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  • Nick Keppel-Palmer

Business is screwing up nature

The way we design supply chains has to change - a lot


It's been a while, apologies. We've been busy in Mongolia on our quest to find a way to restore nature systematically. In a way we've come full circle. When we started Good Growth we were convinced that the structure of business was at the very least problematic for nature. And now we know it's worse than that. The industrial design of super efficient supply chains is not just incompatible with nature, it destroys it.


We've gone into the forces that are driving environmental degradation in the rangelands. And yes it's complicated. There are the effects of climate, the incursion of extractive industry, socio-economic and demographic changes, hearts and minds issues, difficult science.


But the foundation of all the problems in the landscape is human. It's not just that we became disconnected from nature; we designed our business systems to treat nature as a resource we could exploit without consequence.


We were wrong.


It's a system flaw - all the 'good' things about the industrial business model we have relied on for so long, such as scale and efficiency are really not so 'good' when they penetrate, and then dominate, a landscape.


So now we really do need to redesign business for nature.


Single commodity supply chains wreak havoc on the landscape.


There is a not-so-white lie peddled in environmental world - that there is such a thing as 'sustainable production'. It's a comforting idea for brands who operate traditional sourcing chains - they can pick and choose raw materials that are somehow 'sustainably produced'.


It's nonsense. 'Sustainable production' is an oxymoron. It's the picking and choosing that causes the natural landscape to degrade. Time to spell out the reality.


There is no such thing as 'sustainable production' - only 'sustainable landscapes'.


It doesn't matter how certified, how organic, how carefully produced something is. If a single commodity supply chain penetrates a landscape it creates a massive environmental and economic distortion. Pineapples in Costa Rica, cotton in India, cashmere in Mongolia.


The Environmental Damage


In Mongolia, since the end of the Soviet era, market forces have driven goat numbers up and up. Progressively goats have become the dominant commodity in the landscape. More goats equals more money. At the same time the disappearance of alternative jobs has pushed more and more Mongolians into herding, with herder numbers estimated to have doubled from 90,000 to 180,000. Herd numbers and herd sizes are growing.


But the goats eat everything.


So the rangelands are being eroded and turned into desert. Larger herds don't just eat everything, they also are less mobile so congregate in one place 'like locusts'.


It's a massive problem - but the root cause is the other end of the chain.


The Economic Trap


What's stopping the 60 to 70% reduction in goat numbers that's necessary to start bringing the rangelands back into balance?


Money.


More specifically income dependence on cashmere. In the 3 areas in Mongolia where we're focused the herding households are disproportionately dependent on cashmere for income.


Over 170,000 hectares 75 families between them have around 5 tons of de-haired cashmere wool and another 10 tons of sheep wool, horse hair and camel wool. The cashmere is worth $500k to them, the rest $20k.


Cashmere is the only game in town. The price of cashmere paid to herders doesn't change if their wool ends up in a luxury jumper selling for $1000 or a chemically coloured cheap sweater selling for a (mendaciously miraculous) $75.


The only way to earn more money is to have more goats. The only way to insure against catastrophic weather events is to have more goats. The only way to protect against fickle buyers is to have more goats.


Herding in Mongolia is a difficult way to make a living. Winters can be harsh, killing many animals. It costs money to send kids to school. Cashflow is always a problem - there are big gaps between paying out for livestock and earning money from sales of fibre. Herders need cash - which is why they are often at the mercy of cash buyers. They have an expression which is something like "better cash today than a higher price tomorrow".


Single commodity chains create monocultures


Cashmere has driven out all the diversity of value in the landscape. Healthy natural environments are diverse - yet human economic systems create monocultures. The camel, the sheep, the horsehair - all worth nothing compared to cashmere. So the number of goats keeps going up.


No attempt can be made at regeneration without addressing this problem first.


If we're not reducing the goat numbers we haven't got a hope of restoring nature.


The only way to reduce goat numbers is to switch the herders away from an income dependence on cashmere.


