Does size matter?

Responsible Management in Small and Medium Enterprises

 

In my previous blog on social entrepreneurship I pointed out that many people hesitate to follow a meaningful career path because they believe it is too risky or that profit has to be the greatest goal. In this blog I would like to highlight the possibilities of small and medium enterprises that seek for profit and a meaningful impact at the same time.

One might think that SMEs cannot have any real influence in the business world, but did you know that they account for 60-70% of employment and 55% of GDP in the OECD countries? Lower hierarchies, short decision making and communication processes, a high motivation for innovation and adaptation are only some benefits that SMEs can have. Back in the days, small and medium sized enterprises might have had a limited influence and were defined by the number of employees, its annual turnover and balance sheet, thus it might have been more attractive to work for well-known and worldwide recognized enterprises. However, with growing opportunities of the internet and media, even small companies can have a worldwide influence. WhatsApp, for example, had only 55 employees but served 420 million monthly users.

As you can see, these small players have many positive features and are playing an important role in the business world – not only because of the amount of SMEs on the market, but also because they are usually a supplier or customer of a big company. On the one hand, SMEs can have a collective impact and might have the power to change the way the business world is working. On the other hand, many SMEs lack financial resources in order to improve their businesses in a responsible manner. This is where big companies can play an important role in supporting their suppliers through capacity building or knowledge transfer whilst simultaneously improving their sustainability strategy and minimising the impact throughout their supply chain.

Even though multinationals can support their suppliers, there are many environmental, economic or employee related issues SMEs can change, even with only limited resources. The improvement of working conditions, work-life balance, health and safety issues, fair prices or ethical advertising are not necessarily expensive and will be recognized by employees as well as customers. Investments in areas such as skill development, waste reduction, recycling or quality can even save money and will most certainly track the attention of costumers as well as potential investors.

The German company “LR Facility Services”, for example, provides German classes for employees with migration background free of charge, organises workshops around environmental issues and has created a charity project in Sri Lanka, right after the Tsunami destroyed the livelihood of thousands of people in 2004. Another example of responsible management can be recognized in the “Denkstatt GmbH” in Austria. This small consultancy company is not only working in the field of environmental and sustainability issues, but follows strong values such as respect, honesty and open mindedness. Furthermore, the Denkstatt GmbH carries out different activities in order to maintain the well-being of their employees. The company is not only offering fruits and drinks free of charge, but the employees also prepare meals for one another and benefit from several sports activities as well as flexible working hours. All of this does not only create a positive atmosphere, but also leads to a low fluctuation of the employees and has a positive impact on the clients.

We have to realize that size does not matter in order to follow a responsible business strategy – what matters is a person with strong values who is willing to follow this strategy and who is not afraid of investing part of the profit in important issues. With the right motivation and people behind it, even small and medium enterprises have the ability to make changes in the way they treat their employees, supplier, customers and other stakeholders.


From the EU ETS to a global carbon market?

Since the introduction of the Kyoto Protocol, some local, national and regional carbon trading mechanisms have been launched in Europe, North America, Asia and the Pacific. Other emissions trading systems, for example in Latin America, North America, Russia and Asia are planned or under consideration.

The EU emissions trading system (EU ETS) can be seen as the world’s biggest, regional carbon market, aiming to reduce greenhouse gas emissions through a cap and trade system. According to Horstink and Bode, in 2012 the EU ETS took “up between 84% and 98% of the value of all carbon markets (…) [and covered] about 50% the EU’s total CO2.” Even though the EU ETS has changed business as usual and led sectors to cut their emissions, the issue and the effects of greenhouse gas emissions are not limited to Europe or specific countries. Therefore, the European Commission and the International Carbon Action Partnership are striving for a mechanism that links the different cap and trade systems beyond the European border, in order to create an international level playing field, share knowledge and support a worldwide cooperation on climate change. This international collaboration should also lead to reduced costs, a more stable carbon price and an increase of the market liquidity.

How could the implementation of a global carbon market look like, taking into account that some national and regional mechanisms already exists? On the one hand, there is the top down approach, which is based on multilateral decision making processes and where allowances would be traded among governments, on a country level. This system, however, requires a strong political will and cooperation from all countries and is therefore unlikely to happen in the near future. On the other hand, the so called bottom up approach is discussed and planned to be established. This method links the already existing emission trading systems and emissions could freely be traded on a company level. Despite the technical challenges that the bottom up approach generates, it brings a high need for regulatory supervision and coordination along. Furthermore, this approach needs to take the different market rules into consideration, which makes the implementation rather challenging.

