FOR CORPORATE ACTION NYU STERN STUDENT VOICES
VOL. 5 / SPRING 2018
PROFESSOR JEFFREY J. YOUNGER, AMY DONG, CATHERINE O’CONNOR, DORIT SOSNOWIK AND JESSICA MARION MODI DESIGNED BY
KELLY XIE PHOTOGRAPHY BY
FOR CORPORATE ACTION
NYU STERN STUDENT VOICES VOL. 5 / SPRING 2018
Front and back cover photos by Jonny Byrne, NYU Stern ‘18
CONTENTS Letter from the Dean
DEAN GEETA MENON
Beyond the Concrete Roots
Introduction to Business and Its Publics
PROFESSOR BATIA WIESENFELD
Good Peer Pressure: How to Increase Savings in Latin America
Putting a Cap on Opioid Addiction
Oceanic Plastic Pollution Solved: Collection, Recycling, Repurposing
Addressing the Gutter Oil Issue in Beijing, China
Can a Sponge Save the Deepwater Horizon?
Could Trash Cure Haiti’s Employment Crisis?
One Step Toward’s a Greener China: The Beijing Energy Park
ANTONIO DI MEGLIO
Power to the Period
PROFESSOR JEFFREY J. YOUNGER
Photo by Jonny Byrne, NYU Stern ‘18 CONTENTS / 03
THE DEAN GEETA MENON Dean of the Undergraduate College Abraham Krasnoff Professor of Global Business and Professor of Marketing NYU Stern School of Business
we are so proud of the incredible upward trajectory of the NYU Stern Undergraduate College and the accomplishments of our students. Since 2011, we have received a new recordbreaking number of applications to the incoming freshman class. Our graduates are off making a global impact in the world after achieving an impressive 98% placement within six months of graduation. These accomplishments are the result of a rigorous and innovative curriculum that includes business fundamentals and global study, with more than 50% of the coursework in the liberal arts. Add to that a four-course sequence dedicated to exploring the social impact of business on our communities and you have a truly unique approach to undergraduate business education. The Social Impact curriculum started as a single course in 1998 and grew into a program of four core, sequential courses
04 / LETTER FROM THE DEAN
that launched in 2004 with: • Business and Its Publics, a firstyear course that explores the interconnections between business, society, politics, art, and culture, • Organizational Communication and Its Social Context for sophomores that looks at the study of social processes of influence and how to effectively communicate to different audiences, • Law, Business, & Society in which juniors examine the role of law and commerce in shaping and governing business, and • Professional Responsibility & Leadership, a capstone course for seniors. The NYU Stern Undergraduate College treats business as a dominant social institution of our time, and we believe it can and should be used for good. The Call for Corporate Action is a collection of select essays that were written by firstyear Business and Its Publics students
as they examined the relationships between corporations and society in class each week. It is exciting to read students’ perspectives on the world and the critical examinations they’ve done on some of our most pressing social, corporate, environmental, financial, and international issues. In this fifth edition of these collected works, the essays range from an exploration of new techniques in cleaning oil spills to an analysis of the effects that expanding the manufacturing industry could have on employment in Haiti. We are proud of today’s students, as they are on their way to being creative innovators who will help solve tomorrow’s biggest global challenges. I hope you take some time to explore The Call for Corporate Action, and I’m sure you will enjoy it! Warm regards, Geeta Menon
BUSINESS AND ITS PUBLICS
business is the primary source of all value created in our economy. Business innovates more effectively than organizations in any other sector. Then, it leverages those innovations to bring new and better products and services to market to make people’s lives better, while at the same time creating rewarding jobs and profit for owners and shareholders. Businesses partner more today than in the past not only with one another but also with government and non-profits, developing solutions to social problems that seem impossible to fix. The most successful businesses have an important feature in common – they have a clear sense of purpose guiding them. Purpose-driven organizations shape their own environments proactively rather than reacting to the environments of others. Leaders and members of such organizations share clear common goals, and those goals help them to coordinate, accomplish a great deal, and avoid ethical lapses. The essays in this volume are great examples of how prepared Stern students are to change the world using the strengths of business. In each essay, the author seizes upon a serious social ill – a problem he or she feels passionate about and wishes to solve – and outlines a path for corporate action. Amy Dong offers a plan for how markets like Whole Foods can reduce food waste by changing customer views of produce that doesn’t perfectly conform
to prototypes, and Jane Lin calls on oil companies like BP to stock a novel sponge capable of absorbing spilled oil, reducing environmental damage. Their solutions are both creative and implementable. New businesses may emerge from the solutions in these essays. And while these businesses might ultimately seek to capture some portion of the value created and distribute it to those who have invested in creating solutions, they recognize that value must be created before it can be captured and distributed. In this way, these essays reflect the philosophy behind the Business and Its Publics course. Business and Its Publics introduces students to the role of business in broader society as well as the relationships between business and other important societal institutions. Students explore the novel partnerships that are developed between business and other institutions to address society’s most pressing needs. The course prepares students to offer novel, value-creating solutions to these problems by helping develop students’ critical thinking skills that enable them to analyze issues, evaluate arguments, and become aware of (indeed, embrace) multiple perspectives. As evidenced by this collection of essays, this approach is one that will continue to leverage the strength of business to advance our society and make the world a better place.
BATIA WIESENFELD Andre J.L. Koo Professor of Management Chair, Management and Organizations Department
INTRODUCTION TO BUSINESS AND ITS PUBLICS / 05
THE CONCRETE ROOTS ESSAY BY
Green roofs across an urban landscape offer the allure of science fiction but are rooted in science fact. Eileen Wang discovers that a green roof can extend the life of a building and reduce energy costs while at the same time enhance urban biodiversity and improve our quality of life. Real estate developers, take note!
t is generally recognized that humans require five basic needs in order to survive: air, water, food, sleep, and shelter.1 However, with the world’s population constantly increasing, the quality of some of these basic needs have been compromised. The most prominent effects, driven by exponential population growth, are the harmful emissions concentrated within our densely occupied cities. While cities only cover two percent of global land area, they account for 70 percent of the world’s greenhouse gas emissions.2 Manhattan, one of the most densely populated cities in the world, harbors more than eight million people in only 22.82 square miles and delivers a corresponding share of gas emissions.3 Buildings require large amounts of energy in order to provide heating, cooling, lighting, and power on a daily basis, but the fuels used to generate electricity emit large amounts of atmospheric pollutants including CO2, SO2, and NOx. These pollutants facilitate climate change by contributing to the greenhouse effect and ground level ozone, which raises overall temperature and exacerbates living conditions.4 As temperatures increase, asphalt, concrete, and city buildings absorb increased amounts of heat from the sun, causing surface and overall air temperature to rise. As a result, the surface of a conventional rooftop can rise 90 degrees above the ambient temperature on a hot day. Cities are more prone to heating up, as they contain greater surface areas of concrete than other surface areas, hence earning their moniker as “urban heat islands.”5 Their overall warming effect increases city energy consumption, air pollution, heat-related illnesses, and death.6 Further, these warmer ambient temperatures can also prompt an abundant number of changes in urban organisms. For many species, temperature marks the beginning of ecological events. As animals shift their habitats out of the city to cooler areas, many species find it difficult to adapt and disappear altogether. Plants, 08 / EILEEN WANG
unable to physically migrate, simply die. This decrease in urban vegetation can be detrimental to communities as plants produce oxygen, clear air pollutants, and filter contaminants found in storm water runoff flowing into New York’s municipal water system.7 Cities also destroy habitats through alteration and fragmentation, as human development divides large habitats into smaller, more isolated fragments.8 Although New York City has cut down on greenhouse gas emissions in the past decade by a significant eight percent, there are additional steps that can be taken to further reduce the effects of climate change while positively impacting a variety of sectors. One simple step towards improving the urban environment is to use green roofs. By growing vegetation on buildings, green roofs reduce energy use, decrease air pollutants, and serve as a habitat for many valuable organisms. Plants provide insulation for buildings by absorbing heat, which reduces the energy needed to moderate building temperatures and ameliorates carbon emissions that contribute to the urban heat island effect. Heat waves are lowered, which in turn reduces heat stress and improves residential health and comfort. Also interesting, noise attenuation from vegetation can reduce external noise up to 50 decibels, which is highly beneficial for residents who live in noisy urban areas.9 Green roofs serve as a sustainable habitat for plant, insect, and bird species while providing a stepping -stone habitat for migrating species that would otherwise be fragmented by the lack of urban vegetation. Increasing biodiversity increases the overall ecosystem productivity by facilitating nutrient cycles related to the production of clean air. Moreover, the aesthetic values of green roofs have positive impacts on community, as they bolster psychological well-being.10 Installing green roofs is an effective way to reduce energy use, decrease air pollutants, and promote biodiversity. Along with a plethora of public
benefits, green roofs also provide a variety of private incentives for building owners. The main method of gauging a green roof’s effectiveness is by the amount of energy saved, as reducing energy has proved to be massively beneficial not only for the environment but for companies as well. In 2009, the U.S. Postal Service’s Morgan Mail Processing Facility built the largest green roof in Manhattan, which reduced its power usage by 30 percent each year and cut annual company expenditure by $30,000.11 In addition, green roofs increase building roof-life twofold, reducing costs of maintenance and repair.12 A General Services Administration’s report estimates that green roofs on commercial and public buildings provide an average payback of 6.2 years nationally, an internal rate of return of 5.2 percent, and a 224 percent return on investment. Tax-wise, companies that install green roofs can also receive a one-time tax cut of up to $100,000 from the NYC Department of Buildings, a payback that could reimburse more than half the cost of installing a green roof for an average commercial building.13 A green roof offers a substantial investment that generates a large profit while paying for itself in the long term. Despite the multitude of public and private benefits, many buildings have not integrated green roofs due to the steep installation costs. At $20 per square foot, an entire green roof could cost an average 12,000 square foot building around $240,000.14 Gardens also require routine maintenance, which may deter building owners who wish to avoid additional time and expense.15 On the other hand, green roof maintenance could potentially open up more jobs for people in the market.16 Large real estate firms, such as Blackstone, would profit from introducing green roofs to their portfolios. The Blackstone Real Estate platform currently manages more than $102 billion in real estate assets and holds a strong presence in Manhattan, yet none of its properties integrate green roofs. According to the company’s Global Head of Real Estate, it hopes to “build a
By growing vegetation on buildings, green roofs reduce energy use, decrease air pollutants, and serve as a habitat for many valuable organisms.”
