Should bike sharing be subsidized? Or privatized?

Capital_Bikeshare_station_outside_Eastern_Market_MetroI’m a fan of bike sharing, as regular readers of this blog know (see this and this), and a satisfied, albeit irregular, customer of Capital Bikeshare, the convenient and well-managed public bike-sharing system in Washington, D.C., which now extends into the suburbs of Maryland and Virginia.

There’s a potential cloud over bike sharing, though, and it is this: So far, at least, no big-city bike sharing system of which I am aware is financially self-supporting.

This doesn’t trouble me. Bike sharing is form of mass transit. If you believe, as I do, that subways and buses deserve taxpayer support, bike sharing does, too. It creates a slew of positive externalities, including reduced air pollution and greenhouse gas emissions, reduced traffic congestion, a healthier populace and the mobility that city dwellers without cars need to get to work or school. (You may be wondering, are cars subsidized, too? Perhaps, but not by as much as you would think, some say. But it’s complicated. A few years back in Slate, Dan Gross argued just the opposite, that governments provide massive subsidies to private car owners.)

In any event, we’ve learning from the bike sharing boom that bike sharing is very popular, but that at the current pricing levels — $75 for an annual membership, $15 for a three-day membership in Washington — it can’t pay for itself. New York’s Citibike was touted as a bike sharing system that would pay for itself with user fees and Citi’s marketing dollars, but it is millions of dollars in the red. Emily Badger of The Washington Post’s Wonkblog wrote a good analysis of the economics of the two systems.

A startup bike-sharing company called Zagster offers an alternative: private bike sharing. It provides bike sharing systems to companies, universities (including Yale and Duke), apartment buildings and hotels for their employees, students and guests. Lately, it’s been making headway in Detroit.

I wrote about Zagster this week for Guardian Sustainable Business. Here’s how my story begins:

Of all the big cities in America, Detroit is among the least hospitable to bike sharing. The city is bankrupt. Its residents are poor. And it sprawls over 142 sq miles (367.8 sq km), nearly enough area to fit San Francisco, Boston and New York within its borders. Winters can be harsh, public transit is dismal and it is, after all, the Motor City.

But a nimble little bike-sharing startup called Zagster is making inroads in Motown. Last year, Dan Gilbert, the founder of Quicken Loans who has invested more than $1.3bn in Detroit, turned to Zagster to start a private bike-sharing network for his employees. The local utility company DTE Energy, as well as the United Way of Southern Michigan and several small companies, followed. This week, General Motors announced that Zagster will make its bikes available to 19,000 employees at the 330-acre GM Tech Center in Warren.

What’s more, Bill Ford, the executive chairman of the Ford Motor Co, has invested in Zagster through Fontinalis Partners, a venture capital firm that invests in “next-generation mobility”.

Tim Ericson, the 28-year-old co-founder and CEO of Zagster, told me: “We’re creating what is almost becoming a citywide bike sharing program, with no public funds and no use of public space.”

As you might imagine, I have some reservations about Zagster’s model. The more we privatize goods and services — private schools, private parks in the form of country clubs, Google’s private bus from SF to its campus, and the like — the less political support there will be for public schools, parks and transport.

Then again, I can’t envision bike sharing come to Detroit in any other way.

You can read the rest of my story here.

The elusive fortune at the base of the pyramid

cimg7634It’s been an exceptionally busy week, beginning with the 2014 edition of Fortune Brainstorm Green (selected videos are online here) and ending with a holiday weekend visit from my new grandson, so I’m going to quickly post a link to my latest story for Guardian Sustainable Business.

It’s a long-ish story about doing business at the bottom of the pyramid, an idea popularized by the late C.K. Prahalad in a book published a decade ago. Here’s how the story begins:

When CK Prahalad‘s book, The Fortune at the Bottom of the Pyramid, was published in 2004, the book made an immediate splash. Its argument was irresistible: The world’s poorest people are a vast, fast-growing market with untapped buying power, Prahalad wrote, and companies that learn to serve them can make money and help people escape poverty, too.

Microsoft founder Bill Gates called the book “an intriguing blueprint for how to fight poverty with profitability”. BusinessWeek’s Pete Engardio described Prahalad, a professor at the University of Michigan business school, as a business prophet. He was awarded honorary degrees and sought out by CEOs.

Ten years later, businesses big and small continue to pursue profits at the bottom of the pyramid. The global uptake of mobile phones has proven that poor people will buy cell service if it’s available at low prices. (It costs a fraction of a cent per minute in India.) Single-serve packages of shampoo, toothpaste and soap dangle from shelves of tiny storefronts in rural villages. Products ranging from eyeglasses to solar panels are being designed and marketed to people earning $2 a day.