Both approaches involve inherent risks and a high political willingness to compromise. Despite a likely dispute about the overall cap, some other key points that would need to be negotiated are how allowances are allocated, what kind of offsets could be used or which sectors should be involved. Once a global carbon market is established, it is likely that the different local players are becoming less responsible regarding their own targets, which might result in less ambitious caps.

To give you an example of how difficult it is to converge two mechanism, we are taking a closer look at the planned link between the EU ETS and the Australian Carbon Pricing Mechanism (CPM): The European Commission states on their website, that a first step towards an international carbon market lays in a cooperation with Australia. From 2018 on, businesses from both systems shall be able to trade emissions among each other. However, it might be quite a challenge for the EU ETS to link with a non-existent system. Despite the fact that Australia had set up the CPM as an emission trading scheme, which became law in 2011, this mechanism has been annulled last year. When a new government was elected in 2013, they announced the repeal of the CPM in order to lower costs for businesses and households. Instead of the CPM, the Australian government now aims to establish a Direct Action Plan, including an Emissions Reduction Fund. In the Emissions Reduction Fund Green Paper, which was released in December 2013, the government stated that “the Emissions Reduction Fund will provide a pool of capital to purchase the lowest cost abatement through a reverse auction, and this will be a far more effective means of reducing Australia’s emissions than the carbon tax”. Yet it can be questioned if Australia will meet its 2020 goal in emissions reduction with a mechanism, which “is designed to allow businesses to continue ordinary operations without penalty”.

One can only imagine how challenging it is to not only to establish a national systems which satisfies all stakeholders, but to take it one step further and trying to consider all the different multilateral interests. A good example is the planned linkage between the EU ETS and the Swiss emission trading system. Even though both systems are quite similar and both parties already have a strong political connection, the negotiations are ongoing since 2010.

At first glance, an international carbon market seems to offer many benefits to all participants. A closer look, however, reveals many issues and raises the question whether an international carbon market is more efficient than national or regional markets and, considering the political reality, whether it is feasible and desirable after all. In my opinion, a global carbon market is unlikely to emerge in the near future, since there are too many disparities in the different mechanisms, as well as on a political level. Keeping in mind how the EU ETS has changed since it was first launched in 2005, one can imagine how difficult it must be to coordinate a global carbon market. In my opinion, it is more likely that different approaches will coexist. Despite my doubts about a global carbon market, I do believe that every country needs to take actions against greenhouse gas emissions and that countries should share knowledge and best practices about emission trading systems.

 

Main sources

Behr, T. and Witte, J. (2009). Towards a global carbon market?  Potential and limits of carbon market integration. Global Public Policy Institute.

Horstink, M. and Bode, J. (2012). The future of global carbon markets. IESE Business School. Publisher: Ernst & Young.

IEAT. The world’s carbon market.

International Carbon Action Partnership (ICAP).

Parliament of Australia.

Schweizerische Eidgenossenschaft.


That “Monday Morning Feeling”

Thoughts on Social Entrepreneurship and happy Mondays

 

I think we all know this Monday morning feeling, where we just don’t want to get up but rather continue to stay in our warm bed, surrounded by comfort and dreams. Dreams about a world where we can follow our passion and do something meaningful instead of gaining the only joy in life from our monthly pay check and from planning our next vacation.

You want to stop dreaming and change something in your life? First of all, it is up to you what you are doing with your life. For many years, social entrepreneurs have decided to leave their routine in order to turn their real passion into business. Into social enterprises that are driven by a strong motivation, a passion to tackle a social issue, an idea that creates social value and a solution to a real need. A business that is visionary, replicable, aims to transform and is yet financially sustainable. Somewhere in the grey area between a private company and a NGO.

You think that this is not possible, that profit must be your only goal? Well, not with the right idea and the right people. Social entrepreneurs are the people behind these businesses, but there is no definition or one face for a social entrepreneur. Social entrepreneurs are as diverse as their ideas. They can be young or experienced, starting their day with an empty stomach or with their pockets full of money, from India, the US, China, Latin America or Europe. Everyone has the chance to become a social entrepreneur and the capacity to think big.