BEYOND THE CONCRETE ROOTS / 09
secure financial future for millions of employees, retirees, schools, non-profit organizations, and others.”17 The addition of green roofs offers a straightforward solution that helps improve urban tenant happiness, extend building life, and heighten public awareness of the environment. As one of the largest real estate private equity firms in the world, Blackstone has the funds necessary for green roof installation and the reputation to facilitate change. Since Blackstone’s core investing strategy is to purchase and improve properties, the company tends to have long holding periods for investments. A study done by the Mortgage and Housing Corporation shows that creating productive rooftop gardens increases the net worth of a building by at least seven percent, without accounting for the additional marketing benefits generated from public interest.18 Rooftop gardens long have been viewed
10 / EILEEN WANG
as a luxury, and as public knowledge of green roof benefits increases, buildings with this “green” feature will standout and attract wealthy buyers.19 Blackstone can generate large profits from selling buildings with green roofs as well as set an eco-friendly trend for other real estate firms to follow. Many readily available installation groups have emerged to support the rising popularity of green roofs. Specialized companies, such as LiveRoof, apply their knowledge of ecology when they install green roofs by layering plants and engineering soil above a waterproof membrane.20 By partnering with LiveRoof, Blackstone can ensure expert installation, leak prevention, and routine maintenance while adding quality distinction to their buildings. As rooftop gardens continue to rise in popularity, installing green roofs will allow Blackstone to profit while leading major environmental and social
change within urban areas. Green roofs help bolster urban biodiversity and improve the overall quality of life for many species, including people. Although many may view cities as too degraded and depauperate to contain biodiversity, green roofs offer a steady, long-term step towards diminishing our carbon footprint by establishing vibrant urban communities.
Boundless. “Survival Needs - Boundless Open Textbook.” Boundless, Boundless, 31 Jan. 2017. <https://www.boundless.com/physiology/ textbooks/boundless-anatomy-and-physiology-textbook/ introduction-to-anatomy-and-physiology-1/life-31/survivalneeds-283-5203/>. 2 Falk, Tyler. “UN: Cities Contribute 70 Percent of Global Greenhousegas Emissions.” ZDNet, ZDNet, 30 Mar. 2011. <http://www. zdnet.com/article/un-cities-contribute-70-percent-of-globalgreenhouse-gas-emissions/>. 3 “Current and Projected Populations.” NYC, NYC Planning, 1 July 2016. <http://www1.nyc.gov/site/planning/data-maps/nyc-population/ current-future-populations.page>. 4 Global Energy Network Institute. “Global Energy Problems.” GENI. <http://www.geni.org/globalenergy/faq/general/faq_I-amconcerned-about-global-energy-problems.shtml>. 5 “Heat Island Effect.” EPA, Environmental Protection Agency, 28 Sept. 2017, <http://www.epa.gov/heat-islands>. 6 “Using Green Roofs to Reduce Heat Islands.” EPA, Environmental Protection Agency, 27 June 2016. <https://www.epa.gov/heatislands/using-green-roofs-reduce-heat-islands>. 7 “U.S. Postal Service Opens First Green Roof.” United States Postal Service, 22 July 2009. <https://about.usps.com/news/nationalreleases/2009/pr09_063.htm>. 8 “Biodiversity & Species Conservation.” Biodiversity & Species Conservation - NYS Dept. of Environmental Conservation, New York State. <http://www.dec.ny.gov/animals/279.html>. 9 “GREEN ROOFS.” Conservation Technology, Conservation Technology. <http://www.conservationtechnology.com/greenroof. html>. 10 Ibid. 1
“U.S. Postal Service Opens First Green Roof.” United States Postal Service, United States Postal Service, 22 July 2009. <http://about. usps.com/news/national-releases/2009/pr09_063.htm>. 12 “FAQ.” Green Roof Technology, Jörg Breuning & Green Roof Service LLC. <http://www.greenrooftechnology.com/green-roofsexplained>. 13 Belson, Ken. “Green Roofs Offer More Than Color for the Skyline.” The New York Times, The New York Times, 27 Aug. 2008. <http:// www.nytimes.com/2008/08/28/nyregion/28roof.html>. 14 Galbraith, Kate. “Green Roofs: Are They Worth the Expense?” The New York Times, The New York Times, 19 May 2009. <https://green. blogs.nytimes.com/2009/05/19/green-roofs-are-they-worth-theexpense/?_r=0>. 15 Ibid. 16 “Green Roof Benefits.” GRHC WEBSITE, Green Roofs for Healthy Cities. <http://www.greenroofs.org/index.php/about/ greenroofbenefits>. 17 “Who We Are.” Blackstone, Blackstone Real Estate. <https://www. blackstone.com/the-firm/asset-management/real-estate>. 18 Tomalty, Ray. “The Monetary Value of the Soft Benefits of Green Roofs.” Greenroofs, Aug. 2010. <http://www.greenroofs.org/ resources/Monetary_Value_of_Soft_Benefits_of_Green_Roofs.pdf>. 19 Gamerman, Amy. “Lavish Gardens Sprout Up on Luxury Penthouse Roofs.” The Wall Street Journal, Dow Jones & Company, 12 June 2014. <https://www.wsj.com/articles/lavish-gardens-sprout-up-onluxury-penthouse-roofs-1402 604617>. 20 “GREEN ROOFS.” Photo Credits: Stefano Boeri Architetti, Forêt Blanche in Paris—page 6 Stefano Boeri Architetti, Nanjing Vertical Forest—page 9 Benjamin Child/Unsplash—page 10 11
“The idea for ‘Beyond the Concrete Roots’ is targeted toward a major issue in our world today— pollution. As humans, it is our social responsibility to fix the damage we have done to the environment, as it impacts every living thing around us.”
CLASS OF 2020 FINANCE BEYOND THE CONCRETE ROOTS / 11
After realizing how important it is to have emergency funds, author Mary Gao wanted to explore what stops people from saving. Here she suggests that a new form of a “savings group” can connect historical practices with modern technology and empower local populations.
PRESSURE: HOW TO INCREASE SAVINGS IN LATIN AMERICA
he poor are not too poor to save money. In fact itâ€™s been forecast that, by 2020, fifty million individuals who are unbanked and unserved by formal financial institutions will mobilize $1.25 billion USD through informal savings groups.1 According to Jeffrey Ashe, director of community finance at Oxfam America, savings groups are revolutionizing international development. 2 These groups flourish particularly in regions like Latin America where nearly 90 percent of the population does not have any savings in a formal institution. 3 Without savings, millions are left vulnerable to financial shocks and unable to build wealth related to investment, education, and retirement. Owning a home becomes nearly impossible when paying in full is the only option. Studies have shown that participants in a formal financial system are better equipped to start and expand businesses, invest in education, and manage risk.4 They are able to save safely and draw on a line of credit. Given this need, banks themselves are best positioned to bring the excluded into the formal system. THE CURRENT PATCHWORK SOLUTION TO SAVINGS Latin America has one of the lowest savings account rates in the world, about one-fifth the rate of Organization for Economic Cooperation and Development (OECD) countries.5 In a survey conducted for the Global Financial Inclusion Database in Latin America, more than half of respondents said that it was not possible to come up with emergency
funds.6 Without savings, financial shocks that may result from losing a job can spiral into disaster. Some have argued that the high number of the unbanked is voluntary, but data does not support this argument. According to the World Bank, only four percent of unbanked adults reported lack of need as the only reason for not having an account.7 Instead, unbanked adults report the lack of necessary documentation, lack of trust, and the inability to get an account as reasons for exclusion.8 These claims suggest that users want access to financial services but that other external barriers inhibit them. For those who want to save but do not have access to formal institutions, informal savings groups have filled the gap.9 Informal savings groups, and in particular Rotating Savings and Credit Associations (ROSCAs), are widespread in Latin America. These groups function as members contribute a set amount of money on a regular schedule into a central fund. The lump sum of the fund is then given to a different member in rotation. 10 For example, say there are 12 members who each contribute $100 a month. The order of who receives the money each month is determined by a draw. The person who draws the number one will receive the collected $1,200 the first month, the person who draws the number two will receive $1,200 the second month, and so on. This procedure continues until every person has received $1,200 at which point the ROSCA ends. Considering only 13 percent of Latin Americans save in a formal institution, a staggering eight percent save informally in groups like ROSCAs.11 ROSCAs are well ingrained into the culture of more than 70 countries and go by many traditional names.12 They’re called pasanacu in Bolivia, tanda in Mexico, pandero in Peru, and consorcio in Brazil.13 ROSCAs are local, accessible, and leverage social pressure to secure savings. The prevalence of ROSCAs is proof that the model is salient—the unbanked can and want to save.
