BUILDING BLOCKS FOR SUSTAINABLE ENTERPRISES

Michael Berman Raul Valenzuela

BUILDING BLOCKS FOR SUSTAINABLE ENTERPRISES

Balancing growing demand with responsible action by Michael Berman and Raul Valenzuela

Submitted to OCAD University in partial fulfillment of the requirements for the degree of Master in Design in Strategic Foresight and Innovation Toronto, Ontario, Canada, April 2017

Michael Berman and Raul Valenzuela, 2017

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ii ABSTRACT

This research paper can be segmented into three parts. The first segment aims to understand the concept of sustainability by looking at the evolution of the definition over time, as well as relevant scientifically founded frameworks that explain the root causes that have generated our current unsustainable state of society. The second segment looks at stories of enterprises that have managed to successfully integrate sustainability into their business model to develop sustainable on-going operations that have benefited all stakeholders involved equitably. The third segment is an initial assessment of the Peruvian alpaca wool sector to demonstrate some of the challenges entrepreneurs face to develop a sustainable enterprise, as well as probe applicability of the tools we developed from our work in the previous two segments.

Findings from the first and second segments of this paper served as fundamental basis for the development of our output: The Bottom-up pyramid model, and the Sustainability guiding principles. The Bottom-up pyramid model visually represents our understanding of the required components to develop a sustainable enterprise from the ground up. The main takeaway of this representation is that a sustainable enterprise should be founded on knowledge from the incumbent community home to a natural resource, and that business development and growth should be bottom-up, taking into account community concerns and points of view. The Sustainability guiding principles are a list of guidelines entrepre- neurs can use to get a better understanding of some of the challenges they may face when attempting to develop a sustainable enterprise in a rural community. Ultimately, these instruments are aimed at providing guidance to leaders and entrepreneurs who want to establish business models with sustainable operations that do not compromise the long- term welfare of a natural resource and the community reliant on it.

The last segment of this paper aims to probe the tools we developed to iterate their practi- cality and relevance with a contemporary real-world situation. We chose the alpaca wool sector in Peru because it is representative of the types of hurdles leaders could face when attempting to initiate a sustainable enterprise. Additionally, one of the team’s researchers had access to stakeholders in this sector, which provided primary research to complement and corroborate our literary review. This assessment is an initial step that needs further validation with more pragmatic information and on-site data for a more detailed analysis of the issues hindering specific communities in the Andes.

iii CONTENTS

ABSTRACT iii

INTRODUCTION 1 What is our objective? 1

Who is our audience? 2

What is our approach? 4

What is our scope of applicability? 7

SUSTAINABILITY 13 Why is sustainability a focal point in today’s society? 13

What are Ecosystem Services and how do they benefit humans? 17

What are the root-causes making our society unsustainable 18

What is our interpretation of sustainability? 22

STORIES OF SUSTAINABLE ENTERPRISES 25 Why did we choose these enterprises? 25

How do these stories fit into our scope? 26

How did the Monhegan Fishery remain sustainable? 27

How did African Bronze scale sustainably? 31

How does Patagonia foster transparency throughout their organization? 34

How can we further refine our understanding of sustainable enterprises? 36

iv THE BOTTOM-UP PYRAMID MODEL 39 What are the components of the model? 39

Why does local heritage and tradition matter? 41

How does transfer of knowledge unite all stakeholder groups? 45

How does policy facilitate the development of sustainable enterprises? 47

What does a scenario look like for a sustainable enterprise? 50

What does a scenario look like for a unsustainable enterprise? 51

OUR GUIDING PRINCIPLES FOR SUSTAINABLE ENTERPRISES 54

THE ALPACA INDUSTRY IN PERU 57 What is the context of rural alpaca farmers in the Peruvian highlands? 57

What are the main environmental issues affecting rural farmers? 64

What are the fundamental inherent issues burdening how the alpaca sector functions? 68

What are the issues and opportunities identified by the tools we developed? 70

Final Thoughts & Next Steps 75

BIBLIOGRAPHY 77

Appendix A. Characteristics of alpaca breeds 89 Appendix B. Summary of interviews 90 Appendix C. Interviews were done with farmers from the Tambo Saccsamarca community 91 Appendix D. Augustina, an interviewee, takes a rest while herding her alpacas 91

v IMAGES

Image 1. Artwork by Chris Jordan. Silent Spring, 2014 16

Image 2. Artwork by Chris Jordan. Tuna, 2009 21

Image 3. Bottom-up model: Sustainable business operation 40

Image 4. Bottom-up model: Over-regulation 52

Image 5. Bottom-up model: Unregulated profiteering 53

Image 6. Ceperiano, interviewee 56

Image 7. Location of research gathering: Huancavelica 58

Image 8. Typical landscape of highlands in Peru 59

Image 9. Huancavelica city 60

Image 10. Rudimentary housing of farmers 61

Image 11. Living conditions of farmers 61

Image 12. Winter season landscape 63

Image 13. Winter freeze in December 64

Image 14. Highland pastures 65

Image 15. Farmer with alpaca herd 66

Image 16. Intermediary fibre shop front 66

Image 17. Standard trade unit: one-pound sachs 67

Image 18. Augustina, interviewee 69

vi vii viii INTRODUCTION

WHAT IS OUR OBJECTIVE?

The objective of this paper is to envision leaders about the importance of integrating the building blocks required to implement existing social and biophysical systems into and manage sustainable business initia- their business model. tives for natural resources. Acknowledging the divergent understanding of sustain- Over the last decades, several definitions of ability as a concept, our research aims to sustainability have surfaced from various distill its meaning into an actionable tool. knowledge sectors in an attempt to capture Through the examination of businesses its meaning and relevance to a particular that use sustainability as a core pillar in field. Given the topic’s complexity, sustain- their business model, we aim to extract the ability can have different interpretations common characteristics that make these and implications under different contexts. operations successful as well as to identify Although, this paper eventually contributes risks and challenges in each venture. Ulti- a clear explanation of sustainability based mately, our research aims to contribute to on multidisciplinary scholarly knowledge, the global movement inspiring sustainable it is important to provide an initial notion business. We aim to help empower vul- of the concept. The following definition nerable populations in rural areas where, provides an overall rendering of sustain- untapped natural resources may be found. ability as it relates to our research paper Additionally we aim to inform business

“Sustainability is the protection and well-being of the living planet; the preservation and protection of the earth’s natural cycles, the preservation and the protection of the millions of species of plants and animals, including humankind, from the destructive forces of anthropogenic manufacturing processes, technologies and human populations.” (Sachs, 1993; Cash, Clark et al, 2003)

To demonstrate the applicability of our to be championed in developing countries sustainability model, we probe the required like Peru. In doing so, we aim to identify conditions against a present-day case found fundamental leverage points to ensure the in the Peruvian alpaca industry. Through development of sustainable value systems. the examination of the alpaca sector’s Sustainability will be comprehensively ex- unrealized value and innovation potential, plored by touching on dimensions includ- we will attempt to illustrate the opportunity ing environmental impact, equitability and fairness, ethics and other relevant dimen- of primary stakeholders and other stake- sions. Through the investigation of the holders who could benefit from a systemic alpaca sector in Peru, we will illustrate the shift towards a more sustainable business current state of its value system, including model. To illustrate the magnitude of social an analysis detailing stakeholder interac- impact inherent in establishing a sustain- tions and flow of value demonstrating to able value system, we begin to apply our re- whom it accrues. search findings against the Peruvian alpaca sector. Furthermore, this exercise aims to Establishing the current state of the alpaca shed light on the implications inherent in sector will lead us to identify barriers that envisioning what a sustainable value system are limiting the socio-economic potential may look like.

WHO IS OUR AUDIENCE?

Given the nature of the problem to be tack- Change leaders are entrepreneurs, business led, we identified that business leaders who owners, managers and key decision makers are in a position to build sustainable ini- who aim to inject “change” into a given or- tiatives are potentially the strongest levers ganization. Change can come in many dif- of change to drive a shift toward a more ferent forms, however in our research, we sustainable future. As with most complex define change as an initiative that prioritiz- social systems, there is a myriad of primary es people and planet in addition to profit as and fringe stakeholders within a natural line items on a balance sheet. Our objective goods value system. Considering the differ- is to reach change leaders who align with ing points of view of a variety of stakehold- similar values and philosophies outlined by ers is critical to understanding dynamic B-Lab, a nonprofit organization that serves and complex problems, and while this was a global movement of people using business done throughout our research process, this as a force for good (B Corporation, 2016). report has ultimately been shaped with The vision of B-Lab is that one day all “change leaders” interested in implement- companies compete not only to be the best ing sustainable business practices as its in the world, but the best for the world, and primary audience. The following research as a result society will enjoy a more shared is intended to inspire future leaders to and durable prosperity. B-Lab spearheads integrate sustainability into their business this systemic change by building a global model by illustrating the critical role sus- community of companies that meet the tainability plays in achieving and maintain- highest standards of verified, overall social ing business objectives. In addition, a clear and environmental performance, public synthesis of pragmatic principles outlining transparency, and legal accountability. Our the rationale required to successfully in- goal is to contribute to the sustainability tegrate sustainability into a given business movement by providing change leaders operation is aimed to provide future change with actionable building blocks to make leaders with actionable takeaways. sustainability a tangible outcome.

2 Change leaders who are inspired by B-Lab’s el prove to leverage this new competitive vision and mission outlined above are the advantage while positively impacting every profile of people we hope to reach with this stakeholder involved. Fairtrade is a stan- research. Today, there is a growing commu- dard that our report aims complement with nity of more than 1,600 Certified B Corps a greater focus on actionability for future from 42 countries and over 120 industries change leaders. working together toward 1 unifying goal: to redefine success in business (B Cor- Taking all of this together, we resolved poration, 2016) . Ultimately, we decided to provide insights and initial findings to to focus on change leaders because they change leader s as mission-aligned part- represent influential stakeholders in the ners with significant influence to incite a global business landscape, and can harness shift in business practices. This approach the resources and capabilities to shape the was facilitated by our decision to conduct future of sustainable business practice. By research with participants representing targeting future leaders, we aim to support local farmers, entrepreneurs and commu- the movement to redefine what success nity representatives. As we will explain means for truly sustainable businesses. below, these participants provided insights into the complex realities handicapping the The emergence of Fairtrade, a certification sustainability of natural resources due to scheme setting a standard for better prices, the economic and environmental pressures decent working conditions and fair terms applied by businesses. These initial findings of trade for farmers and workers (Nicholls, along with next steps that detail various 2005) demonstrates a movement toward points of engagement, are explained in sustainable business that embodies the subsequent sections of the paper. objective of this report. Fairtrade Canada states that “when you buy products with the As a team, we collectively decided to craft FAIRTRADE Mark, you support farmers our initial recommendations with a view and workers as they work to improve their to their operationalization and implemen- lives and their communities. The Mark tation. With change leaders named as our means that the Fairtrade ingredients in the primary audience, we sought to articulate a product have been produced by small-scale set of recommendations that would lever- farmer organizations or plantations that age the resident opportunities and chal- meet Fairtrade social, economic and envi- lenges that may exist when dealing with ronmental standards” (Fairtrade Canada, natural resources together with various 2016). Fairtrade is a unique business model linked ecosystem services. In our research, in that its approach is based on partnership; our team identified change leaders as hav- one between those who grow our food ing the greatest capacity to shift the system, and those who consume it. Additionally, through their direct influence on business Fairtrade is the only organization that is operations. 50% owned by producers representing farmer and worker organizations. With an equal voice, producers have a say in deci- sion-making. As of 2015, there were 1,250 fairtrade certified producer organizations in 75 countries which generated more $1.6 billion in producer revenues in 2014-2015 (Waal, 2015). Organizations with Fairtrade principles integrated in their business mod-

3 WHAT IS OUR APPROACH?

The methodology of this research proj- Finally, in phase four we apply our findings ect aims to achieve two goals. Firstly, to about sustainable enterprises by assessing communicate sustainability in a way that the alpaca sector in Peru with a focus on is universally understood, and secondly, rural farmers. The resulting output is evi- to provide change leaders with tools to put dence of the pragmatic utility of the tools sustainability into action. To accomplish we have developed. this, our methodology follows a four-phase approach. The initial two phases aim to In terms of the division of tasks and work- gather information and distill our findings load, our team tried to be as equitable as about sustainable enterprises, while the possible given our individual strengths and last two phases aim to probe our findings skills. That said, we strived to synthesize all through a real-world example that falls information as a couple to make sure we under our intended scope of applicability. were sanity checking our assumptions and Phase one is an in-depth literature re- deductions. Using the apportionment of view, covering a broad range of secondary our approach, our team divided our efforts research topics. Phase two is an assessment equally for phases one and four. Howev- of three well-documented enterprises that er, given the amount of Spanish literary have successfully implemented sustainabil- review involved in the assessment of the ity into their core business model. Phase alpaca sector, Raul Valenzuela took a larger three is an assessment of the Peruvian portion of the effort for phase three. Con- alpaca sector, which is accomplished by sequently, Michael Berman tackled a bigger coupling literary review and semi-struc- portion of the literary review for phase two, tured interviews with diverse stakeholders the assessment of sustainable enterprises. to extract insights, identify barriers and Nonetheless, all synthesis of findings and opportunities, and challenge assumptions deductions were done in concert to build in the Peruvian alpaca sector. To probe our more comprehensive arguments, and make principles in the last phase, we first describe sure we were not missing complementary and assess the value system of the alpaca knowledge in our arguments. The following sector, and the underlying barriers pre- paragraphs explain our four-phase method- venting the advancement of rural farmers. ology in greater detail.

PHASE 1: LITERATURE REVIEW

To build a comprehensive understanding aimed to triangulate the concept of sustai- of the building blocks for a sustainable nability in the context of natural resource enterprise, our team started by conducting harvesting. All team members were respon- an in-depth literature review using contem- sible for ongoing research and continuously porary news periodicals along with accre- scanned sources for incorporation into dited academic journal and government a central database. Our research process reports on topics including sustainability, started with a literary review on sustainabi- supply chain dynamics, and natural systems lity, which enabled us to have an educated among other knowledge areas pertaining discussion on the evolution of sustainability to our study. In doing so, our research team as a scholarly concept, and its relevance to

4 natural resource harvesting. Acknowled- garnered. Through group and participatory ging the evolution of sustainability and the research tools, including Ackoff’s D.I.K.W. critical analysis of experts over time, an on- framework (Aven, 2013), we generated in- -going literature review allowed us to grasp sights, shaped plausible hypotheses, identi- the principles that underlie sustainability, fied bias, and articulated key assumptions. but more importantly the criticism it has

PHASE 2: ANALYSIS OF SUSTAINABLE ENTERPRISES

Next, we analyzed three enterprises that raphy and operation-size. To illustrate our had a successful implementation of sustain- findings, we developed a visual model that ability principles in their business opera- synthesizes our core insights and helps con- tion. We use Abraham Maslow’s approach vey the potential scenarios that may arise to researching human psychology, where when key variables are altered. he studied the healthiest 1% of the college student population to help describe the During the assessment of the selected pattern that human motivations generally enterprises, we came across a number of in- move through (Muula, 2009). Our team flection points, in which we had to resort to hypothesizes that to determine the building alternative information sources to corrobo- blocks necessary to implement a sustain- rate and/or complement the knowledge we able enterprise, we should study cases that had synthesized. Our assessment process have been known to successfully implement can be metaphorically described as a vast and uphold them. research landscape, where each enterprise represents a cluster of knowledge, and the Through the assessment of enterprises that valleys in between are complementary and have defied conventional business prac- corroborative information depicting the tice by looking beyond the bottom line to overall panorama of information gathered ensure long-term viability, we are able to about sustainable enterprises identify the conditions required to foster sustainable business practice involving The concluding portion of this project in- natural resources. To select sustainable volves probing our research output against enterprises of interest, we determined three a natural resource with characteristics that dimensions that allow for a comparative fall under our intended scope of applica- analysis of examples while providing a bility. We chose the alpaca wool sector in diverse variable set to consider. The criteria Peru mainly for two reasons. First of all, by which our team identified sustainable the sector has characteristics aligned with enterprises are as follows: 1) Resource the scope and objective of our research. Type, 2) Scale of Operation, and 3) Origin Secondly, our team had access to primary of Operation. Based on the criteria high- research through interviews from various lighted above, we analyze three sustainable stakeholders who make up the value system enterprises including honeybees in Zambia, of the alpaca sector. lobsters in Maine and goose down used by Patagonia. In determining wins, call- outs, and risks inherent in the sustainable enterprises we assess, our research attempts to demonstrate the wide-range applicability our findings have across resources, geog-

5 PHASE 3: SEMI-STRUCTURED INTERVIEWS WITH PRIMARY STAKEHOLDERS

To capture firsthand knowledge about the allowed us to corroborate literary review alpaca sector from primary stakeholders, findings in terms of the living conditions our research team gained approval from the and their participation in the value system OCADU Research Ethics Board to con- generated by the fibre’s trade. In addition to duct interviews with rural alpaca farmers the interviews, pictures and video footage from the province of Huancavelica in the of the research process served very helpful highlands of Peru. These semi-structured in understanding intricacies and nuances interviews were a compelling source of that shaped our insights. The visual do- insights from stakeholders directly affected cumentation also provided us a refined by the ramifications of the alpaca sector. understanding of dynamics rural farmers To perform the interviews we resorted to a face as primary stakeholders in the Peru- proxy, Guilfo Rebata, a university-trained vian alpaca sector. Bachelor in Communications, who works as a market researcher specializing in rural Reflecting on the interviews, a couple of populations. He possesses an adequate drawbacks should be acknowledged to balance of post-secondary education and understand how the first-hand research professional experience to conduct inter- process could have been strengthened. views with these populations. The infor- The first drawback is pertinent to the mation gathered by the proxy allowed us to quantity and diversity of the stakeholders better understand the afflicting experiences interviewed. Ideally, we would have like and shortcomings rural alpaca farmers to interview more rural farmers to have a encounter. larger data set to draw conclusions from, and discern overlapping patterns. Given All farmers interviewed were from the our focus was on rural farmers, it would town of Saccsamarca, which is located have been valuable to have a larger pool approximately five kilometers southwest of of interviewess. Furthermore, it would Huancavelica city, the largest urban hub in have been ideal to conduct interviews with the area with close to 50,000 habitants. Ru- several rural farmers from different loca- ral farmers care for and herd their alpacas tions within the Peruvian highlands to see in pastures outside of Saccsamarca town, commonalities and differences in their li- up to 20 kilometers away and 3,700 meters velihoods. From our research we know that above sea level. Given the remote location certain provinces are more developed in the of these people and the tricky topography trade and processing of the fibre. Therefore, of the area, it takes half a day of trekking it would have been interesting to contrast and traveling in horse or motorcycle from the successes and failures from different the city of Huancavelica to reach their communities to identify gaps, and potential ranching sites. More information on the ways to tackle issues that have been addres- location and context of rural alpaca farmers sed by other farmer groups. is given in the concluding portion of this paper. The second drawback is pertinent to the research methods employed with the The objective of these interviews was to interviewees. We would have liked to tap gain an intimate understanding of rural into the latent and tacit knowledge of farmers’ everyday lives and the issues most these people by employing participatory or afflicting them. Furthermore, the activity generative research methods to leverage the

6 intrinsic knowledge of rural alpaca farmers. mediaries. These interviews were useful to Given our limitations in terms of time and triangulate information we had gathered resources, we were not able to develop through other research channels, and to catered research tools to engage these peo- realize a clear understanding of the salient ple. However, we think it would have been underlying dynamics driving the system. valuable to complement the interviews with A continual process integrating different other research methods that would afford research sources, allowed us to discern a the triangulation of information and more holistic understanding of a value system criticality in our findings. A summary of inherent in the alpaca sector. Our research the details about the interview can be found protocol comprises a number of resear- in the appendix. ch methods to elicit insights profoundly shaping the alpaca value system, and thus, In addition to the rural farmers, we also our overall understanding of the sector as a interviewed stakeholders from other links whole. of the system such as retailers and inter-

PHASE 4: PROBING OUR OUTPUT & UNDERSTANDING THE VALUE SYSTEM

To conclude the paper, we perform an alpaca sector. (Gharajedaghi, 2004). We assessment of the alpaca sector with our first laid out a number of subsystems and research output: The Bottom-up pyramid stakeholder relationships in a map that model and Guiding Principles question- consolidated our initial knowledge. This naire. The purpose of this assessment is map provided the basis upon which we fur- twofold. Primarily, to probe the framework ther built and enhanced with insights from we have developed against a contemporary diverse research sources and interviews. real-world situation. Furthermore, we can Our explanation of the alpaca value system explore and shed light into the building seeks to depict the main dynamic relation- blocks change leaders would need to put ships driving the value of alpaca fibre from in place to establish sustainable enterprises its primary stakeholders, rural farmers, to involving rural communities. We employed the main manufacturing facilities, which Gharajedaghi’s Iterative Process of Inquiry process approximately 80% of all fibre, as it to develop and refine our understanding of will be subsequently discussed. the value system inherent in the Peruvian

WHAT IS OUR SCOPE OF APPLICABILITY?