You think this is too risky, because a social entrepreneur is working alone on an idea, which is likely to fail? To be honest, becoming a social entrepreneurs implies some risks. Many ideas come to nothing or they face financial problems. But the great thing is, that social entrepreneurs are not alone. They help each other out, share their ideas and have many possibilities to gain support from various organisations, such as Ashoka or the Schwab Foundation.

All of this still sounds too risky for you and you want to stay in your company? Don’t worry, you don’t have to change your life completely, in order to make a change. So called INTRApreneurs are people who have identified a social issue that is linked to the company’s business model in which they are working in. INTRApreneurs create a win-win situation for the company and their project. Driven by their passion, they have managed to establish a social project that not only benefits from the resources of the company, but they also give something back: Social projects can be carried out as a way of gaining competitive advantage, while earning revenues.

As you can see, there are many questions about social entrepreneurship and a lot to think about. Why don’t we start thinking about our own passion and how we can turn it into something feasible, a social enterprise that pays our bills simultaneously tackles a social issue? Let’s think big in order to turn our dreams into reality and to start our Monday mornings with a smile.

 


Returning from the land of the dragon

When I left for China two weeks ago, I thought that I had some general ideas about this far away country. Looking back, I have to admit that my knowledge was very limited and that this study trip has changed my impression a lot. Several lectures at Jiao Tong University, company visits and cultural events taught me more about China, than I would have imagined. But what exactly have I learned? Let me share some ideas and key learnings with you.

Our very first lecture at Jiao Tong University – Chinese History, Geography, Culture, Values and Way of Life – was held by Jason Inch, who has many years of working experience in Asia Pacific. Besides introducing us to the Chinese way of thinking, which is characterised by a moderately high power distance, collectivism, masculinity and long-term orientation, we got to know two key cultural concepts: Guanxi and Mianzi. Guanxi means to have a personalized, long-lasting network of people with influence, while Mianzi stands for the concept of face – one should always assure to treat people with respect and to prevent your counterpart from losing its face. Both concepts are crucial to take into consideration when doing business in and with China and have been referred to during many other sessions. Furthermore it is important to know that wealth and economic activities are mainly concentrated in the eastern regions around super-cities such as Bejing, Shanghai, Hong Kong and Tianjin, while eastern regions lack infrastructure and economic opportunities. Even though the government tries to promote the economy in western regions, the gap between east and west is growing steadily.

When establishing a business in China, there are different legal forms to consider, as Dr. Lorenzo Riccardi taught us. Foreign investors can mainly choose between a joint venture (JV) and a wholly owned foreign enterprise (WOFE). Establishing a JV can be more difficult at first hand, because a suitable partner needs to be found and a unanimous approach is needed for many issues. However, since WOFEs can be more expensive and the business scope is very narrow, nowadays most foreign businesses are establishing JVs. Regarding the tax system one can see the difference in the regions again, since each province has their own local authority and therefore different types of tax. Several tax incentives exist in order to promote businesses to “go west” and to invest in environmental protection or energy saving. Overall one needs to take into consideration, that the government plays an important role in every business.

While visiting Baosteel and Volkswagen Shanghai, we were able to see some examples of state owned enterprises. Both companies made a really good impression, but it was interesting to see how the companies struggled to give out in depth information to visitors. Since I have been working in the automotive industry in Germany, I was able to find many similarities between the Shanghai Volkswagen plant and what I knew from German automobile plants. This shows that, even though the company is a joint venture between Volkswagen AG and SAIC Motor, there is still a huge influence from Volkswagen.

Simon Campostrini from the European Chamber of Commerce depicted the importance of European companies joining forces, in order to influence decision making in China. While decision making in the EU is very complex, in China there are only two lines: the government and the party. Since the country is so diverse, Mr. Campostrini advises new companies to start a pilot project, before moving on to new cities or districts.

Our visit to the Mondragon Group has been a good example of how European companies can benefit from each other in an industrial park just outside Shanghai. The companies here are close enough to the city, but can also benefit from lower salaries and property prices. This visit also showed that there are different dimensions when talking about business in China. While the Mondragon Group is the 7th biggest employer in Spain, it is not even under the top 100 in China.