14 / MARY GAO
The weakness of these groups however, according to Lauren Hendricks from the Grameen Foundation, is that “they’re not full financial inclusion… they don’t provide all the products that people need when they need them.”14 For example, participation in informal groups is not officially recorded. Therefore, participants cannot build credit history to get loans.15 Participants don’t receive interest and their money is not insured from theft. Savings are also limited because too large a pool with bigger sums makes recordkeeping a burden.16 Formal institutions, however, can mitigate these downsides. THE PATH TO INCLUSION Banco Santander would benefit enormously from being the first to bridge the gap between informal groups and formal banks. Currently, more than half of Banco Santander’s profits come from Latin America with a client base of 44 million.17 Given that there are 210 million people left unbanked in the region, the potential for expansion is clear. 18 Moreover, with more than 6,000 branches in its Latin American network and established financial tools, it is uniquely positioned to reach out and create shared value. Further, opening a pathway for millions to join the formal system delivers a welcome expansion into an untapped market. Envision a program in which, at the end of each ROSCA cycle, Banco Santander receives the lump sum and deposits it into a savings account. By partnering with informal savings groups and enabling them to run independently until that last automated step, there will be minimal overhead work for Banco Santander. Furthermore, the ROSCAs will continue to be flexible and local. To find these informal groups, Banco Santander should partner with CARE International, the largest facilitator of savings groups in Latin America today.19 By working with CARE, Banco Santander will have access to tens of thousands of local organizers of ROSCAs.20 The next step, then, is to create a platform that
digitizes the ROSCA model. The platform would not replace local groups but rather act as a familiar option to engage more users. CARE International already works with the private sector to co-create opportunities for shared benefit. The organization states that it “develops new partnerships with the private sector and new models (such as mobile banking) to deepen financial inclusion—for example, by supporting village savings and loan groups to keep their savings safe and access the financial services that they need to grow their businesses.” 21 Having already worked with Barclays on initiatives in Africa and South East Asia, CARE International would likely be open to working with Banco Santander in Latin America. The key to understanding ROSCAs is that they are not anonymous.22 This unique feature makes them unlike anything currently offered on the formal market. Instead, they utilize social pressure to encourage disciplined savings. A professor observing a ROSCA once noted, “…without the discipline of group participation, many individuals would not have managed to actually set aside the specified sum each week.” 23 Overcoming the psychological urge to consume now at the expense of future welfare is extremely difficult for many.24 Introducing peer pressure into savings is an effective solution. What’s more, individuals are not just saving menial amounts but large enough sums that can significantly improve their quality of life. For example, one woman bought a small rice mill when she received the lump sum from a ROSCA. This purchase saved hours of walking by allowing her to conveniently mill rice in her home. She also could rent the rice mill to farmers around her village.25 The illiquidity of ROSCAs is actually an advantage. By saving one large sum instead of many small ones, larger investments, such as the purchase of a rice mill, can be made. Pooling money into a central fund and then distributing those funds is not
…individuals are not just saving menial amounts but large enough sums that can significantly improve quality of life.”
logistically difficult for banks. Small startups, such as eMoneyPool and Puddle, have already built the technology.26 Banco Santander’s version should allow ROSCAs to run exactly as they do now, enhanced by the automated transfer of money. In other words, participants themselves would continue to decide who participates, how much to deposit, the length of a cycle, etc. The organizer would then provide this information to the bank, and the bank would transfer the money. Currently, the common practice for storing the collected money is in a metal box secured with three locks given to three people.27 Banco Santander can offer customers all the advantages of the traditional system with added top-level security. Combining the advantages of traditional savings groups with modern savings accounts creates a superior product. The advantage of a ROSCA over a bank is the social pressure to save. As noted in a report by the Gates Foundation, “members value the discipline that is forged by having limited access to their funds and being required to make regular deposits.”28 The advantage of a bank over informal groups is that clients build up credit history and their savings are safe.
Furthermore, clients will have access to a full range of services including owning a debit card, accessing loans, and opening investment accounts. Building an online ROSCA in which the money saved counts as collateral for a loan is a vital step towards financial inclusion. By combining a traditional model with modern online banking, Banco Santander can offer the benefits of both to a wider range of clients and move them one step closer to financial inclusion. In a case study published by the DellAmore Foundation, the First National Housing Bank of Africa partnered with 50 local ROSCAs. It extended credit to participants in exchange for ROSCA deposits that could then be used as collateral for loans.29 One such participant was Jonathan Mutumbo. He was previously denied a loan because he could never save enough capital at once to deposit. But through the collaborative program, he was able to buy a house for himself and his family using ROSCA funds. In fact, this model is so promising that the MasterCard Foundation has invested $17.6 million in a program called Savings at the Frontier in Africa.30 Similarly, the
Bill and Melinda Gates Foundation have injected more than $30 million into comparable programs.31 Unfortunately, these pilot programs have not yet made their way to Latin America. They should, given that, according to the World Bank Group, fewer Latin Americans save in a formal institution than even SubSaharan Africans.32 So the opportunity exists, and the question becomes: who is going to work with the Latin American market first? DOING GOOD TO DO WELL Harvard professors Michael Porter and Mark Kramer define shared value as a practice that enhances both the competitiveness of a business as well as the economic and social conditions of the community in which it operates. 33 By bringing the ROSCA model into the formal system, Banco Santander will gain competitive advantage by capturing clients. By leveraging this well-established model, it reduces the risks traditionally associated with a less financially developed demographic. Simultaneously, millions of unserved people will gain access to the formal system. The formal system will allow
GOOD PEER PRESSURE: HOW TO INCREASE SAVINGS IN LATIN AMERICA / 15
them to grow wealth, create a safety net, and invest in themselves, their families, and their communities. The foremost benefit to Banco Santander in adding a social element to its products is the trust it will gain. A very particular challenge in Latin America is the perennial lack of trust in financial institutions.34 Overcoming this access barrier will require personto-person contact through agents who are both locally accepted and financially literate.35 As it turns out, these people already exist and have been running ROSCAs for years. Once money moves from participants, through agents, to Banco Santander accounts, the loyalty of these customers will likely increase. In a 2016 report, Bain & Company found that a person’s primary bank receives 64 percent of all purchases and 78 percent of all deposits.36 In other words, being the first to leverage pre-existing social trust will win Banco Santander both market share and customer activity. Furthermore, providing a digitized version of a service already familiar to the unbanked gives Banco Santander an edge in the mobile banking space. Latin America leads the world in terms of mobile money user growth and competition is fierce. 37 By the end of 2015, there were 45 mobile money providers operating in Latin America.38 However, uptake has been slow largely
due to “long-term distrust of financial institutions.”39 Because of ROSCAs’ social element, the trust among savings group participants will likely extend to trust for the institution facilitating the group. Instead of trying to convert the unbanked through elaborate products designed for financially fluent users, why not replicate an already understood product? The reason why banks have not already expanded their services is the perceived higher level of risk and cost. After all, it is expensive to screen users who have no formal financial history. That is why Banco Santander’s partnership with locals who organize ROSCAs is vital. These locals will continue to determine who may participate based on their prior record. Indeed, “the link between prior savings and credit is stressed much more in the informal sector than in the formal one.”40 The risk of nonpayment decreases because of strong social repercussion—a penalty that may include exclusion from future cycles.41 The organizers of ROSCAs have already assumed the sunk costs of educating the clients and vetting their reliability. This step lowers the risk and cost to Banco Santander. Finally, incorporating the unbanked into the formal system would be tangible proof of Banco Santander’s Sustainability Mission. Banco Santander defines sustainability as “doing business and, at the same time, contributing to the
“I wanted to show that mixing cultural and historical practices with modern technology is a powerful combination. For example, utilizing social pressure through locally empowered groups accomplishes something even the most advanced systems could not.”
CLASS OF 2020 BUSINESS & POLITICAL ECONOMY 16 / MARY GAO
economic and social progress of the communities where it is present.”42 Its mission is almost verbatim the definition of shared value. It promises to promote access to banking along with social and financial inclusion. By reaching out to ROSCA participants and providing them with full services, including one already familiar to them, Banco Santander would affirm its commitment to social good. CONCLUSION Bringing the 210 million unbanked adults into the formal system will require a concerted effort—but an effort that will pay off for all stakeholders. Transferring ROSCA sums into formal savings accounts will be the foot-in-thedoor that users need to begin trusting and embracing formal banking. What’s more, developing an online version of the ROSCA model will give Banco Santander a competitive advantage when acquiring customers from an untapped market. This strategic partnership between the private and community sector in Latin America will ultimately give millions a chance to save more and save better. To date, banks remain the world’s most sophisticated institutions for managing and growing wealth. Extending these services to the unbanked not only will do good, but also holds the promise of shared prosperity for all stakeholders.