The bottom-of-the-pyramid (BOP) market leader, arguably, is Unilever, with its Anglo-Dutch colonial heritage and a chief executive, Paul Polman, who is determined to improve the world. Unilever generates more than half of its sales from developing markets, with much of that coming from the emerging middle class. Its signature BOP product is Pureit, a countertop water-purification system sold in India, Africa and Latin America. It’s saving lives, but it’s not making money for shareholders.

And there’s the rub. If there is a fortune to be made at the bottom of the pyramid, it remains elusive. Partly that’s because doing business with the poor is unavoidably complex, and partly that’s because the notion was oversold, says Mark Milstein, director of the Center for Sustainable Global Enterprise at Cornell’s business school and an expert on the BOP.

“I haven’t seen anyone making a fortune,” Milstein told me. “Unilever’s made money on some products, but they’ve been challenged. Other companies are making profits, but not enough to matter to their organization.”

The story goes on to report on successful and not-so-successful efforts to do business with the world’s billion or two poor people. We’ll be considering this topic again next month at the Guardian, with a live tweet chat on Tuesday, June 10, at noon. You can read the rest of my story here.

Flour power? Soon you may be eating coffee

0408_coffee_cherry_inline_315Maybe because I do a lot of writing in coffee shops (thanks, Quartermaine!), I’ve long been interested in the coffee industry. Many years ago, I wrote about Starbucks in my book Faith and Fortune. Last fall, I covered McDonald’s efforts to source sustainable coffee. And I’m currently reporting a story about Green Mountain Coffee (and looking for its former CEO, Bob Stiller, so if anyone reading has his email address, please pass it along).

Today, though, the topic is a startup company that intends to turn a waste product that piles up at coffee mills around the world into a new ingredient called Coffee Flour, which can be baked into cookies or brownies, combined with chocolate, worked into candy corn and used in a variety of gourmet recipes. This startup, called CF Global, has some impressive investors, including Intellectual Ventures, the company started by former Microsoft executive and renowned foodie Nathan Myrhvold, and two coffee industry giants, ECOM Agroindustrial Corp, a Swiss-based coffee millers and traders,  and Mercon Coffee Corp, a trading firm with roots in Nicaragua. If CF Global gets traction, the company could help eliminate a pollutant (the coffee waste often gets into waterways), provide added income for coffee farmers and create a source of nutritious food for a hungry world.

My story ran today in Guardian Sustainable Business. Here’s how it begins:

Dan Belliveau is not a coffee guy. He is an engineer who has helped design factories for General Motors, Frito-Lay and Starbucks, among others. At the coffee giant, while helping to automate roasting and packing plants, he stumbled upon a big problem: coffee waste.

Specifically, Belliveau learned that billions of pounds of reddish pulp, known as coffee cherry, are left over after coffee beans are extracted from their shells. Some discarded pulp is used to make tea, some is worked back into the soil as fertilizer, but most of it piles up around coffee mills and pollutes nearby waterways.

Why, Belliveau wondered, couldn’t the waste be made into something useful?

His questioning eventually led him to invent coffee flour – a nutritious, gluten-free meal, made from coffee cherry, that can be baked into cookies, brownies, granola, candy corn and even chocolate. If coffee flour becomes a success, it could help solve an environmental problem, supplement the income of coffee farmers and deliver nutrition to a hungry world.

The story is generating a lot of, er, buzz. More than 2,000 shares on Facebook, as I write this. You can read the rest here.

A lean startup seeks to “green” travel

United_Airlines_Boeing_767-322ERI’m writing this blogpost in London’s Heathrow Airport, on my way home after a brief visit to the UK.  I had a great trip, visiting colleagues at The Guardian and relatives in Manchester, today is not a good day for my personal carbon footprint. According to this carbon footprint calculator, my share of the emissions on the flight back to Washington, D.C., will be about 0.52 metric tons. That’s roughly the equivalent of driving 2,100 miles (four months of driving, for me) in my 2008 Honda Civic hybrid. So my efforts to occasionally ride my bike or take Metro instead of driving are trivial, to say the least, when compared to my air travel. I shudder to think of the carbon impact of a family vacation to Europe.

The point is, air travel is a carbon-intensive activity and there’s not much any of us can do about,  other than to travel less. (Taking a ship to London wasn’t an option. And none of the airlines use low-carbon fuels at scale because they’re too expensive.) That’s one reason why I was intrigued to hear about TripZero, a startup that aims to offset the carbon footprint of travel, at no cost to the traveler.

