Yearly Archive September 18, 2020

ByIESA Shift

COVID-19: Inform your study advisor

In these times of a global pandemic information and communication are essential tools in combating this threat. Which is why we’d like to remind you all of the rapidly changing measures to keep both you and your friends safe. Regarding your studies, both Universities provide frequent updates in their own websites. Please check here for Leiden University and for TU Delft

Furthermore, if you or any of your roommates or close friends are tested positive for COVID-19 we urgently ask you to inform your study advisor. We’re all part of a larger community and we should use the communicative capabilities of this community to our advantage.

ByPromo Committee

Prosperity within limits: is it possible?

Book review by Lowik Pieters:
Prosperity without growth by Tim Jackson

It seems like the world is changing rapidly, but one thing has been stable for centuries: our need for (economic) growth. To date, the EU and the UN stick to the mantra of ‘green growth’, arguing that over time, our economic system will function separately from its resource demands. Tim Jackson, Professor of Sustainable Development at the University of Surrey, UK, immediately exposes that ‘decoupling’ material and energy input from economic growth is a myth. In his book Prosperity Without Growth, Jackson doesn’t preach a post-material phantasy, he offers serious solutions to a flaw in the fabric of our economies.

Prosperity Without Growth: Foundations For The Economy Of Tomorrow was first published in 2010 and immediately gained attention among scholars and economy students: why was ‘post-growth’ economic thinking not part of their curriculum? When it’s second edition was published in 2017, the book was no longer regarded a radical narrative. Instead, it offered a clear vision for a post financial crisis world, with proposals for changes in the financial sector.

Tim Jackson inspired Kate Raworth to write her bestseller Doughnut Economics and his book is seen as a ‘landmark in the sustainability debate’. The Guardian called it a manifesto for an emerging movement that is trying to convince economists that there’s more than GDP growth. In fact, GDP growth is eventually limiting prosperity because of its unequal distribution. Today, many countries acknowledge that GDP isn’t a good indicator for prosperity measurements, but they seem to fear to take action on how to deal with prosperity issues differently.

The dilemma of growth

Tim Jackson’s ‘dilemma of growth’ resulted in his book Prosperity Without Growth and several scholarly publications. According to Jackson, prosperity means flourishing, a steady state that strives for wellbeing for everyone. This isn’t a very new way of thinking, though. Already in 1973 the book Small Is Beautiful was published by economist Fritz Schumacher, who urged economies to transition to regional systems, focusing on social and ecological principles. It reads like a hands-on economy focused sequel to Limits to Growth. 

In what way is this book different from Doughnut Economics and earlier publications that address the dilemma of growth? Jacksons work offers a solid theoretical background, but also includes concrete solutions to problems of capitalism (such as employee ownership, revitalization of social investment, changing investments in general). Would these solutions be the perfect answer to neoliberalism?

ByPromo Committee

Coastal engineering: going multifunctional?

By Ankita Singhvi.

A quarter of the world’s population lives within 100km of a shoreline, with urbanisation on the rise. Coastal space is scarce and valuable, but it is becoming increasingly vulnerable due to climate change. The main hazards that the coast needs to be protected against are erosion (the loss or displacement of land, or the consistent removal of rocks and sediment along a shoreline due to waves, currents, tides or storms) and flooding (when sea height exceeds the elevation of land and covers it, caused by high tides or storms). In order to protect the coast, various interventions are taken on the shoreline: e.g. dikes, dunes, seawalls, beach nourishment. In particular, multifunctional coastal protection has increasingly been receiving attention due to its promise of enhancing adaptation to the threats of climate change, as well as relieving the pressures of increasing urbanisation. Multifunctionality refers to the multiple benefits that an intervention can provide beyond risk reduction. The concept emphasizes the explicit interweaving of ecological, social, and economic functions. What does this look like in practise? Here, I will describe two cases in the Netherlands – one ‘nature-based intervention’ and one ‘grey’ intervention.