Their incomes need to be diverse to reflect the diversity of nature. Value needs to be diverse to sustain the diversity of nature. We need to be creating value for all of the natural materials in the landscape, not just a tiny selective bit of it.


I am yet to see a sustainability program that even makes a decent attempt to address this problem. No amount of training and traceability and monitoring and capacity building is going to make any difference if we don't reverse the monoculture.


"Sustainable production" has zero impact at landscape level. Millions of well looked after goats are still too many goats. Injecting a bit of green into your supply chain does not solve the problem.


Unfortunately - despite all the good stuff they do - conservation programs often exacerbate the monoculture problem in the way they seek financial longevity by "linking" to (always) a commodity market - i.e. exposing the landscape to the ravages of single supply chains. It's a trap which they need to break out of - more on this shortly.


And ESG - if we're being kind - just keeps score. Mostly it just points out "risks" to the current business model.


The ONLY way to address this problem is to change the way supply chains act on the landscape. To reverse the picture above - create value out from and for the landscape not extract value from it.

  • Pay more for less - in Mongolia that means pay more for fewer goats.

  • Buy all the wool from all the animals and create diversity of value.

  • Pay the herders upfront - shift the income risk from them to us.

  • Link payments to herder directly to delivery of landscape stewardship.

  • Create new value for the natural materials that are currently ignored.

  • Long term commitment to the landscape.

Diversifying value creation is crucial - and the fun bit. It means shifting product innovation into and driven from the landscape. So for us creating yak wool blankets, acoustic ceiling panels from camel wool, fertiliser pellets from - um - sheep dung. A bunch of products from one place in a value chain designed to create maximum value for that place.


If we do all that we have a chance to convey place value all the way through the product value chain to the end buyer. Which would go a long way to reconnecting people back to nature - helping them to identify again with nature. One of the casualties of industrial chains is our sense of place and our sense of origin.


(Those of you who were at Anthropy will know I am kind of obsessed with this - and think the world would be a much better place if all products retained the same kind of source of origin we get in wine. Come to think of it - supply chains would be a heack of a lot less destructive if they were modelled on the wine value chain which retains place value whilst delivering economy of scope).


All of this adds up to brands shifting from off takers - buyers of (how they wish) "sustainable fibre" - to catalysts for regeneration. But to do that they have to change the way they buy - pay against environmental outcomes, and - crucially - collaborate with others at a landscape level.


It's what we call 'collaborative landscape action'.


Why does it have to be collaborative? Because there is no "sustainable production" - only "products from sustainable landscapes". And for a landscape to become sustainable all the value creation needs to be aligned to natural diversity. The opposite of a monoculture.


The other thing I love about this reversal, is that it changes the role of the people who live in the landscape. No longer seen as simply "producers" they become stewards, custodians of the landscape.


Regeneration requires a marriage


I've come to think of successful landscape regeneration as a marriage between the people in the landscape and the brands that make stuff out of the materials in that landscape.


There needs to be a reciprocal commitment from both parties to do everything they can to restore that landscape - which means the herders becoming stewards of the landscape and the brands committing - long term - to buy differently.


The thing that makes the marriage work - and the bit which until now has been overlooked - is a new design of value chain. Landscape out, diverse, with place value reinforced and amplified throughout.


It starts with a commitment to buy differently - but this is unbelievably hard.


For a start most clothing brands have *no idea* what is really going on at the other end of the chain. Only 14% of clothing companies know even the country where their raw materials are produced or grown. That's really not OK. (Great report here).


Then the big ones split their sustainability function from their procurement arm. These are two completely different worlds which desperately need to come together.


A re-booted sourcing department that really is focused on sustainable landscapes would behave in a completely different way - collaborative, obsessed by value for the landscape - not from it, disdainful of certification programs that are input based, and above all paying more for hard reductions in livestock numbers. Perhaps the biggest shift would be long term commitment to place - multi-year commitments to the stewards of the landscape.


No brand can do that on their own. But in aggregate they can.


Roll on the revolution. Watch this space.




#regenerativebusiness #goodgrowth






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