November 29, 2010

How to Turn Garbage into Gold

Bridgespan Partner Bob Searle discusses how companies are using natural capital— the natural resources a company depends on—to create entirely new products that have the potential for profit at the same time that they're addressing social and environmental problems.

By: Bob Searle

(This weblog originally appeared on the Harvard Business Review website.)

A colleague recently told me about a company named TreeZero that makes paper from sugar cane husks. These husks are the byproduct of the sugar production process, and it turns out the fiberous pulp (called bagasse) is ideal for making paper.

The paper, which performs as well as regular copy paper, can be recycled with regular paper, is biodegradable, and uses less bleach than paper made from tree pulp. What's more, it's made from a material that would otherwise end up in landfills or be burned, contributing to global warming. It's a great case of turning garbage into gold.

Throughout this blog series (read previous posts on why a paper company started berry picking, how chocolate can save the world, and how to make money grow on trees ), my Bridgespan colleague Serita Cox and I have shared a number of ways that natural capital—the natural resources a company depends on—can contribute to the bottom line while also delivering value to society. We've talked about using natural solutions that cut costs, help the environment, and generate new revenue streams. This post focuses on using natural capital to create entirely new products.

While TreeZero is benefiting nature and its bottom line with its tree-free paper, a company called PT Intaran Indonesia is combining a social mission with the commercialization of new products from a tree called the neem. The neem is a fast-growing evergreen in the mahogany family, and in 1999 the company began helping farmers to plant the neem in two districts to protect and improve the soil and create new business. As the company's director, Ujang Andari, stated in the firm's sustainability report, "In the past ten years the Indonesian archipelago has gone through some major environmental and social transformations, particularly in the agricultural sector. In particular, there have been growing concerns about the sustainability of so-called 'modern' farming techniques, as their heavy use of chemical pesticides and fertilizers have resulted in serious crop and soil damage." These issues are most acute among the nation's rural poor, many of whom are subsistence farmers whose very lives are threatened by these trends. Turns out the neem tree can help.

The tree has unique properties that make it an ideal solution to repair the soil: It can grow in dry areas with low fertility, prevent erosion, absorb CO2, and fix nitrogen back into the soil to re-enrich it. At the same time it creates shade, and in groves can create a microclimate that can reduce the ambient temperature up to ten degrees Celsius. From a commercial standpoint, the neem scent makes it a great, natural pest repellent, disturbing bug reproduction cycles. For example, a neem planted beside a rice pond can help keep mosquitoes away from the area. And neem seed cake (the residue of neem seeds after oil extraction for insect repellent and medicinal purposes) can be processed into a natural fertilizer. So the neem tree both creates opportunities for farmers where they might not be able to grow other crops and enhances the land around it. TreeZero and PT Intaran Indonesia both show how far-sighted companies can develop products that have profit potential at the same time that they're addressing social and environmental problems.

I'd like to hear from others about companies that are using natural capital to develop new products.

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