The profound intricacy of our planet’s of knowledge sectors to develop a clear natural systems requires a multidisciplinary and easy to understand interpretation of approach to understand the extensive and sustainability as a concept. Employing a complex ramifications of sustainability. This multidisciplinary approach to understand paper touches on links between a number sustainability affords the development of

7 comprehensive arguments that draw from The scope of this paper has three mutually complementary knowledge sectors to pres- complementary dimensions: Natural char- ent a clear and buttressing rationale for our acteristics of resource, Maturity of sector, deductions about this concept. By delving and Socio-economic context. These dimen- into numerous frameworks addressing the sions delineate the extent of applicability concept of sustainability, we are able to of our findings and their implications. As obtain a well-rounded understanding of the it has been stated, our intended audience is different lenses and underlying paradigms Change Leaders, including entrepreneurs informing its most relevant explanations. looking to develop sustainable business This approach provides integrative benefits, models from the ground up. Therefore, a as we were able to complement and corrob- discussion of business development context orate knowledge through different research is pertinent to the interests of those who sources. want to establish sustainable enterprises in nonresident rural locations. However, it is Additionally, a multidisciplinary approach important to mention that our discussion allows us to sanity check conclusions we on the socioeconomic context are mere deem apprehensive through alternative suggestions of signals worth considering sources, and make sure our insights are tak- when looking to identify where to develop ing into account relevant and encompassing an enterprise. These suggestions are based points of view. Ultimately, we want to de- on economic development knowledge from pict the concept of sustainability as simply business literature. The following para- as possible, so a generalist audience could graphs describe each dimension’s character- easily understand the root causes affecting istics, and discusses the rationale for their our planet’s sustainability. To achieve this, choice. we have to strike a balance between schol- arly scientific based and quotidian language to distill the key takeaways.

NATURAL CHARACTERISTICS OF THE RESOURCE

The focus of this paper is on a subset of and life-sustaining or life-enhancing goods. natural resources innate to our planet’s Thus, the findings of this paper are appli- biosphere, which is known as biotic re- cable to the following agricultural sectors: sources. Furthermore, our interest lies in Aqua-farming, farming of livestock and biotic resources that exist and grow on the produce, apiculture, fishing, forestry, and earth’s surface, whether plant or animal ranching. A wide variety of animals, plants, based. This includes natural resources from and other organisms are fall under the pre- bodies of water and the various climates viously mentioned sectors. among our planet’s diverse geographies. It is important to note this assessment is not Part of the assessment and synthesis of applicable towards mineral resources that our research comes from the examination require mining extraction processes for of enterprises leveraging native natural their supply. resources. We look at specific business initiatives that leverage autochthon natural This paper is relevant to natural resources resources native to a location. The impor- including animals, plants, and other life tance of a resource’s inherent tradition and forms that provide food, fiber, medicine, heritage within the community it resides

8 in, proved to be critical. The findings of this of natural resources to enhance the resil- paper are relevant to autochthon natural iency and flexibility of our food systems resources native to a location, where the and other related systems. In summary, resource has history of socioeconomic the natural dimension of our scope has the activity from past generations. following characteristics:

Finally, this paper aims to shed light onto • Biotic resource: A resource that origi- agricultural resources that may not be nates and develops in the biosphere. massively consumed at a global scale, but nonetheless, have proven value in terms of • Actual resource: A resource that has quality, benefits, and competitive character- been surveyed, its quality determined, istics. In the last decade, a number of over- and is currently under use. Its value looked natural goods have gained popu- stems from its benefits over incum- larity in developed countries, and achieved bents. global-scale consumption demands such as quinoa, chia and noni among others. These Indigenous resource: A local resource that new entrants to the global market have has historically supported communities as gained acceptance because of their benefi- a native asset to the region. Consequently, cial features over other incumbents, and the there is ancestral knowledge (tradition and overall value they provide to consumers. heritage) associated with the cultivation of Furthermore, we call for the diversification these resources.

MATURITY OF SECTOR

When referring to maturity of sector, of the sector may be characterized by nat- we specifically allude to the commercial ural resources that generate predominantly maturity and scale of trading activity of a local or provincial level demand illustrating natural resource. Our investigation focuses an opportunity to scale. Finally, the natural on natural resources in which the supply resource of interest is one that has been chain and operational activity is non-exis- integral to the survival of local communi- tent, underdeveloped or at the early-stage ties for generations through the traditional of development representing an opportu- use of the given natural resource. This can nity for entrepreneurs and change leaders. be determined through verbal or written It is important to acknowledge that quan- historical records of indigenous communi- tifying the commercial maturity of trading ties working, growing and surviving off a activity is difficult and varies depending on valued natural resource. the natural resource and area in which it is found. For the purpose of our investigation, Our research team intentionally decided to our research identifies underdeveloped not restrict the applicability of our insights commercial maturity as a scale of trading to specific countries or regions of the world. activity characterized by limited compe- Although the pertinence of our research tition and local supply and distribution. is relevant to a significant portion of the Our research is not targeted to large-scale developing world, we are also cognizant operations that have extensive distribution our findings may be applicable to particular channels and operational infrastructure locations within developed countries. There characterized by dominant players like are a number of local-scale economic activ- WalMart. In addition, early stage maturity ities driven by the use of craft-like methods

9 and processes for the production of natu- dimensions. Not only does agriculture ral goods around the world. An example represent an economic opportunity, but it that stands out is the cheese sector within has global implications in terms of food different developed countries like France, security as we face several challenges that Italy, Germany, and Canada. Therefore, the will test the ingenuity and adaptability of synthesis and development of our insights our species. Once we understand the sus- takes into account a global applicability tainability gaps in our topic of interest, we and audience embodied by change leaders aim to offer a solution to develop sustain- previously described. able value systems that will remediate the negative effects of conventional industrial The importance of natural resources in practices that continue to cause negative the twenty-first century has taken on new social and environmental consequences.

SOCIO-ECONOMIC CONTEXT OF HOST COUNTRY

The political and economic contexts of a equivalently. The following indicators serve host country play an important role in the as evidence of markets where enterprises development of an enterprise that can com- can be built from the ground up, and com- pete under equal terms and fair conditions. pete under fair conditions. When deciding to establish a new enter- prise, it is in a firm’s interest to take into Two indicators are the economic openness account socio-economic characteristics of and stability of the host country. Economic the location. We suggest bearing in mind openness can be understood as the ability, three socio-economic considerations as flexibility, and straightforwardness to devel- signals of a context with a fair and healthy op business ventures that can compete in a business development prospects. level playing field. The concept of economic openness comprises adequate infrastruc- These socio-economic indicators serve ture for the production, and distribution of as signals that support the identification goods; swift and uncomplicated procedures of locations where business development to find a business, grow it, and integrate does not have barriers, impediments, or it into the global market; and a healthy complications for entering entrepreneurs financing environment with access to who want to establish new enterprises. funding options (Dobson, 2014). In terms Considering the character of our audience of economic stability, a market-friendly and their attentiveness to business develop- structure for businesses to operate is a de- ment, we thought fitting to discuss general sired characteristic. Policies in place should economic characteristics of a host location provide a setting for businesses to evolve that signal a favourable context for business based on their own capabilities, as well as development. By no means we are suggest- foster transparency and minimize unnec- ing the socioeconomic indicators discussed essary red tape. Other economic stability are traits are a level playing field for competi- tion, and stable economic indicators like mandatory requirements for sustainable inflation and currency exchange. enterprises. However, we do see these in- dicators as cues of a market that is open to The last socio-economic indicator is related business development, and that safeguards to a host country’s governance and rule of a fair competitive landscape for all players law. The rules of the game and the institu-

10 tions that frame and enforce those rules, are key components of a favourable business environment (Dobson, 2014). Also, just as important is a fair judicial system buttress- ing the rules of the game. Policies should provide adequate checks and balances to oversee a fair competitive environment for all players. Furthermore, the transparency and honesty of regulatory institutions is fundamental to prevent corruption.

We do not aim to determine whether inte- gration into the global market is sustainable or not. This will depend on a several factors like the type of resource and scale of opera- tion among others. The variables, contexts, and considerations pertinent to a specific resource are too diverse in order to make a broad-level generalization whether global integration is a requisite for a sustainable enterprise.

11 12 SUSTAINABILITY

WHY IS SUSTAINABILITY A FOCAL POINT IN TODAY’S SOCIETY?

By the end of the seventies, the United This definition sheds light onto two key Nations (UN) was well aware of the heavy sustainability concepts. The most import- deterioration of our environment and its ant being that meeting people’s basic needs natural resources. During that decade, the (globally) should be a priority, and should UN hosted a Conference on the Human not be compromised for any other purpose. Environment. By 1983, the UN General The second concept is around the thresh- Assembly created an independent orga- olds of natural resources, and their ability nization to address environmental issues: to provide for future generations, which The World Commission on Environment is directly linked to the technologies and and Development (WCED), also known as social paradigms that humanity as a society the Brundtland Commission. The Com- embraces. The main insight of the Brundt- mission’s mandate was to assess the critical land Report’s definition of sustainability issues of environment to strengthen inter- is the notion of intergenerational equity, national cooperation, and to raise aware- which surfaces the social and temporal ness, understanding, and commitment, dimensions of sustainability. After the pub- of individuals, organizations, and govern- lication of the Brundtland Report, the issue ments around the concept of sustainable of sustainability has been on the agenda of development. international institutions from numerous sectors, businesses, and governments. To address the needs of developing coun- tries, the UN identified a need to reconcile In comparison to Earth’s existence, con- economic growth with environmental temporary human civilization is of recent well-being. This challenge translated into origin. The first farming communities start- the question of how to continue economic ed to emerge globally approximately 8,000 growth without harming the environment. years ago. Eventually, villages evolved into The result was the concept of sustainable small cities, and contemporary human civ- development, which was coined in the 1987 ilization commenced roughly 5,000 years Brundtland Report, “Our Common Fu- ago. Our initial domestication of plants ture.” Sustainable development is the kind and animals was the basis that enabled the of development that meets the needs of the development of civilization as we know it present without compromising the ability today (Gilding, 2012). of future generations to meet their own needs (World Commission on Environ- For the last 250 years, humankind has ment and Development, 1987). gone through significant socioeconomic transformations as a result of milestone

13 episodes like the Industrial Revolutions which make human life possible. The most of the nineteenth and twentieth centuries obvious Ecosystem Services include the and the fairly recent Information (digital) food we eat, the water we drink and the Revolution. On the one hand, economic plant materials we use for fuel, building wealth and growth has spread across many materials and medicines” (World Forum on countries and their populations, who have Natural Capital, 2015). The term Ecosystem been fortuned with socioeconomic pros- Services will be subsequently discussed in perity and improved living standards. On detail. the other hand, the planet’s natural assets and their environments have been under- Technological advancements throughout going degradation and depletion mainly the Industrial Revolution caused general- due to intense industrial activity and use of ist factory workers to be redundant, and fossil fuels. demanded few skilled machinists and op- erators. Furthermore, our planet’s natural The world has lost a third of its arable resources were perceived as unbounded land due to erosion and pollution in the and costless. Thus, the main focus of the past forty years, with potentially disas- time was to achieve economies of scale trous consequences as global demand for through development of large-scale manu- food soars, scientists have warned (Hillel facturing and intensification of efficiencies et. al., 1991). The University of Sheffield’s to achieve as much savings and profits as Grantham Centre for Sustainable Futures, possible. Several innovations such as steam which undertook the study by analysing power, machine tools, metallurgy, fossil various pieces of research published over fuel mining, chemical factories, and many the past decade, stated that the continual others accomplished efficiency, the main ploughing of fields, combined with heavy objective of the time. Furthermore, these use of fertilizers, has degraded soils across technologies have been extended as much the world, with erosion occurring at a pace as possible whenever feasible. Each wave of up to 100 times greater than the rate of of innovation has been an extension of soil formation (Horton, Koh, Guang, 2016). the same theme: From Adam Smith’s pin As more soil quantity and quality are lost, factory and Armor Swift’s meat disassembly farm output in the U.S., for instance, has plant to Henry Ford’s automobile assem- dropped by about 8 percent in the short bly line; all as if there was no end in sight term and projected to fall 20 percent over (Princen, 2005). the next 20 years (Eisenberg et. al., 1998). In order to achieve the referred innova- Most ancient civilizations collapsed be- tions and technological efficiencies, hu- cause they destroyed their topsoil but few man knowledge has developed processes policymakers seem mindful of that histo- to transform mineral resources like coal, ry. The degradation of the natural capital iron, and oil into energy and infrastructure that is the foundation for agriculture and that have enabled the provision of goods to farming has been found to be decreasing solve a wide variety of needs. The manufac- overall productivity in almost all systems turing and transportation of goods required studied worldwide. Natural Capital is for an increasingly growing population defined as “the world’s stocks of natural spurred the creation of large-scale factories assets which include geology, soil, air, water and industrial operations around the world. and all living things. It is from this Natural Most of these operations have been pow- Capital that humans derive a wide range ered by fossil fuel energy for almost a cen- of services, often called Ecosystem Services, tury (Rodrigue et al, 2013). These economic

14 advances – technologies, capital markets, during the late 1960s, as well as the largest transportation and communication sys- annual increment to world population (86 tems, and convenient devices – represent million persons each year) in the late 1980s an ever-increasing throughput of material (UNPD, 1999). Our global population’s and energy, which threatens to undermine growth and its increasing needs have put those very economies (Princen, 2005). tremendous stress on our planet’s natural resources, which are the fundamental com- The fishing industry evidences the detri- ponents of natural ecosystems. Our planet’s mental effects of inconsiderate technolog- natural ecosystems provide critical and ical advancements and disproportionate unique favorable services to our popula- scaling. Today, industrial fishing vessels tions, which will be subsequently discussed. are like a floating factory, with onboard processing, packing plants, and preserva- tion systems.(Croswell, 2013). The United Nations Food and Agriculture Organization (FAO) surveyed 600 marine fish stocks, of which 25% were considered depleted or overexploited by fishing activity (FAO, 2004). Aquaculture, the farming of fish, use forage fish as feed. In 2003, salmon farming alone consumed 19% of global fishmeal; it takes approximately five to ten pounds of prey fish to grow one pound of salmon; if current trends continue, researchers predict aquaculture will outgrow the supply of fish- meal as soon as 2020 (OCEANA, 2017).

In addition to mineral resources, other natural resources are also used as raw inputs for diverse industrial purposes, be it the production of goods or food. Whether it is the extraction of wood for furniture manufacturing, or depletion of animals’ ecosystems for food provision, all natural resources have boundaries to the benefits they can provide us. The world’s urban population has been steadily increasing for several decades, and as a result there has been significant depletion of nature to ac- commodate for urbanization and provision of goods to a growing urban population (Hinrichsen, 2012).