Sand Motor, Monster

The coast of Monster has a large, man-made hook-shaped peninsula (see image above) – one of the few interruptions to the otherwise uniform shoreline of the Netherlands. This peninsula is a beach nourishment project called the Sand Motor (also referred to as Sand Engine and Zand Motor). It was constructed by placing 21.5 million m3 of sand on the beach with the aim of reducing the speed of coastal erosion and protecting upland infrastructure from storm surges or high tides. Typical nourishment projects are a repetitive process; a coastline is artificially replenished every five years. In contrast, five times the volume of the average sand nourishment was used at the Sand Motor with the expectation that replenishment would become unnecessary along the Delfland Coast for the next twenty years.

The Sand Motor’s design uses an ecosystem-based conceptualisation of multifunctionality and emphasizes ‘building with nature’ in its design philosophy. In other words, the multiple benefits that the coast provides in addition to protection are dependent on the newly created sandy ecosystem. The hook-shape of the peninsula is crucial for the creation of a shallow lagoon, which supports kitesurfing, recreational swimming, fish habitats and soil organisms. The sediment size and grading of the sand, as well as the presence of shells allows dune formation, which supports an underground fresh water lens and above-ground vegetation and habitats for wildlife. The width of the beach supports recreation, and the entire system is a pilot project that benefits research and education.

Scheveningen Boulevard, The Hague

Scheveningen’s boulevard has a 2km long dike integrated into it for the purpose of flood defence. The boulevard has an undulating course that follows the historical coastline. On the sea side of the boulevard, the beach has been widened to reduce the impact of waves on the flood defence structure during extremely high water. This allows a lower crest height for the dike to suffice. Furthermore, sand supplementation has made the beach ~50 metres wider with the aim of creating a smooth transition from the boulevard to the beach. The core principles that guided the design of the boulevard are: accessibility, vitality, spatial quality and strengthening the identity of Scheveningen.

The boulevard takes a spatial planning conceptualisation of multifunctionality: it uses the dike-in-boulevard to increase the capacity of the shoreline to provide services such as parking spots, hotels, residential buildings and commercial zones – which are all built on top of the dike. The premise of this multifunctional dike is that it is more cost-effective than a conventional dike because it optimises land use by providing multiple real-estate development opportunities. In addition to coastal protection, the dike serves the town with a mixed-use program that should be interesting for both tourist and business visitors, and secure a year-round programme to attract more long-stay visitors. Scheveningen is the most popular seaside resort of the Netherlands, and the dike aims to support this function rather than subtract from it.

 

To summarise, both coastal protection interventions showcase multifunctionality in different ways: in the Sand Motor, it stems from the ecosystem, and at Scheveningen it stems from the urban system. In the context of increasing scarcity of space in urban areas, it no longer makes sense to build mono-functional infrastructure. The cases show how multiple functions can increase the adaptivity of an intervention to an uncertain future by making it useful even when there are no immediete flood or erosion hazards. Multiple functions help in building public and political support for large investments, and they support the creation of multiple lines of defence – leading to safer, higher quality spatial planning for our cities.

 

ByPromo Committee

Reviving the not-for-profit business model for a sustainable economy

By Lowik Pieters & Quirien Reijtenbagh.

It is often assumed that profit is to capitalism as sand is to a beach. The constant growth of resource extractions, essential in a for-profit economy, is aggravating ecological and social crises. Currently, many organizations are adopting a not-for-profit structure. How can these structures contribute to an economy that includes environmental and social justice? Hinton & Maclurcan (2018) developed a Not-for-Profit (abbreviated as NFP) World economic model. In this article, we will investigate the potential for a ‘real-world application’ and the possibilities for starting an NFP business after graduating from Industrial Ecology. 

What is the NFP business model?

Let’s start with a clear definition: a non-profit organization is legally excluded from making profits, whereas a not-for-profit business model should be understood as a not-only-for-profit business. For such organizations, profit is no longer the key focus. Practically, we use not-for-profit as an equivalent for non-profit in this article, since we think the long term strategies of both business models are the same. We do not favor hybrid structures, which we will explain later on.

Organizations that have adopted an NFP model are seen as mission-driven enterprises, usually with a changed nature of incentives and ownership structure (Hinton & Maclurcan, 2018). The successes of these companies are based on their impact in the community, rather than the profits they generate. NFPs don’t have private owners and financial surpluses should serve social and environmental benefits (Hinton, 2020).

