Earth & Sky

Help the world or make a profit?

Stuart Hart says businesses can and should do both.

Stuart Hart says businesses can and should reduce their impact on the environment, meet the basic needs of the world’s poorest people, and make a reasonable profit – all at the same time. He ought to know. This Cornell professor is an expert on business in both the developed and developing worlds. His book is called Capitalism at the Crossroads. Earth & Sky’s Jorge Salazar spoke with him in March, 2006.

Salazar: So you think business can be a force for good in the world?

Hart: I believe it’s possible to solve social and environmental problems through business, and make money doing it.

The issues that we face as a planet – environmental issues, social issues – are some of the most pressing that we can imagine. The private sector is in an unusually interesting position to have a positive impact.

Salazar: What are some of the big challenges we’re facing?

Hart: Every natural system is in decline on the planet. That simply can’t continue. Eventually, we will crash. And I’m not just talking about running out of oil or running out of resources. I’m talking about basic, natural systems that are required for life, such as soil to grow crops, clean water and a stable climate system. They’re all basic requirements for ongoing existence.

And all of them are stressed out. Forests are in retreat. Fisheries are fully utilized or overexploited. We have to come to grips with this.

On the social side, we have a growing population and growing inequity almost everywhere in the world. Four billion to 4.5 billion people in the world earn less than $3 a day.

Salazar: How can businesses help solve these problems?

Hart: There’s a huge opportunity if we can think about this in a new way. It’s possible to imagine strategies that take on these issues and that involve all 6.5 billion people on the planet in the capitalist dream, not just the 800 million richest people. These would be strategies that fundamentally address underlying environmental issues and make money doing it.

And it’s not just trying to sell poor people stuff.

It’s imagining and creating a commercial process where you can include the world’s poorest people in the business model, lift them out of poverty and create new opportunities for the company itself. Think of the needs for electric power late at night, clean water, a dependable source of protein, clothing, housing materials.

These are huge business opportunities for the companies that can figure out how to focus their development of technology properly. And they also need to partner with those on the ground in the developing world to bring new business models and technologies forward.

Salazar: Can you give me a specific example of a problem that’s being tackled right now with new technologies or business models?

Hart: There are upwards of 2 billion people in the world with no electricity at all. But they have needs and aspirations for basic things like light at night, which is currently being achieved through candles, kerosene lanterns or dry cell batteries. It turns out that those light sources are very dangerous and polluting. Hundreds of thousands – maybe millions of people – die or are seriously injured every year by kerosene fires. You have young children breathing the fumes in. It’s not a pretty picture.

Fortunately, there have been organizations such as Light Up the World, that have shown the way. They’ve shown that there is a commercial model here. They’ve assembled a very low–cost rural lighting system with essentially a small solar panel. Because it uses LEDs – light emitting diodes – instead of standard light bulbs, it doesn’t require much generating capacity.

When you combine solar power with LEDs that are 90 to 95% more energy efficient than standard light bulbs, you can dramatically reduce the size of the solar panel that you need in order to generate the electricity to create light. So you combine that with some wiring, some switches and controls, and a little battery, you can essentially go to market with a rural lighting system.

Light Up the World has brought it to the point where they can bring a rural lighting system to market for about $75. For a family earning $300 a year, that’s like buying a car would be for us. They have to finance it over two or three years. But the amount of money in monthly payments for financing that system is less than what the poor are currently paying for candles, kerosene, and dry cell batteries. And after two or three years, they own the equipment. The energy is free, from that point on.

Is there a business there? I think so. We just lack the imagination to figure out how to do it, especially as western capitalists, and especially multinationals that have been consumed with just the wealthiest people.

If this rural lighting system becomes enormously successful, it’ll grow the solar industry. It’ll grow the LED industry. And eventually, these distributed systems are going to become so good, so dependable and so cheap, that they will blow the current utility–generated centralized power system out of the water in the United States.

Salazar: So you’re saying we could see benefits from this project here in the developed world?

Hart: You might end up with something that could – over time, if it’s good enough – displace the way that we currently do things now in the developed world.

Salazar: Are there any lessons from this project that can be applied elsewhere?

Hart: In order to reach and serve the world’s poorest, you can’t possibly think about taking the technology, products, and business models that you use to serve the wealthiest people, and then just try to adapt them. That’s because the cost structure of the model that’s evolved to serve the wealthy is far too high.

So, you have to start from scratch, reinventing the business model entirely, to get costs down. You have to refocus on real needs and aspirations of the world’s poor. Then you have to build the business model from the ground up, with local partners.

Salazar: Any final thoughts?

Hart: If we look at what’s happening in the world today – in terms of social unrest, and at the extreme, terrorism – then it seems to me that this whole approach of sustainable enterprise for the world’s poor has potential, at least, to deal with the root cause of a lot of these problems.

That’s because the root cause, in my mind, has to do with the sense of frustration, alienation, and lack of opportunity. Look at the Middle East. In many countries, there’s 50% unemployment. You’ve got people who have skills, have capacity, and nowhere to apply them.

So, what we really need to be thinking about in the world is creating alternative pathways. We need more than anything to create options, ways forward, ways out, for the world’s poorest.