Ashe, Jeffrey. In Their Own Hands: How Savings Groups Are Revolutionizing Development. Berrett-Koehler, 2014. 2 Ibid. 3 “Financial Inclusion Data / Global Findex.” The World Bank, The World Bank Group, 2014. Web. 19 Apr. 2017. <http://datatopics. worldbank.org/financialinclusion/region/latin-america-andcaribbean>. 4 “Global Findex (Global Financial Inclusion Database).” The World Bank, The World Bank Group, 2014. Web. 19 Apr. 2017. <http:// databank.worldbank.org/data/reports.aspx?source=1228>. 5 Ibid, 7. 6 Ibid. 7 Demirguc-Kunt, Asli, Leora Klapper, Dorothe Singer, and Peter Van Oudheusden. “The Global Findex Database 2014: Measuring Financial Inclusion around the World.” World Bank Group (2015): 61. World Bank Group. Web. 25 Apr. 2017. <http://documents. worldbank.org/curated/en/187761468179367706/pdf/WPS7255. pdf#page=3>. 8 Ibid, 60. 9 “Savings at the Frontier.” Oxford Policy Management, Oxford Policy Management, 21 Nov. 2016. Web. 19 Apr. 2017. <http://www.opml. co.uk/projects/savings-frontier>. 10 Moser, Caroline. “Using Microinsurance and Financial Education to Protect and Accumulate Assets.” Reducing Global Poverty: the Case for Asset Accumulation. Brookings Institution Press, 2007. <http:// www.jstor.org/stable/10.7864/j.ctt6wpdp5.17>. 11 “Financial Inclusion Data.” 12 Brown, Adam & Garguilo, Steve & Mehta, Khanjan. (2011). The Relentless Pursuit of Financial Capital for Micro-enterprises: Importance of Trust and Social Capital. International Journal for Service Learning in Engineering. 6. 78-97. Web. 19 Apr. 2017. <https://www.researchgate.net/publication/257142786_The_ Relentless_Pursuit_of_Financial_Capital_for_Micro-enterprises_ Importance_of_Trust_and_Social_Capital>. 13 Ibid. 14 Bornstein, David. “An Inclusive Emerging Economy, With Africa in the Lead.” The New York Times, The New York Times, 27 Nov. 2014. <https://opinionator.blogs.nytimes.com/2014/11/27/an-inclusiveemerging-economy-with-africa-in-the-lead/>. 15 “Episode 466: DIY Finance.” NPR, NPR, 10 Feb. 2016 Web. 22 Apr. 2017. <http://www.npr.org/sections/money/2016/02/10/ 466281062/episode-466-diy-finance>. 16 “Savings at the Frontier.” 17 “Grupo Santander.” Santander Private Banking, Santander Private Banking International, 2013. Web. 22 Apr. 2017. <http://www.pbsantander.com/en/node/17>. 18 “Financial Inclusion in Latin America and the Caribbean.” FINDEX NOTES (2015): n. pag. World Bank Group, World Bank Group, May 2015. Web. 23 Apr. 2017. <http://pubdocs.worldbank.org/ en/856261461702868199/N4-LAC.pdf>. 19 “Savings Group: Global Coverage by Facilitating Agencies.” SEEP Network (n.d.): n. pag. SEEP Network. Web. 23 Apr. 2017. <http:// www.seepnetwork.org/filebin/docs/SG_Member_Numbers_ Worldwide.pdf>. 20 Ibid. 21 “Breaking the Barriers to Financial Inclusion with Barclays.” CARE. Web. 26 Apr. 2017. <http://www.careinternational.org.uk/fightingpoverty/working-way-out-poverty/banking-change>. 22 Besley, Timothy, et al. “The Economics of Rotating Savings and Credit Associations.” The American Economic Review, vol. 83, no. 4, 1993, pp. 792–810. <http://www.jstor.org/stable/2117579>. 23 Miracle, Marvin P., et al. “Rotating Credit Associations in Latin America [with Reply].” Caribbean Studies, vol. 11, no. 3, 1971, pp. 119–122. <www.jstor.org/stable/25612416>. 1
Frederick, Shane, et al. “Time Discounting and Time Preference: A Critical Review.” Journal of Economic Literature, vol. 40, no. 2, 2002, pp. 351–401. 25 “Saving for Change.” Oxfam America Inc., 28 May 2009. Web. 24 Apr. 2017. <https://www.oxfamamerica.org/explore/stories/saving-forchange/>. 26 Schütte, Arjan. “Susu Sudio: Shared Savings.” Forbes, Forbes Magazine, 12 Apr. 2013. Web. 25 Apr. 2017. <https://www. forbes.com/sites/arjanschutte/2013/04/11/susu-sudio-sharedsavings/#668e1b3c43b0>. 27 Pérez, Avril, et al. “Herramientas Efectivas Para El Ahorro Inclusivo En América Latina Y El Caribe.” Proahhoras, Mar. 2015. Web. 29 Apr. 2017. <http://www.pro-savings.org/system/tdf/09.09. pdf?file=1&type=node&id=786>. 28 Goss, Salah. “One Early Success Story: Savings Led Groups.” Global Savings Forum: Gates Foundation. Bill & Melinda Gates Foundation, Nov. 2010. Web. 24 Apr. 2017. <https://docs.gatesfoundation.org/ Documents/one-early-success-story.pdf>. 29 Chirmeister, Raimund, and Michael Nadler. “PROMOTING LINKAGES BETWEEN FORMAL AND INFORMAL FINANCE IN AN AFRICAN COUNTRY: A CASE STUDY.” African Review of Money Finance and Banking, no. 1/2, 1996, pp. 135–154. <http:// www.jstor.org/stable/23027372>. 30 “Savings at the Frontier.” 31 Goss, Salah. 32 Demirguc-Kunt. 33 Kramer, Michael E. Porter Mark R., et al. “Creating Shared Value.” Harvard Business Review, 25 Aug. 2015. Web. 24 Apr. 2017. <https:// hbr.org/2011/01/the-big-idea-creating-shared-value>. 34 Serebrisky, Tomás, and Eduardo Cavallo. “DIA 2016 Saving for Development: How Latin America and the Caribbean Can Save More and Better.” IDB - Inter-American Development Bank, 2016. Web. 24 Apr. 2017. <https://publications.iadb.org/bitstream/ handle/11319/7677/Saving-for-Development-How-Latin-Americaand-the-Caribbean-Can-Save-More-and-Better.pdf?sequence=6>. 35 Ibid, 260. 36 Du Toit, Gerard, and Maureen Burns. “Customer Loyalty in Retail Banking: Global Edition 2016.” Bain & Company, 24 Apr. 2017. <http://www.bain.com/publications/articles/customer-loyalty-inretail-banking-2016.aspx>. 37 “Payments in Latin America: Under Digital Transformation.” Americas Market Intelligence (2016): 10-18. Americas Market Intelligence, Oct. 2016. Web. 26 Apr. 2017. <https://static1. squarespace.com/static/557dd429e4b035c8591b78e0/t/5817931b1 97aea6c5f226444/1477940002686/AMI_Latam_Payments_Digital_ Transformation_Oct_2016.pdf>. 38 Ibid. 39 “Digital Banking in Latin America: Trends and Opportunities.” Fisa Group, May 2016. Web. 26 Apr. 2017. <http://www.fisagrp.com/en/ digital-banking-in-latin-america-trends-and-opportunities>. 40 Germidis, Dimitri. “INTERLINKING THE FORMAL AND INFORMAL FINANCIAL SECTORS IN DEVELOPING COUNTRIES / LES RELATIONS ENTRE LES SECTEURS FINANCIERS FORMELS ET INFORMELS DANS LES PAYS EN VOIE DE DEVELOPPEMENT.” Savings and Development, vol. 14, no. 1, 1990, pp. 5–22. <http://www.jstor.org/stable/25830210>. 41 Chirmeister, Raimund. 42 “Sustainability Strategy.” Banco Santander S.A. Web. 25 Apr. 2017. <http://www.santander.com/csgs/Satellite/CFWCSancomQP01/ en_GB/Corporate/Sustainability/Santander-and-sustainability/ Sustainability-strategy.html>. Photo Credits: Brookings Institution—page 12 World Bank/Flickr—page 15
GOOD PEER PRESSURE: HOW TO INCREASE SAVINGS IN LATIN AMERICA / 17
OPIOID ADDICTION ESSAY BY
ANTONIO DI MEGLIO
The ongoing opioid crisis in the United States has been declared a national public health emergency. Antonio Di Meglio explores how a leading health insurance association, Blue Cross Blue Shield, can use medical innovation to address one of the worst drug abuse problems in U.S. history.
et a pres cription; pop a pill; ease the pain; and get addicted: more than 33,000 Americans died from opioid abuse in 2015, and nearly 80 percent of opioid users report that their first opioid was a legal prescription painkiller.1, 2 The opioid epidemic spans the country’s socioeconomic classes, affecting urban, suburban, and rural areas alike. Opioids are commonly prescribed because they are cheap, effective painkillers that millions of Americans depend on every day. However, these drugs have a high potential for addiction, leading many to develop a toxic dependence on either ingesting or snorting them—the latter is significantly more dangerous because the drug enters the body and brain much faster. Those who become addicted often suffer from nausea, brain and cartilage damage, paranoia, and depression, and in extreme cases, opioid overdoses lead to death.3
AN INDIFFERENT MARKETPLACE Despite this alarming reality, the opioid issue is seemingly immune to public policy, as pharmaceutical, medical, and consumer stakeholders alike are primarily motivated by the drugs’ costefficiency. The root of the opioid crisis is economic greed, and current government regulations are futile. Solutions like tamper-resistant/abuse-deterrent formulations and interdisciplinary pain management exist, but they are ignored in the healthcare market because insurers do not cover them. ENTER BLUE CROSS BLUE SHIELD How can the opioid crisis be addressed in a way that effectively targets the underlying problem? In the complicated American medical system, health insurers are the ones with the power to connect consumers with pharmaceutical products through healthcare coverage plans. Blue Cross Blue Shield in particular is a
leading insurer in the healthcare market: its 36 independently operated insurance companies cover one in three Americans, and the second largest health insurer in the country—Anthem Insurance Companies, Inc.—is fully composed of Blue Cross Blue Shield companies.4, 5 Furthermore, the association includes both for-profit and nonprofit companies, linking financial capital with valuable nonprofit research. Finally, the association has a strong influence on the federal government: as the third-largest lobbying spender of any organization in the United States, Blue Cross Blue Shield spent more than $25 million on healthcare campaigns in 2016.6 Thus, with significant influence in the for-profit, nonprofit, and public sectors, Blue Cross Blue Shield has the potential to take effective action. Specifically, it should leverage its market power and reject the coverage of addictive opioids among its member companies, instead replacing them with tamper-resistant/ abuse-deterrent formulations and interdisciplinary pain management. A RECIPE FOR REFORM OxyContin is the most popular opioid in the country and is covered as a firstline treatment option by all major health insurers. The prescription opioid was originally formulated as an extendedrelease tablet, but addicts often crush the pills to obtain a high only possible through injection or nasal inhalation. 7 Eighty milligram doses of oxycodone had historically been the “most commonly diverted and injected” opioid, but in 2013,
Purdue Pharma released a reformulated OxyContin that changed the course of the opioid industry.8 The new formulation deters addicts because it cannot be crushed into a powder. A 2014 study in Australia found that reformulated OxyContin had become “among the least commonly injected drugs.”9 According to the Journal of Pharmaceutical Care & Health Systems, “Tamper-resistant/abuse-deterrent formulations have a rigid structure [or] insoluble coating, or can release a gel when mixed with liquid.”10 Because doses of these formulations cannot be manipulated, they prevent overdoses and save addicts’ lives. Health insurers cover opioids because there is a constant market demand for painkillers—one that will not subside in the near future. Indeed, chronic pain is a public health issue that affects more than 100 million people in the United States with an estimated cost of $635 billion annually.11 A solution to the opioid crisis therefore should not aim to prevent the sale of painkillers but, rather, negate the drug’s addictive qualities. Because nearly 80 percent of opioid users are introduced to opioids through prescription pain relievers, the development of nonaddictive alternatives as first-line coverage options would deter new opioid users from becoming addicted.12 Thus, by covering tamper resistant/ abuse-deterrent formulations, Blue Cross Blue Shield would allow people to mollify their pain without risking the chance of addiction.
