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The International Fund for Animal Welfare (Ifaw) has commissioned a report by Economists at Large assessing the value world wide of whale watching to support their position of an outright ban on whale hunting at the current International Whaling Commission meeting.  The report estimates that whale watching generates $2.1 billion per year.

The director of Ifaw, Patrick Ramage, is quoted by the BBC as saying “Whale watching is clearly more environmentally sustainable and economically beneficial than hunting and whales are worth far more alive than dead.”

Mr Ramage is setting up the economic argument as an “either or” but various people (such as the Icelandic whaling commissioner) have suggested that you can have some of both.  We’re back to economics 1.1 as shown in the diagram below.  The curved line shows the marginal rate of substitution between eating whales and watching whales, and the straight budget line shows the relative price of the two goods.  The “optimal” point is (theoretically) where the gradient of the lines are equal.  At this combination the maximum value is extracted.

whaling1

This piece of basic under-graduate economics probably gets us not very far to the answer of “how much hunting, how much watching?” but it does go some way to debunking the argument that if one good is more valuable than another you should only produce the first good.  People corporately probably want a bit of both.

And what of the recession? How does this affect the logic of maintaining whale populations as tourist attractions?  Again considering the properties of the two goods in the model above may be useful. Consuming whale watching is by its nature lumpy. To go whale watching I need to travel to the country in question, probably as part of a larger holiday and I will probably do various other touristy things while I’m there.  When money gets tight it is difficult for me to cut the cost of the combined single good of “holiday to a place where I can go whale watching.” As such I’m likely not to go at all, or to go to some place cheaper without whales.  My demand for whale watching is reduced by 100%.

The problem is that whales can only be watched whole and in their natural environment. However if I shoot the whale, cut it up and put in tins it becomes a lot more transportable and less lumpy (economically speaking, I’ve never eaten whale so can’t comment on its texture). If say I would usually consume ten cans of whale meat in a year and money gets tight, presuming whale meat to have a cheaper substitute, I can chose to consume only eight tins this year. My demand for this product has only reduced by 20%.

As with so many good and markets considered by Sustainable Slump the consumption is defined by the properties of the goods themselves but also there substitutes. Is whale watching a luxury good? Probably. Is global travel going to get more expensive in the future? Probably.  Will whale watching still be worth $2.1 billion if the recession continues? Possibly not.

Debate has raged over the ability of luxury fashion to contribute to sustainable development and of the industry’s potential to be a trailblazer in setting an example of how business can contribute to wider ethical, social and environmental good. The recession has brought this debate into even sharper focus.

A report by WWF entitled Deeper Luxury argues that: “Luxury companies must do more to justify their value in an increasingly resource-constrained and unequal world. Despite strong commercial drivers for greater sustainability, luxury brands have been slow to recognise their responsibilities and opportunities. We call upon the luxury industry to bring to life a new definition of luxury, with deeper values expressed through social and environmental excellence.” It rates ten luxury brands on their environmental and social performance and none score highly.

Others argue that despite their reputation for being less than ethical that ‘change is in the air’ for luxury brands. The guardian argues that “Major players [in the luxury fashion industry]….appeared to be tripping over themselves to reduce energy consumption, announce water projects or phase out excess waste (in an industry where faulty or end-of-line products are incinerated to “protect” the brand) at a recent sustainable-luxury conference in Delhi. Meanwhile LVMH, returned to the FTSE4Good Index Series, has just become a shareholder in Edun, the socially conscious clothing company set up by Ali Hewson and her husband Bono.”

Luxury fashion has not been necessarily immune from the financial crisis, but it has certainly been faring better than its less luxurious counterparts. Some luxury brands have bucked all recession trends with Hermes and Mulberry reporting strong profits for the first quarter of 2009, particularly with the sale of accessories, such as handbags, which satisfy consumers’ shopping itch and are longer-lasting and more versatile than a season-only dress. Hermes and Mulberry have effectively targeted consumers move away from conspicuous consumption: ‘Mulberry with its authentic and understated designs is striking a chord, not just in the UK, but also worldwide, because over-the-top extravagant consumption just isn’t in favour right now.”

