Sustainable Solutions: Entrepreneurship and Environmental Challenges

1. Sustainable Solutions:Entrepreneurship and Environmental Challenges NREL Lecture Series “Perspectives on Sustainability” Paul Hudnut December 7, 2007 CSU Global Social & Sustainable Enterprise Program

2. Chemistry • Poverty/Degradation Equation • Envirofit • GSSE • Integration of Business Ecosystems and Natural Ecosystems

3. Poverty and Environmental Degradation • Sachs: • Poverty a risk factor for environmental degradation and vice versa • “An integrated approach linking poverty alleviation with responsible management of ecosystems and biodiversity is vital to a sustainable future of shared global prosperity.” • Stern Report on Climate Change (U.K.) • All countries will be affected by climate change, "but it is the poorest countries that will suffer earliest and most." The western model of growth that India and China wish to emulate is intrinsically toxic. It uses huge resources- energy and materials- and generates enormous waste. The industrialized world has mitigated the adverse impacts of wealth generation by investing huge amounts of money. But... it remains many steps behind the problems it creates. India and China have no choice but to reinvent the development trajectory. Sunita Narain, Centre for Science and Environment, India

4. Who Drives Big Change • Global challenges require some “BIG” ideas • Restructuring Economies and Societies • Eliminating Poverty • H.E.R.O’s (Human & Ecologically Regenerative Organizations) • What might this look like? Who can make this happen? • The history of societal change is not one of leadership by governments or large corporations… • It is of change led by activists and entrepreneurs.

5. Big vs. small… or big vs. focused? • The largest companies are usually publicly traded and are most talked about… • But most businesses are small and privately held • Most employment in USA and globally • Most innovation and patents • They are designed and built by entrepreneurs • Rise of Entrepreneurial Firms • “Value creators”: turn ideas into businesses • Relatively recent phenomenon • Entrepreneur: “a hacker with a business model.”

6. Convergence • Force #1- Social Entrepreneurs • Taking business approaches to solve social and environmental problems • Base of the Pyramid (“BOP”) markets • Ashoka/Bill Drayton: “Change Makers” • Force #2- Triple Bottom Line business management • The “bottom line” historically has been profits • New focus on financial, social and environmental performance • Both large and small companies are involved • Driven by leaders, customer segments, eliminating waste? Link between poverty and environmental degradation will drive a convergence of these forces.

7. Force #1- Social Entrepreneurs as Change Agents 800 million people>$15,000/yr The Global Wealth Pyramid 1.5 billion people $1,500-15,000 4 billion people < $1,500/yr of which 1 billion earn less than $1/day (extreme poverty) S. Hart, Capitalism at the Crossroads (2005)

8. Entrepreneurs like really “BIG” markets • Something new in the developed world • Very competitive; most firms have limited growth opportunities • Home run approach: targeting Billion $ breakthroughs (iPods, Lipitor) • Something new in the developing world or emerging markets ( a “BOPportunity”) • If those 3 billion people make $1 more/day, it is a $1.1 trillion market • This is what is happening in China and India (US GDP is $12 trillion & China is $2 trillion)

9. A Tipping Point for Social Entrepreneurship? “This is not charity. This is business: business with a social objective, which is to help people get out of poverty.” -Muhammad Yunus, founder of Grameen Bank Nobel Peace Prize 2006

10. EnviroFit International

11. Problem or Opportunity? • There are over 50 million two stroke motorcycles in the world • They are powerful, reliable vehicles used for taxis and delivery throughout Asia and Africa • Drivers make $1-3 day • Each scooter produces air pollution equivalent to 50 cars • Tons of pollution from each tailpipe every year • Significant contributor to the pervasive air pollution in megacities • Annual cost of air pollution in Manila is $400+ million • Technology needs to be adapted for motorcycle retrofit • “If I had a million dollars…”

12. Conventional wisdom… • Difficult to fund technology based businesses that can’t promise high returns • Difficult to build a business where customers have limited ability to pay • Difficult to build technology based businesses that are based in developing world • Difficult to fund a non-profit to develop new technology • In short, difficult to build and finance a sustainable, technology based company with operations in the developing world that could significantly reduce urban air pollution… DIFFICULT…. BUT NOT IMPOSSIBLE!

13. Envirofit International, Ltd. • Founded in October 2003 as a non-profit corporation • Based on a CSU student business plan and technology used in a “clean snowmobile” competition • Mission • To develop and commercialize environmentally friendly technologies for the developing world. • Product • Direct injection retrofit to improve fuel efficiency and reduce emissions • Each retrofit reduces CO2 emissions by over 1 ton per year • Payback is less than 12 months for cash purchase • Microfinance and carbon finance makes driver cash flow improve

14. EnviroFit International • Impact of this business: • Significant: “more pollution than all the cars in the world” • Scaleable: industrial supply chain; local and MNC companies • Sustainable: fuel savings allowed < 1 year payback, some components are made locally • Potential for expansion • Other countries: Indonesia, Malaysia, Thailand, Viet Nam, China • Other products: solutions for indoor air pollution Profits through Pollution Reduction and Poverty Production

15. Global Social & Sustainable Enterprise Program CSU COLLEGE OF BUSINESS

16. Program History and Concept • Grew out of entrepreneurial work at CSU • Energy and Public Health • Global challenges are also business opportunities • Improve social and economic conditions • Improve environment and reduce pollution • Make money • Global Social and Sustainable Enterprises • Innovative, private enterprise approaches to global challenges • Significant differences from traditional business approaches • No comprehensive program on how to build, fund, lead and grow such enterprises.

17. GSSE Goals • Convergence of Social Entrepreneurship and Sustainability • New business focus on sustainability and BOP • For profit and non-profit world • Power of private enterprise for development • Specialized business degree program • Master of Science in Business Administration • Hands on/Learn by doing • Experience with BOP ventures and organizations • Results oriented • Real projects working on real issues • Learn from leaders • Tools and Experience to Build and Lead Innovative Organizations in this sector • Success: New Enterprises and Changemakers

18. MSBA Degree Program • 39 credits • Covers the different functional areas of business as well as interdisciplinary focus on social entrepreneurship and developing world markets and challenges • Full time program • 12-15 hours/week of class • 25+ hours/week of study and project work • Project focus, including summer field work • No prerequisites • Requires 3 consecutive semesters (Fall, Spring, Fall)

19. Integration • Business Ecosystems • Natural Ecosystems • Organizations<->Organisms • Communities • Language of Competition?

20. Thank you! paul.hudnut@business.colostate.edu www.bopreneur.blogspot.com www.csugsse.org

21. Travel Guides for the Bottom of the Pyramid • Prahalad: Fortune at the Bottom of the Pyramid (2005) • BOP as opportunity • Focus on MNC as key player/change agent • DeSoto: Mystery of Capital (2002) • Developing world is entrepreneurial • Lacks rule set to transform assets into capital • Sachs: The End of Poverty (2005) • UN Millennium Development Goals • Plan to eliminate extreme poverty; public finance focus

22. Hart: Capitalism at the Crossroads (2005) • Adds environmental dimension to BOP opportunity • Need for disruptive innovation by MNCs • Becoming an “indigenous” organization • Enriquez: As the Future Catches You (2002) • Current productivity difference is 360:1 …and soon will be 1000:1 • Not about natural resources- about human capital • Easterly: White Man’s Burden (2006)