During the twentieth century, world population has increased from 1.65 billion in 1900 to 7.5 billion in 2016, and experi- enced both the highest rate of population growth (averaging 2.04 per cent per year)

15 IMAGE 1. CHRIS JORDAN. SILENT SPRING, 2014. Depicts 183,000 birds, equal to the estimated number of birds that die in the US every day from exposure to agricultural pesticides. Retrieved from: http://chrisjordan.com/ gallery/rtn/#silent-spring

16 WHAT ARE ECOSYSTEM SERVICES AND HOW DO THEY BENEFIT HUMANS?

Gretchen C. Daily popularized the term is the most important service because it Ecosystem Services in her 1997 book, “Na- embeds the others: Provisioning Services, ture’s Services.” Ecosystem services are the Regulating Services, and Cultural Services conditions and processes through which (Millenium Ecosystem Assessment, 2005). natural ecosystems, and the species that Supporting Services are related to soil make them up, sustain and fulfill human formation, nutrient recycling, and food and life (Daily, 1997). Ecosystem Services con- water supply. Provisioning Services enable serve our planet’s biodiversity and support the goods we consume such as food, raw the ongoing provision of natural goods materials, minerals, and others. Regulating consumed by humans. Services provide the regulation of natural cycles like disease control and purification In the year 2000, the United Nations of air and water. Finally, Cultural Services (UN) founded the Millennium Ecosystem are non-material benefits provided from Assessment Organization, which defined ecosystems like religion, sense of belonging, Ecosystem Services as the “benefits that and heritage (Reid et al, 2005). people obtain from our nature’s ecosystems (Millenium Ecosystem Assessment, 2005).” Unlike the traditional factors of industrial The average valuation of earth’s Ecosystem production, capital and labour, technology Services is of USD$ 33 trillion dollars per has not effectively replaced all critical fea- year, with the highest estimates up to USD$ tures of natural resources. In Adam Smith’s 54 trillion (Constanza et al. 1997). Al- concept of free market economy, one can though these figures appear steeply prized, exchange machinery for labour. However, the valuation of our natural systems takes nature cannot be exhaustively substituted into account assumptions, which are not by any other production factor, and there- comprehensively accurate. Despite efforts fore its value is precious and irreplaceable. to be precise, we cannot account for all of Water is an example of an irreplaceable the value afforded by our natural systems’ resource in that all or most of the water the complex and far-reaching ramifications. earth has today may be about all the planet Thus, there may be a risk in promoting a will ever have. Of this supply, 97.5 percent value for our nature’s worth because the resides in the oceans as salt water and concept lends itself to comparison with the remaining 2.5 percent represents the capital investing efforts. We suggest there planet’s entire ration of freshwater (Stevens, is no monetary justification for the defi- 1998). The renewable freshwater supply on nite depletion of any asset of our natural land is constantly replenished as part of a systems. Nonetheless, the current industrial perpetual cycle in which water evaporates system in place has been developed in a from the oceans and falls as saltless precip- way that disregards ecosystem services that itation.This small and finite supply is the nature affords us. water that actually supports human exis- tence and as such, must be used sustainably. The UN has classified four types of Ecosys- tem Services that afford benefits to hu- As it was presented earlier, our planet’s Eco- manity. Fundamental Supporting Services system Services provide unique and fun-

17 damental supporting benefits for human- The term Carrying Capacity also alludes ity’s subsistence. Ecosystem Services are to this concept; it refers to the permissible governed by natural cycles that have been number of people the Earth’s natural re- continuously attuned by nature to balance sources could hold at different standards of and regulate life conditions in the biosphere living and levels of resource consumption (UCAR, n.d.). Currently, our global scale of (McGinley, 2013). While there is a wide socioeconomic activity is interfering with range to the estimates of Earth’s carrying our planet’s ability to regenerate and self-in- capacity, the greatest concentration of esti- vigorate its natural cycles, and ultimately mates falls between 8 and 16 billion people diminishing our Ecosystem Services. (Pengra, 2012). It is important to highlight the differences in carbon footprint lev- It is estimated our current global consump- els resulting from lifestyle consumption tion rate is of 1.5 planets to provide the habits among different populations. Several resources we use, and to absorb that subse- countries from what is known as the “West- quent waste in one year (Global Footprint ern” or “Developed World” are among Network, 2016). This means the planet the largest carbon footprint contributors. needs one year and and a half to regenerate Hence, Carrying Capacity estimates consid- what our global population consumes in er projections of current conditions, which one year, which evidences our overshooting are unequitable and below basic living consumption patterns. A bathtub analogy standards for billions of people, mostly in can help understand this concept. If both developing countries. As developing coun- the drain and the faucet of a bathtub have tries continue to mature, living standards the same output and input rate respective- and carbon footprints may be increasingly ly, the water level in the tub remains the shifting towards “Western” consumption same. Currently, our planet’s population levels. Although both mentioned figures are is draining earth’s natural resources faster by no means static or absolute, and there than its faucet, which represents nature’s re- is a spread of variation among experts, the generation capacity. This state is described underlying deduction is that the sound as functioning with an ecological deficit functioning of our planet’s Ecosystem Ser- which models a scenario where the popu- vices are being increasingly compromised lation consumes more than the planet can as our population grows. regenerate by depleting the existing stocks (Ferng, 2003).

WHAT ARE THE ROOT-CAUSES MAKING OUR SOCIETY UNSUSTAINABLE

The Natural Step, a non-profit organiza- Award in 2000, and has worked with hun- tion with a global network of offices in dreds of companies using their proprietary 11 countries, has been at the forefront of framework for sustainable development. sustainability for more than 25 years. This organization was awarded the Blue Planet

18 The Natural Step pinpoints three scientifi- naturally degrade at fast enough rates. The cally founded root-causes of sustainability, overall buildup of synthetic materials, and discussed subsequently. its increasing rate of this accumulation are detrimental to our biosphere’s Ecosystem The first root-cause is related to how soci- Services as well (Natural Step, 2015). Ap- ety extracts resources from underneath the proximately 140 million tonnes of synthetic biosphere (minerals, iron, oil, etc.), and has polymers are produced worldwide each been systematically accumulating them in year. These polymers are extremely stable, the biosphere, where they do not belong and do not readily enter into the degrada- at such elevated proportions (Magnin, tion cycles of the biosphere. Environmental 2014). This systemic accumulation has been pollution by synthetic polymers, such as occurring at a rate that impedes our planet’s waste plastics and water-soluble synthetic natural cycles to self-generate, and conse- polymers in wastewater, has been recog- quently it is diminishing the planet’s Eco- nized as a large problem (Shimao, 2001). system Services. The main issue with this systemic accumulation is that on aggregate, Finally, the spur and growth of urban it has been growing at an increasing rate as centres throughout the world has physically a result of our global population growth, displaced and removed nature’s biodi- and its consumption requirements. versity. Global urbanization and natural resource extraction for the supply of goods An example of this phenomenon is the to urban clusters have diminished the pollution caused by the use of mercury in proportion of nature in our planet. In 2008, the mining industry. Mercury is a heavy for the first time, the world’s population and toxic mineral that is extremely rare was evenly split between urban and rural in earth’s crust. Mining and refinement of areas; there were more than 400 cities over metals is the third largest man-made source 1 million and 19 over 10 million (PRB, of mercury emissions, as it contributes 2016). In the coming years, as more people approximately 18% of man-made mercury migrate to urban clusters, the current in- emissions (Mining Facts, 2012). Mercury is dustrial system will overwhelm and inhibit used in artisanal gold extraction operations our planet’s natural cycles. The industrial in developing countries, often in unsafe and system in place has developed in a way that environmentally damaging ways. Over 55 the resources extracted from the earth’s countries have small precarious gold refin- lithosphere, and the products created by ing facilities, which release approximately humans will continue to build up in the 800 metrics tons of mercury into the air, biosphere and systematically increase their soil, and water every year (EPA, 2017) concentrations (Robert, 2008).

The second root-cause is related to the To sum it up, our planet is currently abundant synthetic materials that our unsustainable due to the systemic rate of scientific and technological advances have accumulation of materials from beneath afforded us. Over the last century, scien- the biosphere and synthetic man-made tific knowledge has enabled humans to materials, as well as the physical extraction develop several materials that do not exist of nature due to urbanization and depletion naturally. The diverse range of plastics, of resources. It is important to note that chemical compounds, and their derivatives pollution by natural materials like nitrogen are examples of man-made materials that pollution and carbon dioxide from land have also been systematically accumulat- use changes are being released at a faster ing in the biosphere without being able to rate than the ecosystem can remove them

19 as well. This represents yet another cause of developed and developing countries evi- unsustainability on an overburdened natu- dences the far-reaching social implications ral system. The accumulation of materials of our unsustainable systems. extraneous to the biosphere, in addition to the physical extraction and depletion of By being unsustainable we are not allowing nature, are causing our planet to be unsus- all humans to meet their basic needs. There tainable. are pockets of the world where populations do not have enough resources to meet basic The most important and often less dis- needs like potable water, sanitation ser- cussed aspect of sustainability is its social vices, nutritious meals, or access to educa- dimension, and the implications on people’s tion. The systemic effects of sustainability livelihoods and well-being. As it has been are far-reaching and at different dimen- referenced, various scientific estimates indi- sions, scales, and levels. Hence, the negative cate our planet is having trouble providing societal impacts of our unsustainable sys- life-supporting assistances for its 7.3 billion tems are affecting billions of people around inhabitants (USCB, 2017). In the current the world. Our cleverness in progressive global landscape, not all populations enjoy resource extraction has been largely applied similar levels of living conditions. Many to escaping limits, displacing costs, and populations in regions like Africa, Latin distancing negative consequences (Princen, America, and South-East Asia reside under 2005). This mindset has caused unintend- substandard living conditions. According to ed systemic impacts on society and the the United Nations, 840 million people liv- economy. Several companies are employing ing in extreme poverty have less than USD$ business models catering to self-serving 1 per day to go by (UN, 2017; UNESCO, interests at the expense of people’s basic 2017). Approximately 100 million children needs and well-being. Consumers provide under age five are undernourished, and a the revenues for companies to continue significant portion of people living in these growing. Therefore, we should be mindful conditions are in sub-Saharan Africa and of what companies we are funding growth Southeast Asia (UN, 2015). The contrasting to. breach in basic living conditions between

20 IMAGE 2. CHRIS JORDAN. TUNA, 2009. Depicts 20,500 fi sh, the average number of tuna fi shed from our oceans every fi fteen minutes. Source: http://chrisjordan. com/gallery/rtn2/#tuna

21 WHAT IS OUR INTERPRETATION OF SUSTAINABILITY?

To understand the environmental impli- It is an on-going process with direction and cations of a decision, one needs to gain a magnitude, but there is no absolute or static systemic understanding of the relation- end. ships amongst the different components and stakeholders affected by, or affecting To be sustainable is to be part of an ongo- the sustainability of our planet. All actions ing progression that continually pushes for from business and society have direct and innovations that emulate nature’s processes indirect impacts on our planet’s sustainabil- and underlying principles as much as pos- ity. Society, economy, and environment are sible. Our current technologies are still far intimately intertwined with different types away from achieving the wonders nature of dynamic and emergent relationships. does at normal environmental conditions. To really assess the environmental impact Significant portions of our manufacturing of a business decision, one needs a grasp technologies are based on heat, beat, and on Systems Thinking knowledge to un- treat processes that require staggering ener- derstand the systemic archetypes and key gy inputs, and leave toxic harmful byprod- relationships to tackle. Throughout history, ucts for our environment (Benyus, 1997). our decisions have triggered reactions we Therefore, we should aim to reduce our did not foresee. Consequently, the solu- sustainability gap with respect to nature in tions of today may become tomorrow’s order to develop more sustainable innova- problems. Today’s challenges are a result of tions. To build a sustainable society for our the systems we have created; the unantic- children and future generations, we need ipated side effects created by our inability to fundamentally redesign many of our to understand and act in consonance with technologies and social institutions so as to our long-term goals and deepest aspirations bridge the wide gap between human design (Sterman, 2002). and the ecologically sustainable systems of nature (Capra, 2004). Our global level We propose considering The Natural Step of consumption moving forward will need framework as a scientifically based foun- technological innovations that are mind- dation for understanding the concept of ful of the detrimental implications to our sustainability. Change leaders must be environment, and integrate nature-inspired mindful of the three root causes triggering processes and operations to provide for the negative environmental impacts, and be largest population levels in history. able to understand the systemic impacts of their decisions as it relates to sustainabil- ity. To be sustainable is to shift away from the root-causes that inhibit and alter the natural life-supporting structures provided by our planet’s Ecosystem Services. Being sustainable is to respect the natural cycles that enable life in the biosphere, which is the only environment where human life as we know it is possible. Therefore, sustain- ability does not have an ultimate end-point.

22 23 24 STORIES OF SUSTAINABLE ENTERPRISES

WHY DID WE CHOOSE THESE ENTERPRISES?

Sustainability is resoundingly complex, to diverge in research, and assess at the with a scale of depth that is measured not impact of a number of actors, layers and only in a company’s carbon footprint, but levers within different value systems at any also in the irreversible devastation that one time. We acknowledged this encom- is caused by profit-driven tunnel vision passing approach as mandatory to explore blinding leaders from acknowledging the and understand the nuances and intricacies critical role Ecosystem Services play in the of value systems stemming from enterprises resilience and long-term value of a given that have successfully integrated sustain- enterprise. Sustainability reaches across ability in their business operations. diverse sectors, and is scrawled into the agendas of numerous tiers of government. After a comprehensive analysis of the en- It holds real estate across campuses, incu- terprises under investigation, and a review bators and hubs in cities across the country, of related patterns we found, our team and holds the precious attention of those distilled similarities, differences and key around tables. However, we have seen fish- points of interest to determine principles eries collapse (Myers & Worm, 2003), ara- that influence the successful development ble land turned infertile, species go extinct of a sustainable enterprise. Our synthesis (Baillie, Stuart, 2004) and many other ancil- approach was inspired by the methodolo- lary effects of our mechanistic approach to gy of renowned 20th century psychologist resource production and manufacturing. Abraham Maslow. Maslow studied what Buried under the litany of past environ- he called exemplary people such as Albert mental devastation lay important lessons Einstein, Jane Addams, and Eleanor Roo- that must be researched and published to sevelt rather than mentally ill or neurotic correct our course for future leaders. people, writing that “the study of crippled, stunted, immature and unhealthy speci- Thus, the complexity of sustainability is mens can yield only a cripple psychology so great and dependent on situational and a cripple philosophy”. Maslow studied variables that it deserved our undivided the healthiest 1% of the college student attention to research, analyze and synthe- population to help describe the pattern size instances in which sustainability was that human motivations generally move successfully integrated into business oper- through (Muula, 2009). In this section we ations. To do so, our investigation sought aim to showcase examples of successful sus- to cast a wide net when researching and tainable enterprises through the narration assessing successful sustainable enterprises. of sustainable enterprise chronicles. Broadening our effort meant we were able

25 To select sustainable enterprises of interest, to consider. The criteria by which our team we determined three dimensions that al- identified successful sustainable enterprises lowed for a comparative analysis of exam- were as follows: 1) Resource Type, 2) Scale ples while providing a diverse variable set of Operation 3) Origin of Operation

HOW DO THESE STORIES FIT INTO OUR SCOPE?

Our investigation seeks to identify the con- “three fourths of the world’s food comes ditions by which biotic natural resources from only seven crop species – wheat, rice, can be commercialized sustainably through corn potatoes, barley, cassava and sorghum” the consideration of Ecosystem Services (Diamond, 2003) . In every one of these key within a given business model. In the crops, genetic diversity is rapidly dimin- sustainable enterprise chronicles discussed, ishing as native habitats are destroyed and the natural resources investigated include monocultures dilute the genetic pool. A plants from the Zambian Jungle, lobster loss of genetic biodiversity has catastrophic from the Atlantic coast of the United States, implications on a given species as genetic and a global supply network of natural differences allow a species to adapt to chal- fibres. Assessing enterprises that span in a lenging environmental pressures including number of dimensions like type of resource bacteria, parasites, viruses and responses to and geographic locations, allowed us to sudden climate changes. identify overlapping key variables involved in the development of a sustainable enter- Scale of operation was another consider- prise. ation taken into account when selecting examples to assess. Therefore, to validate As mentioned above, the core of our inves- the relevance of the insights derived from tigation focuses on natural biotic resources. the enterprises studied, we aimed to devel- In choosing natural resources vital to man- op conclusions applicable to large, medium kind’s survival, our research aims to shed and small-scale operations. Acknowledging light on a topic of immediate relevance. As the varying degree of acceptance to change our global population places more pressure in a given organization, we aim to make a on agricultural and farming industries to case that any scale of business operation meet growing demand, large-scale technol- can apply the insights derived from our ogy has been idealized as the solution to investigation when undergoing the im- the on-going question of global supply. An plementation of a sustainable enterprise. example of such technological intervention To quantify “scale of operation”, our team is that of monocultures. Although mono- deemed the metric “total annual revenue” cultures have been a productive avenue to as the measurable unit by which we de- rapidly produce crops, serious systemic re- termine scale. The large-scale operation is percussions have surfaced as a result of this represented by Patagonia, an apparel com- unsustainable practice disregarding Eco- pany generating approximately 190 million system Services. Today, the world’s farming dollars in annual revenue (Hoovers, 2016). rests on an extraordinarily narrow genetic Forest Fruits Limited, a Zambian compa- base. Biogeographer, Jared Diamond notes ny exporting roughly 1200 metric tones

26 of honey per year and sales of USD $2.5 However, there are varying methods of million dollars, represents a medium-scale governance as influenced by a country’s operation. Lastly, the small-scale operation culture. Therefore, in order to evaluate the is illustrated by the Monhegan Coopera- applicability to a wide range of geographic tive, a lobster fishery in Maine that sells on locations with varying cultural nuances and average USD $ 1.2 million dollars of lobster methods of governance, our research led us per year. Although the revenue magnitudes to investigate enterprises originating in dif- of the latter two examples may be compa- ferent regions of the world, represented by rable, the difference in scale of operation one in Africa, one along the North-Atlantic is noticeably evidenced in the number of Coast and one with global operations in livelihoods involved in the processing of different pockets of the world. The repre- their products. The Monhegan Cooperative sentation of varying cultural backgrounds is an operation involving 25-30 lobstermen, contributed yet another set of potentially while the operation of Forest Fruits Limit- influential variables that would provide ed works with a network of approximately valuable insights when considering the 10,000 beekeepers from local communi- knowledge derived from the sustainable en- ties. Choosing sustainable enterprises that terprise chronicles subsequently discussed. span varying scales of operation allowed us to consider how our findings overlap in In determining wins, call-outs and risks different sized operations facing different inherent in the sustainable enterprise challenges in terms of leadership and busi- chronicles, our research is aimed at demon- ness objectives. strating the wide-range of applicability our findings have across resources, geography Finally, origin of operation was another and operation scale. It is important to note consideration factored into our selection the takeaways extracted from each chroni- of sustainable enterprises to investigate. As cle are unique to each context, however the mentioned in the scope section, economic broad-level implications drawn from the openness and rule of law are critical factors common symptoms across all examples act in countries where sustainable enterprises as reinforcing insights that informed the are to be implemented. In order to allow development of our sustainability model for a business venture to flourish, the host discussed in the following sections. country must enforce ethical governance.

HOW DID THE MONHEGAN FISHERY REMAIN SUSTAINABLE?

