Lessons from Latin America: Green businesses that work

Production of honey by indigenous communities in Puerto Barra, Paraguay. G. Pucci, World Bank

At the recent Green Business Forum in Asunción, Paraguay, organized by ITAIPU Binational and the Environment Department of the World Bank, examples of successful ventures highlighted the potential for the growth of companies that not only deliver profits but also use natural capital in a sustainable way, promote forest restoration and help mitigate climate change. The overarching message was clear: there is an increase in demand around the world for products that have sustainability, both social and environmental, encoded in their business DNA.

According to Jean-Marie Maizener, CEO of Nelixia, a Swiss-based company that supplies essential oils to perfume companies, consumers in North America, Europe and even emerging economies want to know where the product they are buying comes from. “They want transparency,” he said.

Nelixia buys ingredients such as Peruvian balsam, styrax from Honduras, and Guatemalan patchouli and cardamom, while working to make sure its purchases also have a positive local impact. The cardamom, for example, comes from indigenous communities Nelixia works with to improve yields by encouraging sustainable planting in forests, as well as reduce dependency on middlemen by helping famers install dehydration ovens to dry the seeds. As a result, the cardamom producers have seen a 30 percent rise in income.

“My clients are telling me they want more of what we have to sell,” said Maizener.  “Their brands that are dedicated to sustainable development are the best performers in their portfolio, and are growing in the double digits, while the growth of their traditional brands is stagnant. And I don’t think it’s just a trend. I really believe that in the future, it will be the way to do business.”

From left, Copiasuro’s Alvaro Almengor, Nelixia’s Jean-Marie Maizener, Guayakí’s Fabiana Pose and World Bank trade specialist Alex Sanchis. World Bank

The story is similar for California-based organic beverage company Guayakí, which makes energy drinks with yerba mate, a traditional South American pick-me-up tea.

“We are taking advantage of a niche market of conscientious and responsible consumers – a consumer looking for a different kind of product and demanding to know where this product is from,” said Fabiana Pose, the company’s executive director for South America.

With the goal of stewarding and restoring 200,000 hectares of the Atlantic Forest, Guayakí works with more than 1,100 smallholder farmers and indigenous peoples in Paraguay, Argentina and Brazil, creating 670 full time jobs in the process. While commercial producers often cultivate the tea in large open fields, Guayakí uses agroforestry to plant its yerba mate under tree shade, which not only gives the leaves a better flavor, said Pose, but also preserves forests and biodiversity.

This ethical sourcing is what attracts customers, she said. Last year the company made more than USD 60 million in revenue, a 24 percent increase from 2016.

“Through organic production, fair trade and forest regeneration, we have given yerba mate a value add, allowing us to create a premium product at a price that allows us to internalize the social and environmental costs of production.”

Yet despite the uptick in demand for their products, companies involved in green business still face a number of challenges.

Quantity and quality are perhaps two of the biggest challenges, said Ana Karina Quintero, coordinator of Colombia’s Ministry of the Environment and Sustainable Development green business promotion office. As part of Colombia’s 2016 peace accord with the FARQ, as well as the ministry’s green growth strategies, her office has worked with local environmental authorities to support more than 26,000 companies around the country.

“In Colombia, we have focused more on small entrepreneurs in local markets,” she said, “so that they can improve quality and quantity, which is where most of the problems and failures are. We are developing a strategy of intervention in which we identify [the entrepreneurs], do a verification of their economic and social sustainability, and based on that verification, we help them.”

Gaining market share and diversifying sales is another major issue for such producers, Quintero said.

“We are now innovating in a theme we call territorial markets, setting up business roundtables within the regions themselves to incentivize not only local buying but buying among themselves. So they can buy supplies like packaging and raw materials from each other and become more sustainable.”

Diversifying its sales was also the goal of Copiasuro, a fair trade certified cooperative of honey producers spread across the southwestern highlands of Guatemala.

The organization started out in 1987 with a USD 50 budget and 22 members. Now it has 285 members, exports more than 600 tons of honey each year, receives support from international financers such as the EcoLogic Development Fund, and has launched several reforestation projects to counter climate change and preserve honey bee habitats. Its impact has not only provided income – more than USD 2 million per year – and jobs to small farmers and indigenous communities, but it has also helped increase pollination in coffee and forest landscapes.

But, said the cooperative’s general manager Alvaro Almengor, “about 90 percent of our product goes to Europe, and one of our biggest challenges is to diversify our market. We are betting on the regional market, which is very fractured, as where we think that there is a chance to do some real business.”

Yet for many would-be green business entrepreneurs, getting into the market in the first place is perhaps the biggest obstacle. To do so, they can follow in Almengor’s footsteps, attending trade shows and contacting international NGOS. They can also get support from government, through their national environment or trade ministries.

Cattle ranging in Caazapa, Paraguay. Paraguay is the eighth-largest beef producer in the world. World Bank, G. Pucci

For Nelixia’s Maizener, the best way is to start a project is with a ready client. “This is what we do,” he explained. “We build a bridge between the project and the market. We have a client who says I would be interested in this or that, and then we develop the product.

“My advice would be to try to find all the companies in that particular market in their own country, to go knock on their doors and see which one is closer to their values.”

The question of economic diversification is a pressing one in Paraguay, where soy production and beef – both major causes of deforestation – currently make up more than 90 percent of the country’s exports. The country “needs to incentivize green business and identify opportunities,” said Cristina Goralewski, president of Paraguay’s National Forestry Institute at the Forum’s opening session. “We have to transform the economy toward sustainable production.”

Ruth Tiffer Sotomayor, senior environmental specialist at the World Bank and organizer of the Forum, noted the importance of Paraguay’s government promoting better land-use practices and sustainable production, to a more prosperous end for everyone involved.

“We have high hopes that Paraguay can see the many opportunities there are to diversify its economy by supporting other sectors that have a lessened environmental footprint in forests but can generate income for both small farmers – yerba mate, honey, plant oils, crafts, agroforestry – and large investors – reforestation for wood products, ecotourism, agrosilvopastoril, logistics.”

“We want to support interested farmers to reach national and international markets,” said José Alderete, director of ITAIPU Binational in Parguay, “and to connect all with the best international practices for protecting the environment.”

Mr. José Alderete, Paraguayan director general of ITAIPU Binational, with Liz Cramer, the country’s Minister of Commerce; Celia Ortega, World Bank representative in Paraguay; and Ariel Oviedo, Minister of Environment. World Bank

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