Blog
Agriculture
The Race for Sustainability
February 28, 2011
The signs were obvious. In manufacturing, energy, and agriculture the shift had been underway for some time. But the “s-word” was popping up in unanticipated fields like financial services, municipal government, hospitality, and healthcare.
The driver: consumer attitude. When people are asked whether they want a product that’s “green” or “organic” they hesitate. Experience tells them it’s going to be somehow a sacrifice of quality and higher priced to boot. Not a great choice unless you’re in the minority of the market that wants to save the planet at any cost.
But the term “sustainable” refers to the concept of renewable or the ability to be perpetual. A UN commission in 1987 established a definition that holds today, “meet the needs of the present without compromising the ability of future generations to meet their own needs.” Consumers sign on to that thinking readily. So readily, in fact, that the future is going to be full of battles over the ability to use the term.
A conflict in an active segment of my practice is a good example. Organic food producers would like to claim the sustainable term as their own. An organization called the Leopold Academy applied to the American National Standards Institute a few years ago to establish a standard, a definition, of “sustainable agriculture.” When forming the group that would put forward the criteria they pointedly omitted the largest food producers in the US – production agriculture. You know, the farmers that use chemicals and genetics to be the most productive on the planet and which account for well over 80% of the food production in our country.
The US Department of Agriculture intervened and the Leopold Academy agreed to put 11 production ag representatives on the committee where they were outnumbered 3-1 by organic producers and environmental group representatives. The new participants tried to turn the standards to what’s known as the “triple bottom line” – defining sustainable as not only environmental but based on economic and human capital issues as well. The short version is people – planet – profit. The discussions continued for some months but last fall the production agriculture reps pulled out of the talks.
Today it may be impossible to establish a standard until two sides of the debate can sit down in more equitable numbers to reach consensus on the definition. It’s a huge issue that could lead to more than standards and labeling. With a political overlay the standards would eventually translate to regulations.
Look for many more debates, discussions, and organizations positioning themselves as “sustainable” in the years ahead. Look for them to use the triple bottom line as the standard. In your own industry or field, no matter the level of environmental sensitivity, look for sustainability to be a major issue in the future.
The Buffett Letter
March 01, 2010
I read Warren Buffett’s letter to me as a shareholder this morning. Direct, analytical, balanced as usual. I like this passage a lot:
“Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be. In the past, it required no brilliance for people to foresee the fabulous growth that awaited such industries as autos (in 1910), aircraft (in 1930) and television sets (in 1950). But the future then also included competitive dynamics that would decimate almost all of the companies entering those industries. Even the survivors tended to come away bleeding. Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean we can judge what its profit margins and returns on capital will be as a host of competitors battle for supremacy.”
The chairman’s contention that obvious upside growth is no guarantee of success is one that many leaders miss. I see it in industries challenged by bright but unclear futures.
Agriculture is an example. It’s obvious that increasing world population is going to demand food and a growing middle class will increase demand for animal protein in diets.
OK. Barring a major disease outbreak or a comet hit, this is an obvious outcome.
Many in agriculture assume that North America will be the big winner. That the world will beat a path to their production. That other nations, other producers will not be able to keep pace or match their products. Here the Buffett interpretation is missed.
Predictions from Malthus to Paul Ehrlich to recent forecasts of peak oil after-effects have breathlessly proclaimed danger. I watched Lester Brown of the Worldwatch Institute in 1995 do a predictive presentation on Who Will Feed China. He’d written a book with that title.
The answer to Brown’s question? China itself. While importing substantial quantities of soybeans and vegetable oil it is quite adept at meeting its own food needs and exporting very large quantities of foodstuffs and value-added products to the world.
Where is Buffet’s “host of competitors” battling for supremacy? Everywhere.
I can cite examples of basic crop rotation and sound agronomy’s ability to triple and quadruple the productivity of land in Asia and Africa.
Then there’s wonderful technology not involving genetic modification but making use of plant genomes to bolster Mendel’s techniques in developing even better crops and nutritious food. Mega-competitors like Brazil, Argentina, and huge multi-national corporations that have bought land in the poorest nations will crank out food, feed, and fiber in the next 3 decades.
Errors in judgment like looking at autos in 1910 or TV sets in 1950 or hand-held converged devices today with rose-colored myopia abound. There’s no argument that strong demand is ahead but there are no clear, dominant, easy winners.
Heck, one of my clients, Motorola, is spinning off its well-known handset business and retrenching to the predictable, profitable platform that has been there for decades: two-way radios and similar technology. Personally I think it’s a solid, overdue strategic move.
Question the too-easy and too-optimistic assumptions. Widen your view. Look ahead. Identify the potential competition before it surprises you. And then adjust your strategy to compete in the good, but challenging times ahead.
The chairman’s contention that obvious upside growth is no guarantee of success is one that many leaders miss. I see it in industries challenged by bright but unclear futures.
Agriculture is an example. It’s obvious that increasing world population is going to demand food and a growing middle class will increase demand for animal protein in diets.
OK. Barring a major disease outbreak or a comet hit, this is an obvious outcome.
Many in agriculture assume that North America will be the big winner. That the world will beat a path to their production. That other nations, other producers will not be able to keep pace or match their products. Here the Buffett interpretation is missed.
Predictions from Malthus to Paul Ehrlich to recent forecasts of peak oil after-effects have breathlessly proclaimed danger. I watched Lester Brown of the Worldwatch Institute in 1995 do a predictive presentation on Who Will Feed China. He’d written a book with that title.
The answer to Brown’s question? China itself. While importing substantial quantities of soybeans and vegetable oil it is quite adept at meeting its own food needs and exporting very large quantities of foodstuffs and value-added products to the world.
Where is Buffet’s “host of competitors” battling for supremacy? Everywhere.
I can cite examples of basic crop rotation and sound agronomy’s ability to triple and quadruple the productivity of land in Asia and Africa.
Then there’s wonderful technology not involving genetic modification but making use of plant genomes to bolster Mendel’s techniques in developing even better crops and nutritious food. Mega-competitors like Brazil, Argentina, and huge multi-national corporations that have bought land in the poorest nations will crank out food, feed, and fiber in the next 3 decades.
Errors in judgment like looking at autos in 1910 or TV sets in 1950 or hand-held converged devices today with rose-colored myopia abound. There’s no argument that strong demand is ahead but there are no clear, dominant, easy winners.
Heck, one of my clients, Motorola, is spinning off its well-known handset business and retrenching to the predictable, profitable platform that has been there for decades: two-way radios and similar technology. Personally I think it’s a solid, overdue strategic move.
Question the too-easy and too-optimistic assumptions. Widen your view. Look ahead. Identify the potential competition before it surprises you. And then adjust your strategy to compete in the good, but challenging times ahead.