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Does luxury fashion therefore have an even more important role to play in upholding high social and environmental standards in the context of a struggling global economy where other sectors struggle to survive and perceive their immediate priority to be their bottom line, let alone a second or third bottom line?

Sustainable slump argues that the recession is an ideal opportunity for luxury brands to forge a new image for themselves based on real, reportable and transparent efforts towards environmental and social sustainability. This will provide an important source of competitive advantage and consolidate market share, even whilst the recession rages, adding value for consumers – not just through the quality and presitge of their brand, but through their potential for superior environmental and social perfomance – and setting a precedent for how businesses can work with producers (and all the players in the value chain) and the environment to deliver long-lasting, meaningful change at scale.

The UN approximates that an additional 100 million people will now go hungry as a result of the recession, as total numbers of those suffering from hunger hit 1 billion – a 6th of the world’s population. Many experts predicted that the recession would impact poverty levels, despite the recession’s origins in the West, and that through rising unemployment and food prices and falling incomes, hunger would be ever more pervasive. Despite these predictions they had not been quantified, until now. And what a depressing figure it is, demonstrating how something so seemingly detached (sub-prime mortgages) has led to the undoing of significant progress made to date. This number has fed fuel to the debate of just how globalised the economy has become.

In Asia and the Pacific, an estimated 642 million people are suffering from chronic hunger; in Sub-Saharan Africa 265 million; in Latin America and the Caribbean 53 million; in the Near East and North Africa 42 million; and in developed countries 15 million in total (FAO).

Whilst the crisis appears to have been indiscriminate for the poor, it is thought to have affected urban populations more severely than rural areas, due to the stronger connection between jobs in urban areas and falling export demand and foreign direct investment. However, rural areas have been by no means immune and migration from urban to rural areas has become a phenomenon. Remittances have also thought to have declined this year as a result of the recession, delivering another blow to the poor, whilst more recent falls in food prices have yet to benefit the developing world:

“While food prices in world markets declined over the past months, domestic prices in developing countries came down more slowly. They remained on average 24 percent higher in real terms by the end of 2008 compared to 2006. For poor consumers, who spend up to 60 percent of their incomes on staple foods, this means a strong reduction in their effective purchasing power.” (FAO).

The FAO Director-General, Jacques Diou, has argued that investment in agriculture is vital as a solid basis for further development and economic growth and because of the dominance of agriculture as the mainstay for a significant proportion of the developing world.

Whilst a clear solution may not be obvious, what is clear, is that this is a global recession, with global ramifications and one that makes us all responsible for its solutions. Even though the ethical and moral grounds for eradicating hunger are powerfully clear, the threat posed to global peace and security makes finding a solution a global imperative.

Evidence is showing that across the board, niche markets are appearing to do well in the slump. Bespoke tailoring, super-expensive Hermes bags, large yachts and Fair Trade chocolate are just some examples.

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While niches are often occupied by smaller businesses with a lot of time, experience and sweat invested in promoting and supporting that niche, it isn’t taking long for the bigger suppliers to realise that in this slump, carving up their market segments into smaller pieces and hypothecating their marketing at these, is one strategy for beating the recession into submission.

A great article by Damian Joseph in Business Week argues that “supermarkets may not be able to pull shoppers away from the competition by putting 2-liter sodas on sale, but convenience, green products, or a ready-to-eat meal just might do the trick……Differentiation works for the retailer who can truly master it.” Supermarkets may be able to capitalise on several trends – for example offering the high quality ready meal for those who want to ‘trade down’ and avoid the cost of eating out, whilst also offering greater variety in their ‘own brand’ budget lines for basic goods. Waitrose is a good example of offering its customers a new lower-price range of ‘essentials’ to prevent customers defecting to competitors and Sainsbury’s profit growth for the first quarter of 2009 has been attributed to the expansion of its budget line.

Within commodified goods supply chains, those goods with sustainable development (SD) criteria are often occupying niches – for example, ecotourism in SE Asia, Fairtrade flowers, green beans from Kenya, BEE wine from South Africa.

 Does a renewed focus on these niches by the bigger businesses spell boom or disaster for these SD poster-goods?

 Will profit motives crowd out good SD intentions within these supply chains by increasing competition and price pressures between retailers and ultimately reducing the price premium for producers?

