The Need of New Business Models for a Sustainable Evolution

Working Day 5 june 2013- The Need of New Business & Management Models

Lecture Alejo Etchart- New Business Models for a Sustainable Evolution

(Welcome & introductions)

During this first part of the day, we’ll discuss the need to move towards community-based social businesses to make the community building approaches sustainable over time. We willl share what is happening in  ‘Butroi en Transitición‘ as an example that can be a test for the construction of a business model that could later be adapted to other communities. In the second part, Jon Walker will present the Viable Systems Model as a management model for this type of initiatives.

We avoid referring to the infeasibility of the current economic model for three reasons: first, because it is clear and obvious, in theory and in practice; second, because the alternative we are proposing is desirable in itself, apart from probably unavoidable; and third, because although outrage is necessary, what is really essential is to present alternatives.

Similarly, we will not talk about the need to re-localize the economy and the ways of living in order to increase responsiveness to shocks, to retrieve values ​​(prior to consumption) on which the welfare of people has traditionally been built, to aim people take a leading role on their futures and to come closer to real democracies – deliberative, cooperative and participatory.

Both hypotheses –the infeasibility of the model and the need for re-localization—are widely covered in hundreds of academic works, including recent publications of Joseba Azkarraga and Alejo Etchart, both here present.

A. What we want to share now are, first, a few thoughts on the re-localization, the community-based alternative:

A.1. The most relevant consideration is that, in fact, local community movements are already happening worldwide through processes of citizen-led innovation on the ground that are catalyzing change and unlocking untapped assets. Tens of thousands of cases are occurring around the world, multiplying exponentially –but hardly detected by the radars of mass media, and far below those of companies and governments. In Europe alone, there are more than 2,000 cases, either aligned within Transition NetworkEcovillages, Ecomunicipalities (Europe and worldwide), Low Carbon Communities Network, Local United, Community Energy Wales, Green Communities, The Community Energy Practitioners’ Forum (UK), Association pour le maintien d’une agriculture paysanne AMAP), Terre de Liens, Virages Energie (FR), Arcipelago Scec, Descrescita Felice (IT), All Sweden Should Live, Converting Sweden (Sweden), Climate Alliance (Netherlands), Converge Network (Portugal), European Network of Community Supported Agriculture and many others. A European network is currently being built to group these movements together and raise the profile of community initiatives.

A.2 The same applies to dozens of theoretical movements align with the idea of relocation: Degrowth, Economics of Good Living, Welfare Economics, Economy of the Common Good, New Economics 20 +20, Ecological Economics, Permaculture, Responsible Consumption, Integral Cooperatives, and many others.

A.3. Unlike what is often said, the biggest drawback for re-localization might not be the lack of awareness about the need to change the path of the economy. Opposite, the need to change is a topic in daily conversations, but, individually, people feel unable to achieve any significant change. People are often only able to report that authorities should do this or ban that, as if responsibility wouldn’t lie on each one of us but only on lawmakers –who may be aware of the imperative need to change but can often do very little, impelled by powerful economic driving forces. The signals provided by market prices, misinform rather than inform about the scarcity of resources –thus failing on the essential objective of Economics. Nevertheless, people get excited when they hear, for example, about the Transition Movement. More and more people are becoming more and more aware that each person must activate his or her responsibility before their own destiny, and realizing that they can empower themselves through their living communities.

A.4– Solutions to many partial sustainability problems exist, but the lack of integrative approaches is a major obstacle to progress. Agenda 21, for example, was rather a collection of partial proposals (energy, food, transportation, etc.) that an integrated approach. On the A21, regardless the assessment about its contribution, the fact is that its walk seems exhausted. Top-down approaches can hardly last longer than the funds that support them. Thus genuinely bottom-up community movements appear as a clear next step. We believe that communities are the true cell units for sustainable development.

The words by Rob Hopkins fit perfectly the last two reflections: “if we wait for the governments, it’ll be too little, too late; if we act as individuals, it’ll be too little; but if we act as communities, it might just be enough, just in time.”

and A.5. To reach that next step and to make it durable, we believe that it’s vital to overcome another barrier that might be the major one: to get not only our own and self-economic viability in Butroi, but to do it with a pattern that other communities could adapt. We envision a systematic way for these socially and environmentally desirable community proposals to achieve their economic viability, because only once they are systematically viable, they will gain a systemic profile.