PROFITABLE INNOVATION The primary concern for healthcare industry stakeholders is profitability. As such, Blue Cross Blue Shield member companies must directly negotiate with pharmaceutical corporations to promote the development of tamper-resistant/ abuse-deterrent opioids. Thankfully, there is evidence to show that these formulations are indeed profitable. For example, since its label change, the abuse-deterrent formulation of OxyContin has dominated the market, maintaining its status as the most popular prescription opioid. Furthermore, while abuse-deterrent formulations represented less than five percent of all opioids prescribed in 2015, they generated more than $2.4 billion in sales. 13 This amounts to nearly a quarter of the $10 billion U.S. opioid market, proving that the shift towards abuse-deterrent formulations has already gained traction. Blue Cross Blue Shield can use Purdue Pharma’s successful reformulation of OxyContin as proof to pharmaceutical industry leaders that tamper-resistant/abusedeterrent formulations do not result in decreased profits. With a shift in coverage policy, Blue Cross Blue Shield can create newfound competition in a traditionally stagnant industry. Pharmaceutical patents last 20 years after their filing dates, and new patents are needed for every unprecedented tamper-resistant/ abuse-deterrent formulation.14 Thus, the opportunity to gain new patents through
reformulation of popular opioids will likely attract innovative pharmaceutical firms aiming to gain market power. The lucrative patent held by Purdue Pharma on the reformulated OxyContin, for example, lasts until 2030.15 OxyContin’s long-term profitability promotes one aspect of this reformulation solution. With the increase in research and development spending across a variety of medical fields, further economical advances are bound to emerge. Addictive opioids have been a common prescription medication option for nearly 20 years in the U.S., yet new proposals such as these can shift the fundamental balance of the healthcare sector from cost-efficiency and corporate dissonance to profitable q u a l i t y- f o c u s e d , p a t i e n t - c e n t r i c medicine development. A SECOND LINE OF DEFENSE Despite the success of abuse-deterrent formulations for new opioid users, more than 2.5 million Americans are addicted to opioids today.16 The New England Journal of Medicine cites that heroin use among addicts in a substance-abuse program, “nearly doubled after the introduction of abuse-deterrent OxyContin.”17 While OxyContin was the premier addictive opioid prior to its reformulation, heroin now is coveted as the only drug that can produce the same high that addicts seek. This increase in heroin addiction since the reformulation of OxyContin may prove that current opioid addicts have not been able to transition from traditional,
addictive opioids to tamper-resistant/ abuse-deterrent formulations. However, the implementation of interdisciplinary pain management as a second-line treatment option within Blue Cross Blue Shield coverage plans can solve this issue. According to University of Texas Southwestern Medical Center, interdisciplinary pain management introduces a “biopsychosocial model” of treatment. 18 While prescription opioids are developed for efficiency, interdisciplinary pain management involves a holistic medical approach to both physical and mental rehabilitation. Addicts are more likely to opt for comprehensive treatment options than ask for non-addictive opioid pills. With full coverage of interdisciplinary pain management, Blue Cross Blue Shield can lead the transition toward a more patient-centric approach across the healthcare industry. This personalized approach to treatment not only is costeffective, but also, it is not bound by traditionally expensive prescription drug regulations. Further, it is forward thinking, resulting in a more patientfriendly medical ecosystem overall. Unfortunately, the popularity of opioid prescription painkillers over the past 20 years has decreased the value of interdisciplinary pain management, and in 2014, the industry was plagued by “draconian cuts” from the Centers for Medicare and Medicaid Services. 19 However, Blue Cross Blue Shield’s rejection of opioids could revive this forgotten industry, increasing research
and development spending and opening a nationwide conversation on alternative pain treatment. WEST VIRGINIA: A CASE STUDY By moving beyond prescriptions, Blue Cross Blue Shield can take the country out of the stagnant abyss perpetuated by opioid prescription painkillers. Low income Americans currently threatened by a lack of choices would be able to choose a treatment option that differs from simply taking an addictive opioid pill. To move further in this direction, Blue Cross Blue Shield’s nonprofit arms should invest more heavily in research and development, beginning with a case study in West Virginia, the state with the highest drug overdose death rate.20 Highmark Blue Cross Blue Shield West Virginia, a nonprofit member of the Blue Cross Blue Shield association, is the state’s largest health insurer with $6.5 billion in cash and investments and $5.2 billion in net assets. In 2016 alone, the Highmark parent company invested $450 million into its core and growing businesses.21 The company is financially stable and clearly willing to develop its own operations, and thus it should welcome any opportunity to invest in profitable medical research. If it does manage to introduce opioid alternatives, Blue Cross Blue Shield would benefit not only from medicine sales but also from the unprecedented US media attention it would receive. Americans today have a negative opinion of health insurers, but the Blue
PUTTING A CAP ON OPIOID ADDICTION / 21
The root of the opioid crisis is economic greed, and current government regulations are futile.”
Cross Blue Shield association could use positive results to show the nation how its member companies truly create shared value. In their Harvard Business Review article “Creating Shared Value,” Michael E. Porter and Mark R. Kramer state that the creation of shared value focuses “on the connections between societal and economic progress.” 22 Blue Cross Blue Shield companies hold billions of dollars of assets, and investing in pharmaceutical corporations that bring opioid alternatives to the market would deliver incredible monetary and social reward. The long-term viability of this proposal is bolstered by the 20-year pharmaceutical patents that come with each new opioid alternative. In addition, consumers are more willing than ever to spend more on products and services provided by socially conscious companies.23 According to the Deloitte 2017 Global Health Care Outlook, “social determinants” will improve patient
outcomes and decrease costs dramatically in the long run.24 RECONCEIVING A CONVOLUTED SUPPLY CHAIN A socially conscious company cares about a specific, relevant social issue, and the opioid crisis is the most important public health crisis facing the US today. There is a trust gap between firms and consumers in the health insurance industry, and this proposal for Blue Cross Blue Shield takes steps to bridge that divide. Blue Cross Blue Shield has the resources and influence to positively impact the lives of more than a hundred million Americans. It can shift its companies toward more sustainable and profitable social consciousness both by replacing traditional addictive opioids with tamper-resistant/abusedeterrent formulations and introducing interdisciplinary pain management. Americans have become impatient with the stagnant healthcare system, but
Blue Cross Blue Shield can win over care providers and consumers alike by driving innovation and profitable competition. The potential for profitability makes increased research and development spending feasible, and it encourages a race for new patents and dynamic medical advancements. This proposal can generate measurable profit for Blue Cross Blue Shield companies and promote priceless shared value. It reconceives the healthcare supply chain by streamlining the role of the health insurer and enabling local cluster development among competing pharmaceutical firms. It also rewards pharmaceutical firms for successful research, benefits society through medical breakthroughs, and saves lives through cost-efficient prescription alternatives. Finally, it dramatically reduces the risk of addiction and addresses additional deficiencies with interdisciplinary pain management.
“The opioid crisis hits home for me because it has had a direct impact on the county where I grew up: Bergen County, New Jersey. The opioid crisis has a localized perspective that reaches far beyond the suburbs of New York City, however, and writing this paper allowed me to develop a solution that could impact all Americans from the coasts to the heartland.”