 Or will good intentions that also turn a profit open these businesses eyes to the potential for business-led SD throughout their businesses?

For the niche product champions, it is clearly time to raise their game, look the Board in the eye and spell out the concessions that they are not willing to make. For the Board, they need to realise that profit isn’t everything [honest].

Indeed, the fugacious consumer is a persistent worry for retailers aiming to imbue brand loyalty “Grocery stores lose or gain about 10% of their customer base each year,” says Neil Stern, a senior partner at Chicago-based retail consultancy McMillan Doolittle. “So the question is: Can you grab your share of new customers?”

And it isn’t just the recession, the “global village” is also driving differentiation: As the purchasing power of minorities grows, grocers are increasingly attempting to accommodate their tastes. Wal-Mart’s Supermercado and Publix’s Sabor are examples of smaller, ethnic stores that cater to Latinos or immigrants from Asia and the Middle East.

It sounds like mid-Slump might be the right time to start marketing new niche products to the big players in your industry – assuming they are listening!

Either way, SustainableSlump will keep an eye on these emerging trends.

One thing that can be said for the recession is its ability to be thought-provoking. Having read an article about rising demand for meat and leather and its damaging impact on the Amazon and on its significant contribution to greenhouse gases (GHG) and climate change, I pondered how the recession might either exacerbate or alleviate deforestation through its impact on meat demand.

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There are several things that could happen:

  • Total demand for meat decreases as it’s a relatively expensive form of protein. This trend is supported by other changes in consumption, for example the increase in sales of eggs, which offer a cheaper protein source.
  • Demand for more expensive or ‘niche’ meat decreases (for example organic, or free-range meat, which may have less negative impacts on the environment, because it is less intensively farmed), whilst overall demand for meat remains static (picture meat on this graph).
  • Demand from the developed world drops for beef from international origins decreases, as ‘local’ produce becomes more important. These farming systems may have less direct impact on the rainforest, but their environmental impacts remains unknown and they will still contribute to GHG emissions.

In the first scenario – where total demand for meat drops, this may be a positive for the environment. In the second scenario, the impacts on the environment are likely to be negative. In the third scenario, the impact on the environment is uncertain.

To complicate matters further is the impact changing demand will have on the livelihoods of those who rely on meat production and for those who already have limited incomes to afford meat, the recession may shift consumption to wildmeat or bushmeat (much of which is illegally hunted and can contain endangered species) as a cheaper alternative.

What the recession has certainly shown us is just how interconnected income, consumption and sustainable development really is.

During the recession, consumption has been changing for a range of products. But we are concerned with how products that are sustainable [for environment and development] are faring. This graph [“recession’s crosshairs”] attempts to capture two simultaneous trends — in total product sales during recession and in those sustainable niches. untitled1While this graph has its problems — for instance, quality issues are not displayed — broad trends and crucially differences among products is evident. This means, different policy prescriptions for different economic times. Here, coffee category sales are up, but niche sales [e.g. Rainforest Alliance] way down; while chocolate [Fair Trade] up – partially owing to chocolate’s role as a “treat” but also owing to Cadbury’s inclusion of Fair Trade cocoa in its Dairy Milk bars.

  • Is this a good way to represent these Slump-induced changes?
  • Are our calculations/positionings correct?
  • How could all this be improved?

In the UK, consumption of frozen food is up, but what does this mean for sustainable development through consumption? Does this mean healthier Brits upping their veg intake or a rational bargain-hunters’ substitute for fresh produce? How is the health of fresh produce suppliers from the developing world faring?

frozenfood

Hot freeze: frozen-food retailer Iceland’s bullish comments “we are not taking part in this recession”, frozen food sales rising 7% across the category at supermarkets, total frozen food sales expected to top £5billion this year.

Favouring developed world: Frozen foods favour the highly capitalised larger firms with access to freezing facilities and cold chains. They favour those companies with ability to store product for several months, even years, in order to take advantage of market conditions. Many developing country producers are able to access these markets.

Furthermore, frozen has been a forgotten category for the past ten years and declining. Investments from companies in sustainable development aspects to their supply chains are conspicuously absent and certainly far below those for fresh produce.