Monhegan is a small, 2.5 square-kilometers haven for artists and visitors who appreci- rocky island located 16 kilometers off the ate its natural beauty, isolation, and easygo- coast of Maine. The island is only accessi- ing pace. ble by boat, and it does not have any car transit or paved roads. For the last century, The island’s year-round population is fairly Monhegan has been known to be a summer small, at roughly 50 households, which are home to approximately 75 people (USCB, 2010). Today, Monhegan’s two main eco-

27 nomic activities are fishing and tourism. A re-establish its biophysical cycles, and to large portion of tourism happens during allow for the reproduction and growth of the summer months, when the average new offspring. This limited time window population of the island increases up to 250 had been agreed upon and respected by people. However, the hot tourist season is Monhegan lobstermen several decades not enough to provide for the year-round before official law endorsed it. By 1907, welfare of the community. a ratifying policy allowing for six-month fishing periods only during the winter The year 2014 marked the Monhegan’s was passed. Therefore, lobster fishing in 400th anniversary since the arrival of John Monhegan was usually done from De- Smith in the 1600s. Nevertheless, ancient cember to May. The longstanding origins Native Americans have been known to fish of closed seasons came as a result of the Monhegan’s coast long before Smith’s arriv- requirements of lobster fishing: Summer al. Up to this day fishing is a core backbone was the best time for lobstermen to repair activity maintaining the economic well-be- and maintain their traps, boats, and other ing of Monhegan’s community. During the fishing gear (Princen, 2005). Until today, 1800’s, fisheries in the North Atlantic coast Monhegan lobster is not consumed during were richly diverse and plentiful. However, the summer. Summer visitors eat lobster increasing demand from East coast (Bos- from other regions because nobody fishes ton & New York) markets during the 19th lobster during tourist season. century prompted the definite depletion of several lobster fisheries along the coasts of As it has been previously mentioned, New Jersey, New York, and New England. intensive fishing throughout the first half During the “bust” period between 1920 and of the 1900s resulted in the depletion of 1940, Maine’s department of Sea and Shore many fisheries along the North Atlantic Fisheries declared lobster stocks in the coast. This was partly a consequence of the North Atlantic coast had collapsed (Phil- systemic pressures of the fishing sector, in- lips, 2006). Currently, only a dozen fishing cluding the growing number of fishermen, communities still have year-round residen- the quantity and technology of their traps, cy in Maine, down from approximately 300 and the spike in demand for lobster. During a century ago (Princen, 2005). the 1960s large operators in Maine were employing over 1,000 traps, and by 1964 The Monhegan fishing community is an ex- Maine fishers had set out approximately ception to the depletion pattern that most one million traps, which was quadruple North Atlantic fisheries underwent over the the number in 1952 (Princen, 2005). By last century. Three specific initiatives have 1975, Monhegan lobstermen agreed upon played an important role in safeguarding a self-enforced trap limit for all lobstermen the sustainability of the island’s fishing of the community at a maximum of 600. waters. These initiatives were eventually The Monhegan lobstermen were the first backed up by policy supporting the ac- community in Maine to agree and self-im- cumulated intergenerational knowledge pose such limits. Today, only a few of the inherited over several decades of intimate Monhegan lobstermen employ more than engagement with nature. 500 traps. This quantity of traps has proven to keep the fishery sustainable over time, Traditionally, Monhegan lobstermen did and allows making enough of a living to get not extract lobster from their waters year- the lobstermen’s families through the whole round. Lobster fishing was done during year. the winter months in order to let nature

28 A governance initiative passed in the 1990s was the exclusive and selective nature of the had considerable impact in the sustainable community’s governance structure. The re- management of Monhegan’s fishing waters. strictions governing Monhegan’s fishing dy- In 1996, legislation was passed to emulate namics were rooted in the prioritization of and encourage self-governance by delegat- the community’s autonomy. The communi- ing key decision-making to the community ty controlled and defended its own “lobster level, and by dividing the Maine fishing bottom,” a traditional method that proved region into management zones. Represen- remarkably effective at conserving the tatives for each management zone would be region’s lobsters, virtually the only import- elected by the fishing community, and have ant commercial fish species that has not more rule-making authority than state law been fished into near-oblivion (Woodward, (Princen, 2005). This policy empowered 2005). This tradition had been respected the Monhegan community to agree upon for many decades within the Monhegan and self-impose a number of principles fishery, and it was legitimized through the that allowed its fishing activity to remain community’s autonomous governance. sustainable. In addition to legally ratifying Therefore, needs of local stakeholders had the two initiatives previously discussed, an- preference and clout over external parties other important parameter was legitimized with lesser vested interests. Monhegan’s to safeguard the scale of lobster harvesting. protective and exclusionary frame of gov- Monhegan established a limit to the num- ernance proved fundamental in the sus- ber of fishing permits based on traditional tainable welfare of the community, which apprenticeship standards that had been suggests smaller scale policy-making may practiced over several generations. be more adequate to manage small opera- tions. A fundamental factor in the sustainable welfare of Monhegan’s fishing operation

INSIGHTS

The Monhegan chronicle provided a num- understand and acknowledge these specific ber of insights that informed the synthesis needs are paramount to safeguarding the of our principles for the development of sustainability of a natural resource. sustainable value systems. The abstract of our observations are the following: It is crucial to maintain a leveled playing field and flexibility amongst all players to accommodate Policy-making at a smaller scale can be more for any unexpected issues or handicaps that may effective when dealing with natural resources arise. In Monhegan the fishing season sche- that are the socio-economic core of a community. dule was flexible and open to change, which Research suggests that large-scale sta- evidenced the compromise and respect te wide policies had not been successful Monhegan lobstermen had amongst them. because hundreds of fisheries had suffered Although the start of the fishing season definite depletion along the North Atlantic was agreed upon every year, if last minute coas (Princen, 2005; Phillips, 2006). The unexpected issues occurred with any of Monhegan fishing waters were considered the fishermen, no one started fishing until a sub-region that had needs unique to the everyone was ready to sail (Princen, 2005). community, its context and its stakehol- Furthermore, this initial event had ritualis- ders. Therefore smaller scale policies that tic significance as Woodward mentions in

29 The Lobster Coast, “Trap Day has a ritu- ty representative is the fact that they have alistic importance that transcends dollars lived within the region they supervise. A and cents. “It’s like cleaning the slate,” one representative’s stake is reflected in how islander explained to me. ‘We all come invested they are in a community via their together to get the boats ready and any of household and family’s livelihood. This is a the crap and hard feelings that have accu- crucial factor to help avoid the cultivation mulated in the community are wiped away’ of a breeding ground for corruption. (Woodward, 2005). Just as important was the fact that all lobstermen respected the Apprenticeship affords selectivity, and functions closing date of the season as a reflection of as a filter to determine the lobstermen candidates their fair competition attitude. Additional with the best fit for the community. Given the evidence of the fair competition mindset fixed number of fishing licenses in Monhe- was the fact that all lobstermen had boats gan, the permits can only be obtained when and equipment with similar capacities, passed on by a retiring lobsterman. This which reflected their long-term investment process is accomplished through selection in the community and interest in keeping from a pool of apprentices that have been their resource sustainable. learning and understanding the lobstermen lifestyle for a few years. Those with decades Individuals outside a community understand its of lobstermen lifestyle experience choose natural system differently because their stake the incoming lobstermen generations. Ulti- in the economic activity is not as invested as the mately only those that embrace the lifestyle stake of those within that community. The remo- and do not have a short-term gold rush te and isolated location of Monhegan Island mindset are offered a license. It is about has fostered a prudent sustainable mindset having the right fit with the lifestyle and the to its community. Without its yearly fishing community, and accepting that one will not season the Monhegan community would become extremely affluent by doing this not be economically feasible, and people activity. This process has resemblance with would not be able to live there. Having sig- other sectors such as law or consulting, nificant reliance on a natural resource ena- where an individual starts as an employee, bles developing an intimate knowledge and and can then gradually become a partner relationship with it (Princen, 2005). This conditional to one’s skills, performance, knowledge and relationship are achieved and overall fit in the organization. through the dedicated practice of the craft and lifestyle related to that natural resource. Trust and credibility in rule of law and its represen- tatives is key. Representatives should have the most interest and stake in the wellbeing of their community and its natural resources. A community representative’s main role was to oversee and manage the dynamics of their designated region’s fishing activity. The Monhegan community representa- tive had experience as a lobsterman, and knew the local lobstermen well because of their repeated interactions over the years. Therefore, an important factor in ensuring the stake and commitment of a communi-

30 HOW DID AFRICAN BRONZE SCALE SUSTAINABLY?

Forest Fruits Limited is a company founded nity and culture in which it operates, Forest by Dan Ball, a Zambian-Canadian entre- Fruits is able to make a real difference in preneur with a mission to create a business the lives of beekeepers,” said Renee Bowers, that sells honey found deep within the executive director of the Fair Trade Federa- north western Zambian forest. Recognizing tion (Birnbaum, 2016). a global shortage of honey bee products, especially those that are raw and fairly Forest Fruits Limited is built on values ded- traded, Dan decided to capitalize on the icated to preserving and promoting culture, opportunity to create a commercially-vi- social and environmental values. These able enterprise that significantly improves values have influenced the organization’s the well-being of people and planet (Birn- interactions with diverse stakeholders and baum, 2016). Leveraging the marketability actions towards the environment in which of its fair-trade, organic, dark, antioxidant, they operate. As mentioned above, all har- micronutrient rich and full flavour, Forest vesting techniques are based on traditional Fruits positioned their honey as a uniquely practices to ensure continued sustainability. differentiated product in expanding market In using “wild” African bees as opposed niches within North America. to importing European bees, Forest Fruits Limited focuses on the ecological benefit In remote and under developed areas of the of wild bee cultivation leading to increased world like rural Zambia, local communities resilience and biodiversity over the uniform have relied for generations on traditional genetics of high producing European bees. harvesting techniques to live off their land. Meetings and discussions are held during Dan had lived in Zambia for many years, harvest season to facilitate an on-going which enabled him to gain an intimate un- relationship with local communities, and to derstanding for the people and their land. ensure all business objectives are reached This experience afforded him a greater ap- and executed in a sustainable manner. Both preciation for the culture that exists among parties provide critical information from the Zambian community and the proper all nodes of the value system, resulting in a harvesting techniques that have been iterat- holistic understanding of the environment ed on by past generations. Dan’s idea was to in which the business operates, and the leverage tradition and local assets that had Ecosystem Services that must be factored been practiced and improved over many into the business model to ensure a con- generations to create a sustainable business tinued supply for the company and com- model. Using traditional hives made from munities. Working symbiotically with the bark and hollow logs as practiced by local environment is contrary to the mechanistic farmers, and applying Dan Ball’s knowl- approach applied by many foreign compa- edge of the trade, Forest Fruit’s was birthed. nies looking for market-driven profitabil- Until today, the unique transfer of knowl- ity, ultimately resulting in environmental edge between critical stakeholders directly collapse and short-term gains. The part- linked to the natural resource proves to nership and unique transfer of knowledge be critical to the continued success of the demonstrated by Dan Ball and the local company. This knowledge transfer is seen beekeepers exemplifies a crucial paradigm as vital wisdom for the longevity of the business. “By being sensitive to the commu-

31 shift in business practice by corporations This business model promotes sustainable looking to monetize natural resources in small-enterprise development, capacity foreign land. building and poverty relief for local com- munities, organic agriculture, preserving Over time, as the company grew, so did the biodiversity, and creating new niche export beneficiaries of the economic opportunity markets all the while creating jobs and in a number of communities. The number economic development in rural locations of beekeepers has grown from roughly requiring opportunity as well as environ- 6,000 in 2010 to more than 10,000 in 2016, ment protection. By respecting the tradi- and the company is practically doubling tional knowledge shared by local commu- its annual income allowing the purchase of nity members, this company has created a essential benefits for the community such sustainable value system that respects with as bicycles, adequate roofing and schooling the ecosystem services that exist in the for all children (Ball, 2003). In addition, Zambian jungle (The Embassy of Zambia in beekeepers are also trained in numeracy Stockholm, 2009). Paul Whitney, co-found- and literacy to enhance their prospect for er of African Bronze stated, “A major flaw success. with many aid projects is that the systems created aren’t indigenous to the community Currently, the honey is sold online by sev- and thus, often fall apart once complet- eral vendors, and in 125 organic, fair-trade ed” (Ball, 2003). However, it is important independent retailers across North America to note that the approach does have its including Whole Foods Market. By posi- challenges. Forest Fruits Limited focuses on tioning the brand as sustainable, leveraging respecting the social values of communities the positive attributes of the product, and in which they operate in order to foster aligning themselves with partners who positive and bilateral working relationships, share the same values, Forest Fruits Limited and to ensure the ongoing sustainability of has been able to create a strong network of the natural resource being leveraged. Indig- retailer support. In addition, their val- enous resources have been fundamental to ues-based marketing approach has attract- the survival of the local communities and ed the interest of adjacent products looking thus, have deep-seated values that make the to leverage the benefits of the product in use of the resource a community-driven their own marketing as demonstrated by process with several relationships at play. Beau’s Brewery who uses the honey in a Bowers noted. “This may not be the most special B Corp brew presented at the Amer- efficient way of doing business but it is ican Craft Brew Association. It is also an the most effective.” (Birnbaum, 2016) Dan ingredient in a Fire Cider beverage that un- Ball’s unique experience living in Zambia, til now used all organic ingredients except gaining an understanding and appreciation one: the honey. These two examples show for the cultural nuances that exist in the how Forest Fruits Limited has managed to community, and the long-standing knowl- enter the business-to-business market by edge about honey in the area, gave this leveraging the core features of its product, operation the underlying magic ingredient driven by their underlying values. Critical required to make it a long-term commer- to their success is maintaining the integrity cial success. of their story and sustainability piece that has driven consumer demand and attracted Further validating the successful imple- mission-aligned partners that embody the mentation of their sustainable business same ethos. model, Forest Fruits Limited was granted membership to the Fair Trade Federation in

32 2014. To assure customers of their contin- practice, Forest Fruits Limited became cer- ued commitment to sustainable business tified as a Benefit Corporation upholding the core values that anchor their company.

INSIGHTS

The Zambian honey chronicle provided a sulted in an effective harvest of the resource number of insights that informed the syn- without harming the fragile balance of the thesis of our principles for the development ecosystem. of sustainable enterprises. The abstract of our observations are the following: Secure certifications to assure customers: The ear- ly acquisition of critical certifications to provide Inspired leadership with experience in the emer- potential customers with quality and safety assu- ging country: Dan Ball’s unique ability to communi- rance is paramount to the success of any supply cate and gain an understanding for the people and chain. The acquisition of the Global Organic culture that exists in the area was vital to establish and Food-Safety and B-CORP certifica- the operation in a sustainable manner. Having tions were critical credentials to have as an intimate understanding of the cultural new product with a value-driven marketing nuances and the communities’ dependence strategy. on the resource resulted in Dan acquiring the knowledge about traditional harvesting Sustainability as a core pillar of the business techniques that respect the Ecosystem Ser- model: The transfer of knowledge demonstrated vices upholding the health of the environ- by Dan Ball and local beekeepers was fundamental ment and thus, the continued supply of the to the success of the business. Sustainability resource. was not considered a charitable or corpo- rate social responsibility play. In fact, it was Mission-aligned distribution partners: The a critical building block that contributed successful scaling of the operation was highly to the success of the company’s business dependent on the addition of Paul Whitney and Liz model. A pillar of Forest Fruit Limited’s Connell, two Canadian entrepreneurs. Effectively philosophy is that trade is more sustainable conveying the core mission of the company than aid. Dan Ball taught the beekeepers to combined with the ability to engage and ac- operate as business venture. tivate mission-aligned distribution partners proved to be a critical piece of the puzzle in allowing the product to surface in North America and eventually acquire shelf space in more than 360 Whole Foods stores. Leverage intergenerational knowledge: African Bronze’s raw honey comes from beekeepers who don’t use commercial hives. Instead, they har- vest the wild honey twice a year from bark hives made to look like hollowed-out logs. The knowledge passed down from genera- tion to generation through iteration has re-

33 HOW DOES PATAGONIA FOSTER TRANSPARENCY THROUGHOUT THEIR ORGANIZATION?

Patagonia is a outdoor retail apparel company safe conditions and minimal environmen- pioneering the triple bottom line. However, tal impact, Patagonia is a company that is their responsibilities as business people came committed to causing no unnecessary harm slowly and almost involuntarily. Yves Chou- socially and environmentally. Demonstrat- inard, the founder of Patagonia was an avid ing the company’s commitment to supply rock climber. On his expeditions, he noticed chain transparency, Patagonia launched the that his climbing equipment was eroding the Footprint Chronicles, an interactive website rock face preventing future climbers from tracing Patagonia products geographically enjoying the mountain. He set out to create from design to fiber, to weaving or knitting, high quality climbing equipment that caused to dye-products (Fletcher, 2012). In addition, minimal damage to the rock face. The origins the company calculated carbon emissions, of Patagonia built on climbers and surfers energy use and waste as well as the distance dependency on the environment to support traveled from origin to warehouse. This infor- their passion influenced the evolution of the mation was publically available to customers company. In the early days of the company, on the product’s online selling page as well as this meant preserving rock faces and pro- on the Chronicle’s’ website. To date, Patagonia ducing the highest quality products to ensure has been able to calculate and post online the safety in life and death situation, however life-cycle analysis for about 150 products, or these philosophies evolved into what Pata- about 20 percent of the product line repre- gonia represents today. Patagonia’s mission senting approximately 80% of sales (Pongtrat- evolved into building the best product, cause ic, 2007). Patagonia envisions that within five no unnecessary harm, use business to inspire years any customer who owns a smartphone and implement solutions to the environmen- will be able to scan the QR code on any Pata- tal crisis (Chouinard, 2013). It is important to gonia product to learn its social and environ- note that Patagonia is not completely sustain- mental impact (Chouinard, 2013). able and should not be idealized as such. For the purposes of this investigation, we have The intention behind the Footprint Chron- chosen Patagonia to illustrate how any group icles was to examine Patagonia’s impact of people going about their business can come beyond employees to every person who to realize their environmental and social worked on Patagonia products. An example responsible, then begin to act on them. of supplier relationship is found in Nicara- gua, Managua. Launched in 2006, Patago- Patagonia is an organization focused on its nia had about 500 people on payroll where- people and their unique interaction with each as up to 10,000 people at any given time stakeholder from customer to retailers, to worked on Patagonia products throughout supply chain partners. Integral to the success the supply chain (Patagonia, 2016). For- of Patagonia is their unique supply chain mosa Textil has been a supplier since 2006 process (Pongtractic, 2007). Committed to specializing in constructing soft-shell and working with local farmers directly, they have fleece outerwear. As the only outerwear established a network of farmers globally to factory in the country, they invest heavily supply the raw materials and manufactur- in education and specialized skill devel- ing of their products. Pledging fair wages, opment. They also care deeply about the

34 wellbeing of their workers. After learning and after planting hundreds of native trees, that their employees like to sit outside when they now have more trees on their factory they eat, they built a new outdoor eating grounds than the entire rest of their Free space and garden. In addition, the factory Trade Zone combined (Patagonia, 2016). has started an urban reforestation project

INSIGHTS

Several lessons can be extracted from our informed the synthesis of our principles for analysis of Patagonia Inc., predominantly the development of sustainable enterprises. focused on the operational dynamic of The abstract of our observations are the their supply chain. The following insights following:

COMMITMENT TO IMPACT ANALYTICS

To meet the high standards set-out by same principles, scope and methodology. By Patagonia to produce the best products and working closely with their suppliers, Pata- cause no unnecessary harm, the company gonia continuously improves their systems has established a clear methodology and code and in turn, suppliers must demonstrate full of conduct to maintain the ethical integrity transparency and commitment to continuous of the sourcing and manufacturing process. improvement in order to remain a supplier. These methodologies are driven by Patago- Through the close working relationships nia’s company values, local and international established by Patagonia and their suppliers, regulations, consumers and NGO groups Patagonia is able to provide consumers with (Chouinard, 2013). The standards are created the most transparent and robust contents to ensure all independent and third-party claims assurance available in the industry certification audits are completed to the (Petrie, 2016).

