Managing Business and Culture in the Rainforest: The Arenga Rainforest Case
In a conversation with the Hoffmann Institute for Business and Society, INSEAD Professor, V. Paddy Padmanabhan and Distinguished Executive Fellow, Dominique Lecossois discuss the Rainforest Gold case study – cultural barriers, social impact and recommendations for our students.
Used in almost 50% of the packaged products found in supermarkets, palm oil’s resistance to oxidation and stability at high temperatures makes it a popular choice. However, the cost of this popularity is visible through increased deforestation, habitat destruction of endangered species, and greenhouse gases. While measures are in place to reduce these effects, and produce palm oil more sustainably, INSEAD’s case study explores another interesting alternative – the sugar palm.
In a conversation with the Hoffmann Institute for Business and Society about the study, Professors Padmanabhan and Lecossois shared more about the Indonesian business, Arenga Rainforest Sugar. Originally run as a non-profit by locals, two INSEAD MBAs began consulting Lecossois in hope of collaborating with the locals and reinventing Arenga’s business model into that of a social enterprise. With a vision to better the environment, improve the livelihood of farmers, and address the demands of sustainable foods in developed markets, this new business model would address most of the United Nations Sustainable Development Goals (SDGs). However, transforming a non-profit into a social enterprise was far from easy, especially with the cultural challenges.
Explaining this further, Lecossois said, “Coming from an individualistic society, what I found most challenging was learning to navigate in a society that is centered on collectivism, and community. For example, instead of meeting the farmers directly, we had to first interact and speak with the head of the village.” Reflecting on the same, Professor Padmanabhan added, “In order to successfully create change, you need to realise that there are key individuals who need to get on board first, because these are the people trusted by the rest of the community.” He continued that while it might be a challenge initially, once convinced of the benefit to the village, the farmers and the community as a whole, “it generated a fantastic externality because after persuading that one person, the whole village is in agreement.” Adding that this was not something achieved in a day, Lecossois pointed out that, “building trust requires proximity, patience and is a long journey.”
To continue building trust within the community, improving the livelihood of farmers, as promised, was vital. From providing a stable income, implementing fair negotiation practices to opening schools – how was the enterprise able to balance the economic needs of the business while delivering the positive impact for the farmers? Highlighting the complexity in trying to ensure this, Professor Padmanabhan stressed on the need for on-ground research.
Citing the remote location of such places, he spoke of the lack of information available online. “You cannot simply go onto the internet and find all the information. There is nothing as effective as being on-ground and doing your homework. You also should be prepared to address challenges you otherwise may not have to in a modern society, such as the overall infrastructure.”
Also speaking about the need for research to understand different price points along the value chain, Lecossois shared that, “such information gives you a leverage to offer the farmers a better price than what they would earn previously, while making sure both the business and farmers make money.” Underlining another strategy, Lecossois spoke about offering other benefits that would be a positive addition to the farmers and the community, such as education for the children or providing medical accessibility with nurses visiting the village twice a week. “There are a lot of intangible aspects that you can build to generate interest from the farmers and the community.”
In addition, by adding such benefits across villages, it helps create an ecosystem of improved healthcare and education, while making the villages more self-sufficient and sustainable. With responsible business and sustainability being at the core of INSEAD, what would be the key takeaways and learnings for our students that may be keen on starting their own social enterprise, or business for social impact?
“First of all, find a ‘why?’ for both parties – you need a clear purpose for it all. Once you have that answer, it will lead you to the course of action, and help you in planning your overall strategy,” shares Lecossois. “Second, build upon and strengthen the ‘we,’ as in the whole team. Lastly, implement the ‘how,’ which means building and acting upon your plan to deliver benefits for both parties.” Closing the conversation, Professor Padmanabhan shared his insights for INSEAD students. “Building a startup with social impact is a lot more challenging than a standard startup, because you will be faced with a different set of issues. You need to have the commitment, passion and the energy to see it all the way through, because it will take more time to understand the complexities.”
While establishing a business for social impact may present a fair set of challenges, the outcome of providing famers and their community with a better source of livelihood, while driving action for the SDGs, will continue to show the world that business can be a force for good.
The case study was co-written by Wina Andreini and Frederik Gerner, both INSEAD GEMBA ’17, and Nandini Vijayaraghavan, INSEAD Research Associate, with guidance from Dominique Lecossois, Distinguished Executive Fellow at INSEAD Emerging Markets Institute and Professors Sameer Hasija and V. Paddy Padmanabhan.
Also visit INSEAD Knowledge to learn How Sugar Could Save the Borneo Rainforest.