Making business look beyond greening

Arvind Jayaram | Updated on January 24, 2018

STUART L HART, Thinker & author

Stuart L Hart explains how the bottom of the pyramid can make sustainable initiatives hugely successful

For Indian corporates, initiatives promoting the sustainability of a business are usually limited to pollution control and CSR. But this model falls short when it comes to preparing a company for the future, feels Stuart L Hart, a leading thinker on the implications of environment and poverty for business strategy. Hart says there’s a need to distinguish between sustainability efforts and improving products and processes that a company already has. Excerpts from an interview:

How should companies approach sustainability?

I’ve developed an approach called the sustainable value framework, a tool to transform this very amorphous notion of sustainability, which could mean many different things to different people.

The core idea behind the framework is that there are two levels of sustainability when you think about it in business terms. One I’ve called ‘greening’, which essentially refers to the initiatives that relate to the current business.

The strategies around greening are essentially how do we reduce the negative impact associated with today’s products and processes.

The second level is what I call ‘beyond greening’, which is really about creating tomorrow’s sustainable technology and creating future markets.

Rather than being premised on continuous improvement, it’s about disruption. It’s about replacing unsustainable ways with more sustainable or actually inherently sustainable or even regenerative technologies.

It’s also about thinking in more inclusive terms how do we serve further down the income pyramid and include those people in the business model, not just as customers, but as partners.

What are the benefits of this?

Explicit in the sustainable value framework is how these things connect to financial value creation. You begin with the core premise that every company has to be successful, effective and efficient in its core market, but also has to be creating tomorrow’s opportunities all the time at the same time. So the drivers for beyond greening have to do with creating new options, building new technologies, creating new potential and creating the possibilities for new markets, and then actually creating new markets in underserved or poorly served spaces that the company has not been in before, where there are real growth opportunities.

How does this kind of local community embedding translate into good business?

Let me give an example from a project that we did in India some years back, it was with a subsidiary of Dupont, a company called Solae. Solae is in the soy protein business.

Solae had been in India for 10 years and still had not managed to cross 10 million in sales so they were interested in figuring out how they would get more growth. The problem is that soy is not a big part of Indian cooking.

So how they tried to deal with that initially was putting a couple of R&D people on that problem, but that didn’t help. So we became engaged and developed a process of business co-creation methodology called ‘base of the pyramid protocol’, which involved giving a business development team — people from the company as well as others from outside who are skilled in this kind of methodology — to actually spend time in slums and rural areas, becoming embedded in those communities and meeting people who could become local business partners, and then taking stock of the resources each other had to basically create a value proposition and a business model that either could have on their own.

Solae’s initial strategy was just to price the stuff low and sell it because it’s a very good source of protein and there’s a protein malnutrition problem in India. The only problem was that it wasn’t part of Indian cooking.

We did the process of business co-creation in both a slum area as well as a rural area. What came out of this was the idea behind the business in the slum was called the Solae Culinary Rooftop Garden . The notion here was that in slums you have stable rooftops in many cases, but nowhere at the ground level for women and families to take their kids

The idea the women partners had was that it would be great to use rooftops to take their kids and then the idea was to put a cooking facility up there where they could experiment with soy. The idea was to get the women who were known as the best cooks in the neighbourhood to come up and cook with soy and share the recipe, the word spreads and then other people would want the recipe and start buying soy for sale there.

In your workshop, you stressed on “reverse innovation”…

Part of the challenge with clean technologies is the presumption they are only for rich people, when in reality many of the emerging clean technologies have the best application in underserved communities that don’t have built-out infrastructure. As an example, a Chinese company called Tsinghua Solar had developed a special kind of glass vacuum tube that is able to very effectively absorb the sun’s energy. So you have a series of these glass vacuum tubes and they stick into a water tank and heat the water, it’s that simple and low cost — less than half the cost of a flat panel solar. But initially, they were captivated by the assumption that because it’s solar, it’s a green product and we have to sell it to rich people, but went absolutely nowhere because these people already had hot water.

So almost out of desperation, they went out to the towns and rural areas and discovered a huge need and pent up demand.

But the way they optimised the technology, these solar water heaters were more for the upper end. So they had to go through a process of adapting and redesigning the solar water heater, where they engaged local people to help them think through the redesign of the product itself, but also included local people in thinking through a business model that would work, where they ultimately became sale and service agents.

What’s more, if local people were to use this product, there needed to be a financing mechanism in place as well, so it involved creating a microfinancing mechanism. Tsinghua Solar is growing about 60 per cent a year, very profitable business, but also a huge value proposition for local customers and communities.

What does it take for a company to make the ‘green leap’ to sustainability?

It is, of course, a new proposition for most companies to do this on-the-ground co-creation and empathy-based deep dialogue business development; so that’s a new skill, but it’s a teachable, learnable skill. The ground game part of this is challenging, but for organisations, the internal challenges may even be more formidable because it means you have to create a protected space within the company.

The ideal really is to create a leadership team that can oversee and protect and resource and provide inreach into the company for this BOP team. The internal organisation challenge is to enable this to occur.

Published on March 24, 2015

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