TRANSPARENCY

Central to Patagonia’s success is their com- An increase in transparency makes it easier mitment to transparency. As evidenced by the for competitors to work cooperatively to solve Footprint Chronicles initiative, transparency problems that range from materials shortages toward their customers, suppliers and compe- to emissions and effluents to the need for a titors makes it possible to gain the trust and better grievance process for the workers on buy-in from all stakeholders involved. A quo- the floor. The more you reveal about your te from Yves Chouinard’s novel entitled, The environmental and social challenges and Responsible Company stated, “It is crucial to successes, the more you help others in your share knowledge within the company so that industry who are trying to reduce their social social and environmentally responsible beha- and environmental footprint (Pongtractic, vior can be mandated as part of every job”. 2007). As evidenced by the Sustainable Ap- “For a company to set goals or assess progress parel Coalition, companies organizing them- toward meeting them it needs freely flowing, selves into industry-wide working groups to transparent information. No transparency develop shared methodologies has resulted in equals no accountability” (Chouinard, 2013). increasing the level of trust and communica-

35 tion among participating companies. Similar- ly, transparency encourages suppliers to work together to better identify their problems and priorities. (Fletcher, 2012)

MANAGEMENT-STYLE

Patagonia Inc. is built and managed by managed in machine-like ways, as popular- a leadership team intimately connected ized by Frederick Taylor results in employee to the company ethos. With a vision and animosity and an emotional divide between mission that is tethered to the strategic employees and their leadership team. Con- decision-making, Patagonia has been able sequently, such a divide prevents members to effectively govern their core principles from truly identifying with the intent and by empowering their workforce through vision of the organization (Capra, 2004) Pa- a bottom-up management approach. This tagonia exemplifies a “living organization” management style mirrors the characteris- as leadership governs through partnership tics of a “living organization” explored by and empowerment instead of siloed direc- Capra in which he asserts that applying the tion. As a result, Patagonia is able to main- principles of living systems to traditional tain the ethical integrity of their supply business management theory encourages chain. Partnering with suppliers who follow creative autonomy, self-sufficiency and the strict guidelines set-out by Patagonia, effective feedback between a employees and and obtaining third party certification to leadership in a given organization (Capra, conduct regular audits allow for continual 2004).Capra suggests that organizations feedback and improvement.

HOW CAN WE FURTHER REFINE OUR UNDERSTANDING OF SUSTAINABLE ENTERPRISES?

Applying the research methodology inspired no longer be deemed as such because we live by Abraham Maslow, encouraging the study in a state of continual change whereby, the of “best practices” as a means of extracting shifting context alters the conditions by which potent insights from one’s area of research a practice was deemed “best”. Therefore, it is proves to be valuable in many respects. How- important to acknowledge that the insights ever, this research method has limitations and findings presented in this report are and criticism that need to be acknowledged by no means considered uncontested “best when considering the information presented practices”. The findings from this report acts throughout the report. The initial weakness in as data points upon which our team aims this methodology is well articulated by Max to continue strengthening to advance our Neev, who argues the dynamic nature that understanding about the development of exists between people and their environment sustainable enterprises. creates an ever-changing context. As a result, a previously considered “best practices” can

36 Once we acknowledge these guiding princi- In the event that a change leader successful- ples are not instructional in their nature, it ly establishes a sustainable value system, it is important to note the strategic complex- should be understood that the initial time and ity that is involved in the development of a financial investment required might not result sustainable enterprise. As stated above, in a in immediate benefits to the organization. In chaotic system where conditions are con- fact, organizations may experience dimin- stantly changing, the target is always moving, ishing profitability in the short-term further making the process to establish such an oper- delaying the gratification associated with ation very challenging both from a financial establishing such an initiative. However, it can and strategic standpoint. Some examples of be rationalized by indicating how the initial changing conditions include, topography, investment in sustainable business practice cultural nuances and social codes, climate, will build a more resilient and profitable orga- geopolitics and several others. Managing nization in the future. this diverse set of variables is a challenge that allows for margin of error. Finally, the last limitation to acknowledge is the concept of scalability. Central to the Given the changing nature of today’s natural insights derived from the cases above is the environments, it is important to mention the notion that sustainability is governed by the critical role that traceability and measurement natural constraints of Ecosystem Services of ecosystem data plays. In order to acknowl- that support the natural resource of interest. edge and respect the thresholds governing As a result, the level at which an operation the on-going replenishment of a natural can scale is subject to the natural limitations resource, it is necessary to track and measure of the environment in which it operates in. relevant information that enables sound deci- Therefore, when considering the development sion-making for the harvesting of a resource. a sustainable value system, a change leader This tracking serves as a feedback mechanism must identify the maximum sustainable sup- that provides information about the overall ply to determine if the venture’s profitability is status of a natural resource’s welfare in terms attractive. of replenishment rates and scales, stock levels, toxicity levels, and other indicators relevant to The consolidation of our insights derived the natural cycles governing a resource. from the sustainable enterprise assessment, resulted in a visual representation of the intri- Our research suggests it is necessary to cate system that exists between key stakehold- integrate information on ecosystem data into er groups in a sustainable value system called management decisions to make sound judge- the Bottom-Up Pyramid Model. Through data ments that do not compromise the ongoing gathering, analysis and representation, our welfare of a natural resource with short-sight- research team aimed to equip change leaders ed appetite for gains that disregard detrimen- with a pragmatic visual model to help them tal implications. This feedback mechanism better understand the social, economic and is necessary to develop business operations environmental landscape in their area of that do not interfere with the resiliency of interest and identify challenges and gaps that a natural resource. Ultimately, the gathered may need to be addressed to develop a sus- information should translated into rules and tainable enterprise from the bottom up. In the guidelines that dictate how a sustainable op- following section, we will explore the stake- eration works. This will be further discussed holder groups involved in the Bottom-Up in the explanation of our model. Pyramid Model and the critical role knowl- edge plays in stability and thus, sustainability.

37 38 THE BOTTOM-UP PYRAMID MODEL

WHAT ARE THE COMPONENTS OF THE MODEL?

Inspired by Abraham Maslow’s approach, highlight the crucial role of equivalent bidi- our team investigated enterprises that have rectional transfer of knowledge amongst all been known to successfully implement and of them, the Bottom-Up Pyramid model. maintain sustainability principles. Through the assessment of businesses that defied The Bottom-Up Pyramid Model has a conventional business practice by looking unique structure in which an upside down beyond the bottom line to ensure long- pyramid is balanced on a fulcrum point. term viability, we could better appreciate Created for its metaphorical pragmatism, the conditions required to foster sustain- The Bottom-Up Pyramid Model is meant able enterprises involving natural resourc- to convey the fragile and interdependent es. To have a holistic and comprehensive relationship between three key stakeholder understanding of each selected enterprise, groups in a value system: Community, a we resorted to literary reviews from vari- fundamental source of knowledge, Busi- ous sources representing different points ness, and Government, each of which has of view. This allowed us to double check crucial responsibilities involving the sus- deductions and complement information to tainability of a value system. build well informed arguments in addition to other benefits mentioned in the method- Our research suggests pre-industrial heri- ology section. tage and traditional knowledge should be seen as the bedrock to a sustainable inter- The intersection between business and action with a natural resource and the local environment sparks a highly complex communities living off its intrinsic value. system with myriad stakeholders involved. All natural resources are part of our envi- To understand the underlying dynamics ronment’s natural capital, which is the pool of such value system, it was important to of earth’s natural wealth and assets, as it identify the stakeholder groups involved was previously introduced. Therefore, every and the interactions driving the generation natural resource represents a component of value To discern the interdependence of playing a role in the provision of nature’s stakeholders in a sustainable value sys- Ecosystem Services tem, our team developed two tools to help understand the building blocks required to Heritage and tradition is paramount to assemble a sustainable enterprise from the achieving a sustainable value system. When ground up. One of the tools helps visualize seen as a fulcrum point, heritage and tradi- the interdependent relationship between tion provide vital knowledge that should be three fundamental stakeholder groups, and integrated into decision-making processes

39 for the development of sustainable poli- a valuable source of knowledge to sus- cies and business practices. As mentioned tainably maintain the natural stock of a in the section discussing sustainability, given resource. Th roughout our literary most technological interventions to meet review on sustainable enterprises, we found the exponentially increasing demand for evidence pointing to heritage and tradition natural goods have disregarded fundamen- as a source of knowledge that proved to tal Ecosystem Services that support the be key for the maintenance of a sustain- sustainable viability of natural resources. able operation. As demonstrated through Evidenced by increased soil erosion due to the assessment of sustainable enterprises intensive agriculture, collapsing fi sheries, like Monhegan, a fi shery that was able to and rapidly growing infertile land, value maintain a sustainable source of biomass systems involving natural goods must be through the permanency of traditional re-examined to reverse these detrimental pre-industrial knowledge and social codes, consequences to the environment and peo- heritage and tradition is a source of funda- ple in surrounding areas. mental knowledge for the development of a sustainable enterprise in rural communities Our research suggests that some inherited from the ground up. traditional knowledge obtained by local indigenous communities dependent on natural goods for survival, has resulted in

Equilibrium

GOVERNMENT BUSINESS People LT Profit

Sustainable Enterprise

COMMUNITY (Tradition & Heritage) Planet

Transfer of knowledge

Image 3. Bottom-up model: Sustainable enterprise

40 WHY DOES LOCAL HERITAGE AND TRADITION MATTER?

Dictionaries describe heritage it as some- In his book, “Tradition”, Edward Shils thing that can be passed from one genera- describes the concept as “all that a society tion to the next, something that can be con- of a given time possesses and which already served or inherited, and something that has existed when its present possessors came up historic or cultural value. However, there upon it, and which is not solely the product are various non-physical manifestations of physical processes in the external world of heritage that are conserved from past or exclusively the result of ecological and generations. Intangible heritage indicators physiological necessity.” (Shils, 1981). Thus, like culture, lifestyle, literature, and popular tradition has both pragmatic and subjective song play a very important role in helping a components that determine its significance social collective understand who they are. and relevance.

We are interested in the intangible aspect Our research interest lies in the transmissi- of heritage: How it influences and affects ble components of tradition, which are the the ways in which communities go about patterns of action and beliefs governing the conserving their resources. That is, the enactment of those traditions. The patterns choices a community makes about what to of actions from the past are the conditions conserve from the past and what to discard: for subsequent actions; they are precedents Which memories, instruments, and prac- for future actions. Tradition is the past tices to maintain. To this extent, we focus in the present, but it is as much part of on heritage as the composition of customs the present as any very recent innovation and habits that inform how we behave and (Shils, 1981). who we are as a social collective. Ultimate- ly, communities have been using heritage to shape their ideas about the past, present, and future.

RELEVANCE OF HERITAGE AND TRADITION

Heritage and tradition have a reinforcing to the changing landscape of social and relationship, in which both are mutually biophysical contexts, which will be further supporting each other to determine the discussed subsequently. beliefs, practices, and purposes that trans- late into shared lifestyle standards within Our interpretation of heritage and tra- a community. As it will be subsequently dition can be described as the intimate discussed, heritage and tradition passed understanding of a lifestyle that permits over generations serve as a basis to inform the ongoing provision of a natural resource the adequate social norms and collective without compromising its quality and avail- practices of a community whose livelihood ability for future generations. Correspond- depends on a natural resource. However, ingly, lifestyle is an accumulated knowl- it is also important to mention that flexi- edge-set inherited from past generations bility and iteration are crucial features of of labourers who have been interacting a resilient community that seeks to adapt with a resource’s natural cycles to deter-

41 mine a sound balance between its harvest genuinely integrates the dependence of a and self-regeneration. This lifestyle trans- community’s livelihood into the sustainable lates into specific social customs, norms, welfare of a natural resource. and habits stemming from a mindset that

IMPORTANCE OF HERITAGE AND TRADITION IN LIFESTYLE

The underlying mindset supporting the for the consideration of a natural resource’s inherited lifestyle comes from an accumu- thresholds in terms of scale and rate of lated intergenerational understanding and operations. By recognizing the boundar- acknowledgement of the sound intersection ies of a resource’s permissible harvesting between biophysical and social systems. capacity, change leaders can then establish Heritage and tradition are fundamental adequate restraints, in terms of technology pillars of this lifestyle inheritance within and processes, to achieve a sustainable op- a community. In the Monhegan fishery eration. Therefore, we suggest the inherited example, lobstermen interacted with the lifestyle discussed represents an interface at natural systems linked to the ongoing the crossing of social and natural systems; provision of lobster on a daily basis, season it affords an understanding of practices that after season. This interaction characterizes are sustainable for a natural resource. the crossing of the biophysical systems gov- erning the ongoing provision of a natural We postulate there should not be a tension resource and social systems, embodied by between inherited traditional knowledge the lobstermen, their community, and their and technology. When integrated fittingly, collective lifestyle. this valuable knowledge can be embedded in the development of technologies that Through their activities, dictated by the recognize the thresholds of the natural social norms of the community, Monhe- systems governing the natural resources a gan lobstermen were able to identify the business relies upon. To aim for a sustain- thresholds of their operations in order to able operation, it is important a business not interfere with the natural cycles sup- integrates this knowledge as a fundamen- porting the natural resource they relied tal pillar of the mindset underpinning its upon. Our research deductions suggest the culture and vision. In doing so, a business inherited lifestyle of a community depen- will be able to flourish and have long- dent on a natural resource functions like a term continuance without compromising dual feedback mechanism that enables the depletion of natural resources. Additionally, identification of congruent equilibriums we underscore the importance of a flexible between natural and social systems. iterative frame of mind to regularly gauge and attempt new improvements in the pro- The knowledge and feedback afforded by cesses and operations of a business. an inherited lifestyle should be leveraged

IMPORTANCE OF ITERATIVE PROCESSES IN EXPERIENTIAL KNOWLEDGE

Our assessment revealed that a fundamen- been defined, is experiential knowledge. tal aspect of heritage and tradition, as it has Communities that have relied on natural

42 resources for centuries have experiential ible and adapt is key for rural communities knowledge, in terms of physical process- to continue relying on natural resources. es and methods, which has evolved and In the examples and literature assessed we been refined over time. This experiential observed that overtime, newer generations knowledge is passed along generations, of labourers are able to validate and ac- and overtime it upgrades and adapts to the count for inherited knowledge that contin- present conditions of the environment. We ues to work today. Eventually, only those see experiential knowledge as an itera- principles and processes that continue to be tive process because there is a continuous in-tune with the limits’ of natural systems testing of the inherited physical processes will remain as the heritage and tradition of and methods to determine if they are still a community. suitable to the current conditions of natural systems. Consequently, this continuous Our research deductions suggest that an iteration of inherited practices fosters a iterative mindset and a culture of experi- test-lab mindset, in which the community mentation are a fundamental aspect of heri- is always looking to fine-tune their practic- tage and tradition, and the dissemination of es to the present environmental conditions experiential knowledge fosters this mind- and overall context. set.. Inherited experiential knowledge of ancestral practices involving human labour As it is commonly known, the environmen- allows for the continuous testing of tradi- tal conditions of climates in various regions tional methods, to adapt or discard them around the world have been morphing over based on their congruence with current the last two decades. Our environment will natural conditions continue to change, so the ability to be flex-

APPRENTICESHIP AFFORDS INHERITANCE OF INTER-GENERATIONAL KNOWLEDGE

An important take away from the enter- 1. Filtered selection based on an indi- prises assessed is the role of apprenticeship vidual’s fit with the collective and its and its relevance in the knowledge transfer community, and between generations of labourers. Appren- ticeship affords the inheritance of accu- 2. Permissible scale of operation to ensure mulated inter-generational knowledge that natural cycles are able to self-generate. has proven to be sustainable over time. We understand apprenticeship as the process in Apprenticeship allows the more experi- which individuals are selected to join a col- enced individuals of a collective, the selec- lective of people with particular skillset and tion of new waves of incoming labourers. knowledge related to a craft. In the enter- Leaders and influencers act gatekeepers to prises we assessed, apprenticeship played a select those individuals who best fit with fundamental role in the maintenance of the the mindset and lifestyle of the group. livelihoods of people harvesting a resource. Through our assessment we found length of Our research findings point to apprentice- apprenticeship to be a factor linked to the ship as a process providing two beneficial successful selection of individuals with an mechanisms: optimal fit for a collective.

43 The longer the apprenticeship, the more ev- es that employ the outcomes of interactions idence and corroboration for both incum- to select a subset of components to enhance bent and incoming parties to determine (Levin, 1999). whether they are aligned and committed to an underlying worldview that is mindful of Our insight was corroborated by our re- the resident community’s envelopment in search evidence supporting an inclination its surrounding natural systems. towards more traditional and elementary harvesting instruments. In the examples An additional benefit of the apprenticeship assessed, we found technologies and instru- process is the implications on the collective ments that had been employed for several scale of operations within a community. generations because they did not interfere Throughout our research we observed that with the resiliency of its embedding natural a community’s mindfulness for the natural systems. Most of these instruments and systems governing its resources were enact- their capabilities did not require advanced ed in a number of ways. First and most im- technology or large equipment, as they portantly, there was a cap to the number of were from local natural materials inge- people directly involved in the harvesting niously designed to accommodate for the of a resource. In the examples analyzed, we harvesting requirements without compro- found that only fixed number of individuals mising the resilience of natural resources. were allowed to harvest a natural resource. Apprenticeship processes provide a pool It is important to understand and ac- of potential candidates to join a collective knowledge the thresholds delimiting the once someone retires. For the Monhegan wellbeing of the natural system governing community, the limit to the amount of a natural resource. Hence, as it has been active fishermen was crucial in protecting stated, the importance of tracking and its lobster population from depletion like measuring ecosystem data, which serves the hundreds of neighbouring fisheries in as a feedback mechanism. This knowledge the region. can partly be found in the inherited tradi- tions of communities whose craft directly In addition to the amount of people interacts with a natural resource By un- involved in the harvesting of a natural derstanding the processes and methods resource, the technologies being employed inherent in the craft of a community, one may also pose a significant risk to its deple- can discern the relevant variables that merit tion. Throughout our research, we found monitoring. Furthermore, it is important evidence suggesting the harvesting rate and for business stakeholders to understand the scale of some technologies can be detri- critical role those variables play, and find mental to the sustainable welfare of natural means to track those variable and integrate resources. As discussed earlier, large-scale them into the decision-making for harvest- industrial technologies may not be suit- ing operations. able for the harvesting of natural resources managed by circumscribed complex natural The application of large-scale technologies systems with intertwined relationships. to harvest a resource without considering Natural systems are inherently complex, as the implications on the thresholds regulat- they are characterized by the diversity of ing its replenishment, may have irreversible components, the relationships among those detrimental effects to the long-term provi- components, and the autonomous process- sion of that asset. Therefore it is key that all stakeholder groups share the same knowl- edge, and are aligned in the underlying

44 rationale that aims for a sustainable opera- tion. To achieve this, transfer of knowledge and transparency from the community

HOW DOES TRANSFER OF KNOWLEDGE UNITE ALL STAKEHOLDER GROUPS?