The NFP business model isn’t new. Lately there has been renewed interest in old business models such as consumer cooperatives (Utting et al., 2014). Nowadays, consumer cooperatives often supply food or renewable energy. We think that the NFP business model has been on the rise because of a certain level of distrust in governments and new forms of financing, such as crowdfunding or community bonds.

 

Hybrid business models?

The profit/non-profit dichotomy is secured in most industrialized countries in regulations with a clear distinction between the for-profit and the non-profit legal status (e.g. foundations, associations are not allowed to make profits). This separation resembles the classic capitalist distinction between market and state. However, in practice, many companies already have diverging operations that make the profit/non-profit distinction questionable (Schmid, 2018). Scholars demand a hybrid structure (Alberti & Varon Garrido, 2017), but we specifically propose a revival of the not-for-profit with an obligation to clearly define objectives and values.

We chose this option because we think that the dynamics of a not-for-profit organization are key to breaking with the capitalist growth mantra. A hybrid structure is diffusing. Social housing corporations represent a pertinent example.  Many Dutch housing corporations prefer building profitable houses where returns are high, rather than serving their original objectives: essentially, these organizations should provide affordable household and community services.

 

The critical role of profit for sustainability

An unfortunate consequence of the for-profit structure is that it is built on the foundations of ‘limitless growth economy’. This system encourages depletion of natural resources, consumerism and social inequality (Hinton, 2020). A typical example of a for-profit structure is the shareholder model with profit maximization. Profits are usually the only incentive for shareholders to invest. Diametrically opposed to this, when the legal structures are well defined, a not-for-profit should only pursue social and environmental benefits. Any generated profits should be reinvested to ensure the continuation of the NFP’s socio-environmental strategy.

Moreover, the diversity of goals of not-for-profit organizations supports heterogeneous economic structures, which helps us to move away from the narrow-minded perspective that economics only includes for-profit enterprises (Schmid, 2018). Contrary to for-profits, NFP structures, such as cooperatives, are surprisingly resilient when coping with (financial) crises (Toia, 2013). The societal benefits of NFPs can be derived from the fact that NFP earnings are maximized for mutual or collective benefit rather than for individual investors (Utting et al., 2014).

 

Pros for non-profit startups

At the micro level of a company itself, the advantages of the NFP business model are as follows.

  1. A not-for-profit business is usually easy and cheap to start, as costs of legal assistance for founding the company are low.
  2. NFPs can enjoy tax exemptions in many countries (such as ANBI status for foundations in NL )
  3. But most importantly, NFPs create a lot of public goodwill and generally have more options for voluntary help from universities and research centers. This is particularly valuable for startups.

 

Is it always promoting sustainability?

Even though Hinton & Maclurcan (2018) argue that the NFP business model encourages sustainable decision-making by a changed ownership and incentive structure, NFPs are not obliged to have social and environmental aspects as part of their strategy. This is an important limitation that is lacking in legal requirements (Schmid, 2018). Also, the blurry legal structure allows for cheating. Limited supervision by authorities can promote abuse of the regulations such as misreporting on annual accounts (happens at ANBI foundations (In Dutch)).

Coal mining on South Kalimantan, Indonesia. Courtesy of Dominik Vanyi via Unsplash.

 

A Business Model for Sustainability

Schaltegger, Lüdeke-Freund, and Hansen propose a ‘Business Model for Sustainability’, that “helps describing, analyzing, managing, and communicating (i) a company’s sustainable value proposition to its customers, and all other stakeholders, (ii) how it creates and delivers this value, (iii) and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organizational boundaries” (Schaltegger,Lüdeke-Freund, and Hansen, 2016: 6). We agree with the three points of this definition, but would like to emphasize the need of supportive and transparent governments.

 

The role of the government

Due to their structured course of action and their enormous outreach, we see governments as perfect facilitators of bottom-up initiatives like cooperatives. However, they should not become initiators that try to function as a business. If citizens come up with initiatives, governments should find ways to support them, but not appropriate their ideas. Nonetheless, we encourage governments to arrange appropriate supervision to avoid cheating with the mutually agreed rules. An important condition of this collaboration is that a government should have the trust of its citizens. But a trustworthy government is unfortunately not a matter of course.