ANTONIO DI MEGLIO
CLASS OF 2020 FINANCE and COMPUTING & DATA SCIENCE 22 / ANTONIO DI MEGLIO
RECONCEIVING A NATIONAL NETWORK Following the example set by the Blue Cross Blue Shield association, health insurers nationwide have the opportunity to take advantage of market power and help end the ongoing opioid crisis. This proposal sprouts a new wave of rebranded, socially-conscious health insurance institutions that recognize
the need to end the opioid crisis and prioritize patient-centric quality over cost-efficiency. The opioid epidemic is a complex issue affecting a broad stakeholder constellation, but the path to a successful movement begins with Blue Cross Blue Shield saying one word: no. As a wellestablished health insurance association that monitors the health of one in three
Rudd, R A, et al. “Increases in Drug and Opioid-Involved Overdose Deaths - United States, 2010-2015.” MMWR. Morbidity and Mortality weekly report, U.S. National Library of Medicine, 30 Dec. 2016. Web. 25 Apr 2017. <https://www.ncbi.nlm.nih.gov/ pubmed/28033313/>. 2 Volkow, Nora D. “What Science tells us About Opioid Abuse and Addiction.” National Institute on Drug Abuse, NIH, 27 Jan. 2016. Web. 25 Apr 2017. <http://www.drugabuse.gov/about-nida/ legislative-activities/testimony-to-congress/2016/what-sciencetells-us-about-opioid-abuse-addiction>. 3 “Understanding the Dangers of Snorting Opiates.” Opiate.com, Web. 25 Apr 2017. <http://www.opiate.com/effects/understanding-thedangers-of-snorting-opiates/>. 4 “Health & Medical Insurance in the US: Market Research Report.” Ibisworld.com, IBISWorld, Aug. 2017. Web. 25 Apr 2017. <http:// www.ibisworld.com/industry-trends/market-research-reports/ finance-insurance/carriers-related-activities/health-medicalinsurance.html>. 5 “BCBS Companies and Licensees.” Blue Cross Blue Shield, Blue Cross Blue Shield Association, 2017. Web. 25 Apr 2017. <https://www.bcbs. com/about-us/bcbs-companies-and-licensees>. 6 “Lobbying Top Spenders.” OpenSecrets.org, The Center for Responsive Politics, n.d. Web. 25 Apr. 2017. <https://www.opensecrets.org/ lobby/top.php?indexType=s>. 7 “Understanding the Dangers of Snorting Opiates.” Opiate.com, Web. 25 Apr 2017. <http://www.opiate.com/effects/understanding-thedangers-of-snorting-opiates/>. 8 Degenhardt, L, et al. “The Introduction of a Potentially Abuse Deterrent Oxycodone Formulation: Early Findings from the Australian National Opioid Medications Abuse Deterrence (NOMAD) study.” Drug and Alcohol Dependence, U.S. National Library of Medicine, 1 June 2015. Web. 24 Apr 2017. <http://www. ncbi.nlm.nih.gov/pubmed/25910850>. 9 Ibid. 10 Hedaya, Mohsen A., and Dana Aldeeb. “The Need for TamperResistant and Abuse-Deterrent Formulations.” OMICS International, OMICS International, 5 May 2014. Web. 24 Apr 2017, <http://www.omicsonline.org/open-access/the-need-fortamperresistant-and-abusedeterrent-formulations-JPCHS-1-e102. php?aid=26193>. 11 Gereau, Robert W., et al. “A Pain Research Agenda for the 21st Century.” The Journal of Pain: Official Journal of the American Pain Society, U.S. National Library of Medicine, Dec. 2014. Web. 26 Apr 2017. <https://www.ncbi.nlm.nih.gov/pmc/articles/ PMC4664454/>. 12 Volkow, Nora D., op. cit. 13 Perrone, Matthew, et al. “Drugmakers push profitable, but unproven, opioid solution.” AP News, Associated Press, 15 Dec. 2016. Web. 26 Apr 2017. <https://apnews. com/2e8d2b0b93db4cb788a5de7655e8b58c>. 1
Americans, Blue Cross Blue Shield can and should lead the national charge against opioid abuse. It should renounce the culture of quiescence that currently plagues the American healthcare system, rejecting the coverage of addictive opioids and sparking a revolution that drives health insurers to create sustainable social value.
“Frequently Asked Questions on Patents and Exclusivity.” U.S. Food and Drug Administration, U.S. Department of Health and Human Services, 5 Dec. 2016. Web. 26 Apr. 2017. <https://www.fda.gov/ Drugs/DevelopmentApprovalProcess/ucm079031.htm>. 15 Ibid. 16 “Opioid Addiction 2016 Facts and Figures.” (n.d.): n. pag. American Society of Addiction Medicine, American Society of Addiction Medicine. Web. 26 Apr. 2017. <https://www.asam.org/docs/defaultsource/advocacy/opioid-addiction-disease-facts-figures.pdf>. 17 Dart, Richard C., Hilary L. Surratt, Theodore J. Cicero, Mark W. Parrino, S. Geoff Severtson, Becki Bucher-Bartelson, and Jody L. Green. “Trends in Opioid Analgesic Abuse and Mortality in the United States.” New England Journal of Medicine, Massachusetts Medical Society, 15 Jan. 2015. Web. 24 Apr. 2017. <http://www.nejm. org/doi/full/10.1056/NEJMsa1406143#t=article>. 18 Gatchel, Robert J., Donald D. McGeary, Cindy A. McGeary, and Ben Lippe. “Interdisciplinary Chronic Pain Management.” American Psychologist 69.2 (2014): 119-30. UT Southwestern Medical Center. Elsevier BV, 2014. Web. 27 Apr. 2017. <http://www.nejm.org/doi/ full/10.1056/NEJMsa1406143#t=article>. 19 Manchikant, Laxmaiahi, Hans Hansen, Ramsin M. Benyamin, Frank J.E. Falco, Alan D. Kaye, and Joshua A. Hirsch. “Declining Value of Work of Interventional Pain Physicians.” Pain Physician Journal. N.p., 2014. Web. 24 Apr. 2017. <http://www.painphysicianjournal. com/current/pdf?article=MjAzMg%3D%3D&journal=80>. 20 “Drug Overdose Death Data.” Centers for Disease Control and Prevention, U.S. Department of Health & Human Services, 16 Dec. 2016. Web. 26 Apr. 2017. <https://www.cdc.gov/drugoverdose/data/ statedeaths.html>. 21 “2016 Annual Report | Financials: Overview.” Highmark Health. Blue Cross Blue Shield Association, 2016. Web. 26 Apr. 2017. <https:// www.highmarkhealth.org/annualreport2016/about/glance.shtml>. 22 Porter, Michael E., and Mark R. Kramer. “Creating Shared Value.” Harvard Business Review, Harvard Business Publishing, Jan.-Feb. 2011. Web. 28 Apr. 2017. <https://hbr.org/2011/01/the-big-ideacreating-shared-value>. 23 “Global Consumers Are Willing to Put Their Money Where Their Heart Is When It Comes to Goods and Services from Companies Committed to Social Responsibility.” Nielsen, The Nielsen Company (US), LLC, 17 June 2014 Web. 26 Apr. 2017. <http://www.nielsen. com/us/en/press-room/2014/global-consumers-are-willing-toput-their-money-where-their-heart-is.html>. 24 “2017 Global Health Care Outlook.” Deloitte United States, Deloitte Touche Tohmatsu Limited, 2017. Web. 28 Apr. 2017. <https://www2. deloitte.com/us/en/pages/life-sciences-and-health-care/articles/ global-health-care-sector-outlook.html>. Photo Credits: TheDigitalWay/Pixabay—page 18 NVinacco/Flickr—page 20 Emilian Danaila/Pixabay—page 22 14
PUTTING A CAP ON OPIOID ADDICTION / 23
P l a s t i c p o l l u ta n ts f ro m t h e o c e a n a re i n c re a s i n g l y suffocating shorelines, harming both the environment and the economic prospects of ocean side corporations. In this essay, Zach Asato explores how the large hotel chain Marriott International can save tourism by treating the oceans.
OCEANIC PLASTIC POLLUTION SOLVED: COLLECTION, RECYCLING, REPURPOSING
OLLUTION IN THE SEAS The plague of plastic pollutants in the ocean is a continuous, man-made phenomenon—one that has become increasingly pervasive amid the rise of consumerism. Recent data suggests that “44 percent of all seabird species, 22 percent of cetaceans, all sea turtle species, and a growing list of fish species have been documented with plastic in or around their bodies,” demonstrating both the immense scale of the issue and the failure of current attempts to rid the ocean of such waste.1
ANALYZING CURRENT POLICIES Current government policies aimed at combating the crisis have yielded negligible positive results. The Australian government took legislative action to curb the rate of sea lion entanglements off the Australian Coast, but its proposals were unsustainable in the long run. 2 Furthermore, while the United States Government had proper legislative intent in enacting the Marine Plastic Pollution Research and Control Act of 1987 and the Marine Debris Research, Prevention, and Reduction Act of 2006, there was no accountability to ensure the necessary changes. Finally, environmentally conscious organizations and private corporations have had the opportunity to drive stakeholder alignment by forging international alliances, but they too have been unsuccessful in spurring change on a substantial scale. Such partnerships, like the Ocean Conservancy’s Trash Free Seas Alliance, cater to public and private stakeholder interests, but have minimum effect. A NEW PARTNERSHIP PROPOSAL The aforementioned solutions, although effective at gathering interest, were unable to end the widespread issue of plastic pollution. If oceanic plastic pollution is to be removed for good, a new approach is required. I propose a three-way partnership between the highend hotel brand Marriott International, The Ocean Cleanup, a company with
26 / ZACH ASATO
innovative plastic collection technology, and TerraCycle, a business that can repurpose plastic into new materials. Together, they can break this seemingly insurmountable cycle of pollution. HIRING A HOTEL Consider a major international hospitality brand like Marriott International, which has a global collective of 143 beachfront properties.3 These properties attract thousands of visitors annually and serve as a main revenue stream for the business. However, such beachfront properties are in danger of becoming undesirable. Current beach cleanup pursuits are ineffective because they focus on the aftermath of oceanic pollution rather than the source. Thus, oceanic pollutants continue to collect along shorelines, resulting in undesirable coastlines littered with thousands of plastics. For reference, the Great Pacific Garbage Patch is roughly “seven million tons [in] weight, [is] twice the size of Texas, and is around nine feet deep.”4 The sheer magnitude of pollutants should push private corporations relying on seaside revenues to continuously clean up their surroundings. Because most of Marriott’s luxurious beachfront properties include privately owned beaches, it is also in the hotel chain’s interests to remove surrounding waste to maintain a pristine, tourist-friendly aesthetic. Marriott International owns 22 properties in the Hawaiian Islands, and in 2016 alone, 57 tons of garbage washed up on Hawaii’s shores.5 Plastic pollutants impact tourism when travel destinations lose their picturesque nature, water contamination issues arise, and harmful ecological effects on coral reefs intensify. Additionally, health hazards linked to consuming fish that have ingested plastic pose potential risks. Add the fact that “in the United States, 85% of tourism revenue comes from coastal ocean states,” the long-term economic viability of oceanside hospitality operations is called into question.6
PARTNERING WITH THE OCEAN CLEANUP A hotel brand like Marriott International has a clear interest in ensuring the sustainability of tourism as it is directly related to the financial success of its coastal properties. In order to ensure that plastics do not continue to inhibit the potential of the hospitality industry, Marriott International should invest in a foundation like The Ocean Cleanup. Led by Dutch entrepreneur Boyan Slat, The Ocean Cleanup project addresses the issue of floating plastic through a prototype system that can collect ocean plastics autonomously over several years.7 The Cleanup team is currently testing the effectiveness of its design in the North Sea. The Ocean Cleanup project is an ideal partner for Marriott because its operations are cost-effective and environmentally friendly. Its plastic collection system is energy-neutral, using ocean currents to collect plastics. Furthermore, it is completely autonomous. Once deployed, the system has a unique design that allows for gradual scalability. 8 The model is flexible, durable, and capable of collecting materials of various shapes and sizes while withstanding extreme weather changes. ADDRESSING THE COSTS The system is the first of its kind to employ ocean currents to end oceanic plastic waste rather than seeing them as an obstacle. This technology will enable the natural collection of garbage, as estimates show that half of the Pacific Garbage Patch can be collected within ten years. The principle obstacle of a potential partnership comes from the upfront investment and the initial fixed costs necessary for assembling and deploying The Ocean Cleanup Array. Although The Ocean Cleanup already has an incentivebased donation structure through a tax-deductible contribution structure, a large-scale corporate funder, like Marriott International, can enable the project to reach an effective scale.