Transfer of knowledge is defined as the Policy makers represent the stakeholders explicit exchange of information between that establish laws that protect and govern. stakeholders in a given system. In the These stakeholders enforce the limits and system being explored, a sustainable value regulations required to ensure a business system, our research has identified transfer operation is run sustainably. Without in- of knowledge between each stakeholder to formed policy makers, natural resources are be a crucial element required to achieve at risk of depletion. For example, during re- sustainability. Transfer of knowledge acts source harvesting, the value of the resource as a stabilizing force between stakeholders, can be squandered by extracting and/or establishing a level playing field to deter- selling it at the wrong times or by extract- mine the mutually-beneficial course of ing it with excessive losses. This can be seen action. The three crucial groups of stake- in the forestry sector where most govern- holders are identified as “policy makers”, ments have underpriced timber on public “business owners” and “local communities”. lands, ignoring the dictum that govern- To develop sustainable enterprises, the ments must “devise administrable instru- integration and application of a diverse set ments that enable the government-as-own- of knowledge areas into the business model er to appropriate as large a rent share as is and policy ensures that all needs are met practical” (Ascher, 1999). The result has for each stakeholder. Leveraging a diverse been reckless and excessive timber har- set of knowledge areas provides a more vesting in Brazil, Cameroon, Costa Rica, comprehensive and holistic plan that con- Honduras, Indonesia and Malaysia (Ascher, siders all variables that would impact the 1999). To shape fair and comprehensive long-term success of a given business op- regulations that adhere to the natural eration including people, planet and profit. limits of a given ecosystem, policy makers Therefore, it is important to identify these must communicate with local community knowledge sectors, and determine their members and farmers who have been living systemic influences as fundamental build- off the land for generations. Working with ing blocks required to shape a sustainable local communities provides insight into value system involving natural goods. To the cultural nuances and intergenerational facilitate the successful transfer of knowl- knowledge that is central to the establish- edge, members of each stakeholder group ment of policy, governing a given natural must be present and involved in a produc- resource. tive dialogue that informs the development of policy and business. Local farmers hold invaluable knowledge about sustainable farming techniques that

45 should be integrated into the policy mak- the natural limits of the environment into ing process. Intimate knowledge about the the economics of the business operation to environment and its natural limits comes ensure long-term profitability. from generations of dependency on a given resource. Tradition established by past As with sustainability, transfer of knowl- generations comes from the iterative pro- edge is an ongoing process. Transfer of cess of farming techniques that have been knowledge, described above as a stabilizing refined to the point of sustainability. Given force between all stakeholder groups, is that local communities rely on indigenous required to build and maintain a sustain- natural resources to survive, sustainability able business model by leveraging heritage is prioritized above all to ensure the contin- and tradition to inform the needs of people, ued survival of their people. Thus, a unique planet and ultimately profits. In attempts to social self-restraint is ingrained in local further clarify the powerful driving force communities where respect for the ecosys- behind transfer of knowledge, our team tem services that support the continued identifies a reinforcing loop between new abundance of natural resources, leads to an and old generations that builds tradition, innate understanding and appreciation for which is ultimately passed down to next sustainability. generations as heritage (insert diagram). This iterative process of tradition through Business owners represent a third and final the intimate relationship between people stakeholder in the sustainable value ecosys- and their environment resulting in a sus- tem triage. As with most business owners, tainable relationship is at the heart of this profits are central to their objectives. To wicked problem. Our research team has ensure that people and the environment found that the intersection between past are integrated as a line item in the balance knowledge in form of traditional pre-indus- sheet, transfer of knowledge in the form trial practice and present knowledge in the of a productive dialogue between business form of technological innovation is critical owners and local community members to building solutions surrounding sustain- must be involved in the development ability. In the examples investigated above, of business operations. Leveraging the we have learned that the modernization of unique knowledge set possessed by local the agricultural industry has largely ignored communities, business owners will be able the fragile ecosystem services that protect to integrate the natural limits of ecosys- the continued sustainability of a given tem services into their business model. natural resource. Through the noise made As illustrated by the Flourishing Business from population growth, overconsumption Model Canvas, a resilient business strategy and fixation on artificial solutions, we have must consider the natural ecosystem that ignored the natural limits of our ecosystem. supports the business operation and the unique social dynamics that exist be- tween the economics and the environment (Upward, Jones, 2016). In other words, to generate profit, there are key ecosystem actors and resources that drive profitability. Once these resources are depleted, prof- itability disappears. Therefore, to build a resilient business model, we must integrate

46 HOW DOES POLICY FACILITATE THE DEVELOPMENT OF SUSTAINABLE ENTERPRISES?

The third and final component in the good governance as outlined by the United Bottom-Up Pyramid Model is identified as Nations Development Program (UNDP). “Goverment” representing a group of stake- The following excerpt outlines the five holders involved in the process of policy dimensions that characterize good gover- making and rule of law. Acting as a rein- nance as defined by the UNDP. Although forcing weight, governance through policy this list is not exhaustive, it functions as maintains and regulates policies aimed to a globally recognized standard to which realize organizational and societal goals. “change leaders” can follow when sculpting Given the complexity of governance, it is the conditions necessary to allow for the difficult to capture in a simple definition. development of sustainable of value sys- For the purposes of this investigation, our tems in a given area. analysis is based on the five principles of

1. LEGITIMACY AND VOICE

A. Participation – all men and women should have a voice in decision-making, either directly or through legitimate intermediate institutions that represent their intention. Such broad participation is built on freedom of association and speech, as well as capacities to participate constructively.

B. Consensus orientation – good governance mediates differing interests to reach a broad consensus on what is in the best interest of the group and, where possible, on policies and procedures.

2. DIRECTION

A. Strategic vision – leaders and the public have a broad and long-term perspective on good governance and human development, along with a sense of what is needed for such development. There is also an understanding of the historical, cultural and social com- plexities in which that perspective is grounded.

3. PERFORMANCE

A. Responsiveness – institutions and processes try to serve all stakeholders.

B. Effectiveness and efficiency – processes and institutions produce results that meet needs while making the best use of resources.

47 4. ACCOUNTABILITY

A. Accountability – decision-makers in government, the private sector and civil society organizations are accountable to the public, as well as to institutional stakeholders. This accountability differs depending on the organizations and whether the decision is internal or external.

B. Transparency – transparency is built on the free flow of information. Processes, institu- tions and information are directly accessible to those concerned with them, and enough information is provided to understand and monitor them.

5. FAIRNESS

A. Equity – all men and women have opportunities to improve or maintain their well- be- ing.

B. Rule of Law – legal frameworks should be fair and enforced impartially, particularly the laws on human rights.

Capra asserted that when working with received and integrated into the output. To living systems, continuous feedback and derive key principles directly related to our adjustments are necessary to maintain fair subject matter, biotic resources, we applied and effective involvement of all compo- the conditions for good governance as nents and stakeholders (Capra, 2002). This defined above by the UNDP to the dynam- concept can be applied directly to the rela- ics that exist in each case being explored. tionships involving the stakeholder groups In doing so, our research team determined represented in our model. To achieve the three dimensions that allow for good principles discussed, a symbiotic relation- governance specific to the agriculture and ship must exist amongst all three stake- farming industry. holder-groups, in which active feedback is

FREE MARKET DYNAMICS?

A key observation made during our investi- claim this type of system may lead to mo- gation was that free market dynamics might nopolies resulting in sluggish production not be an ideal model for natural resourc- methods, questionable quality, unethical es. Given the finite character of natural social values, and overall weak competitive- resources, an open market in which the ness in the global market. In the Monhe- prices of goods and services inadequately gan fishery example, it was observed that reflect their true costs due to self-serving business owners entered the market to reap interests of stakeholders allows for exploita- short-term gains from the available stock of tion. In addition, a free market without lobster in the area. Disregarding the natural laws protecting the limitations of the limits of the ecosystem services, business natural systems linked to a resource further owners entered the market with a “gold- enhances the probability for unsustainable rush mentality”. Ultimately, over-fishing business practices. Critics of free markets diminished the biomass of lobster in the

48 area, risking collapse of the fishery. Charac- protect the natural limits of a given natural terizing the dynamics of a free market, this resources to mitigate the risk of overex- case exemplifies the need for regulation to ploitation that may lead to breakdown.

ACKNOWLEDGEMENT OF LOCAL SOCIAL DYNAMICS

Social equity is required to ensure good go- marginalizing other stakeholders with the vernance of natural resources. Establishing most at stake, in some cases even the ques- positive social relations in the area in which tion of survival itself. a business owner aims to operate is pa- ramount to achieving a sustainable value The concept of social equity also refers system. Respecting the land and resources to the social codes that exist among local that local community members have lived communities living off their land’s natu- on for generations allows for a productive ral resources. Through the dependency and meaningful conversation between key on a given resource, communities form stakeholders involved in the sustainable self-management systems fostering a value system. The prioritization of natural community-driven mentality that con- resources to the stakeholders with most at trasts with a market-driven mentality. As stake establishes that relationship from the illustrated in the African Bronze example early-onset of development. Recent eviden- above, the honey is harvested once a year, ce of this tension between stakeholders was and profits are equally distributed among the North Dakota Pipeline protests during local beekeepers involved in the harvesting the last quarter of 2016. As demonstrated process. The preservationist mindset that by the North Dakota Pipeline in the United exists in these communities acknowledges States, indigenous communities have stated the fragility of their own ecosystem and their opposition to the project on the grou- thus, informs their every action including nds that the pipeline and its construction harvest and consumption. Policy should be threatens the tribe’s “way of life, their water, developed at the intersection of social and people and land” (Archambault, 2016). biophysical systems. Outsiders including According to the statement by Alvaro Pop business owners and policy makers un- Ac, Chair of the United Nations Permanent derstand the system differently and hold Forum on Indigenous Issues, “the project different perspectives that are far removed was proposed and planned without any from the intimate knowledge that exists consultation with the Standing Rock Sioux in these insular communities. Therefore, or others that will be affected by this major policy must be informed by the social codes projection. According to the U.S. Army that exist in their insular communities to Corps data, there had been 389 meetings achieve the good governance of natural with more than 55 tribes, including nine resources. meetings with The Standing Rock Sioux Tribe (Medina, 2016). While both sides contradict each other, the fact remains that both sides have yet to reach an amicable so- lution that integrates the needs of all stake- holders involved. This situation exemplifies the conditions in which an unsustainable value system may surface, one that prioriti- zes the needs of specific stakeholders while

49 LOCAL KNOWLEDGE TO INFORM POLICY

The third and final dimension of good with political jurisdictions, it is necessary governance identifies that policies should to be flexible when choosing the scale at be tailored to the community hosting the which monitoring and decision-making natural resource of interest. Acknowl- occurs. This requires an awareness of major edging the differences in types of natural environmental pathways that run through resources, cultural practices, and geograph- landscapes to understand how seemingly ic characteristics, our investigation led us remote areas may be connected in ways to the realization that good governance is that are not immediately apparent” (Fra- composed of tailored policies specific to ser, Reed, 2006). The study illustrates that the region and type of resource. Contrary policy must leverage and reinforce heritage to traditional management theory pop- to allow for the sustainable management of ularized by Taylor, which advocates for the environment and social dynamics in a top-down approach to management, our location with desirable natural resources. research suggests that the inverse is cru- cial to the successful implementation of However, it is important to note that the a sustainable value system. A bottom-up process of tailored policy-making should approach allows for the intimate knowl- be flexible and iterative, as it needs to be edge possessed by local communities to be adaptable to an ever-changing context. successfully integrated in the policy and Acknowledging the dynamic nature of business operations that aim to leverage ecosystem services and social networks in a natural resource in a given area. This a given location, the policies that govern insight was supported by a study assessing a natural resource must be adaptive to the the impact of participatory possesses on changing conditions that occur. Like the sustainability indicator identification and equal and reciprocal relationship that must environmental management (Fraser, Reed, exist between all stakeholders in a sustain- 2006). The research team concluded that able value system to allow for the successful “Multi-stakeholder processes must formally transfer of knowledge, governance and feed into decision-making forums or they policy-makers must acknowledge the social risk being viewed as irrelevant by poli- and biophysical systems that exist and drive cy-makers and stakeholders”. To support the continued sustainability of a given natu- this conclusion, the research identified that ral resource. “since ecological boundaries rarely meet up

WHAT DOES A SCENARIO LOOK LIKE FOR A SUSTAINABLE ENTERPRISE?

The Bottom-Up Pyramid Model illustrates picting an upside-down pyramid balancing the interdependent relationship between on a single fulcrum, this model intends to key stakeholder groups involved in the es- convey the fragile balancing act that must tablishment of a sustainable enterprise. De- exist between local native communities,

50 government, and business to reach a sus- group of stakeholders. Ultimately the goal tainability point where enhanced benefits is to draw from culture, specifically heritage for people, planet and profits are realized. and tradition, to shape business models The connective tissue fundamental to the aimed at monetizing untapped natural structural integrity of the model, is the resource, and policy acting as regulatory relevant equivalent and reciprocal transfer brakes to ensure sustainable practices are of knowledge that must exist between each understood, respected, and enacted.

WHAT DOES A SCENARIO LOOK LIKE FOR A UNSUSTAINABLE ENTERPRISE?

In understanding the optimal scenario to perity. This behavior is representative of a strive for, as previously discussed, it is also reinforcing loop with detrimental effects. important to consider the dynamics of a However, in most occasions, the systemic scenario in which there is not an equal and effects on a location’s natural resource and reciprocal feedback between all stakeholder its people are not foreseen and accounted groups, and thus, is considered an unsus- due to lack of information. tainable value system. In the following section, we employ our model to present In this type of scenario monopolies and examples depicting scenarios of unsustain- oligopolies may form, mitigating the ability able value systems. The scenarios discussed for smaller operations to compete on a are illustrations of unregulated profiteering leveled playing field. Business stakeholders and over-regulation. are driven by a short-term mentality in attempts to satisfy investors. Policy-makers In the scenario described as “unregulated and business owners working with a fou- profiteering”, the below iteration of The ndation built on unregulated profiteering Bottom-Up Pyramid Model depicts a sce- enables a short-term mentality resulting nario in which the underlying mindset of in rapid resource depletion, overexploita- business owners has shifted away from her- tion and ultimately, value system collapse. itage and tradition to a profit-driven mind- As illustrated by The Bottom-Up Pyramid set. Thus, heritage and tradition is largely Model, the foundation built on a cultural ignored by policy makers and business shift toward profiteering leads to an unba- owners, who are mainly focused on growth lanced pyramid in which business owner’s and establishing a competitive advantage intentions and knowledge base was prio- in the market at all costs. In a parallel way, ritized above all other components in the government stakeholders are lured by the framework. This unequal prioritization of influence of business stakeholders and their business interest leads to people and planet promises of more economic activity. As a falling out of the sustainability triage, elo- result, the government provides business quently suggesting the subtraction of their stakeholders with aid and support to facil- interests from the scenario. Although this itate their inequitable operations with the scenario is built on characteristics identi- justification of increasing economic pros- fied in the examples above, it is important

51 to acknowledge that these descriptions are government in the form of subsidization largely assumptions used to illustrate the and economic policy. In this scenario, possible future of sustainability as culture government interest is prioritized above shift s on Th e Bottom-Up Pyramid Model. all other components in attempts to con- Th e eff ects of exploitation of natural resour- trol the price, volume and demand of a ces are exhibited in the impacts from the valued resource. Over-regulation may lead Ok Tedi Mine. Aft er BHP Billiton entered to a non-competitive, sluggish economy into Papua New Guinea to exploit copper as local and foreign business interest are and gold, mining pollution including toxic limited due to the high risk of regulatory contamination of natural water supply for costs and local tariff s making entering the communities along the Ok tedi River, cau- market, profi tably undesirable. In addition, sed widespread killing of aquatic life. over-regulated countries may be indicative of political instability and corruption con- In the scenario described as “over-regula- tributing to a reduced attraction to entering tion”, the below iteration of Th e Bottom-Up the market from local and foreign business, Pyramid Model depicts a scenario in which ultimately stunting economic activity. the cultural landscape has shift ed away from heritage and tradition to a fulcrum point of over-regulation of markets by the

Equilibrium

GOVERNMENT BUSINESS

Over-regulation

COMMUNITY (Tradition & Heritage)

Transfer of knowledge

Image 4. Bottom-up mode: Over-regulation scenario

52 Equilibrium

GOVERNMENT BUSINESS

Unregulated Profiteering

COMMUNITY (Tradition & Heritage)

Transfer of knowledge

Image 5. Bottom-up model: Unregulated profi teering

53 OUR GUIDING PRINCIPLES FOR SUSTAINABLE ENTERPRISES

After extensive research involving literature reviews, case study analysis, primary stakeholder interviews and data distillation in the form of categorizing and sensemaking, our research team synthesized the findings into a set of principles aimed at empowering change leaders with ac- tionable insights to drive their sustainability initiatives. The following list of principles and the corresponding visual representation, entitled “Bottom-Up Pyramid Model Principles” is the summation of our findings that may be applied to changing contexts involving the implemen- tation of a sustainable value system seeking to extract untapped natural resources. It is import- ant to note that these principles are by no means definitive in their meaning and should not be treated as such. These principles aim to shed light on the core values and philosophies required by change leaders to effectively establish and maintain a sustainable enterprise.

54 All Stakeholders • Operate with as much transparency as possible to foster ethical integrity among partners • Cultivate and facilitate feedback culture to ensure effective transfer of knowl- edge among all stakeholders

Community • Leverage intergenerational knowledge to inform policy and business operations

Business • Strive to instill and augment the most added value to your offering

Government • Institute market policy that acknowledges the limits of the natural cycles gov- erning a natural resource and the players involved in its harvesting

Business - Government • Ensure all stakeholders are well-aligned and committed to social and environ- mental responsibilities • Maintain transparency and ethical integrity through third party scrutiny and certification

Community - Business • Business leaders require an intimate understanding of the people and land they wish to operate in • Develop apprenticeship programs to safeguard community knowledge and foster professional development • Provide an opportunity for employee ownership to foster accountability with most at stake

Government - Community • Integrate community representation with a vested interest into all stakeholder groups • Develop a bottom-up approach to enable transfer of knowledge from primary stakeholders

55 Image 6. Ceperiano, an interviewee, herding his alpacas. His rope 56 and poncho were made from the fi bre of his animals. THE ALPACA INDUSTRY IN PERU

WHAT IS THE CONTEXT OF RURAL ALPACA FARMERS IN THE PERUVIAN HIGHLANDS?

