CSR: Why Waste a Golden Opportunity?

Making CSR profitable for you and the community

Dr. D. Michael Shafer, Director

Warm Heart Foundation

A.Phrao, Chiang Mai, Thailand

www.warmheartworldwide.org

d.michael.shafer@gmail.com

Please don’t waste your money

• My name is Michael Shafer and I am a do-

gooder who runs an NGO.

• So pay attention to what I am about to say.

− CSR is an investment, not charity.

− Invest in what you know.

− If it’s not profitable, it’s not a good idea.

− Invest in your own future.

• Down at the base of the pyramid, we need

innovative, strategic investments by

companies with a long-term profit

motivation to stay engaged in our

communities.

Phrao is beautiful

The mountains are beautiful

The view from the

mountains is beautiful

Most adults leave to find work

The women, children and elderly

left behind suffer the poverty

Phrao is typical of north Thailand

• Poor

− Average income 72% of the

national average

− Average monthly wage less

than $70

− 30% live on less than

$1.65/day

− More than 1/3 of people own

no land

• Illiterate

− 13% never went to school;

another 69% went no further

than 4th grade

• Underserved

− Highest infant mortality rate

in Thailand

There is nothing special about

Phrao

• Or about northern Thailand

• Or about Thailand

• We are where you work, too.

−Worldwide three billion people

live in the rural periphery

• So what do we want and need?

• And what do we not want and

need?

What we don’t need

• Most charitable donations

• Nice, but seldom costless or easily

deployed

− Computers – without a network admin

or provisions for repair and replacement

− Toys – without batteries

− Software – to perform unheard of tasks

• This stuff is nice and often useful –

but donations alone do nothing to

increase a community’s capacity to

sustain itself.

What we don’t want

• CSR that’s all about you: − Reusing your grey water

− Switching to high-efficiency florescent bulbs

− Reducing packaging

• These are all great for global

welfare

• But they are just smart business

decisions − Spend less on water, electricity and packaging

• They don’t do anything for us.

• They aren’t social.

What do we want?

• We want CSR that provides sustained

improvements in community quality of life.

• We want you to define CSR as:

Investment in innovation that improves your bottom

line by reducing costs and/or improving supply

and/or expanding markets and/or increasing

customer loyalty AND provides training, creates jobs,

opens access to markets and to goods, improves

community quality of life and the environment.

• Why? Because:

− CSR programs that are not profit-driven are

at risk;

− CSR programs that are profit-driven create

social wealth, not just social value.

Today’s plan

• Talk about what you want.

• Talk about what we want.

• Talk about how innovative CSR

investments can work for both of

us.

What you want

• Supply

− Increase supply. improve supply chain, ensure future

supply

• Cost reduction

− Reduce production, distribution, waste disposal costs

− Reduce human capital costs. access trained

manpower

• Demand

− Enable/access base of the pyramid market

• Customers

− Improve brand image and customer loyalty in existing

markets

− Build good will with potential/future customers

• Governments

− Improve government relations

− Create opportunities for government contracts

What communities want

• Meaningful training

− Training geared to specific, real jobs

• Quality jobs

− Jobs that offer good pay and benefits

• Access to markets

− Escape from middlemen, access to

market data

• Access to goods

− Ability to buy and use broader range of

products

• Better quality of life

− Electricity, access to basic medical

services, TV

What Phrao has

• No real world vocational-technical

training

• No quality jobs

• 90 mountainous km to markets,

crippling transportation costs

• High potential demand for consumer

goods and entry level consumer

durables

• High under-served demand for basic

services

− 20% of population has no electrical

service

How can CSR marry wants and

needs?

• Invest in your own needs and future in

ways that meet community needs.