As Allen Wan explained in his lecture on the Chinese Political and Economic System, Chinas economy is expected to face a hard landing. There has been a huge overinvestment in the east, while the west is missing out on the boom. The Gini coefficient ratio shows that the gap between rich and poor is growing steadily. Therefore the National Peoples Congress is trying to narrow the gap with different initiatives: The Hukou Reform, which allows migrant workers the same benefits as local workers, and Urbanization. However, both of them are linked with further problems and it seems as if these are only patchwork fixes, causing additional problems.

Prof. Jacobus Root from Jiao Tong University gave us a deeper insight about Negotiation and Partnership with Chinese Business People. He did not only refer to the important concepts of Guanxi and Mianzi, but also to the much broader context of culture and values which one has to understand when doing business in China. It is important that we, as foreigner, adapt to Chinese habits and do not expect them to change their way of doing business.

The same principle needs to be considered for Marketing in China. Foreign companies should adapt to the local habits and different target groups. Chinese are willing to spend more money on lifestyle-goods that are consumed in public and they want to display their status. Furthermore, they invest in their child as much as possible. However, it can be beneficial to a company when they have a foreign connection, especially when it comes to the Luxury Market. Key success factors are brand storytelling, experience, excellent communication and adaptation to the Chinese market. A good example for the adaptation to the Chinese market is Melia Hotels. They do not only consider the different consumer expectations, but also benefit from the quick return of investment in Asia-Pacific. Mann+Hummel Filters are a good example of how a company can benefit from the opportunities of the Chinese market and the need for customized solutions. They are developing more and more products in the automotive aftermarket and see a great opportunity in water filtration.

Since China is making huge efforts in education and internationalization, foreign students who are trying to settle down in the Chinese business world, need to be aware of the great competition. Even though there are great opportunities, one needs to work hard and differentiate themselves from others, as Intuuchina Co-Founders Fernando Zavala and Marc Ramon Hernandez explained.

As part of understanding the Chinese way of doing business, one should understand the historical and cultural value of the country. Therefore we have visited several cultural sites in and around Shanghai, such as the Shanghai financial district, Nanjing Road, Yu Garden and Suzhou. Additionally, some of us took the opportunity to spend the weekend in Bejing. Seeing the differences between these two cities was clearly a highlight for me. We have seen Chinese business world in Shanghai, while Bejing opened its cultural values for us. The Forbidden City, Tian’an men square, the Temple of Heaven and the Olympic Park had been stunning, but climbing the great wall was for sure the most breath taking adventure.

It has been a rich experience to dive into the Chinese world and I take back home, that doing business in China offers great opportunities but many things should be considered beforehand. To sum it up, I can say that China is not only the land of the dragon, but also the land of new opportunities; cultural beauty; where extremes meet and much more.


A dish of livestock

Thoughts on Rural Development.

 

Source: Heinrich Böll Stiftung. (2014). Meat Atlas.

Growing up in Germany, livestock products such as meat, eggs or milk, came to our dinner table on a regular base. I remember my grandma saying that, for her generation, consuming animal products was something rather special. While the demand for animal products in the global north has increased over decades, it is now beginning to stagnate or even decline.

However, it is increasing rapidly in the BRIC countries, as well as in the global south. Consuming livestock products can be seen a sign of wellbeing and it contributes to an adequate and nutritious diet. Since the worldwide population and prosperity are growing, the demand for livestock products is increasing. The Food and Agriculture Organization of the United Nations (FAO) estimates that the need of these goods will increase up to 70% by 2050.

According to FAO, around 1 billion poor depend on animals for income and food. In rural areas, the non-food use of livestock used to play the most important role to support the livelihood of people, bug due to new technologies and the growing income, the traditional purposes of livestock are replaced by the goal of generating food for humans. Since many farmers in rural areas lack important assets such as technologies, finances and knowledge needed for a sustainable agriculture, far-reaching consequences can be entailed.

Did you know that, according to the Stockholm Resilience Center, three of the nine planetary boundaries are highly influenced by agriculture and livestock production? In the last 50 years there were enormous changes in biodiversity as well as habitat losses, due to the increasing agricultural productivity. Furthermore, the worldwide land use has changed tremendously, mostly because land has been converted to agricultural or other human use. The growing demand of livestock products, and the raising use of fertilizers, also influences the nitrogen and phosphorus input. This leads to polluted waterways and may push marine and aquatic ecosystems across ecological thresholds. Furthermore, livestock production contributes to about 18 percent of global greenhouse gas emissions and therefore has a great impact on climate change.