Th e last portion of our research project en- livelihoods of hundreds of rural communi- tailed performing an assessment of a natu- ties. Moreover, this sector is also refl ective ral resource that fell within the scope cha- of the ecological problem archetypes chan- racteristics initially defi ned. Th e purpose of ge leaders may face when developing an this assessment was twofold. Primarily, it enterprise from the ground up. Th erefore, would allow us to probe the principles and we think that by testing our fi ndings with a model we have developed against a contem- representative contemporary problem, we porary real-world situation. Furthermore, it will be able to further enhance and refi ne would allow us to explore and propose the our tools. building blocks a change leader would need in order to establish a sustainable enterprise By assessing the Peruvian alpaca sector, involving rural communities. we seek to probe the principles and model we have developed through the synthesis In a similar manner, our research revealed a of our research’s insights. Th e following number of coinciding hurdles for the deve- paragraphs will give context to the con- lopment of sustainable enterprises in rural temporary alpaca sector in Peru to depict areas globally. Th e nature of these hurdles the issues and opportunities inherent in its can be better understood by looking at value system. Additionally, a brief discus- a current example representative of the sion of the history of alpacas is provided overlapping diffi culties that arise when de- to understand the intrinsic value of alpaca veloping a sustainable enterprise with rural farming heritage. Th is legacy is represented communities. Th us, we decided to examine in the lifestyle and traditions accumulated the alpaca wool sector in Peru, which leve- over generations, and is validated as appro- rages a promising natural resource within priate through its continued embracement our intended scope, and encompasses the over time.

LOCATION - PERU

Peru has a population of 31.3 million into three territories: Th e coast (costa), the people, and it is the third largest Latin highlands (sierra), and the jungle (selva). American country in terms of surface area. Various microclimates contrasting in nat- Peru’s diverse geography can be segmented ural, biological, and geographical charac-

57 teristics exist within these three territories. ital city and home to major sear port of This segmentation also serves useful to un- Callao. The Peruvian coast’s advantage lies derstand the tiers of socioeconomic pros- in its three strategically located ports and perity and overall scale of economic activity its major economic hubs. Consequently, in the country. The Peruvian coast and the the coast is home to approximately 60% provinces lying within its territory are the of Peru’s population (INEI, 2008). Prov- most socioeconomically prosperous in the inces located in the coast such as Trujillo, country. At the other end of the spectrum Tumbes, and coastal Arequipa are the is the eastern jungle territory, which has the country’s economic backbones, as they are least economic activity and socioeconomic well interconnected to the capital. Given prosperity. the sierra territory is adjacent to the coast, it is the second most socioeconomically This tiered socioeconomic landscape is prosperous territory, significantly surpass- partly a result of each territory’s accessibili- ing the jungle. The focus of this paper is on ty, in terms of transportation infrastructure, the alpaca sector situated in the highland towards the Peruvian coast and Lima,cap- territory, also known as the Peruvian sierra.

LOCATION – PERUVIAN SIERRA Image 8. Typical landscape of Peruvian highlands resulting from the tricky topography of Andes mountain range

The Peruvian sierra is located within the 870,000 residents; Cusco and Huancayo, Andes Mountains, a colossal mountain the second and third largest urban centres, range expanding through the highlands of have roughly 420,000 and 360,000 residents many countries including Peru, Bolivia, respectively; the succeeding urban hubs are Chile, and Argentina. The Andes contains much smaller (INEI, 2008). Several small several geographies and microclimates that populations are scattered throughout the range from sub-tropical valleys to snowy Peruvian sierra, and they have little or no mountain peaks. Consequently, the Pe- accessibility to the country’s main transpor- ruvian sierra hosts a gradient of plateaus tation systems. and depressions, the majority of which are located higher than 3,800 meters above Approximately 60% of agricultural produc- sea level. The Peruvian sierra geography is tion in the Peruvian sierra is not integrated difficult and irregular, making the overall into the larger trading systems that supply development of communication and trans- the Lima or global export markets; most port infrastructure problematic. The layout of the output is for internal consumption of how rural communities are arranged is (Rojas et al, 2008). Consequently, the fur- challenging; it would require an intricate ther away a location is from Lima, the more and complex road network to provide all agricultural self-provision it possesses. This communities with access to the main road tendency reinforces itself as one move fur- systems (Rojas et al, 2008). ther east towards the more remote highland and jungle territories. The takeaway is that Over the last century, scattered pockets transportation systems in the Peruvian sier- of populations have been settling based ra have not been developed with the intent on natural and geographic assets of par- of intra-departmental connectivity; making ticular areas in the highlands. Therefore, only a few rural locations well integrated the Peruvian sierra has few locations with with external economic hubs, mostly in the large urban populations. The city of Areq- coast. uipa is the largest city with approximately

58 Image 8. Typical landscape of Peruvian highlands resulting from the tricky topography of Andes mountain range

Consequently, the overall interconnectivity The aforementioned depiction sets the con- within the Peruvian sierra is at a disad- text in which the alpaca sector has evolved vantage. As it is subsequently discussed, since its beginnings. Small alpaca farmers infrastructure in the sierra has prioritized are scattered throughout remote rural lo- mineral transportation to external econom- cations, which access to adequate transpor- ic hubs in the coast over intra-provincial tation and communication infrastructure. and inter-provincial road development to More than two thirds of alpaca fibre comes integrate remote communities scattered from these pockets of small farmer popula- throughout the region. The symptoms tions vastly dispersed throughout the tricky described above result in a transportation sierra geography. Consequently there is an system that lacks direct access to several opportunity to support and advance the productive areas offering an attractive sup- livelihoods of these vulnerable populations ply of agricultural goods. by increasing the quality and added-value of alpaca fibre at the initial link/component of the value system, rural farmers.

DEFINITION OF ALPACA

Alpacas, scientifically known as Vicugna Alpaca fibre has a few salient features over Pacos, are South American camelids domes- comparable natural fibres like cashmere, mo- ticated for the qualities and excellence of their hair, and angora. The unique thermal prop- fibre. Alpacas have been traditionally farmed erties of alpaca fibre come from its internal for centuries in the Andes mountain range, microscopic air bubbles. Alpaca wool can specifically in altitudes higher than 3,500 be up to three times stronger and six times meters above sea level. However, alpaca herds warmer than generic sheep wool (MINCE- can be found in countries with lower altitudes such as Australia, Canada, and the US today.

59 Image 9. Huancavelica city (population 50,000) is one of the few urban hubs scattered throughout the Peruvian highlands. Interviews were done in Saccsamarca, approximately 17km away.

TUR, 2003). Although lighter in weight, the AGRI, 2014). More specific characteristics fiber’s durability and strength surpasses that in terms of appearance and fibre qualities of sheep wool’s (CONACS, n.d.) of both breeds can be found on appendix 1. Given its significant proportion, the There are two alpaca breeds: The Huacaya Huacaya breed is omnipresent amongst represents approximately 80% of the Peru- small rural farmers, who are the focus of vian population, and the Suri breed about this paper. 12%; the rest are hybrid crossbreeds (MIN-

THE ALPACA SECTOR TODAY

Peru has the largest population of alpacas, Small alpaca farmer operations in rural with close to four million animals repre- communities account for approximately 80% senting approximately 86% of the total of Peruvian alpacas. This is a longstanding global population (INEI, 2010; MINAGRI, household-supporting activity that provides 2014). The largest alpaca populations live for the livelihoods of more than one million within the Andes regions of Peru (86%) people in the sierra highlands (Gestion, and Bolivia (11%), two locations distressed 2014). Small alpaca farmers own on average with extreme poverty and lack of gov- 50 to 60 alpacas, and are the most vulnera- ernment support to meet basic needs like ble populations as alpaca farming provides potable water, electricity, and education for a significant portion of their sustenance. (CONACS, 2005). Furthermore, the ma- Although many rural farmers grow food like jority of livelihoods in the alpaca sector fall potatoes and quinoa, they still rely on alpaca within this disadvantaged demographic in trade to support other needs such as health need of socioeconomic advancement. and education of children (Pacheco, 2009). Furthermore, their remote rural locations and lack of integration to main transportation

60 Image 10. Homes are makeshift structures made from rudimentary local materials like stone, mudcap and wood. networks is a hindrance resulting in under- dealings with the Peruvian government, and valued remuneration and limited opportu- a well-integrated access to the transportation nities for farmers to integrate added value to systems routed to Lima, the capital. their fibre. Given the provenance of our research ‘s The provinces with largest alpaca populations groundwork, the pertinence of our findings in descending order are Arequipa, Cusco, are more applicable to remote rural com- Puno, and Huancavelica; altogether they ac- munities that have little support from pri- count for approximately 80% of the Peruvian vate or public institutions. Large portions population (MINAGRI, 2014). Arequipa of these communities are located within the and Cusco have the most successful alpaca provinces of Puno and Huancavelica, where operations partly because of their favoured there is a lack of an adequate economic integration with alpaca processing hubs

Image 11. Farmers are living under substandard living conditions. Most do not have access to potable water or electricity

61 in Arequipa and Lima. The characteristics tor’s lifestyle. Less than 20% of the alpaca and context of these rural populations are population falls under medium to big sized aligned with the applicability our research operations, which are funded by private in- aims to deliver. There is an opportunity to stitutions (Arestegui, 2011). Consequently, develop a value system that can provide our focus is on the more than one million rural alpaca farmers with the means to livelihoods afflicted by severe poverty, and live sustainably by leveraging inherited who depend on small alpaca farming oper- traditional knowledge from their ances- ations for their basic sustenance.

ALPACA HISTORY

Given the significance of heritage and tradi- Agriculture and textiles were fundamental tion in the development of our insights, it is socioeconomic activities for the Inca civili- imperative to understand this cultural com- zation. Wool from the camelids was mixed ponent as it relates to the legacy of alpaca with cotton to make cloaks, rugs, hangings, farming knowledge. Within the history of and tapestries. Textiles had a religious and alpacas and their progression with Peru- social connotations (Mosley, 2001). Soldiers, vian culture, there is evidence of knowl- religious guides, mentors, and distinguished edge and practices, which have proven to citizens who served the Inca Empire were remain relevant and sound in terms of their given clothing as the uttermost gesture of ap- sustainability implications. We interpret preciation. The finest fiber from alpacas and this evidence as signals of the opportuni- vicunas was reserved for use of Inca royalty ties to leverage heritage and tradition for exclusively, as they were considered godly envisioning more sustainable processes and garments. (Mosley, 2001) operations in a given business model. A brief discussion of alpaca history provides The processing of the alpaca wool involved context to understand the relevance of tra- stakeholders from all tiers of Inca society. ditional alpaca farming heritage from the After shepherds sheared alpacas, the fleece Inca period. was taken to royal warehouses where it was processed into wool, and distributed ac- The earliest signals of alpaca domestication cording to the specific needs of households. come from the pre-Inca Moche civilization, Mostly Inca men were involved in the wool which existed in what is now the northern processing, while the women performed region of Peru from 100 to 800 AD (Ber- spinning and weaving tasks. rin, 1997). The Moche people were skillful weavers of alpaca fiber textiles; evidence Imperial administrators, elected by the Inca of their expertise in tapestry can be seen governing body, oversaw the distribution of museums exhibiting their artistry. Subse- work over a designated population. These quently, the Inca civilization, which began supervisors managed and assigned the in Cusco around 1100 AD, fully embraced type of task and the time allocation for all their autochthon camelids, incorporating individuals involved in textile production. them in many aspects of their lives and All citizens directly or indirectly involved cosmology. Alpacas were integral to Inca the processing of alpaca wool, and were society, as they afforded several usages like expected to abide by the working program clothing, fertilizer, energy source, transpor- they were assigned. tation, and nutrition (Yates, 2015)

62 Within Inca society there were a special Currently, there is evidence of private and group of people, considered special expert public initiatives leveraging Kamayoq advisors, and revered by Incan royalty for knowledge to teach rural communities their wisdom and expertise; they were farming and veterinary methods to take known as kamayoqs. These experts were care of their alpacas (Hurtado, 2010) tasked with advising Inca royalty in a va- riety of matters that ranged from warfare, politics, astrology, agriculture, and other fields. Agricultural kamayoqs were special advisors on agriculture and climate. They were trained to anticipate weather pat- terns and were responsible for advising on key agricultural practices such as optimal sowing dates (Hellin & Rodriguez, 2006).

Image 12. Winter freezes have increasingly become harsher over the last few years. This picture was taken in early December, the beginning of winter season.

63 Image 13. As one reaches higher altitudes, climate conditions gets harsher, and pastures become ruined and scarcer.

WHAT ARE THE MAIN ENVIRONMENTAL ISSUES AFFECTING RURAL FARMERS?

Today, three underlying issues are affecting Extreme cold temperatures down to neg- rural alpaca farmers as a result of climate ative 20 degrees Celsius have been killing change, and its alteration of standard thousands of baby alpacas over the last weather temperatures over the last decades. winters. (El Comercio, 2016). These problems have negative implications on the quality and overall value of alpaca The cold weather also has negative impli- fibre produced by rural farmers in the cations on grasslands in the Andes. Given Andes. Ultimately this situation underpins the high altitude and adverse topography of a vicious cycle, in which the low income the region, there are not many grass species from bulk sales of fibre is not enough to that can thrive in that environment; areas invest in farming resources to increase the of vast available grassland are not ubiqui- fibre quality. tous (Hurtado, 2010). When extended ice storms hit the Andes, some grassland areas Over the last few years, winter freezes have are covered with ice for several days, mak- become colder and more frequent than the ing food unavailable to alpacas. Overtime, last decades (El Comercio, 2016). Alpaca this continued degradation leads to deple- farmers are the hardest hit because most tion of grasslands, which has been known live 3,500 meters above sea level, where to be a problem of increasing concern over weather conditions are extreme, and special the last years (CONACS, 2005). gear is needed to protect cattle, especially babies, from freezing temperatures at night.

64 Image 14. Pasture is not abundant in the highlands, there are not many grass species that can grow under such harsh conditions

Another significant environmental issue The three components previously dis- inflicting small rural farmers relates to the cussed: Water, grasslands, and climate bodies of water they rely on to feed their al- temperature, are fundamental factors that pacas. Bodies of water such as lakes, basins, need to be addressed in order to maintain creeks, and small rivers have been becom- a sustainable operation in rural farming ing scarcer as a result of climate change communities in Peru. As the climate land- and mining operations. Climate change has scape in the highlands continues to shift, it caused bodies of water to change character- is important to put efforts towards tracking istics and dry up over time. Alpaca farmers this type of ecosystem information to mit- in the province of Puno claim a decrease in igate detrimental implications that can be the availability of water for their alpacas in foreseen with this data. the last five years (Pacheco, 2009).

WHAT DOES THE ALPACA VALUE SYSTEM CURRENTLY LOOK LIKE?

The value system generated by the alpaca who engage in relationships that influence sector in Peru involves several stakehold- the livelihood of these rural communities. ers, each with particular roles and varied Furthermore, we want to illustrate how influences over other participants in the relationships among different stakeholders system. The following paragraphs will shape the gestalt of the alpaca value system describe the alpaca value system to provide and its encompassing behaviour. To achieve a holistic understanding of the dynamics this, we examined the value system to un- influencing how it functions. The emphasis derstand how added-value is generated and of this description is on those stakehold- distributed among different stakeholders. ers our research focuses on, rural alpaca farmers and their corresponding traders,

65 Th e initial link of the alpaca value system amiable relationships with Rural Farmers begins with the farmers who raise, breed, to pact self-serving benefi cial transactions. shear, and look for the wellbeing of their Th is is achieved through up-front payments alpacas. Th e scale of farming operations and word of mouth agreements, which may can be segmented into three levels: Small not be thoroughly respected or have formal farming operations account for 80% of Pe- repercussions as it would be the case for ru’s alpaca population and ranch on average business-to-business transactions (Felipe, 50 alpacas; mid-sized operations represent 2009). Th e informal nature of transactions 10% of the alpaca population and ranch on between Reachers and Rural Farmers is average 150 alpacas; the remaining 10% of shaped and reinforced through the relation- alpacas belong to large scale operations that ships these stakeholders develop. manage more than 500 animals (MIN- AGRI, 2014) Th e inequitable dealings of Reachers with Rural Farmers are evidenced in their por- Rural farmers, our focus, sell the major- trayal of information asymmetry and bulk ity of their fi ber to three stakeholders: purchases realized through their transac- Reachers, Small Intermediaries, and Large tions (Pacheco, 2009). Reachers convey a Intermediaries; together these partici- perception of supply surplus to drive prices pants accumulate approximately 65% of down as much as possible. Th e detrimental all Peruvian alpaca production (Aréstegui, eff ects of this action are dual. Given their 2011). Reachers are the smallest aggrega- remote location, Rural Farmers are dis- tors of all three, and their advantage lies in connected from communication channels their proximity to rural farming locations. to corroborate the transparency of prices Reachers usually live in communal hubs agreed upon with Reachers. Secondly, the nearly located to rural communities, so bulk value of fi bre is the lowest price point, they have a fi rst-mover advantage in terms which puts Rural Farmers at a disadvantage of proximity to fi bre supply. Furthermore, because remuneration value is not deter- Reachers leverage their convivial and mined by the fi bre’s fi nesse and quality, but

Image 16. Store front of intermediary stand, where bulk fi bre is traded between Reachers and Farmers

66 Image 17. Husband and wife couple. Males usually handle commercial transactions, while females take care of agricultural tasks rather by its weight. The bulk unit of pur- enables them to drive down prices as much chase for alpaca fibre has been established as possible. These upfront payments are at 450 grams (1 pound) for several decades correspondingly used by Small Intermedi- (Felipe, 2009). The result of this underval- aries to accumulate fibre from Reachers and ued transaction is a minimized and inequi- Small Farmers. Therefore, Small Interme- table remuneration for Rural Farmers, the diaries settle on transaction prices with most vulnerable stakeholders in the system. Reachers, and occasionally Rural Farmers, based on preset figures dictated by Large Small Intermediaries purchase fibre Intermediaries, who provide the upfront from Reachers, but they may also direct- funding for accumulative fibre purchase. ly purchase from Rural Farmers. Small A similar occurrence develops between Intermediaries represent a bridge between Reachers and Rural Farmers as well. Thus, rural alpaca communities and the large the implications of Large Intermediaries’ purchasers of fibre located closer to or negotiation tactics are evidenced in the un- in urban hubs: Large Intermediaries and derrated value of alpaca fibre and underes- Commercial Agents who are employed by timated remuneration of Rural Farmers. Manufacturers. The trade volume between Small Intermediaries and Large Intermedi- Commercial Agents are wholesale buyers aries is approximately twice as much as that of fibre working directly for a Manufac- traded by Commercial Agents (Aréstegui, turer. These agents are analogous to Large 2011). Large Intermediary trade accounts Intermediaries in the sense that they both for approximately 60% of alpaca produc- directly transact with Manufacturers. How- tion; therefore this circumstance intensifies ever, Commercial Agents are more formal their purchasing power to influence market and principled than Intermediaries be- prices for the succeeding subordinate trans- cause they legally represent Manufacturing actions in the value system (Pacheco, 2009). companies held responsible for operating under fair and equitable conditions with Our research suggests the purchasing their suppliers. Consequently, Commercial power of Large Intermediaries derives Agents have two major fibre providers, from their high procurement volumes and Large Intermediaries and Accumulation manipulative payment methods. Their ne- Centres. The former is characterized for its gotiation tactic is to execute large wholesale large volume and informal nature, as it has purchases with upfront payments, which been previously discussed. Commercial

67 Agents purchase fibre from Large Inter- ers to support their family’s sustenance mediaries and Accumulation Centres in through alpaca farming. As it has been decreasing order. Occasionally, these agents described, this network of various interme- may trade with Small Intermediaries or diaries, informal by nature, is an underlying Reachers. More than a third of fibre pur- driving force shaping how the alpaca value chased by Commercial Agents comes from system functions, and inducing detrimental the informal network of intermediaries due implications for Rural Farmers. to its vast scope and ubiquity throughout the Andes (MINCETUR, 2003). The value system generated by the alpaca wool sector in Peru is more complex and Ultimately, the consequent ramifications of interwoven than the previous description, the alpaca value system in the livelihoods which is a condensed synthesis of the of Rural Farmers have a number of implica- fundamental dynamics and relationships tions. Rural Farmers have a limited expo- shaping the value system, and driving the sure to ethical and equitable transaction remuneration of its stakeholders. There are options that could provide them with fair unfavorable implications resulting from the remuneration, and opportunities to instill way this system has been arranged, which added value to their fibre supply. The vast was not planned accordingly with a long- network of informal intermediaries is ubiq- term vision into the development of the uitous, and arguably the only alternative for multitudinous rural communities involved a significant populations of Rural Farm- in the trade of this valuable fibre.

