Stoves, Carbon Credits, Profits and the Poor
You want to change the world? You want to create jobs? End poverty?
Give the corporate powers that be a profit motive: Profit from the poor. Unlikely as it sounds; business is the most effective and efficient way to mobilize capital to solve problems in our world.
Today’s guest post comes from Neil Bellefeuille, co-founder and CEO of The Paradigm Project, which describes itself as a “social enterprise working to create sustainable social, economic and environmental value within developing world communities.” Neil and his partners started the venture in 2007; before that, he was president of Bulldog Drummond, a branding consultancy. One of his clients, World Vision, the big global charity, asked him to go to Africa with them and, he says, “that was really the start of my taking a look at how I could apply my skills to…finding ways to give back and create positive outcomes for the developing world.” That led him to find partners and create The Paradigm Project. Here’s some of what he’s learned so far:
Partly that’s because capital flows to profit-making enterprises. In 2009, Americans gave away $300 billion to charity. Not bad. But in that same year, about $2.5 billion – almost 10 times as much – was invested in private equity funds. Far more was invested in stocks, bonds, mutual funds or banks, where most U.S. wealth resides. Imagine drawing even a small portion of that money into social enterprise in the developing world, to invest in businesses that create social outcomes AND a profit for investors.
We did. And we created The Paradigm Project to do just that.
When I met my partner, Greg Spencer–that’s Greg in the photo, above–in 2008, I wanted to change the way people looked at development work. My goal was to create a business that would help the poor and make money and thus would not be reliant on donor capital. I had no idea then that we would develop a business selling efficient stoves and water filtration products in some of the poorest parts of the world. What a wild ride it has been.
With very little experience in working with NGOs (non-governmental organizations) and even less experience doing business in Africa and other parts of the developing world, it was like being thrown into the deep end of a very deep pool. Amongst our staff, we’ve been attacked by giant camel spiders, made into honorary tribal elders, dined on goat cooked over open fires and walked dozens of miles carrying hundreds of pounds of wood to get a feel for what its like for our customers. All in the name of building a social business that delivers real results. And this is only just the beginning.
We launched in 2008 with a plan to leverage carbon offset revenue to finance early stage project development in Kenya. Our goal was to work with well-respected NGO partners like Food for the Hungry, World Vision and the World Food Program on the ground to establish an efficient stove supply chain including local manufacturing and management. We thought we’d be lucky to sell 20,000 stoves in our first year of operation. Today we’re on track to deliver over 40,000 and our biggest problem is figuring out how to keep up with demand.
We charge $15 for a locally- produced efficient stove in Kenya, about 30% less than it costs us to make. We charge $30 for a high-quality imported stove at a subsidized cost as well. We make up the difference – and provide our investors with a profit — by monitoring the use of that stove and selling the carbon offsets that are generated by the reduction in cooking emissions. It’s amazing the amount of good a simple stove can create:
- $280 in family income saved that would otherwise be spent on purchasing fuel for cooking.
- 1300 fewer hours spent collecting fuel wood which can be used in more productive activities
- 64 trees saved from destruction for use as fuel wood or charcoal.
- Possibly the life of a mother or child saved from smoke inhalation or severe burns from open fires.
- 40% to 60% reduction in toxic emissions resulting in 7.5 metric tons of carbon offsets valued at $95—a 3x return on investment.
Could we be giving stoves away? Yes, we could. But that wouldn’t last. Even if we raised enough donor money to give everyone in Kenya a stove, where would they go to get a replacement when it wore out? Or repairs when it broke? Or training?
By selling the stoves, we can employ sales people and repair people and trainers and provide warranty service and incentivize local partners to stay in the market over the long run because the business provides income for them and their families. We create an industry serving a real need. And we offer a product and service that we can be sure is truly valued — otherwise no one would pay for it.
So where do we go from here? We have amazing early success in Kenya. Demand is nearly four times what we expected. Expansion into the rest of East Africa is next on our agenda, and we are planning similar project in Guatemala and Haiti. The problem is vast: it’s estimated by the UN Foundation that about 3 billion people cooking their meals over open fires. That’s a big number, but we’re committed to making a significant dent in that.
We think we can do it by drawing capital into the shallow end of the pool where it usually doesn’t swim. More investors, we hope, can be persuaded to invest in enterprises that deliver social outcomes and competitive returns. As others join us, we can have a big impact on global poverty.
Here’s a link to a video about our work.
June 17, 2011 by Marc Gunther