I met TripZero’s founder, Eric Zimmerman, early last year, and we reconnected when he launched the website recently. Here’s my story about TripZero, which ran the other day in Guardian Sustainable Business, begins:

About seven years ago, a publishing executive named Eric Zimmerman heard a speech by Eric Corry Freed, the author of a book called Green Building & Remodeling for Dummies. Freed talked about the responsibility that business has to protect the environment, and the stories we will tell our children about what we did. “Have you ever sat in the audience and felt someone was talking just to you?” Zimmerman asks. “That was one of those moments.”

Zimmerman was moved. He did a deep energy retrofit on his home in Carlisle, Massachusetts. He put solar panels on his roof. He stopped outsourcing his company’s printing to China, and he helped to create an industry brand called Green Edition that sets standards for sustainability in book publishing.

It wasn’t enough. About a year ago, Zimmerman, 48, left his job to start a company called TripZero that offsets the carbon emissions generated when people travel by plane, train, car or bus – at no cost to the traveler.

A lean startup – “The company is me,” Zimmerman says – TripZero is tackling one of the most intractable problems in corporate sustainability: the carbon footprint of travel and tourism.

For now, TripZero is a modest enterprise. Essentially, it functions as a travel agency. If you book hotels on its website, it collects a commission from the hotel owner and uses a portion of the commission to buy verified carbon offsets. It’s a clever idea, and it should appeal not only to eco-minded travelers but to NGOs and small businesses when they book travel. You can read the rest of my story here.

2-TripZero Homepage Boat

Small is beautiful. Maybe.

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There’s lots to like about Alter Eco, a San Francisco-based food company that aims to do social and environmental good. The company supports poor farmers, sources from cooperatives, offsets its carbon footprint, etc. Better yet, its products are tasty. I’m partial to the organically-grown, fairly-traded Dark Quinoa Chocolate Bar, which you could think of as a politically correct (and pricey) version of Nestle’s Crunch.

There would be even more to like about Alter Eco if it was a bigger company. The challenge for its founders,  Mathieu Senard and Edouard Rollet, who I visited last fall in San Francisco, is to figure how to drive growth without compromising their values.

My story about Alter Eco, which ran this week at  Guardian Sustainable Business, begins like this:

What would a truly sustainable food company look like? That’s hard to say, but a small company called Alter Eco, which sells quinoa, rice, chocolate and sugar grown in Latin America, Asia and Africa, offers a clue or two.

Striving to hit the very highest environmental and social standards, Alter Eco sources only Fair Trade commodities, buying from small-farm co-operatives. Its products are certified organic. It offsets its carbon emissions. And, when the founders could not find packaging that satisfied them, they designed their own: a bio-based, backyard-compostable package with no petroleum or chemicals or genetically modified corn.

“We are trying to push the envelope towards full sustainability,” CEO Mathieu Senard says.

The trouble is, Alter Eco is small – it reported just $7m in revenues in 2012. When I visited co-founders Senard and Edouard Rollet at Alter Eco’s headquarters in San Francisco, they told me that sales topped $10m in 2013 and are expected to jump 44% to $14.5m this year. “We can go to $100m in the next five to 10 years,” Senard claims.

That said, big food companies measure their sales in billions, not millions. General Mills booked sales of nearly $18bn in the 2013 fiscal year, meaning it does more business in a day than Alter Eco does in a year. For small, socially responsible companies like Alter Eco to have a big impact, they either need to grow rapidly, or influence their much larger competitors, or both.

Part of the problem facing Alter Eco is pricing. Paying Fair Trade prices, sourcing from smaller coops and carbon offsets all cost money, costs which have to be passed along to consumers. (That 2.82 oz. quinoa bar retails for about $3.50.) Higher prices, of course, limit demand–and growth. This is a challenge that has been overcome by a handful of values-driven food companies, including Starbucks and Stonyfield Yogurt. But not many.

You read the rest of my story here.

A socially-responsible energy bar

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Until I met Danny Grossman, I didn’t think America needed another energy bar. You may not have noticed but this great land of ours has entered what might be described as a golden age of energy bars. There’s Clif Bar, PowerBar, Balance Bars, Kind Bars, Chia Bars, LaraBar, Promax Bars, vegan, gluten-free, all-natural, cereal, protein, crunchy and gooey bars. Humble, old-fashioned granola bars and high-tech, scientifically-engineered superfood bars. And of course, as The Onion reported a while ago in a story headlined Women Now Empowered by Everything a Woman Does, energy bars fortified with nutrients especially for women have become popular:

Unlike traditional, phallocentric energy bars, whose chocolate, soy protein, nuts, and granola ignored the special health and nutritional needs of women, their new, female-oriented counterparts like Luna are ideally balanced with a more suitable amount of chocolate, soy protein, nuts, and granola…Proto-feminist pioneers like Elizabeth Cady Stanton and Susan B. Anthony could never have imagined that female empowerment would one day come in bar form.

