Shared Governance begets Shared Value

The ecomarket “shared value” of Porter, M. article in the HBR is on the horizon. To get there one must engage a shared governance model. Interestingly, a common model emerged from two seemingly disparate arenas – An effort to generate energy efficiencies in Chinese factories supplying Walmart and in an effort to improve water quality on livestock farms in Minnesota to meet the state’s water quality (TMDL) goals. Such occurrances are not the makings of coincidences.

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CSV: A 500-pound gorilla or just another elephant in the room

As CSR is soon to be swallowed by CSV, one has to ask,  “is this the final frontier to define sustainability?”  CSV does makes sense while making dollars.  Ecologically-based public goods have long been economic externalities for several reasons, not the least of them being that they are “public goods” with no system in place to capture and distribute those values.  CSV, or Corporate Shared Values, recognizes that the supply chain must share in the cost and values of these public goods, as no one entity can solely carry this cost.  If we narrow the scope to ag sustainability, one would accept that the farmer and the USDA can no longer carry the costs.  CSV also recognizes this and has taken it upon themselves to move forward and develop a system outside the clutter and recent sustainability failures of legislative and government bureacracies – and presumably will get back to them when the machine is up and running.   This 500-pound gorilla has enough muscle to do that.  But will it be comprehensive enough?  Probably not.  While the impact of the joint effort of consumerism and the corporate world carries a wallop, it still leaves gaps in the world of sustainability.  Governments will still want to influence the definition of sustainability, environmental liability insurers will still want to know how lands are being managed, utilities/biorefiners will need landscape intellligence to identify life cycle analysis, and landlords will want to keep tabs on longer term effects on their production base.  The CSV is, indeed, another vital and giant animal coming to the sustainability zoo and it should be welcomed and visited.  But even with the breadth and depth of our global corporate world, sustainability values will need to be shared even broader.

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The word “Sustainability” has paralyzing powers

While the word “sustainability” has always brought different images to people’s mind depending on their perspective, it seems as of late, its lack of a universally accepted definition has become disturbing to some.  In a May 11th Agri-Pulse article, an ag communication consultant, Frank Luntz is quoted, “The word “sustainable‟ is awful. Stop using it. It’s status quo. Nobody can define what it is. Use “cleaner, safer, healthier‟ instead.” Luntz is not the only one struggling with this thing.

In my own discussion with ag professionals I often get a similar reaction along with their rasing hands questioning, “What does it mean? – it is just a word.”  Actually I can’t think of any word that is just a word; they all mean something.  The issue with “sustainability” is that it is so much more than a word.  It could be described as a social movement, economic correction, government regulation, lifestyle and business change or even as a vision in how we percieve the earth and its capacity to supply.  The word “sustainability” has so much potential that it scares the hell out of a lot of people, motivates others to change and create analysis paralysis for the thousands of professionals whose mission is to define it. 

I don’t agree with Luntz.  The power of the word sustainability is too great to toss it aside for an uncatchy phrase.  My suggestion to agriculture is to define it on their own terms with the intention of meeting the economical and ecological aspects of the term.  Actually the problem all along is that agriculture has been waiting for someone/entity to tell them once and for all, what does this term mean.  And since those entities (gov, non-profit, academia) are not immersed enough in agriculture to understand the economical aspect of ecological sustainability, they toss some ideas at agriculture.  Some make piecemeal sense, but none made sense as a whole.  But since ag does not understand that they are in the right place at the right time to define sustainability they feel paralyzed and they are unwittingly turning this global wave of sustainability into their very own tsunami.

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Farmers’ Conservation is twice an “Economic Externality”

Conservation practices that are implemented by farmers with their own money, time and labor remain “externalities”.  In economic terms, an externality is a cost or benefit bestowed on society without due compensation.  Ironically, with the environmental demands being placed on farmers, both the economy and the government’s conservation economy relies on a system that can not process these environmental goods.  This double-wammy was made clear to me a couple of weeks ago when Rich Batiuk, EPA spoke of the massive effort toward cleaning up the Cheseapeake Bay.  He said one of the shortcoming or difficulties is to account for the conservation practices that a farmer applies to their land with thier own money, time and labor outside of a goverment-funded program.  As a farmer, I was am well aware that my conservation outcomes on my farm are not rewarded in our economic system.   Now I learned that the centrally-planned conservation economy of the federal-state governments does not have the ability to recognize and value the conservation outcomes when I flip for the entire bill.  Demanding an increase in conservation on American farms is acceptable,  but embracing a system that doubly-discounts the outcome that is desired will keep us in this decades-long quagmire and tension that is called America’s Conservation Delivery System.  It’s time to move toward an ag ecocommerce system that accounts for all the conservation outcomes on America’s farms, ranches and forests regardless of who pays the bill.

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Ag Safety Net or Subsidizing a High Risk Venture

A discussion on the next Farm Bill is to transfer direct payments to a more robust production safety net.  It is an easily defended position as the payments only go to the production unit when production or price falls below a threshold.  As a farmer, I appreciate the risks associated with  growing crops and livestock.  Agriculture and its representatives often feel that a big enough monetary safety net will save all.  But when risk is packaged in this manner, the system has a tendency to reward those that put all their eggs in one basket.  We then forget that the risk does not just reside in our business transactions, but the true risk is not being able to produce food.  Paying off every farmer that is not able to plant row crops in the Spring of 2011 does not reduce the production risk to our country – it exasperates it.  To divert real risk is to not put all your eggs in one basket.  As a farmer I appreciate that it is often much less profitable for me to carry two or three baskets, so using the Ag Safety Net, I double-down, put all my eggs in one production baskets along with all the other farmers around the table – card table, not dinner table.  If our bet fails our chips are even worth more next round.  In systems theory, it is explained that this type of feedback will eventually create a scenario with the highest risk potential of overall food production failure along with the highest potential for income generation.  With someone at their back, farmers would be irrational to be economically conservative.

