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Om Shanti Om.

My good friend and advisor to my new food enterprise – Capitol Food Ventures – shared with me some of his good work in Mozambique related to Public Private Partnerships.  In essence, PPP’s are “…collaborative arrangements among the private sector, government (donor and national) and civil society that address jointly defined business and development objectives.”  On the surface, I want to believe this is a sustainable avenue for rural areas in Africa – but my heart and center are offering me reservations.  I put it out there to you:

do you believe this idea of the corporation in our communities as shared partners (outside the idea of CSR)? or do you see them as overstepping their role (both in theory and/or in practice)?

I responded to a post on the same article which I am sharing with you below:

John (Tull – Univ. of Syndey), thanks for taking the conversation a step further.  The lens from which I see Shared Value (SV) stems from its historical roots, which like you rightly point out, is commercial interest.  I recall the idea of SV being promoted by the likes of Michael Porter, if not the originator with Mark Kramer – at least academically.  SV stems from the belief that an NGO is an actor (and therefore not a true partner) within the commercial system, along with other stakeholders (Porter/Kramer’s initial example highlights Nestle’s dairy operation in India).  This view is authoritarian in nature and originates from the firm, if not much of capitalist thought.  To demonstrate my thoughts on this (much better depicted), there are two aspects – the real and the intellectualized.

First, with respect to the real life example used in the original article, here, Nestle in its expansion of capital asset investment into India, claims that this was what raised standards and consumption of milk that was otherwise sold on local markets or not produced at all.  The example goes on to illustrate that with this capital investment, Indian’s were ‘better off’ as a result of this intervention.  However a number of things are important to note here.  India was already moving in a direction of mass organization creating a dairy marketing board and organizing cooperatives/dairy hubs as well government investment in the dairy industry was already shifting – not because of Nestle, but Nestle did happen to ride that wave of infrastructure development put in place by the local government.  Also, the milk that Nestle is referring to typically gets processed and then goes to market (a minimum of 20%, but I’m certain I have read numbers nearer the 60% range).  From this view, the producers and cooperatives are still ‘actors’ within the commercial system; merely inputs into the production process.  The mere act of communicating that Nestle purchased milk from poor farmers does not make this a shared value initiative, if we take its true meaning in consideration and not one using the narrow view of the firm.  Yes, those farmers did sell their milk, however, ultimately to a buyer who would process it and sell it back to the same community at a higher price – sometimes displacing a local fresh market for milk and disrupting public heath as a result (…consider the dry powder debate re-emerging today after 30 or so years).

In terms of representing this in the more academic view, I like to think of the typical/traditional value chain which flows downstream to the MNC or firm.  The very essence of these models looks through the MNC or large corporate lens; therefore if they are the ones who are determining what’s happening in the value chain of any food product, they ultimately control and therefore take out the largest portion of whatever price is paid for the dairy or food product (moving towards the idea of vertical integration or power over the vendor/supplier).  The value chain, as Porter depicts it, is geared to accommodate one stakeholder – the firm – the rest are simply noted as inputs.

Where I see the issue coming up for MNC’s or large corporations, is that they are threatened by the combination of technology and medium/small business entering the picture who can fill in (or ‘take’ in the corporate view) for local market share.  So, in the case of dairy, imagine if the MNC was no longer in the picture and a small dairy business who used new technology to reach its customers was established, delivering its products at similar costs to its customers with similar health standards.  How?  The new technology acts as a ‘subsidy’ (if you’ll allow me) which not only brings customers closer to the small business but it also removes/limits a number of actors along the value chain (in the commercial view); however in the true shared value view, more stakeholders/partners exist because more labor is necessary to make the system function.  Even with this additional labor, we now have a shortened supply chain were the ‘value’ captured is by the local firm and not the MNC.

Where does the investment come from if not from the MNC or corporation in a PPP?  With new financing models emerging within communities around our ever more connected world – multi-partner investments including local/in-country private enterprise, donor agencies, NGO’s, local resources/businessmen, local commercial capital, impact investors, social bonds, local governments, and local communities – all participate in a truly more sustainable and shared value model.

11 thoughts on “PPP’s – Corporates as Trusted Community Partners?

