01 April 2006

Social Entrepreneurs: A Fool for Markets - The Future of Conservation?

Two articles appearing side by side in the March 25th edition of The Economist contribute to my concerns about the future of conservation tonight. The first is a profile of Vinod Khosla, the Silicon Valley billionaire, and his efforts to move our culture toward clean energy. The second is an expose about the Sumalindo Lestari Jaya timber concession in Indonesia, a country I have been fascinated with for some time.

Like many entrepreneurs these days (see my previous post on Iqbal Quadir), Mr. Khosla, the founder of Sun Microsystems and a partner at the venture capital firm of Kleiner Perkins, is turning his attention to improving the world. In California, he is taking on the oil industry by promoting a statewide referendum designed to build investments in clean energy technologies through increased taxes on oil production.

His particular interest is in "cellulosic" ethanol, derived from agricultural waste. But his mission is larger than that, according to The Economist, "His plan is to use technology and entrepreneurship to tackle big social and environmental problems." Sounds great to me.

As Mr. Khosla told the magazine, "In venture capital, we fail far more often than we succeed...I've decided that I'd better focus on taking on problems that really matter, so that when I win it makes a difference to the world." Mr. Khosla, if you're reading, sign me up.

Making a difference in the world, that is why I got involved in the public benefit sector. Yet, in civil society, we are so fearful of failure that we become risk averse at the precipice of innovation. After all, we use "donor dollars" to affect change and, with little financial return for our donor-investors, we may not dream as big as we must to get the job done. We are beholden to those contributions and, if we fail, we risk losing those donors in the future. Perhaps I'm in the wrong sector.

But take a look at the timber project on the island of Borneo, the Indonesian half of which is called East Kalimantan. It has more than its share of risk and turns out to be quite exciting. According the UN's Food and Agriculture Organization, as reported in The Economist, "Indonesia is losing almost two million hectares of forest a year -- an area about the size of Wales or Massachusetts. Over the past 15 years, that amounts to one-quarter of its forest cover."

Illegal logging and clearing for agriculture -- primarily plantations or ranching, but also small farms and wood for fuel -- are the culprits. The problem is there are both devastating ecological impacts of such clearing and often-adverse impacts on people, whether from flooding, loss of revenue due to accelerated decreases in timber stock, polluted waters, and even the facilitated spread of disease pathogens.

The article reports the 2004 findings of the American Forest & Paper Association, an industry group, which concluded "illegal wood depressed world timber prices by between 7% and 16%, depending on the specific product. That competition, it argued, cost American companies alone some $460 million every year."

Such cheap wood resulting from illegal logging also "puts pressure on legal operations to cut their costs to compete, generally leading to lower wages and poorer working conditions for their employees."

One solution being tested in Indonesia, as well as a few other forest producing countries, is a barcode tracking system. Attached to the timber stock, the barcode can be scanned to reveal the location of the cut, where it is on the globe in real-time, and its ultimate destination.

Of course, this creative approach hangs on whether there is a premium market for sustainably harvested timber. However, it may potentially lead to better access to global markets, especially in the US where consumers are beginning to make green-conscious choices. Companies like Sumalindo "believe that there is money to be made by following the law and taking care of the forest in which it operates," says The Economist.

Ideas like this intrigue me. They could have a profound and pragmatic impact on how we design conservation in the future. I am both excited and a little apprehensive about this, however, as I begin to wrestle with whether we -- the conservation movement -- have the stomach for such enterprises. The risk is huge and we don't have a high risk-threshold, as I've noted.

In conversation with a colleague in Washington the other night, I compared our traditional approaches with that of the emerging microcredit and microenterprise markets used by such entities as Grameen Bank. Might this not provide a third, even potentially better path for conservation?

I don't have the answers, but have started to wonder whether following that third path might just save the conservation movement from the slow, methodical and, ultimately, dependent path we're on. I wonder about this because it does not seem, in the face of growing resource and development competition, that slow and steady can win this race.

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