Sustainableslump is keeping a watching brief to see if this trend is a substitute or a complement for the fresh produce sector. The exacting conditions that many internationally traded fresh produce are grown under in developing countries are among the world’s most stringent, according to GlobalGAP and DFID. IIED has calculated over one million livelihoods in Africa depend on the UK consumption of imported fresh produce from rural Africa.

Is there a market opportunity for more sustainable standards to enter the frozen foods market?

Crocodile skin, particularly wild crocodile, is prized in the fashion world for its glossy, beautiful appearance and has transcended the often fickle styles and trends of the fashion world, epitomising ‘classic’ and ‘timeless’ fashion. Picture Kate Moss carrying the same crocodile clutch her mother carried back in the sixties. Crocodilians specimens are also traded as meat and hunting trophies.WalletCrocodile-4Crocodilians include all alligators, caimans, crocodiles, gavials and other members of the order Crocodylia. Crocodilians are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which is an international agreement (to which states adhere voluntarily) between governments to ‘ensure that international trade in wild animals and plants does not threaten their survival’.

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The species covered by CITES are listed under three appendixes. Appendix I includes species threatened with extinction. Trade in specimens of these species is permitted only in exceptional circumstances. Appendix II includes species not necessarily threatened with extinction, but in which trade must be controlled in order to avoid utilization incompatible with their survival.

All crocodilian species have been included in CITES Appendix I or II in response to the decline in some wild populations as a result of unregulated international trade. A number of more common crocodilian species are included in Appendix II because they are so difficult to distinguish from more endangered species. As a result of CITES the majority of Crocodile leather comes from farmed and ranched (removing eggs form the wild to breed in captivity) sources. Whilst this is thought to have led to a turn-around in crocodlian populations after numbers plummeted in the 1960’s due to high levels of trade, it has also been argued that through removing traded crocodiles from their natural habitat and decreasing the need to hunt the wild crocodile, the economic incentive for conserving the wild crocodile and its habitat is reduced, or removed, alltogether.

James MacGregor argues that demand for wild harvested crocodilians is important in incentivising conservation. He concludes that: ‘in the crocodilian skin industry, or any industry founded on wild resources, is unwise to turn its back on the wild supply; wild crocodilian skins retain some advantages in today’s market—wild classic skins remain at the vanguard of the strategy of luxury brands.’

For several reasons one could argue that the recession might not impact demand for crocodile skin. This could be justified on the basis that:

  • Croc leather has a diverse and growing portfolio of markets and market segments and a continuing allure among customers.
  • Croc leather products are sold to wealthiest, well-established brands have no fear from crisis (as it exists today) owing to liquidity and relatively small cost. However this does account for small portion of the market. Think Beckham with her collection of $US2  million worth of Crocodile leather Hermes Birkin bags.
  • Accessories and ‘classic, timeless’ fashion pieces are increasingly being favoured, including exotic skin goods. The transfer of budget from other products to these could favour sales of croc products.

Despite these sensible assumptions, interviews with experts have revealed that the recession is undoubtedly taking its toll on the demand for wild crocodile skin – some tanneries, for example, have reported ‘no designer orders’ in the Q1 of 2009 and an significant increase in the downgrading and outright rejection of lower quality crocodile skin. Some industry participants are trying to postpone sales of wild skins to see if market conditions improve. For others, crocodile leather goods remain the ‘fastest-growing product line’ notably in the case of Hermes (who owns its own crocodile farms) claiming that “we cannot face demand. We have massive over-demand. We are limited by our ability to train new craftsmen.”

Co-existence in many countries of dangerous crocodiles and poor people has been made possible through provision of strong economic incentives to harvest sustainably. Indeed, many of the wild crocodile skins are produced under the strictest of regimes using sustainable use. Here, often poor hunters and communities are given opportunities to realise the benefits from these species who are often despised for the danger they present to human life. The changes brought about by the recession add fear that a collapse in orders owing to belt-tightening by the world’s elites will reduce their value in situ and reduce the incentives for co-existence. Closely monitoring the impacts of the recession will be key to ensuring conservation and livelihoods are not adversely affected.