  1. “Even after all this time,
    The sun never says to the earth,
    “You owe Me.”
    Look what happens
    with a love like that,
    It lights the Whole Sky.”
    ~ Hafiz

    As a follow up to this idea of corporations as trusted community partners and the underlying view with which we look at business (i.e. through the firm), one of the choices we have is to divest in large food corporations and reallocate those resources to small/local businesses, small holder farmers, and family farms. Community Capital is one way to do this. Last Monday, some of us gathered in the prelude to SoCap13 (http://socap13.socialcapitalmarkets.net/)– an impact social investment conference that looks at more than just financial returns – to discuss how we can better keep capital flowing locally and better source capital locally. Although this concept is ancient, we are now re-introducing it as a result of the larger conversation and challenges we are facing with Wall Street, socio-economic-political power structures, and the centralization of our products and services to totally foreign, even alien, places outside our community. (Natural Investments offers another overview of community capital: http://naturalinvesting.com/what-is-natural-investing/community-investing)

    Two specific examples of keeping capital local is by utilizing what under the SEC is known as a DPO – a direct public offering – and by utilizing a self-directed IRA, if you have a retirement account. The DPO is explained much more succinctly by Cutting Edge Capital (http://www.cuttingedgecapital.com/what-is-a-direct-public-offering/) however in essence it is a form of legal crowdfunding that allows businesses to sell a share of their firm to the public without the use of an investment bank or a broker-dealer and typically these are done by locally owned small businesses (or large ones) since the trust levels required to make these transactions are at the level of interpersonal relationships (or a new form of due diligence). Really exciting to learn about this!

    The other way we can redirect our resources to local businesses or even to those investments which align with our values, is through a Self-Directed IRA (http://en.wikipedia.org/wiki/Self-Directed_IRA). I have yet to fully dive into this concept, but the intent here stems from the countless emails and phone calls I have had with my broker-dealer (Transamerica) and the fact that they are unable remove my money from investments which contribute to war, pollution, degradation of community, etc. (this is mostly because the mutual funds I am invested are all connected to large firms in the oil & gas space, pharmaceuticals, and agri-business, among others as part of one product – so difficult to separate out).

    These two methods to redirect our personal resources are what can help further the shift to community or local ownership of our economic development – ultimately preserving the flow of capital locally and offering accessibility of capital to those who need it. This is also what some big advocates of family farms such as Joel Salatin out of Virginia (http://www.cornucopia.org/2013/08/a-note-from-joel-salatin/#more-9586) as well the many other institutes (such as Rodale in Kutztown, PA [http://rodaleinstitute.org/learn/curriculum-resources/] and CASFS in Santa Cruz, CA [http://casfs.ucsc.edu/apprentice-training/apprenticeship-information]) which promote sustainable and organic farming (maybe these days we are using the term ‘agro-ecological farming’ or permaculture to better encompass and incorporate other aspects of the eco-system which include humans and technology among other things) are aiming for. Danielle Nierenberg and Emily Salshutz offer a great analysis of the importance and need to invest in family farming (http://www.dawn.com/news/1041492/investing-in-family-farming). Yet, after reading their piece, which I agree with, something felt unbalanced. I believe is it my training in economics, business, and international finance which is at odds with this notion and I believe that this training (higher institutions of knowledge) is a great challenge facing the shift to newer business models (i.e. ways of doing business).

    I’ll preface a future post on community capital by saying that at a certain point, people, money, and resources will migrate towards the city center, into urban areas, where population density soon changes and challenges the current economics of investing in small rural farms. Yes, I’d much rather have the standard of living of those in rural areas improved, but from my experience overseas (East Africa and Southeast Asia) in those rural areas, much of the concept of an ‘increased standard of living’ is a mindset (behavioral) more so than a tangible investment (although tangible investments do help). And if we shift resources from the urban masses (in city centers) to those in rural areas, do we improve the overall ‘life’ situation of the country considering we just transferred wealth to fewer citizens (yes, redistributing wealth, increasing the standard of living for one group, but lowering the standard of living for another)? More to come.

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  2. Pingback: Ag Risks – Realigning the Bank’s View | Talk About Food

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