Transcript Folie 1

Economics of Land Degradation
A global initiative for sustainable land management
Economics of Land Degradation
A global initiative for sustainable land management
1ST ELD BUSINESS PAPER:
OPPORTUNITY LOST: THE EXPOSURE OF
BUSINESS TO LAND DEGRADATION RISK
AND
THE OPPORTUNITIES INHERENT IN
SUSTAINABLE LAND MANAGEMENT
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Economics of Land Degradation
A global initiative for sustainable land management
CONTENTS
1. INTRODUCTION: BUSINESS AND LAND DEGRADATION
2. ON DECISION-MAKING
3. INDUSTRIAL SECTOR CASES
4. CONCLUSIONS
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Economics of Land Degradation
A global initiative for sustainable land management
How are companies connected to land degradation?
Land degradation touches companies insofar as
 their inputs are linked to land
 their outputs are connected to land on the markets
 their production processes have links to land
 their decision-making process includes land degradation as a consideration
 their goals translate to a link to land degradation
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Economics of Land Degradation
A global initiative for sustainable land management
RESOURCE EFFICIENCY DIAMOND
Land Degradation links
Social
Capital
Food
biomass
Land
Plantation:
Non-food biomass &
Water & Energy & Social capital
Non-food
biomass
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Metals
Water
Energy
Mining:
Metals & Water & Social
capital
Economics of Land Degradation
A global initiative for sustainable land management
ON DECISION-MAKING
STATUS QUO: LAND DEGRADATION
IN DECISION-MAKING
TOOLS USED
Current
business
 Fully normal
asset management
 Time horizon longer
than usual
 Often, land not seen as
”core business” –
supplier’s problem
 Time horizon often
shorter than land dictates
Direct land contact
in value chain
 Fully normal
investment calculus
 Time horizon
longer than usual
 Land mostly treated as
image risk
 Raw material prices and
secure supply chain key
Distant from
land in value chain
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New
investment
Economics of Land Degradation
A global initiative for sustainable land management
DRIVERS FOR BUSINESS –
RISKS AND OPPORTUNITIES
Reduced
productivity
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Decreasing
raw material
availability
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Political
instability and
related social
phenomena
Regulatory
and legal
risks
Operations
improvement
New market
opportunities
Brand and
image
goodwill
Economics of Land Degradation
A global initiative for sustainable land management
INITIAL RANKING
High risk
Medium risk
Low risk
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Basic resources (e.g. forestry, papers, metals)
Construction and materials
Food and beverage
Industrial goods and services (e.g. transportation, packaging)
Leisure and travel (e.g. airlines, hotels, restaurants)
Personal and household goods (e.g. consumer electronics, tobacco,
clothing, footwear)
• Utilities (water, electricity)
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Chemicals
Health care (e.g. equipment, services, pharmaceuticals)
Insurance
Oil and gas
Real estate
Retail
Automobiles and parts
Banks
Equity/Non-Equity Investment Instruments
Financial services
Media
Technology (e.g. software and computer services, technology hardware
and equipment)
• Telecommunications
Economics of Land Degradation
A global initiative for sustainable land management
BUSINESS MODELS: CASE MAP
Service
building
Newmont
Whistler Blackcomb
Ecuador tree people
Land
degradation
cases
Ensuring
operating
environment
Edia Alqueva
Michelin
Holcim/Ambuja
Securing
supply chain
Coca-Cola
L‘Oréal/BASF
Indonesia Palm Oil
Fibria
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Economics of Land Degradation
A global initiative for sustainable land management
Project Unnati: Coca-Cola India and Jain Irrigation Systems
Year
2011- ongoing
Type of risk
Opportunity cost: new market
Business and profitability risk: raw material availability
Industry area for which the risk is relevant:
India
Food and beverage
Case description
Despite India contributing 55 % of the world's mango production, the
productivity is one of the lowest in the world. Farming is important for
several communities but improper land management and soil erosion
cause problems. Project Unnati is engaging mango farmers in the state of
Andhra Pradesh to adopt ultra-high-density plantation practices leveraging
drip irrigation which improve the yields with 100% in a sustainable
manner.
Key features common for other Businesses
Partner up with e.g. leading technology providers to support initiatives
together.
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Location of operation
Economics of Land Degradation
A global initiative for sustainable land management
Project Unnati: Coca-Cola India and Jain Irrigation Systems
Larger yields for
the mango
farmers and
faster start of
production.