WHAT ARE THE FUNDAMENTAL INHERENT ISSUES BURDENING HOW THE ALPACA SECTOR FUNCTIONS?

The alpaca sector is impaired by two pivotal Mineral extraction has been a core backbone mutually reinforcing issues, of which one of of the Peruvian economy for several decades. them ensues the other to generate a prolifer- The contemporary mining industry in Peru ating phenomenon detrimental to rural farm- flourished in the 1950s, when policy was ing populations and their longevity. These passed to facilitate and encourage mining populations account for more than two thirds investments through tax breaks, subsidies, of alpaca production, hence it their socio-eco- and other incentives; Peru positioned itself nomic wellbeing is vital for the alpaca sector among the world leaders in silver, copper, to thrive. Moreover, there is an opportunity lead, and zinc production (Chirif, 2008). to advance the socio-economic prosperity of Since the year 1990, after a decade of political these people and elevate the aggregate level and economic turmoil, the Peruvian min- of fibre quality in Peru as a consequence. The ing industry has been a driver for economic underlying issue is related to implications of growth and development in the country. prioritizing the development of a communi- Peru’s mining activity accounts for approxi- cation network for the mining industry. mately 6% of the national GDP and over 60%

68 of exports (Martines, 2012). Today, Peru is tourism destination, and Arequipa for its considered a world leader in copper, silver, significant industrial sector and proximity to lead, and tin production. large mining operations. Consequently, the most successful alpaca operations are located The term ‘neo-extractivism’ refers to the con- in provinces within these two economically tradictory development trajectory of contin- active regions ued dependency on the extractive industries for economic growth, while attempting to use The patterns of poverty among the con- the revenues accrued via the extractive sector trasting spatial differences in the Peruvian to fund social investment programmes or highlands reveal an uneven topography of other socially-oriented development schemes socio-economic prosperity for rural commu- (Yates, 2015). This approach has been crit- nities in the Andes. Socio-economic advance- icized for its failure to provide an equitable ment and opportunities are mostly restricted and sustainable development path for rural to locations with accessibility to major communities in the Andes, and instead en- highways and neighbouring urban hubs. This trenching post-colonial development as usual data reveals complex patterns that emanate (Damonte, 2012). from the intertwining of diverse livelihoods, power relations, public/private institutions, Rural communities engaged in sustainably and poverty. Ultimately, communities located scaled operations and communal trade are in areas favoured by the government stand to being displaced by a broader political agenda benefit from public and private investments. prioritizing the large-scale mechanized indus- trial mineral extraction that lays the ground for capitalist value systems. As a result, rudi- mentary trails that connect numerous remote communities are being destroyed to favour the construction of roads benefitting mining operations. Consequently, younger genera- tions of farmer populations are migrating to large urban hubs like the cities of Arequipa, Cusco, and Lima in search of improvements in income and living standards.This shift rep- resents a strain on the communal non-market forms of exchange and mutual assistance that characterize Andean communities; the result is an exodus from a pastoral way of life and even from the alpaca industry altogether (Yates, 2015). This trend denotes a risk for the Peruvian alpaca sector, and the social DNA carried by the traditional activities and lifestyles inherent in the Peruvian highlands’ peoples

Over the last decades, the central government in Lima has been benefitting two regions with substantial inflows of resources to expand and strengthen socio-economic ties with them: Cusco for its importance as a major

69 WHAT ARE THE ISSUES AND OPPORTUNITIES IDENTIFIED BY THE TOOLS WE DEVELOPED?

To hone in, it is worth focusing on some of nels. Nevertheless, the majority of rural the barriers inherent in the current alpaca alpaca farmers do not have adequate access system, and how they relate to the Bottom- to platforms for direct transaction with -up model. To reiterate, a sustainable value manufacturers. Consequently, as it was system is one that integrates people, planet mentioned, tiers of informal intermediaries and profits into a given practice, and in take on a bridging role, which they leve- doing so, the organization meets the needs rage to reap accrued value for themselves, of the community, and respects natural disregarding an equitable remuneration for limits of the environment to achieve profits alpaca farmers. This evidence points to a sustainably. However, it is important to lack of transfer of information between ma- acknowledge the dynamic and changing nufacturers and farmers. Furthermore, the contexts in which Change Leaders seek to information available it is not thoroughly establish sustainable enterprises. With di- transparent for all stakeholders involved. fferent geographic areas, cultural practices and social codes, come different challenges This wrongdoing is carried out through that should be analyzed on a case by case deceitful means like price asymmetry, basis. misleading information, and unethical negotiation tactics previously mentioned. In the case of the Peruvian Alpaca sector, As a result of this disconnect, a persuasive we identified three underlying barriers that informal platform, conducted by and for need to be addressed in order to develop intermediaries looking for self-benefitting fruitful and sustainable business models. interest, has developed over time. This Each barrier pertains to one of the stake- platform needs checks and balances from holder groups depicted in the Bottom- government stakeholders through poli- -up model: Government, Business, and cy, and sound governance of a commerce Community. By understanding these chal- framework that enables fair and equitable lenges, one can better gauge the myriad of trade for all transacting stakeholders. issues rural farmers are against, and begin to think about how to tackle them. The first Our research suggests, there is a need challenge is most pertinent to government for regulatory market policies that foster stakeholders due to their competency to set equitable transactions for rural farmers, rules and guidelines on how a market can and provide the mechanisms to shift away function, and their regulating role in the from the prevailing reliance on an infor- sound and ethical performance of markets. mal network of intermediaries. We call for government stakeholders to prioritize the Our assessments points to a disconnect, communities directly involved with the underpinned by the difficult topography of fibre’s supply, and to assume a bridging role the highlands, between small rural farmers with the manufacturing sector to pass the and manufacturing facilities. This divide accrued value captured by intermediaries comes in gradients, based on the accessi- towards alpaca farmers for their equitable bility of a community’s location, and its remuneration.. proximity to major transportation chan-

70 Moreover, government stakeholders should gap between rural farmers and factories can foster transparency of information in terms benefit both stakeholder groups by provi- of prices, demand and supply, and overall ding fair sourcing and equitable pay for the market sentiment to safeguard fair tran- fibre, which is a social responsibility asset sactions in all trading stages. We suggest for any business. looking into establishing mechanisms that advance information transfer for all stake- There is evidence of fair and equitable holder groups, as well as implementing sourcing initiatives through accumulation checks and balances to minimize fraudu- centres as mentioned in the description of lent transactions or related activities. To the alpaca value system. However, accu- this end, it is important to be aware of the mulation centres are limited, and do not detrimental effects corruption. achieve an extensive reach throughout the highlands. There is a need for development In summary, we see an opportunity to turn of an accumulation centre network that around the ample trade volume from an has adequate scale and reach for the vast informal network of intermediaries towards scattered rural populations throughout the a formal network of accumulation centres highlands. The lack of access to accumu- that provide alpaca farmers with opportu- lation centres equates into less options for nities to receive added value by classifying rural farmers to trade their fibre equitably, the fibre. In doing this, alpaca farmers will and with added-value through fibre classi- reduce the existent gap with manufacturers, fication. This symptom is more notable in and break a dependency on informal inter- regions that have less accessibility to major mediaries. Overtime analogous initiatives transportation networks. Looking into the have surfaced, but there needs to be a more possibility of developing a network of accu- cohesive and congruous effort to realize a mulation centres can be a pivotal step into scale that can impact the greater portion of shifting away from a reliance of an informal rural communities throughout the Peru- network of intermediaries. vian highlands. The following challenge is relevant to It is worth noting existing partnerships business stakeholders. Due to the early between the private and public sectors to stage development of the alpaca sector, develop networks that trade fibre ethically there seems to be a lack of investment from and equitably. An example is the Pacomar- factories in branding and sales to impro- ca facility, a 12 year-old initiative located in ve the profit margin on alpaca exports. the Arequipa region, and privately funded Currently, approximately 92% of alpaca by Grupo Inca, a dominant player in the products exported from Peru are tops, alpaca sector (Grupo Inca, 2017). This which are fibres that have been washed, well-funded initiative breeds and farms combed, and classified according to their high quality alpacas with aims to improve quality; less than 5% of alpaca fibre exports the fibre’s quality, and partners with local are garments or fabric (Rojas et al, 2008). municipalities to share their knowledge As a result, significant profit margins are with nearby communities in order to ele- lost. Through investments in branding vate the overall fibre quality of contiguous and sales, alpaca fibre has the potential areas (Pacomarca, 2016). Additionally, to generate significant demand in foreign through this initiative, rural farmers can markets as it has attributes that supercede directly transact with commercial agents wools like merino, cashmere, and angora, representing factories owned by Grupo commonly used comparables. Approxima- Inca. This example shows how bridging the tely 10% of exports are textiles including

71 yarn, garments and fabrics, so there is an in ancestral knowledge, and that leverage opportunity to shift focus into boosting local resources instead of relying on costly textile production and considering a stron- technologies. As of 2010, more than 300 ger brand strategy to elevate the material in people have successfully completed training the eyes of global consumers. A comparable and certification by attending theoretical industry to mimic would be the italian gar- and practical lessons over the course of ment industry that has established them- eight months in a training facility (Practical selves as the leader in high quality fashion Action, 2017). through brand recognition and high quality material. Peruvian alpaca factories have the Research suggests several rural communi- resources to emulate this strategy. Ideally, ties lack resources and knowledge of ade- garments and fabrics should represent the quate veterinary and farming practices for majority of exports, which is opposite of the wellbeing of their alpacas. This is partly the current context. due to an episode of terrorism throughout the eighties, which severely afflicted many The final challenge is related to the loss rural towns in the highlands causing exo- of traditional farming knowledge and the dus and death (Yates, 2015). Consequently, social capital of the alpaca farming way alpaca farming knowledge has been wa- of life. As it has been discussed, younger shing away and vanishing as rural alpaca generations of farmers are moving out of communities were broken and abandoned. their rural communities to pursue other However, initiatives like the Kamayoq endeavours in urban hubs. Many of them program are reversing this gloomy episode, are apprehensive about the economic ad- and rescuing pockets of knowledge from vancement alpaca farming can provide, and a few communities that have managed to are choosing to be trained in other occupa- preserve this valuable asset. tions, usually more consistent with urban life. Ultimately, if this trend continues, the We suggest developing initiatives analo- knowledge, tradition, and way of life perti- gous to the ones previously described to nent to alpaca farming will be lost, and with shift away from the momentous informal it, the opportunity to champion a natural network of intermediaries that exists today. resource with the potential to advance the There are two fundamental modifications socio-economic prosperity of more than a to consider. One is related to the physical million rural inhabitants. and communicational disconnect between rural farmers and the ultimate purchasers Throughout our literary review we came of the fibre, manufacturers. The second across a few examples of initiatives addres- pertains to the output quality and overall sing this issue by strengthening and disse- remuneration of alpaca farmers, which minating inter-generational knowledge that needs to be supported by adequate farming continues to be relevant in today’s context. knowledge and equitable pay for an im- This knowledge is related to breeding, proved fibre. As it was discussed, there are veterinary care, and farming practices that, signals of positive initiatives happening, in some cases, traces back to ancestral but there is a need for a more cohesive and inca traditions. An example worth noting concerted effort in order to encompass the is the Kamayoq program led by Practical widely-scattered communities of alpaca Action, an English, privately funded NGO farmers. with subsidiaries in Latin America. This program’s focus is to train individuals To conclude, this assessment is an initial with affordable farming practices rooted glympse at the overall status of the Peru-

72 vian alpaca sector, and it seeks to depict how one can begin to think about tackling the fundamental problems afflicting rural communities. Our viewpoint does not seek to be conclusive or definitive, it is more an illustration of the opportunities available in natural resources like the alpaca.

As demonstrated in our analysis, the bar- riers are complex and intertwined. In order to achieve the goal of establishing a sustai- nable enterprise in the Alpaca industry that is equipped to meet the demand of foreign markets, business leaders must address the disconnectivity among rural farmers, breeding and care education, classification techniques and the need for a revitalization of the alpaca brand internationally. While people or material support can address some of this, it can and should be further enabled by a methodical approach that empowers business owners to generate the greatest impact. In a nutshell, this means planning for a sustainable tomorrow by making deliberate choices today. With the path before business leaders filled with barriers and uncertainty, what is ultimately required is a roadmap that will provide navigational support and empower change leaders to continue the movement toward a more sustainable tomorrow.

73 74 Final Thoughts & Next Steps

For purposes of this section, we are purely It is important to note that our research was examining the implications of this research highly iterative and dynamic. The evolution for future research efforts, whereas im- of our methodology and research started plications for our stakeholders (i.e. initial with identifying an interest in determining recommendations) are explored in greater what it would take to set-up a sustainable detail elsewhere in this report. value system focused on untapped natural resources. This led our research team to In reflection, our research team would like identify Alpaca as a resource of interest, to acknowledge that this process was an which developed into in-depth discussions iterative one that saw our research ques- with our advisors suggesting the explora- tion evolve and develop based on various tion of successful enterprises as a criterion findings. Illuminated by these findings, we by which we measure success. delved into the complexities of sustainabil- ity and its application to the harvesting of On a final note, we acknowledge that natural resources While this phase of the should this research to continue, we should research is officially over, we recognize that employ more elemental data to inform our these findings by their nature require fur- approach, along with other models and ther research to uncover additional layers simulations that might shed new light on of evidence to support our initial findings. the findings we had previously identified. At this point, it may also benefit the study Moving forward, we envision this future to deploy other research methods (such as research will likely involve an examination additional statistical and quantitative tools) of industry-specific dynamics in Peru, and to expand our sample size to inform a such as the advances being made in ma- more robust set of findings. nufacturing technology. These sectoral insights might inform other opportunities to implement sustainability principles in their operation. On a similar tone, a Porter analysis would provide a more contextuali- zed understanding into the unique challen- ges and opportunities that may exist across Peru’s regions. Along these lines, a more penetrating analysis of the opportunity and risks that may exist when deciding whether to embark on a venture as change leader might be beneficial to make informed stra- tegic direction. Further, working with and alongside various government officials that operate within the country of interest, may provide a unique point of entry into the system and permit a more rigorous approa- ch to materialize.

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85 IMAGES

Alpaca Suri http://www.arvi.fr/Nos_voyages/Perou /2012/3-Pisac/images/4711-Centre_lamas_ ALPAGA_SURI.JPG

Alpaca Huacaya http://www.melfordgreenalpacas.co.uk/al- pacas/breeding http://www.melfordgreenalpacas.co.uk/ userfiles/product_images/123/160/Ascen- dent%20EV.jpg

Chris Jordan

Silent Spring (Owls) http://chrisjordan.com/gallery/rtn/#silent- -spring

Blue (water bottles) http://chrisjordan.com/gallery/rtn2/#wa- ter-bottles

Roundup (bees) http://chrisjordan.com/gallery/rtn2/#bees

Monsanto seeds in India & deaths http://chrisjordan.com/gallery/rtn2/#seeds

Tuna fishing http://chrisjordan.com/gallery/rtn2/#tuna

86 87 88 APPENDIX

CHARACTERISTICS HUACAYA BREED SURI BREED

Approximate population 3’200,000 600,000 Its fibers grow perpendicular to its body, Its fibers grow parallel to its body, giving it a giving it a puffy pompous appearance. Also, slenderer and more finessed appearance. Its Description its head is noticeably smaller and elliptical fiber is known for its length and shininess. than the Suri. Its broad colour diversity, give However, it has a smaller range of natural it more than twenty natural tones. colours. Royal: Less than 20 microns Baby: 20 to 23 microns Hair width (tiers) Fleece: 23 to 26.5 microns Medium fleece: 26.5 to 29 microns Huarizo: Thicker than 29 microns Newborn: 7.5 kilograms Average weight Adult: 67 kilograms Average height 90 centimeters Hair length 9 to 12 centimeters 10.5 to 20 centimeters

Appendix A. Characteristics of alpaca breeds

89 MEMBERS OTHER NAME STAKEHOLDER ENGAGEMENT HERD SIZE PER ANIMALS UNIT OF AFFILIATION HOUSEHOLD FARMED TRANSACTION Semi-structured Llamas, cows, Augustina Rural farmer interv. 80 alpacas six guinea pigs Bulk sale Semi-structured Llamas, Benancio Rural farmer interv. 60 alpacas five guinea pigs Bulk sale Semi-structured Ceperiano Rural farmer interv. 120 alpacas six Llamas Bulk sale Victor Intermediary Observation N/A N/A N/A Bulk sale Open-ended Julio Retail vendor interv. N/A N/A N/A Clothes & fabric Open-ended Cesar Community rep interv. N/A N/A N/A N/A

Appendix B. Summary of interviews

90 Appendix C. Interviews were done with farmers from the Tambo Saccsamarca community

Appendix D. Augustina, an interviewee, takes a rest while herding her alpacas

91