The question occurs, how we can ensure a more sustainable use of agriculture and simultaneously improve food security in rural areas while contributing to poverty reduction?

One important approach has been submitted from FAO: Since stakeholders, such as producers, governments, civil society and international organisations, have realized the complexity of the challenges around the sector, they have joined forces and established the Global Agenda for Sustainable Livestock. The agenda aims to ensure continuous improvements by focusing on three main goals:

The approaches from the Global Agenda of Sustainable Livestock tackle important cross-cutting issues around sustainable farming and food security in poorer countries. However, I believe that we should all question our consumption of livestock products – do we really need animal products on a daily base, or would it be enough to have it every once in a while, so we can promote a more sustainable farming and contribute to worldwide food security?


Business in the land of the dragon

What I personally think is important to take into account when doing business in China.

 

A week from now I will go on a study trip to Shanghai in order to learn more about how to do business in and with China. But what are my expectations and what do I think is important when doing business in the land of the dragon?

Living in different countries and cultures, I have already experienced how important it is to adapt to local habits, show respect towards the people you are working with and gain the trust of your counterpart. However, I do not have many experience in working abroad and I am excited to learn more about China during this trip.

Since I expect China to be a very diverse country where different languages are spoken and where each region has unique cultural and economic characteristics, there is probably no one single path of how to do business in China. Usually I like to have at least a basic vocabulary – but would I be safe to go with Mandarin, Shanghainese or rather choose another dialect? In order to circumvent any embarrassment in your first meeting, it might be helpful to find a local partner who can not only help you with the language barrier, but who can also link you up with important contacts and assists you while dealing with the jungle of local regulations.

Furthermore, I believe that you should have at least a basic knowledge of local customs and the proper business etiquette. From friends and family travelling to China, I have heard that it is quite important to build a good business relationship over time and, as everywhere in the world, make a good first impression. The way of how you exchange business cards is only one point which needs to be considered. Morevoer, it is crucial that you do not cause someone losing their face or, as we would say, their reputation. While Germans are usually quite direct when it comes to making business, one should be more patient in China and not expect a decision to be made right at the first meeting. Some important decisions might rather be made during a business dinner and not at the conference table.

However, these are only some statements which I have heard about the Chinese business customs. I am curious to learn more about the habits in the land of the dragon and experience it first hand – such as the business meeting etiquette, how to negotiate and the differences in non-verbal communication. Let’s see what this study trip will bring.

 


Carnivores – both fascinating and frightening for humans, yet vital for the ecosystem

Further thoughts on Environment and Natural Resource Management

Lions, leopards, lynxes, pumas, wolves and sea otters – one can find most of these species on a sunday trip to the zoo. They provoke thoughts of fascination and fear in us. However, they are endangered through pollutants and the intervention of humans in the environment. Their natural habitats are being destroyed without second thoughts. But did you know that the imminent extinction of these endangered species has a huge impact on the ecosystem?

Three fourth of the largest carnivores are in decline and for a long time no one has been aware of their huge contribution to the ecosystem. Bill Ripple and a team of international scientists have just published their study “Status and Ecological Effects of the World’s Largest Carnivores”, which faces this exact issue.

The scientists found out that when big carnivores (tertiary consumers) disappear, smaller carnivores (secondary consumers) are spreading out unrestrained. In Africa, for example, the decrease of lions and leopards led to an increase in olive baboons, which threatened farm crops and livestock. Furthermore, the populations of herbivores, which are usually next in the food chain, tend to explode. If the number of herbivores is unlimitedly growing “they will eat themselves out of house and home. If the plant can’t flourish, that impacts a lot of different animal that depend on the plant”, Ripple stated. The loss of these species has a wide range of impacts and finally leads to a degradation of the ecosystem.

However, large-bodied herbivores can have a positive impact on the ecosystem as well. At least as long as their growth is controlled through a well-functioning food chain. In his study “Erosion of community diversity and stability by herbivore removal under warming” Eric Post, from the Penn State University, proofed that a well-balanced species diversity can protect ecosystems from the influences of climate change and global warming. In a ten-year field experiment in Greenland he proofed that herbivores, such as reindeers and musk oxes, buffer the influences of climate change on the local plant community diversity. However, the diversity of herbivores itself is threatened by climate change as well.