Then there’s the the Yaff Bar, “an all-natural bar made to share.” To share with your dog, that is. This is not a creation the Onion. You could look it up.

But back to Danny Grossman. He’s the founder of Wild Planet Toys, which made socially-responsible toys, and he has been involved with the world of socially-responsible business for decades. He and his friends Mel and Patricia Ziegler have just launched Slow Food for Fast Lives, an energy-bar startup, that I wrote about last week in the Guardian. Like most entrepreneurs, Danny and his partners are optimists.

Here’s how my story begins:

At 55, Danny Grossman already has lived a full life.

He enjoyed a fascinating career in the foreign service: He was stationed in India and in Soviet Union-era Leningrad, where he was doing human rights work before he was accused of being a spy and expelled.

And 20 years ago, he started a company called Wild Planet Toys, which sells socially responsible toys designed to spark childrens’ imaginations. The company grew to have revenues of $60m before it was sold to Spinmaster, a bigger firm, in 2012.

Now Grossman is back in startup mode, this time with a company called Slow Food for Fast Lives that sells healthy, natural energy bars for people on the go. His partners in the venture are also serial, purpose-driven entrepreneurs: Mel and Patricia Ziegler, who founded Banana Republic and Republic of Tea.

indian-bar-final-smx5001The Slow Food for Fast Lives energy bars will stand out from the crowd mostly because they are savory, not sweet. Flavors include California, Moroccan, Indian and Thai. I tried them when I visited with Danny a while back near his home in the West Portal neighborhood of San Francisco, where he grew up; they’re quite tasty.

So crowded is the energy-bar market that consumers can choose among socially-responsible bars.

Clif Bar sources organic ingredients, offsets its carbon emissions, has a LEED platinum headquarters and promotes community service.

Two Degrees (which I wrote about here) provides a meal for a hungry child for every bar it sells.

Is there room in the market for another energy bar? Hard to say, but Danny Grossman is a good guy, so I hope Slow Food for Fast Lives finds its niche, too.

My beef with B Corps

logoThere’s lot to like about the fast-growing B Corps movement, and one thing to dislike, as I explain in my latest column for Guardian Sustainable Business US.

If you’re reading this blog, you are probably aware of B Corps. The idea takes a bit of explaining. B Corps are businesses that are certified by a nonprofit organization called B Lab to meet what its backers call “rigorous standards of social and environmental performance, accountability, and transparency.” These businesses win certification much in the way that buildings are certified to have meet LEED environmental standards by the nonprofit U.S. Green Building Council; they have to complete an assessment of their performance, provide documentation and be open a review from B Lab, as the group explains here.

But the term B Corps is also used to describe “benefit corporations,” a corporate legal structure that has been set up by legislation that has now been passed by 20 states, including, most recently, Delaware. Benefit corporations need not be certified by B Lab, although many are.

It’s unavoidably confusing, but my beef with B Corps is simple.

The voluntary certification system makes sense to me, for reasons that I explain in the story–it’s a way to signal employees, customers and investors that a B Corps aims to do better than conventional companies. Most B Corps are small and privately held. Among the best known are Patagonia and Ben & Jerry’s, which is a unit of a conventional C Corps, Unilever.

The legal “benefit corporation” purportedly gives companies more freedom to serve society as a whole than conventional corporations have. I’m skeptical about this claim, to say the least, and I worry that it could be counterproductive–because it implies that conventional companies, which make up the bulk of the global economy, need to pursue profits, at the expense of broader social and environmental goals. This seems wrong on the face of it. After all, if Ben & Jerry’s can be certified as a “good” B Corps, doesn’t that mean that its parent company, Unilever, can be “good” too?

My worry is that the implicit argument — that most of the world’s companies don’t have the freedom to do the right thing for society — undermines faith in capitalism (which is fragile, at best, for good reason) and that it discourage reformers inside and outside of big companies who are pushing corporate America to do business better. It’s a bit smug to suggest that traditional companies can’t do as much good for the world as B Corps can.

Here’s how my story begins:

To the supporters of B Corps - benefit corporations that say they aim to serve workers, communities and the environment, as well as their owners – 1 August 2013 was an historic day. In what B Corps described as “a seismic shift in corporate law,” the state of Delaware, where one million businesses are legally registered, enacted legislation that will “redefine success in business” by giving the owners and managers of legally recognised B Corps protection as they pursue “a higher purpose than profit.”