• For example, invest to: − Diversify supply and ensure future supply security;

− Cut training costs by making training programs profitable

− Expand your market by enabling consumers

− Show customers your engagement in the community and

win the goodwill of future customers by delivering value

− Improve access to government by solving a key problem

with cost savings

− Build a new product line while reducing green house

gases

Securing future supply: the snack

food industry

• Problem: Rising demand, uncertain supply,

global warming threats to current production

methods and sources of supply for corn and rice

• CSR investment: Develop ag extension

capacity to teach farmers low water, minimal

fertilizer, herbicide, pesticide production

techniques

• Your pay-off: Bigger, more stable supply,

risk mitigation, existing and future customer

loyalty, environmental improvement

• Community benefit: Meaningful training,

quality jobs, market access, risk mitigation

Reducing training costs:

the hospitality industry

• Problem: Lack of and/or high cost of training

qualified house, garden, front desk and wait

staff

• CSR investment: Build small eco-lodges that

combine training facility with profit-making

operation

• Your pay-off: Reduce net cost of training,

provide new, in-house destination to

guests, earn customer loyalty through

customer participation in program

• Community benefit: Meaningful training

with follow-on jobs, local jobs for suppliers

Creating new customers: the

consumer durables industry

• Problem: Huge rural market cannot be

tapped because potential customers do

not have electricity to run refrigerators,

TVs, DVD players

• CSR investment: Design and build village

scale ag waste fired biomass power plant

and install in rural communities

• Your pay-off: New product for

government and private buyers, large,

newly enabled customer base, and

tremendous goodwill

• Community benefit: Meaningful training

with follow-on jobs, enabled access to

goods and improved quality of life.

Winning hearts and minds:

packaging

• Problem: Packaging is costly, environmentally

unfriendly & provokes protest; poor consumers

pay more for small packages & buy less; small

shop keepers under-stock

• CSR investment: Develop and distribute

branded, re-usable bulk and retail packaging

system

• Your pay-off: Lower packaging costs, higher sales,

goodwill among new customers and loyalty among

existing customers; major environmental impact

• Community benefit: Better access to goods,

lower costs; reduced air pollution from trash

burning

Opening Ministry doors: the

medical devices industry

• Problem: Poverty and geography limit patient

access; health focus on urban areas; ministry

purchasing departments notoriously hard to

access

• CSR investment: Develop automated, cell-

phone connected, village deployable patient

vitals taking instrument packages

• Your pay-off: New product for Ministries of

Public Health that fills critical gap in health

coverage at lower cost than alternatives

• Community benefit: Improved quality of life

through remote monitoring of infants’

progress, hypertension, diabetes, COPD and

other chronic conditions

Cleaning up the environment: the

electrical power industry

• Problem: Oil, gas & coal identified as primary

sources green house gases, public resistance to

old & new facilities, target of environmentalists

• CSR investment: Build community-based, ag

waste fired biomass power plants in peripheral

areas

• Your pay-off: Low cost, carbon neutral

additions to generation capacity, current and

future customer support, response to

environmentalist attacks

• Community benefit: Meaningful training, quality

jobs, valorization of ag waste, access to

electricity, ability to buy household durables,

improved quality of life

Second Harvest Power: How

CSR Ought to Work

Investing profitably in biomass power, grass-

roots development and a cooler world

Modeling a replicable and profitable solution

for the developing world

Making a profit from a sustainable CSR

investment in community development

Thailand – a good place to start

• Middle income country of 65 million with

the legal and banking infrastructure to

protect investors

• National commitment to renewable energy

and progressive regulatory environment

• Heavily foreign energy dependent

• Rapidly rising electricity demand growth

• Agricultural economic base susceptible to

global warming

• Agricultural waste to fire 1,700 MW+

What motivates Thailand?