As you can see, the loss of one species has not only tremendous impacts on other species but also on biodiversity. In order to stop the whole ecosystem falling out of balance, it is necessary to protect all species, even the frightening and scary ones.

 


Diving into a new world – Thoughts on Environment and Natural Resource Management

Quite some time went by since I took biology as an intensive class in high school and I have not studied the environment and natural resource management any further since then. That is why the first class in this above mentioned area was really interesting to me. Of course some concepts of ecology and biogeography sounded familiar and I remember drawing different ecological cycles in school, but I have to admit that I have not paid close attention to this topic over the last years..

However, as the class went by I realized that I am confronted with many of these concepts in my everyday life through media and that I am aware of many of these issues. Just to give you some examples: Most of us know that the regeneration rate of the rainforest cannot cope with the speed in which humankind destroys it and most of us know that there is only a limited capacity of what the ecosystems can carry without becoming less resilient or completely destroyed. But are we really aware of how much damage our actions can cost? Just have a look at the picture below which depicts the consequences of overfishing.

It is important that we understand that biodiversity guarantees the ecosystem service production and that inflicting damage on it has wide-ranging consequences. Therefore the protection of biodiversity needs to play a greater role in politics and national accounts. Having these various issues in mind and being confronted with them through media almost every day, it is even more appalling to read the Global Biodiversity Outlook (GBO-3) where it is stated that the goal which has been set “by the world’s Governments in 2002, ‘to achieve by 2010 a significant reduction of the current rate of biodiversity loss […] as a contribution to poverty alleviation and to the benefit of all life on Earth’, has not been met”. One has to acknowledge that the target helped to initiate actions to protect biodiversity and that some significant and measurable results can be seen.

Nevertheless, we need to take on further actions and raise awareness towards a sustainable natural resource management. Almost all of our actions have an impact on the environment and we can’t blame the responsibilities on others.


Cloth donations – causing more harm than good?

Being a student in my twenties I have moved a lot in the past few years. From Germany to Austria, to the Czech Republic (…) and finally my last relocation to Spain. Thanks to a limited amount of luggage that I am able to carry with me in trains and airplanes, I learned to cut back on the amount of clothes I own. Just like many other people I decided to give some of my clothing to charity, believing that I would help others with my donation. However, growing up in Germany I realized more and more that I have quite a Eurocentric way of thinking. At one point I started to question my decisions and to look behind the business that is made through the collection of old clothes and the potential harm it causes.

There are different organizations who collect ones clothes. Depending on the organization, a little percentage of the donated items is kept by the organization and sold in thrift shops or given away to people in need. For free, without trying to make profit out of it. Threadbare and useless fabric are sold to textile recycling firms. As one can see, there is already a business made with the donated clothes and we do not always know if the profit is reinvested into charitable projects. In many cases a high percentage of the clothing is shipped to Sub Saharan countries or to other continents. And here comes the point where I try to look behind this kind of business. I realize that I, among many people, have a huge misunderstanding of what people in so called underdeveloped countries need and that we should question our decisions more frequently. Most people do not know that there is a huge market of old clothes in African countries, which is destroying its local textile industry. In this blogpost I will only concentrate on this continent, because that is where the market began in the early 1980’s1. So, one could say who are we to think, that dumping our clothes in another country will help the economy and the people living there? I will try to look at both sides of the coin, when trying to evaluate this kind of Business.

Europe’s secondhand clothes brings mixed blessings to AfricaOn the one hand, you need to take into account that these imports ruin the domestic textile industry which used to be a major industry in many countries. I would like to stress the word “used to”, because since cloth donations started in the 1980s, the clothing industry across Africa suffered a 40% decline in production and a high drop of the unemployment rate. According to G. Frazer² and his paper “Used-Clothing Donations and Apparel Production in Africa” the imports of used-clothing have a statistically significant effect on the textile and the apparel production in African countries². Local factories are not competitive with second hand fabrics from America or European countries. Since those clothes have been donated, there are only little costs such as administrative, sorting or transportation expenses. As a consequence to those low prices, many local factories had to shut down. In addition to the cheap clothes from donors, which are also known as “Mitumbas”, low quality products from China are threatening the market as well. Therefore the only niche for the local industry seem to be the production of traditional robes, school uniforms or work clothes, which cannot be found on the second hand markets or from the Chinese factories2,3,4.

