia’s people and forests Cambodians will be empowered through an improvement in the quality and sustainability of their livelihoods through higher incomes, renewable energy sources, and entrepreneurship. At the same time, their adoption of certified community forestry practices and environmentally-friendly technologies will reduce deforestation and carbon emissions. Business Model Using Economic Incentives to Drive Adoption of Sustainable Practices Eco-Biz will offer three core products: palm sugar, wood vinegar, and charcoal. All products will be produced in a sustainable manner, using energy-efficient technologies, driving sustainable forestry practices, and contributing to villagers’ livelihoods. Palm Sugar Market Opportunity Global sugar consumption is 4.4 kg per capita per year. It increases by 2% per year and was expected to reach nearly 160 million tons in 2008. In Cambodia, 20,000- 40,000 tons of palm sugar are produced each year. Palm sugar boosts a low glycemic index (a great option for diabetics) and a high mineral content. The Eco-Biz Approach Wood is required to fuel stoves used to cook palm juice into palm sugar. Eco-Biz will pay a premium over the market price for granulated palm sugar produced in a sustainable manner. This premium price provides an economic incentive to drive palm
  3. 3. sugar producers to use sustainably-cut wood from certified community forests instead of illegally logged wood. Eco-Biz will brand, market and distribute the granulated palm sugar to domestic and international wholesalers. Developed by GERES, the Vattanak stove greatly improves upon the traditional palm sugar stove. It uses wood more efficiently (30% less wood), more evenly distributes heat and produces less smoke—reducing deleterious effects on villagers’ health and smoke contamination of the palm sugar. Therefore, Cambodian palm sugar can be produced in an environmentally and socially responsible manner with the Vattanak stove, a point of differentiation that can be leveraged in the high-end market. Green Charcoal and Wood Vinegar Market Opportunity Currently, 85% of domestic energy use comes from wood, charcoal and other forest biomass sources. As forest resources have decreased, the prices of wood and wood charcoal have rapidly increased in recent years. This has resulted in a market for cheaper wood charcoal made from illegally-cut wood, primarily in the capital of Phnom Penh where 90,000 tonnes of wood charcoal are sold annually and 40% of households use charcoal as their main source of energy. Research shows that 99% of the charcoal sold is made from illegal wood. Therein lies an opportunity for green charcoal. In addition, no branded charcoal is currently sold in Cambodia. Wood vinegar is derived from the condensation of smoke produced during charcoal processing. The market for wood vinegar in Cambodia is still in its infancy with potential to grow. Currently, it is understood to have uses as an organic fertilizer and bio- repellent. A recent buyer cited its potency over wood vinegar from other countries, buying 400 litres within six months. There is also a potential market in the CEDAC network of 1.8 million rice farmers The Eco-Biz Approach Similarly with charcoal and wood vinegar, Eco-Biz will pay a premium for CFA wood in order to discourage illegal logging. Using the high-efficiency Yoshimura kiln developed by GERES, Eco-Biz will produce charcoal and wood vinegar. It will also brand, market and distribute the charcoal and wood vinegar directly to the end-consumer in the Cambodian domestic market. Compared to regular charcoal, green charcoal (charcoal made from sustainable wood) is 20% more efficient and can be made in 48% less time and with 30% less wood. Therefore, switching to green charcoal can reduce pressure on forests and encourage the use of sustainably-produced wood. Financial Projections A financially sustainable business
  4. 4. Eco-Biz seeks an external investment of US$500,000 for a 49% equity stake. The projected IRR is 6% for a 5-year holding period or 25% for a 10-year holding period1 . Eco-Biz is projected to break-even by Year 2 with revenues of US$2,650,000 and a net profit of US$550,000 by Year 5. 1 This assumes exiting by selling shares to other interested investors.