In terms of viability, consider that the cost to extract 70 million kg of garbage from the North Pacific Gyre over ten years is estimated to be around €317 million.9 Without any context, this seems expensive. However, it is important to note that the system entails a breakeven cost of only €4.53 per kg of plastic collected, which falls nicely within the range of beach cleanup costs, estimated to be €0.07-€18.0 per kg. 10 Moreover, the cost to install The Ocean Cleanup system to pre-empt plastic accrual in the APEC region is estimated to be less than dealing with the potential aftermath.11 Therefore, funding this project is logical not only in terms of proportional costs but also in terms of future savings. Given that Marriott International had a revenue stream of just over $17 billion in 2016, the cost of €317 million over ten years— or roughly US $34.5 million per year— deploying The Ocean Cleanup’s system seems reasonable and even profitable in the long run.12 , 13 TURNING TO TERRACYCLE Throughout the process of waste collection, a problem remains: where to relocate the recovered plastic. In order to address this issue, The Ocean Cleanup team can bring the plastics to a company like TerraCycle, which can responsibly recycle and repurpose the material through private recycling campaigns. 14 While some may advocate for the plastic to be incinerated—perhaps even for energy—the social and environmental consequences of doing so would counteract the small amount of energy produced. Indeed, such processes are energy-intensive themselves, releasing atmospheric pollutants, and leaving behind toxic byproducts. Therefore, the recycling and repurposing of ocean plastics provides a more environmentally responsible solution and also provides companies with opportunities to earn profit and create shared value. With its size and scale, TerraCycle is the perfect partner for Marriott and The Ocean Cleanup. The company has international partnerships with major
The marine debris of the Great Pacific Garbage Patch is roughly ‘seven million tons [in] weight, [is] twice the size of Texas, and is around nine feet deep.’”
OCEANIC PLASTIC POLLUTION SOLVED: COLLECTION, RECYCLING, REPURPOSING / 27
corporations that use plastic for their products, and it already has the supply chain infrastructure to carry out largescale recycling operations. By leading the initiative to end oceanic plastic waste, this triple partnership approach can combat plastic pollution by repurposing waste into recycled goods. In turn, consumers reward environmentally conscious manufacturers through their purchasing behavior. Furthermore, while most goods are recyclable, the economics of recycling are poor. This proposal will broaden general recycling efforts by providing a profitable way for recyclable plastics to reach consumer markets.
responsible products like Head & Shoulders Shampoo, both Marriott and P&G benefit. Marriott can boast about its investment by eliminating ocean plastics as it provides guests recycled products. P&G, in turn, can expand its market reach. In fact, this partnership falls directly into Marriott’s environmental mission to “educate and inspire associates and guests to conserve and preserve” by “address[ing] environmental challenges t h r o u g h i n n ov a t i ve c o n s e r v a t i o n initiatives.”18 Consumers and the public will see the positive effects of Marriott’s investments thanks to increased publicity and media coverage.
A CLOSER LOOK AT P&G AND CONSUMER DEMAND Meanwhile, companies that are already constructing sustainable products using recycled materials can continue to reap the benefits by receiving free plastics for use. This mutually beneficial relationship will keep production costs low, particularly for companies like P&G, which produces its Head & Shoulders brand shampoo bottles using 25 percent ocean plastics.15 P&G has said that it will continue manufacturing this recyclable shampoo bottle, using “2,600 tons of recycled plastic every year,” 16 and the company only plans to expand this shared value enterprise. By the end of 2018, more than half a billion P&G bottles per year are estimated to include up to 25 percent post-consumer recycled plastic. This represents more than 90 percent of all the hair care bottles sold in Europe.17 The increased consumer demand for this sustainable product incentivizes P&G to pursue its recycling initiative, demonstrating the profit potential of repurposed plastic.
LOOKING AHEAD In terms of future expansion and financial sustainability, consider that P&G also owns Oral B, Crest, Febreze, Downy, Dawn, and Gillette. These are all brands that one day can implement TerraCycle’s recycled plastic program to deliver more economical and environmentally friendly packaging. Thus, this alliance has the potential to bring long-term profit and positive brand image to all three organizations.
CYCLING BACK TO MARRIOTT In order to create a shared value chain that cycles back to Marriott, companies like P&G can provide discounted wholesale prices on goods it provides to the hotel chain. Marriott already purchases amenities for guest rooms, but through discounted, environmentally
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A CYCLE OF CLEAN COMMITMENTS As evidence suggests, the consolidation of Marriott International, The Ocean Cleanup, and TerraCycle under a singular shared value chain will promote the ultimate elimination of oceanic plastic pollution. Marriott is dependent on the influx of tourists to support its business model and is therefore incentivized to invest in The Ocean Cleanup. The Ocean Cleanup, with its prototype that enables large-scale collection of plastics from the various garbage patches, can call on TerraCycle to use and repurpose this plastic. Finally, corporate influencers looking to expand the use of profitable recycled plastics in their products can rely on TerraCycle’s business model and subsequently amplify its scale. These various interactions create a closed-loop solution that fosters a mutually beneficial relationship between
hotel chains like Marriott, non-profits like The Ocean Cleanup, environmentally conscious businesses like TerraCycle, and large corporations like P&G. This interconnectivity provides not only shared value for all affected stakeholders but also the foundation for future partnerships. Moreover, it effectively enforces the legislative intent originally laid out in previously unsuccessful governmental policies. By reconstructing stakeholder relationships and revisiting the intent of past government propositions, Marriott International, The Ocean Cleanup, and TerraCycle can work together to reimagine oceanic plastic pollution once and for all.
D’Alessandro, Nicole. “22 Facts about Plastic Pollution (And 10 Things We Can Do About It).” EcoWatch, EcoWatch, 2 Aug. 2017. <https:// www.ecowatch.com/22-facts-about-plastic-pollution-and-10things-we-can-do-about-it-1881885971.html>. 2 McIntosh, Rebecca. “Entanglement of Australian Sea Lions and New Zealand Fur Seals in Lost Fishing Gear and Other Marine Debris before and after Government and Industry Attempts to Reduce the Problem.” Marine Pollution Bulletin, Pergamon, 20 July 2004. <http://www.sciencedirect.com/science/article/pii/ S0025326X04000086>. 3 “Marriott International Inc.” MAR Annual Income Statement, MarketWatch. 28 Apr. 2017. <https://www.marketwatch.com/ investing/stock/mar/financials>. 4 “The #1 Resource for Facts, Pictures and Videos about The Great Pacific Garbage Patch... and More!” Garbage Patch - The Great Pacific Garbage Patch and Other Pollution Issues, GarbagePatch.net, 27 Jan. 2012. <http://garbagepatch.net/>. 5 Imam, Jareen. “Hawaii Has a Serious Trash Problem.” CNN, Cable News Network, 3 June 2016. <http://www.cnn.com/2016/06/03/us/ hawaii-island-trash-problem-irpt/index.html>. 6 “Trash Pollution.” The Atlantic, Ocean Health Index. 28 Apr. 2017. <http://www.oceanhealthindex.org/methodology/components/ trash-pollution>. 7 “Technology.” The Ocean Cleanup, The Ocean Cleanup, 28 Apr. 2017. <http://www.theoceancleanup.com/technology>. 8 Slat, Boyan. “An Update from the North Sea.” The Ocean Cleanup, The Ocean Cleanup, 31 Aug. 2016. <http://www.theoceancleanup.com/ updates/an-update-from-the-north-sea/>. 1
“How The Oceans Can Clean Themselves - A Feasibility Study 2.0.” (2014): 1-23. The Ocean Cleanup, The Ocean Cleanup, 2014. PDF. 28 Apr. 2017. <https://www.theoceancleanup.com/fileadmin/mediaarchive/Documents/TOC_Feasibility_study_lowres_V2_0.pdf>. 10 Ibid. 11 Ibid. 12 “Marriott International Inc.” 13 “How The Oceans Can Clean Themselves.” 14 Szaky, Tom. “Creating Value: Social Entrepreneurship.” Business and Its Publics, Plenary, 17 Apr. 2017, New York, NYU Skirball Center. 15 “P&G’s Head & Shoulders Creates World’s First Recyclable Shampoo Bottle Made with Beach Plastic.” News.pg.com, Proctor and Gamble. 19 Jan. 2017. <http://news.pg.com/press-release/head-shoulders/ pgs-head-shoulders-creates-worlds-first-recyclable-shampoobottle-made->. 16 Ibid. 17 “News Release.” P&G’s Head & Shoulders Creates World’s First Recyclable Shampoo Bottle Made with Beach Plastic | P&G News | Events, Multimedia, Public Relations, Proctor and Gamble, 19 Jan. 2017. <http://news.pg.com/press-release/head-shoulders/pgshead-shoulders-creates-worlds-first-recyclable-shampoo-bottlemade->. 18 “Environmental & Green Initiatives | Marriott Corporate Responsibility.” Marriott Corporate Responsibility, Marriott International. 28 Apr. 2017. <http://www.marriott.com/corporatesocial-responsibility/corporate-environmental-responsibility.mi>. Photo Credits: IngridTaylar/Flickr—page 24 Vberger/Wikimedia Commons—page 27 9
“Drawing on a BiP lecture given by TerraCycle’s founder, I was inspired to build upon the ideas of collection, recycling, and repurposing of plastic pollutants on a widespread basis. By implementing this approach that engages all three segments, I believe Marriott International can foster a continuous combative strategy against ocean plastics.”