The B Corps movement has much to be proud of: it has built a brand that stands for good business, attracted hundreds of committed followers and sparked debate about the role of business in society. But claims – sometimes made explicitly, sometimes implicitly – that B Corps have more freedom to take an expansive view of their social and environmental responsibilities is not only mistaken, but potentially damaging to the cause of sustainable business.

After all, if conventional companies have no choice but to focus narrowly on maximising short-term profits, at the expense of workers, communities and the planet, then we’re in a heap of trouble and unlikely to get out, because 99% of US businesses today are conventional C Corps, and most are likely to remain so.

You can read the rest here.

Cause: Eat, drink, be merry, do good

IS2C6024 smallImagine a bar and restaurant that, like Newman’s Own, gives all of its profits to charity.

Beer and benevolence, it’s been called. Drafts and donations. More fun, in any case, than salad dressing.

That’s the idea behind Cause, a philanthropub (“a bar where having a good time helps a great cause”) that opened last October in the U. Street/Cardozo neighborhood of Washington, D.C., at 1926 9th St. N.W.  I’ve been three times–first to kick off the new year with the D.C. chapter of Net Impact, then to interview founder Nick Vilelle and this past week to have dinner with my wife.

Cause isn’t alone. “Have a pint, save the world,” says the Oregon Public House, which plans to open soon in Portland, a hub of both craft beer and NGO activity. In downtown Houston, bar owners came together last year to open the Okra Charity Saloon; customers, who get a vote with every drink, decide which charity should receive the next month’s profits. The ideas for these charity pubs evidently arose spontaneously and independently. They’re the latest in a wave of mission-driven businesses that blur the lines between the for-profit and non-profit worlds. [click to continue...]

d.light: Solar power for the poor

A girl in India, studying with d.light

A girl in India, studying with d.light

About three decades ago, Donn Tice was an MBA student at the University of Michigan, studying with the late C.K. Prahalad, who was developing his argument that companies can make money and do good by creating products and services for the world’s poorest people. It’s an exciting notion, popularized in Prahalad’s  influential 2004 book, The Fortune at the Bottom of the Pyramid.

Today, Donn Tice is the CEO of d.light, which sells solar-powered lanterns to the poor. He’s trying to prove that his teacher was right, that a fortune awaits those who can create and sell life-changing products that help the very poor.

For now, this remains an unproven hope. Dozens of startups have ventured into the global south, selling everything from $100 laptops, cheap bikes, clean cook stoves and solar panels to the poor. Some have enjoyed success [See, for example, my blogpost, Clean Star Mozambique: Food, fuel and forests at the bottom of the pyramid] but few have achieved meaningful scale. Or made anything approaching a fortune.

The good news is that d.light is getting there. The company is now selling about 200,000 solar-powered lanterns and lighting systems a month in about 40 countries. By its own accounting, d. light has sold nearly 3 million solar lighting products and changed the lives of more than 13 million people. And, if all goes according to plan, the company will turn profitable this year.

“In addition to bring lighting to people who need it and power to people who can’t acccess it –which is our mission–we think we have the ability to demonstrate that this is a business model that works,” Donn told me, during a recent visit to the d.light offices  in San Francisco. Earlier this year, d.light was recognized with the $1,500,000 Zayed Future Energy Prize.

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RSF Social Finance: Making money, making change

Happy customers of Revolution Foods

Happy customers of Revolution Foods

If you have a few extra dollars in savings, and you’d like to earn more than 0.00001% interest or whatever it is your bank or money market fund is paying, and you’d like to support socially-conscious businesses, you’ll want to take a look at RSF Social Finance.

RSF Social Finance is a financial services organization of modest means (about $145 million in assets under management) that is bursting with big ideas and bold rhetoric. It calls itself “a leader in building the next economy.” It seeks to generate “social and spiritual renewal through investing, lending and giving,” Its mission is to “transform the way the world works with money.”

Whew. What’s going on here?

To find out, I visited RSF Social Finance’s offices in the Presidio complex in San Francisco last week to talk with Don Shaffer, the organization’s president and CEO.

At the simplest level, RSF looks and acts very much like a bank: Its flagship product, the Social Investment Fund, takes deposits and makes loans to so-called social enterprises, a term that’s widely (and often carelessly) thrown around to describe businesses or nonprofits whose intention is to improve society and the environment.

Deciding what qualifies as a social enterprise is subjective, at best. That said, the RSF Social Investment Fund supports companies and nonprofits that, by all appearances, do great work. Among them: [click to continue...]