We stress that the NFP business model should not function as a substitute for failing government policies. This is how many NFPs started in the 19th century in The Netherlands. In this era, the night-watchman state model demanded self-sustainability of all citizens. Non profit organizations, such as housing corporations, were established to provide services for those who couldn’t afford it.

 

How to substitute for missed profit taxes

What if many businesses would really adopt an NFP business model? You might think that this article is just a range of utopian ideas. We couldn’t resist already thinking about practicalities that could help you to put these ideas in a realistic perspective. Considering this proposal from a government perspective, we might imagine that policy makers will wonder: What should governments do to replace the missed profit taxes? Let’s look at our current regulations: carbon taxing of current for-profit businesses has not worked so far and nations struggle to implement laws that include external costs of pollution, environmental damage and social inequality. NFPs are likely to be less harmful. For instance, they could be the big equalizers when adopting nature and environmental inclusive values and employing workers that have a distance from the labor market. This will prevent governments from making costs to fix these negative externalities. Even though NFP business models might lead to less tax revenues, we expect that government expenditures could likewise be reduced.

 

Cons for non-profit startups

In practice, many businesses start with a not-for-profit structure but eventually move to a for-profit model when they grow bigger. This usually has to do with the fact that NFPs have to publish a detailed report of their annual results to the general public. Public scrutiny makes companies more transparent, but also more vulnerable to competitors and prone to social pressure. Since many NFPs strongly depend on a sense of morality, their activities can face opposition. This is why we think that the legal statuses of NFPs should be protected by the government and so should be the level playing field of NFPs. We encourage policymakers to think about instruments for this.

 

An organization that advocates a separate legal status for NFPs as well is Social Enterprise NL (for info on legal status see here). This association aims to connect members that are businesses acting as a ‘social enterprise’ (read the criteria developed by EU here) by supporting them, inspiring them and facilitating an optimal business environment. An important step of the last goal is legal recognition.

 

Our proposal

In short, our proposal includes both a top-down and a bottom-up approach. For governments we underline that they should protect not-for-profits legally, they should demand goals related to sustainability and equality and check regularly if these strategies are complied with. For businesses that want to adopt NFP, we deem it important that they include social and environmental values in their statutes. The same holds for non-distribution clauses and asset locks. By including these values, they do not only serve as objectives, but as a pledge for a long term strategy.

 

Must reads if you are thinking about starting a not-for-profit business:

 

References

Alberti, F. G., & Varon Garrido, M. A. (2017). Can profit and sustainability goals co-exist? New business models for hybrid firms. Journal of Business Strategy, 38(1), 3–13. https://doi.org/10.1108/JBS-12-2015-0124

Hinton, J., & Maclurcan, D. (2017). A not-for-profit world beyond capitalism and economic growth? Ephemera, 17(1), 147–166.
http://www.ephemerajournal.org/sites/default/files/pdfs/contribution/17-1hintonmaclurcan.pdf

Hinton, J. B. (2020). Fit for purpose? Clarifying the critical role of profit for sustainability. Journal of Political Ecology, 27(1), 236–262. https://doi.org/10.2458/v27i1.23502

Schaltegger, S., Hansen, E. G., & Lüdeke-Freund, F. (2016). Business Models for Sustainability: Origins, Present Research, and Future Avenues. Organization & Environment, 29(1), 3–10. https://doi.org/10.1177/1086026615599806

Schmid, B. (2018). Structured Diversity: A Practice Theory Approach to Post-Growth Organisations. Management Revue, 29(3), 281–310. https://doi.org/10.5771/0935-9915-2018-3-281

Toia, P. (2013). Report on the contribution of cooperatives to overcoming the crisis (Nr. A7-0222/2013; Committee on Industry, Research and Energy Report). European Parliament. https://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A7-2013-0222&language=EN

Utting, P., van Dijk, N., & Matheï, M.-A. (2014). Social and Solidarity Economy: Is there a new economy in the making? (p. 71). United Nations Research Institute for Social Development. http://www.unrisd.org/unrisd/website/document.nsf/(httpPublications)/AD29696D41CE69C3C1257D460033C267?OpenDocument