Opportunities
 Coca-Cola India: opportunities to
ensure raw material availability in
a growing market
 Opportunities for the irrigation
system provider and mango pulp
supplier, Jain Irrigation Systems,
to sell irrigation systems and
ensure raw material for processing
Financial relevance
100 %
 The companies invest 1.5 Million €
(0.75 Million each) in the
development of the concept and in
educating about 50,000 farmers
Of the mango pulp
needed for CocaCola India drink
Maaza is sourced
from Chittoor
region
 Farmers invest around 1050€ /
acre in cultivation and irrigation
systems
60 %
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Economics of Land Degradation
A global initiative for sustainable land management
Project Unnati: Coca-Cola India and Jain Irrigation Systems
Coca-Cola
Money
Money
Mango pulp
Educational
organisation
Jain Irrigation
Systems
Information
Money
Drip irrigation
system
Money
Mango
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Farmer
Economics of Land Degradation
A global initiative for sustainable land management
Development of Argan oil sourcing: L’Oréal, BASF and Yamana
Year
2008 – 2010
Type of risk
Opportunity cost: brand image, reduced value of land
Business and profitability risk: raw material availability
Morocco
Industry area for which the risk is relevant:
Personal and household goods
Case description
The Argan tree is endemic to southern Morocco, largely found on the
Souss plain bordering the Sahara desert. It acts as a natural barrier
against the advance of the desert, preventing erosion and protecting water
resources. A program for the sustainable sourcing of Argan oil was set up
to build a long term relationship with the farmers, and to ensure the
traceability and quality of the raw material. The program also sought to
ensure long time production through reducing desertification and soil
erosion.
Key features common for other Businesses
Partnering along the value chain to ensure raw material availability and
sustainability
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Location of operation
Economics of Land Degradation
A global initiative for sustainable land management
Development of Argan oil sourcing: L’Oréal, BASF and Yamana
Opportunities
 Ensuring raw material
availability with improved yields
and increase wellbeing of local
people resulting to increased
attractiveness of the local
livelihood
Financial relevance
 Argan cultivation produces
products and income for 3
million people
The Argan forest
ecosystem only
covers 2% of
Morocco and the
forest is declining
by 1% per year
2%
 Argan oil is one of the rarest oils
due to its small and very
specific growing areas
 Ensuring long term production
possibilities in the area
90 %
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The Argan forest is the
major source of
income for 6% of the
rural population and it
makes up 90% of the
economy in the areas
of native Argan
stands.
Economics of Land Degradation
A global initiative for sustainable land management
DEVELOPMENT OF ARGAN OIL SOURCING: L’ORÉAL, BASF AND YAMANA
L’oréal
Information
Information
Money
Argan oil
products
BASF
Money
Yamana
(local nongovernmental
organization)
Information
Argan oil
Money
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Local people
Economics of Land Degradation
A global initiative for sustainable land management
Year
On-going
EDIA - Alqueva Multipurpose Project
Portugal
Type of risk
Opportunity cost: new market, increased value of land
Industry area for which the risk is relevant:
Utilities (travel and leisure, agriculture)
Case description
Alentejo is one of the most underdeveloped regions in Portugal and it has
severe desertification problems. In the Alqueva Multipurpose Project,
managed by EDIA and including several partners, a dam was built with the
goal of fighting desertification, ensuring water supply to people and
industries in the region, developing tourism and producing electricity.
Location of operation
2.6 mill€
Is the total
estimated
investment of the
project
Key features common for other Businesses
Opportunities
Financial relevance
Sustainable land management to combat land degradation and enter new
markets.
 Acceptability of new
investment
 Improvement of local
livelyhoods e.g.
acriculture, tourism
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 The investment up to 2010 has
been approx. 1.8 million € and the
total project is expected to cost
2.6 million €. Both the state and
community funds contribute to
the investments. EDIA has been a
manager of the project, but has
no own investments in the
project.
50%
From the invesment
was received from
EU funds
350 GW/h/y
Is the total electricity
capacity of the
hydroelectric plant of
the Alqueva dam
Economics of Land Degradation
A global initiative for sustainable land management
Alqueva Multipurpose Project - EDIA
State
Community
funds
Investments
EDIA
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Project
management
Alqueva
multipurpose
project
E.g. water,
energy
Local
environment,
people and
industries
Economics of Land Degradation
A global initiative for sustainable land management
CONCLUSIONS
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Economics of Land Degradation
A global initiative for sustainable land management
STATUS QUO: LAND DEGRADATION IN DECISION-MAKING
Direct contact
with land
Food and beverage, leisure and travel
 Directly linked to land
 Vulnerable to consumer opinion (often
selling to urban population)
Core motive: Brand and image, productivity
Basic resources (forestry, metals)
 Linked either directly or in perception to land
 Land prime resource in thinking
Core motive: Secure supply chain
Industrial goods and services, utilities,
construction and materials
 Vulnerable to supply chain demands
 Rarely feels connected to land
Core motive: Being secure supplier
Personal and household goods
 Vulnerable to consumer opinion
 Dependent on other operators in the chain
Core motive: Brand and image
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Far from
consumer
Close to
consumer
Far from
land in
value chain
Economics of Land Degradation
A global initiative for sustainable land management
A CONCEPT IN NEED OF A CREATOR…
… AND A BESTSELLER
 A new methodology that fully integrates land
degradation into business-as-usual decision
making is needed
 A new methodology (Balanced Scorecard,
Business Reengineering) benefits greatly from
having a business book bestseller associated
with it: suddenly, it is a ”must have” methodology
 A likely concept candidate is one that considers
the changes and transitions ongoing in value
chains and creates a new value chain
management concept
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Economics of Land Degradation
A global initiative for sustainable land management
Thank you!
More info available at:
ELD Secretariat
Mark Schauer
E-Mail: [email protected]
www.eld-initiative.org
T + 49 228 24934-400
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