B. A review of the concept of ‘value appropriation’ may illuminate the answer to the question of how to get such economic viability systematically. To appropriate of the economic fact involved in being a community means that because we are a group demanding goods and services according to certain values, ​​and because we are able to supply that demand internally, we can then address new businesses reducing the risk and sharing the risk, the property and the revenues they generate.

If the experience of Mungia-Butroi demonstrates that community value appropriation is a way to consistently give economic viability community developments, then we might have an integrated model, perhaps systemic, which could be adapted (not replicated as a franchising) to other communities. They can be not just a response to the systemic crisis, but a proposal that is a desirable in itself. In Mungia-Butroi we have a range of assets, elsewhere they have others, because those assets relate to the capabilities of the people and the territory they inhabitate. But value appropriation might be within reach of everyone.

C. The considerations that follow tell the construct for the value appropriation as we envision it in Butroi en Transición, and partially explain what our community is doing:

C.1. Explicitly and implicitly, we are building resilience to adversity. We are trying to regain skills, relationships and food that were getting lost; we are looking for a higher food, energy and telecommunications sovereignty; we are designing activities to generate local and ecological employment, to stimulate monetary and non-monetary economy… Resilience and community living are actually two sides of the same token.

C.2. We believe that we can get by applying a social business, i.e. (in the words of M. Yunus) “a non-loss, non-dividend company created to solve a social problem”. The social issue we want to address is, overall, resilience-building. Although social businesses were originally conceived to fight poverty and exclusion, they really can produce benefit to the entire social pyramid; nuance that becomes critical when more and more people are nowadays increasingly exposed to the risk of poverty and exclusion.

C.3. We want our resilience-building social business to be a cooperative. In the Basque Conutry we have a strong profile in cooperatives with Mondragon Group. However, Mondragon cooperatives are no social but industrial. Socially they have positive implications for their fairer distribution of incomes or their more democratic decision-making, but the object of the Mondragon cooperatives, with the exception of some such as the here represented Bagara and Lanki, are far from being social. The problem that Mondagon founder Arizmendarrieta tried to solve in his days –the poverty of the Mondragon area—doesn’t longer exist (it is indeed showing a high resilience in the current Spanish economic recession). And it is very likely that Arizmendarrieta’s response to today’s systemic problem would not be an industrial cooperative model, but rather a social one –in which businesses would be oriented to solve social problems rather than to increase the companies’ economic value. In fact, the premise of mutual support was in the very root of his ideology.

In Butroi in Transition we therefore aim to constitute a Mixed Coopertative in which the main body will be a  Cooperative of Consumption and it will also include special groups for cooperative workers and cooperative local producers.

C.4. We want our resilience-building, social-oriented, cooperative business to cover several dimensions or business lines, so that those with an economic surplus finance to those that make losses. Some business fields are:

  • energy commercialization and management;
  • commercialization of other local products (primarily ecological, and especially agriculture, but also others such as meat, dairy, bakery, jams, cakes, tinned cooking, etc..);
  • procurements group;
  • time bank;

[We are active in the four dimensions above]

  • management of shared services (laundry facilities, multimedia spaces, home reparations professionals, eldercare, childcare, etc..) and shared consumption (vehicles and accessories, computers and accessories, occasional sporting goods, etc.);
  • pub-restaurant with a social space;
  • exercise and overall health, leisure;
  • ethical banking, ethical insurance and a growing range of products and services that are presented from a new way of understanding the world;
    • and, finally, small business initiatives located in the region not necessarily oriented to the members of the community  when they can create jobs and strengthen the economic viability of the approach.

In Butroi en Transición we are keen to receiving advice to create the business model that integrates the business lines above in social cooperative business. This is the main aim of this presentation.

We have the vision-mission-values​​, the business object, the initial demand, the supply, the distribution channel, high motivation, clear key ideas –probably the most difficult parts for creating a business. With all this, to build the business model and a business plan can be very complex, but not very difficult.

There are two other important elements: the legal aspects and the management model. For legal issues, we have support. For the management model, the VSM, which Jon Walker is next going to introduce, seems to be ideal.

Alejo Etchart, Transition Economist

One thought on “The Need of New Business Models for a Sustainable Evolution

  1. Pingback: Capital social: el gran capital latente | Alejo Etchart

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