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Earth Day Economics Part II

In today’s economic system it is hard to see the forest for the trees and its hard to comprehend the value of the forest for the trees.  Trees are easy.  They are timber.  We live in wood houses and my neighbor sells 2x4s for a living.  The forest is just a forest, just a name for a lot of individual trees.  A field is just a place to grow crops and a pasture is a place to raise livestock.  To think otherwise, that these lands generated other economic goods made no sense and it made you sound like those Earth Day participants in 1970.  Those hardcore economists that demand an economic system without externalities – positive and negative.  But those economists are still alive and they taught their children about this comprehensive economic system.  Their children understood that you can’t really throw something away, you can only buy land and build a giant heap.  And that costs a lot of money to buy that land, transport the non-goods and build the mountain.  This maturing economic system is beginning to bestow wisdom on those that have less than extravagant means.  The challenge for this maturing economic system is to create the goods and services that provide the stuff for a wonderful standard of living such a clean, cool drinking water, a warm furnace, dinner  and mobility without building expensive mountains.  It is the same challenge that species in a maturing ecological system have.  The species find every conceivable niche to make a living with an extraordinary ability to not waste.  The as the economic system enters its next phase it will have an uncanny ability to convert postive and negative externalities into inhabitable niches.  These niches will begin with three major ecocommerce venues.

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Earth Day Economics Part I

Thirty-one years ago enough people percieved that the welfare of the planet was in decline and began an earth recognition day.  Few realized that the core of the movement was economical.  These people intutively recognized that the economic values that the earth bestowed on them was being “free lunched”.   They knew which of the pay-me-now or pay-me-later IOU was being written.  They knew it was going to be very expensive to manage the earth after its production systems were not maintained.  The knew “economic externalities” is a primary aspect of a soon-to-fail market.  They knew because they were not ingrained in economics and they were still aware enough to understand value.  They knew that if you didn’t bother to measure something, it was still happening.   So, 31 years later it surprises many of them, that many of us don’t comprehend that the Earth has economic value.  We still think it is part of our job description that blatant consumption of economic resources is good – that is it beneficial.   The reason for this misunderstanding is that we still don’t apply economic values to the earth’s economic system.  We love our man-made economic system and think we only need just that one.   The other economic system, the natural one, aka ecosystem, ecology, is just there.  For all of time, except for perhaps a few other civilizations that no longer exist, there was no need to invest into it.  But that epoch is now over.  Class has begun for Earth Economics about 31 years ago.

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Ag’s Turn to Define “Sustainability”

The question of what comes first, “supply or demand” is a moot point in the world of agricultural sustainability as both capacities readily exist today.  This economic condition, when both supply and demand exist, yet no meaningful transcations take place, is the entrepreneur’s dream.  Pent-up supply + pent-up demand = Tension.  Under this ripe scenario, something is going to happen.  From a societal environmental sustainability scenario that something can be regulation, subsidies, or market enterprises.  But the entrepreneur’s dream gets even better.  The subsidy track has proven to capture about 10% of the market share and the regulatory track perhaps another 10%.  Using the 80/20 rule, we have already acquired the hard 20% using the 80% side of the effort.  Agriculture now has the opportunity to understand the demand capacity and align that with their supply capacity.  An investment of 20% can now yield the 80% benefit.

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1000 People in the Park

This story is about 1000 people in a park that are readying themselves for a run race, but beyond the basic information that there is a race, no one knows where the starting line is, its duration, or finish line. There are also 50 running coaches in the park. They, too, do not know the race logistics, but they are giving people running advice in anticipation that the route will be determined at some time in the future. Some people have begun running and others are still sitting on park benches. Some have unknowingly finished the race and others have spent their energy and are lost. There are also 10,000 people that have come to watch and support the race, but they are not sure where to set up, what supplies to bring or who is on the right track.

This story is an analogy of natural resource management in our watersheds, states and nation. Many land managers (farmers, foresters, ranchers) are willing to engage in the effort and there are many agencies that have the ability to guide these land managers and there are many stakeholders that want to support both these “runners and the coaches”. Where this effort fails is that we have not defined a starting line or a finish line so that all the participants can use their resources in a symbiotic manner to support the objective of finishing the race. Regardless of the scale and scope of the event, EcoCommerce™ mapping software can map the race. If it is an agricultural watershed, it can be constructed with AgEQA™ software. The mayor or other government entities no longer have the capacity to support the entire race, that must be a coordinated effort by 11,051 people.

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Happy 235th B-day to the “Invisible Hand”

It was on this day in 1776 that Adam Smith’s Wealth of Nations was published and the phrase “invisible hand” was born.  Like many words or phrases, people choose the meaning that best meets their self-interests.  The “invisible hand” is used to justify both ends the economic spectrum.  What I concluded from Smith’s use was that the “invisible hand” is ubiquitous in the economic, social, political and even ecological worlds.  In the broadest sense, it can describe animal instincts and the ticks of evolution.  I am not aware of any being on this planet that upon birth, hatch or sprout does not strive to meet its self-interests of survival and reproduction.  Fortunately, humans’ definition of self-interest does not originate solely from a reptilian perspective.  As we grow our species from 6 billion to ~ 9 billion our definition of self-interest, for the sake of our self-interest, will become more global and our economic system more efficient.  This “invisible hand” will recognize that degrading ecological capital in not in our economic self-interests.

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