On the other hand, a whole economy with different jobs is generated through the business with donated clothes. Once the organization who received the donations has gone through the clothes and sorted out useless items, a wholesaler is buying a container full of ballots with old clothes from Europe or America and sells the ballots to another broker. After several steps the retailer purchases a ballot without knowing its value and tries to sell everything at the highest price at a market. One of the biggest markets is the Gikomba Market in Kenya. However, most of the time the journey of the old cloth has not come to an end yet and more jobs are created. Intermediaries are trying to find the best deal at the market in order to resell them in offices or to tailor new garments out of useless pieces. Besides those jobs there are others, such as ballot carries, security staff, tailors and many more linked to the business with old clothing3,5. As one can imagine, profit is made by each intermediary, but the money is not necessarily going to people in need. Furthermore you have to keep in mind that this kind of industry always depends on the donations of others.

"Pepe" by P. Woods and Ben DeppThe donation of clothes can be seen as very controversy. I do not think that the solution would be to throw away unwanted clothes, but one should consider that money is made with those donations and that this money is usually not helping the people in great need. Furthermore, the local industry is suffering through those donations. At first glance the business with donated clothes seems to be reasonable, because it creates jobs and people are able to buy used clothes for a cheap price. One can say that any kind of business opportunity is an import step, but the new business established will always depend on the donations of others. Do you think that this kind of dependency really helps the economy? Wouldn’t it be more helpful and sustainable to strengthen the local industry by the money which is spend through financing the whole logistical and administrative process?

In my opinion actions are needed to set an end to this habit and to invest in the local textile industry to help it recover. The European Union as well as the countries which receive those donations should work together to strengthen the industry. 12 countries in Africa have already banned those textile imports in order to protect their own local industry4. However, as a response to a parliamentary question the European Parliament states, that they do not “take measures limiting either trade in used garments or export of these products, since such exports take place outside normal commercial circuits and often as small scale initiatives”. Therefore it seems to be in the responsibility of each country to adopt precaution through trade policy, but it is also the responsibility of everyone who is donating clothing.

There is not an easy answer whether to stop donating clothes or not, because other factors, such as the influence of cheap clothing from China, can ruin the local industry as well. Beyond that,  monetary help is not the key factor to success either, since it is hard to track where and how the money is actually spend7. I believe that we should not try to sooth our conscience by “doing something good”, if we do not really know the consequences. Instead we should rather invest into long lasting and sustainable projects which are not trying to impose an idea to a community while destroying its local industry. However, I recognise that this topic is very controversy, just like the effect of many other developing or charitable projects – but this is another huge topic which I will not get into any further at this point…

 

Main sources

1Brooks, A. and Simon D. (2012) “Unravelling the Relationship between Used-Clothing Imports and the Decline of African Clothing Industries”, Development and Change, 2012, vol. 43, issue 6, pages 1265–1290.

²Frazer, G. (2008) “Used-clothing Donations and Apparel Production in Africa”, Economic Journal, 118(532), pages 1764–84.

³Höft, M. (2011) “Das Kilo für 1,20 Dollar – Das große Geschäft mit den Kleiderspenden aus Deutschland”, Zeit online

4Mark, M. (2012) „Europe’s secondhand clothes brings mixed blessings to Africa“, The Quardian, (last access 5/12/2013)

5NDR Fernsehen (2013) “Die Altkleiderlüge – Wie Spenden zum Geschäft werden” (last access 28/11/2013)

6European Parliament (2012), Answer to a written question (last acces 3/1/2014)

7Easterly W., Pfutze T. (2007) “Where does the money go? Best and worse practices in foreign aid”, Global Economy & Development, Working Paper 21 | June 2008


Going green and going local

Municipal utilities as a driver for change – Urban Planning

Projects in urban planning can touch on issues regarding the use of land, waste management systems, public transport, water management, energy supply and more. When I hear about most of these topics and compare the conditions in Stuttgart, Germany, with other cities, I realize that we are complaining on a high level. Before I go any further into issues of urban planning in Stuttgart, I will give you some background statistics about the city.

Inhabitants: 600.000

Size: 207km²

PPP: 52.200

CO2 emission per inhabitant: 4,9t

Municipal waste generated (1000t): 317

Cars (2012): 277.606

Environmental protection investments (2011): 133.785.000 EUR

As one can see, the amount of money spend for environmental protection investments is remarkably high. Unlike other cities there are different technical and political approaches made towards sustainable growth.