• Energy – Energy accounts for almost 8% of GDP – and

demand/cost is rising faster than GDP

• Poverty – Rising energy prices and sharp urban-rural

divide in quality of access to electricity contribute to income and regional inequality

• Global Warming – Rising sea level floods tourist areas, river

estuaries, and Bangkok to the Gulf of Thailand

– Rising temperatures breed bigger storms & more virulent forms of deadly diseases – malaria, dengue, hemorrhagic & yellow fever

– Drought and reduced agricultural production, notably rice, Thailand’s staple export

Thai national energy policy

In direct response to these drivers, Thailand

seeks to:

“…strengthen energy security of the country

by reducing energy imports and promoting

indigenous energy resources, competitive

energy price for sustained economic

growth, and making her contributions in

reducing global emission of greenhouse

gases.”

– Piyasvasti Amranand, Min. of Energy, 2006-08

So Thailand can do it the old way

• Untapped biomass potential = 2+ of the coal-fired 750 MW power plants Thailand is building

• Two 750 MW power stations =

– $2.6 billion national investment costs

– $90 million in transmission system upgrades

– 3.5 million tons imported coal annually

– 310,000 tons of SO2, 21,600 tons of NOx and 1,455,000 tons of CO2 (@ 0.97 mtCO2 per MW) annually

– Jobs in the hundreds

– $0 to community development

Or Thailand can do it the Second

Harvest way

• 1,500 MW = 1,500 1 MW biomass power plants – $0 national investment in generation

– $0 investment in transmission

– 0 tons of imported energy annually

– $0 investment in imported fuel handling facilities

– 0 tons of SO2, 0 tons of NOx and 0 tons of net CO2 annually

– Jobs in the tens of thousands

– Hundreds of millions of dollars invested community developments trusts

Thailand in perspective

• If Thailand offers the opportunity:

– to prevent the construction of two 750 MW coal-

fired power plants – what about the other 143

countries in the developing world?

– to relieve the government of billions of dollars of

investment – what about the other 143

countries in the developing world?

– to provide a permanent source of locally

managed development funds to hundreds of

communities – what about the 4.5 billion

people in the 143 other countries in the

developing world?

– to electrify rural communities without adding to

global green house emissions – what about the

143 other countries in the developing world?

Thailand’s drivers are global drivers

• The world’s poor - 5.4 billion people – and the 143 countries they live in – face three challenges

• Rising global energy prices – Imperil national security

– Swamp export earnings growth

– Cannibalize foreign exchange earnings

• Rising global energy prices drive global poverty by – Pushing inflation

– Dragging on economic growth

– Hammering the poorest hardest

• Rising global energy consumption drives global warming and – Puts at risk the developing world’s agricultural future

– Raises the specter inundation for many countries

– Threatens public health

• These challenges are not going away.

What’s in it for you the investor:

CSR as profit-maker

• The market they create isn’t either!

• The project we propose offers

investors a profitable vehicle for

investing in the huge market for

addressing these challenges

• And the opportunity to do well by

doing good.

What’s in it for you the environ-

mentalist: CSR the social value

creator

• A project that offers the potential to

accomplish large, long-term reductions in

green house gas emissions & the damage

wrought by the construction of traditional

power plants & transmission grids without

need for ongoing subsidies, international

organization and other donor support.

• An environmental improvement project

that people want to participate in.

What’s in it for you the community

developer: CSR as social change

agent

• A project that provides large, long-term

revenue streams to host communities that

belong to those communities & that they

control.

• A project that provides training & large

numbers of quality jobs with benefits to

community members.

• A project that breaks community

dependence on donor generosity & frees it

from the agendas of donor agencies.

Give your CSR a second thought

Just a friendly reminder from Second Harvest Power Company, Ltd.

Are you still burning money?

Back to the beginning

• Can meaningful CSR be an investment

in more than customer loyalty?

• Can meaningful CSR be profitable?

• Do communities actually want for-

profit, investment CSR?

• Oh, yes!

• So remember: We want you to be

strategic

− Profits

− Innovation

− Long-term

Thank you from Warm Heart and

the people of Phrao

To learn more about Warm Heart,

please visit:

www.warmheartworldwide.org

www.facebook.com/warmheart

worldwide

www.twitter.com/warmheartorg

www.youtube.com/warmheartvideo