Who would have thought that the humble egg would have anything to do with the recession? Yet, eggs have come to epitomise the unexpected impacts of the recession on consumption. Egg sales have risen significantly since the start of the year, offering a cheap form of protein and as an important ingredient for home-made food. As a result of ‘trading down’ consumers have seen their kitchens become a hive of activity again, as we move away from restaurant and pre-cooked meals, to home-made food to save our precious pennies.

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Other impacts of the recession include increasing shopper promiscuity as we feel less loyalty to retailers and chose to shop around to find the best deal. A survey by Experian, a retail consultant, shows that ‘more than a quarter of shoppers say they have been more likely to look around for the best deal over the past six months, and 80% say they have become more aware of the price of goods and services.’ Larger supermarkets have been able to count on 80% of their consumers coming back week after week. But recently, they’ve found shoppers getting much smarter and sharper, searching out value. The public has also become less trusting of big businesses – undoubtedly as a result of watching the banking sector crumble, bringing the entire financial system down with it.

Sales of ‘local’ produce from supermarkets have also risen. Asda claims its sales of local produce is up 55% compared to last year. Asda argues that consumers are doing this because of environmental concerns over ‘food miles’ and also as a bid to support local businesses in time of increased job and financial insecurity. However, sales of organic produce have thought to have declined – showing an often contradictory message in terms of environmental concerns – this may, however, be due to the relatively high cost of organic produce. Retailers, possibly as a strategy to regain consumer trust but also to make money from this growing trend, have also turned their focus towards sourcing locally. At the recently held Scottish Parliament Asda stated it was increasing in sourcing from Scottish producers, up from £16m last year towards a target of £25m this year.

What do these trends mean for sustainable development? What does the trend towards local mean for the livelihoods of small farmers in parts of the developing world and what does the fall in demand for organic produce mean for the environment? It might be too early to answer these questions, but monitoring these trends will be vital for understanding how sustainable development can make ensure the net impact of the recession is not a negative one, particularly for producers in the developing world. Dispelling misconceptions about food miles might be one example of ensuring that our growing preference towards local produce does not have unwanted and unforeseen effects.

Sales of hair dye are up 47% in Scotland as people go for DIY hairstyling, orange streaked porcelain and shocking locks, over hairdresser visits. This is fortunate since hair dye is the latest consumable targeted by wiley conservation NGOs.

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As part of WildAid’s commitment to ending the illegal wildlife trade within our lifetimes, it has launched a new hair care range in coalition with David Babaii.

David Babaii for WildAid is an innovative eco-friendly line of hair care products, will be introduced at Sally Beauty Supply stores nationwide beginning June 1, 2009.  The text lets us know that David Babaii for WildAid is free of sulfates, parabens and toxic petrochemicals. However, the line’s most important attribute is: the products are not tested on animals, but rather on Kate Hudson! This cruelty-free hair care line supports wildlife conservation by donating 10% of profits to WildAid, the global wildlife conservation organization.

Kate Hudson is famous for her roles in comic rom-coms and is currently being out-Bridezilla-ed in Bride Wars on every long-haul flight out of London. It seems she might have tempered her lifestyle and begun listening to her eco-Mom Goldie Hawn.

David Babaii is a celebrity hairstylist and Hudson was his first celeb client. And he is busy “he is constantly thinking of amazing new hair designs for Kate, who has naturally wavy hair with some curl”; “he wakes up at all hours of the night with new ideas for hair”.

Either way, this development begs several burning questions:

  • Is this another trend born of the recession?
  • Who is jumping on who’s bandwagon – is it WildAid with slumping donations looking for a celebrity adrenaline rush? or is it down-at-heel minor but-well-connected celebs buying their way into some eco-association?
  • who will buy DB4WA?
  • Can someone quantify 10% of profits, please?!
  • Are we likely to see more eco-celebs bursting out of the closet in a bid to help the developing countries better develop in an equitable and eco-friendly way?
  • And what impact can all this have on conservation?

Sustainableslump is quite serious in advocating that more NGOs serious about gaining traction on sustainable development look to the business model here. Certainly, it might be chance. But hair care products are booming and here are some celebrities to pep-up advertising credibility and hopefully swell WildAid’s coffers at a hard time for donation-based charities.