Energy Performance CertificateJust to give you some examples, I can say that the public transport is reasonable in Stuttgart – as well as in most German cities. Furthermore, buildings are now rated by so called “Energy Performance Certificates” and there are low emissions zones established throughout Germany, in order to lower the high levels of pollution in the air.  Of course one can always make some improvements, but when it comes to many of those issues, the situation in my country is quite satisfying. One of the reasons why we are pioneers in some of these matters is the fact, that many utilities are organized on a local level, in so called municipal utilities (German: “Stadtwerke”). Those municipal utilities can offer a wide range of services such as supply and disposal, e.g. energy supply, water- and waste management, basic infrastructure and services or public transport. In today’s blog I will focus on how the municipal utilities can make a contribution to the energy transition, since this can still be seen as one of the most important concerns everywhere in the world.

Energy Mix Germany 2012Energy Transition in Germany

As related to the European “Energy Roadmap 2050”, and among only few other countries, Germany has formulated long-term programmes in order to perform the shift away from nuclear power and fossil fuels. The Renewable Energy Sources Act (EEG) 2012 aims to increase the share of renewable energy sources in electricity supply to 35 percent by 2020 and 80 percent by 2050. One main reason why the energy transition is on a good path, is the establishment of the municipal utilities which provide and manage the energy market on a local level.

The different municipal utilities vary in their size and the services provided as well as in the form of ownership. However, around 60 percent of them are involved in renewable energy. You may ask yourself what are the key factors of success? Municipal utilities can promote renewable energies as well as energy efficiency, because cities and municipalities are provided with an increased scope for action. Furthermore they generate employment and strengthen the economy, but they also take the opinion of the communities into consideration. Therefore the commitment for innovative change is higher. Due to the higher commitment of the people to their local utilities, services can be provided tailor-made, according to the needs and circumstances. If the CO2 emissions are lowered, not only environmental goals are met, but one can also see the economic success. Since people and small businesses gain trust in the municipal utilities, they are also more willing to invest into renewable energy themselves, as you can see in the following video.

Smart Heating

Municipal utilities can also generate innovative ideas in terms of energy saving, as an example of the employees from the municipal utilities in Stuttgart shows. AlpaEOS, the developer of an intelligent heating control systems, designed a software which allows the employees to adjust a certain room temperature for each day. The software then calculates factors such as solar radiation, humidity or the state of the building and then takes over the control of the radiators. This system is not only comfortable and results in energy efficiency, but one can also achieve heating cost savings up to 40%.

Municipal Utilities as the answer to Urban Planning?

One should consider that municipal utilities can also have some initial difficulties. Since this is what happened in Stuttgart, the City seeks a cooperation with the Monopoly of Baden-Württemberg (ENBW) in order to transfer knowledge and minimize risks.

I think the idea of going local and going green can help in other issues regarding urban planning as well, because it leads to a greater commitment of the community and promotes innovative ideas. However, one needs to take into consideration that the energy transition has been feasible in Germany, because the country has invested into renewable energies for a long time. Furthermore, politicians as well as citizens demand and support the change. So the municipal utilities should not be seen as the only factor of success.

Yet one also needs to take into consideration, that the challenges we face today are not the challenges of a single city or a single country. As the example I have given you shows, going local can help by making changes in a certain area or country. However, at the end we need to share resources and this kind of local knowledge to try and adapt best practices in other cities and countries, in order to support a sustainable urban planning.

Main sources:

German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (2013) “Renewable Energy Sources Act (EEG) 2012”, http://www.erneuerbare-energien.de/en/topics/acts-and-ordinances/renewable-energy-sources-act/eeg-2012/?cHash=816f8cc23fe06c8f81ed0897140ba585

Stadtwerke Stuttgart (2013), „Mitarbeiter im Stadtwerke-Kundencenter setzen auf intelligente Heizungssteuerung, http://stadtwerke-stuttgart.de/aktuelles/news/2013/nov/26/mitarbeiter-im-kundencenter-setzen-auf-intelligent/

Wuppertal Institut für Klima, Umwelt, Energie GmbH (2013), „Gründung von Stadtwerken als Motor einer Neuausrichtung der Energieversorgung“, http://wupperinst.org/info/details/wi/a/s/ad/2346

Energy Transition, the German Energiewende, http://energytransition.de/



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