CLASS OF 2020 FINANCE or MARKETING, TBD OCEANIC PLASTIC POLLUTION SOLVED: COLLECTION, RECYCLING, REPURPOSING / 29
Wholesome ESSAY BY
Fo o d w a s t e i n t h e U n i t e d S t a t e s s t a r t s a n d e n d s with the choices that a consumer makes. Amy Dong explores a way that the leading organic supermarket chain, Whole Foods, can change consumer preferences to promote the purchase of â€œunwantedâ€? food.
ore than a quarter of all food produced worldwide is never eaten, and the worst offender of food waste by far is the United States.1 From farm to fork, Americans throw away about 40 percent—approximately $165 billion worth—of safe, edible food each year. Due primarily to low profit margins and strict consumer preferences, our food industry is incredibly inefficient, suffering substantial losses on the farm (18 percent), in retail stores and food service operations (40 percent), and in our own households (42 percent).2 Even worse, despite various efforts to curb food waste, food is thrown away at an amount 50 percent more than that of the 1970s.3 By throwing out more than 35 million tons of edible food annually, we are generating a significant economic, environmental, and human cost that is unsustainable in the long-term.4 Unless the industry finds a way to change consumers’ wasteful habits, food waste will remain impossible to scale. UGLY PRODUCE, MISSHAPEN PROTOCOL Industry stakeholders have recently intensified their efforts to curb food waste after increasingly feeling its harmful effects. For example, the U.S. Department of Agriculture actively promotes federal policies such as the Food Donation Act of 2008 and initiatives such as the Food Recovery Challenge to encourage farmside redistribution.5 Nonprofits such as Feeding America and AmpleHarvest.org redirect more than 1.5 million tons of food annually to food banks, local pantries, and schools.6 Small farmers and suppliers contribute to composting efforts, sell surplus produce at farmers’ markets, and offer ugly produce at discounted prices.7 Together, these stakeholder groups have efficiently repurposed food otherwise destined for landfills: according to a 2016 ReFED report, their efforts will divert 9.5 million tons of waste annually. 8 While this marks a substantial improvement from the mere 1.5 million tons recovered
in 2011, it is not nearly enough to meet the USDA’s 50 percent waste reduction goal for 2030 and far from ending food waste altogether.9 Large-scale food waste remains an intractable problem because current solutions fail to address underlying consumer preferences for aestheticallypleasing, “perfect produce,” 10 and the market incentives to meet this demand. 11 Since the food industry prioritizes “maximizing profits over maximizing food use,” cheap waste is accepted—even expected—from farm to fork. 12 In their efforts to recover waste, concerned groups have proposed solutions disproportionately targeting producers and suppliers. Moreover, by placing food-insecure communities and the environment at the center of the stakeholder constellation, they have ignored precisely the group whose decisions contribute most to the waste itself: consumers. CALLING OUT CONSUMERS As the ones making the final purchase, consumers have the most leverage in deciding what ultimately gets tossed. As Jonathan Safran Foer points out in Eating Animals, “the entire goliath of the food industry is ultimately driven and determined by the choices [consumers] make.”13 And because we overwhelmingly desire perfect produce; prefer shelves “stocked to the brim year-round;” and overlook “heaps of healthful foods” simply because they are near their sell by and use by dates, we are most responsible for the industry’s operational inefficiencies. 14, 15 Indeed, while catering to our selective consumer demands, producers preemptively cull up to 75 percent of harvests that fall victim to “aesthetic trifles,” and suppliers “throw out mountains” of perfectly edible food every day.16, 17 When confronted by this industry protocol, one Hy-Vee supermarket director responded: “Presentation is paramount to keeping business. We can’t sell a perfectly good banana that doesn’t look good . . . so we toss it.”18
RETHINKING RETAIL Like Hy-Vee, most U.S. suppliers still “opt to ignore the issue” because they perceive food waste as a cheap, and thus inevitable, part of the farm-tofork process.19 Yet by catering to strict consumer preferences, these suppliers are not leveraging their influence as the industry’s “anchor institutions.” 20 As the middlemen between producers and consumers, food suppliers—and in particular, retailers—are perfectly positioned to tackle food waste from both sides of the farm-to-fork process. Armed with an expansive network and a holistic industry outlook, retailers have the greatest understanding of stakeholder concerns and thus the greatest opportunity to “do well and do good at the same time.”21 To overhaul the industry in a way that is not only environmentally sustainable but also economically viable, retailers must provide producers and other suppliers with cost-efficient alternatives to food waste. Additionally, it must actively shape consumer preferences to prevent waste production in the first place. A few suppliers have already begun to incorporate food waste reduction into their business models. Imperfect, a food delivery service based in San Francisco, buys misshapen produce directly from farmers and sells it at a 30-50 percent discount through partner grocery stores.22 The Daily Table, a nonprofit grocery store in Dorchester, Massachusetts, also sells surplus, almost-expired, and ugly produce at “rock-bottom rates”—about half of the U.S. city average price—to turn landfill-destined food into affordable nutrition.23 By considering both producer and consumer costs, these suppliers have been able to reduce waste in an economically feasible way. However, these solutions are not effective on a large scale. As relatively young businesses that operate only within their respective cities, both Imperfect and The Daily Table lack the reputation and resources needed to influence an entire industry. Furthermore, in their attempt to “reel in” new customers with
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“ultra-low prices,” these waste-conscious retailers appease rather than change the consumer behaviors that drive continued food waste. 24 Finally, because cheap cosmetic produce is still readily available at most other retail stores, the majority of U.S. consumers remain unaware of their wasteful habits, continuing to throw out more than a quarter of all purchased food each year.25 Until an established, national retailer leverages its market power to drive a fundamental shift in stakeholder behaviors, food waste levels will only continue to increase. ENTER WHOLE FOODS Whole Foods Market, the first certified organic grocer and one of the largest supermarket chains in the United States, is optimally positioned to combat food waste in an environmentally sustainable, economically feasible way. As a “missiondriven leader,” Whole Foods maximizes profits while simultaneously increasing long-term shareholder value, promising only the “highest quality natural and organic products,” nourishing customers with “healthy food and education,” and “advancing environmental stewardship.”26 With a self-proclaimed responsibility to “co-create a world where each of us, our communities, and our planet can flourish,” Whole Foods is the perfect supplier to combat food waste because it is already concerned with its harmful externalities.27 While any food retailer can champion a “vision of a sustainable future,” Whole Foods also has the reputation and resources needed to actually drive this change.28 With over 430 stores nationwide and $1.9 billion in current assets, Whole Foods can more easily reach its target audience than other smaller chains. 29 Furthermore, with the recent $13.7 billion purchase of Whole Foods by Amazon, the leading e-retailer in the United States, Whole Foods can take advantage of Amazon’s extensive supply chain, its loyal consumer base, and its comprehensive data metrics to dramatically alter the way the supermarket industry sells its products to consumers. With a track
record of sustainability and a dynamic new partnership, Whole Foods can create shared value for its stakeholders in a way that makes all foods—especially the ugly and almost-expired ones— “Wholesome Again.”30 REINVENTING “WHOLESOME” To a c t i v e l y s h a p e c o n s u m e r preferences and industry incentives, Whole Foods should dedicate a section of its traditional brick-and-mortar stores solely to ugly, mislabeled, or almostexpired foods. It can base these “surplus displays” off of those already in Wefood, Denmark’s first, “highly successful” food waste supermarket, placing less desirable items in highly-frequented store areas and selling them at prices 30-50 percent cheaper than their perfect counterparts.31 , 32 With the backing of Amazon’s efficient supply chain, Whole Foods has already seen 10-30 percent markdowns on typical products, such as fruit, meat, and dairy, since its August 2017 acquisition. The launch of these new “surplus displays” would similarly be supported by Amazon’s advanced consumer tracking and operational efficiency, thus allowing for an effective decrease in prices that entices customers and still generates sustainable profits.33 Whole Foods cannot fundamentally alter market demand simply by lowering the prices of normally undesirable produce, however. Thus, when launching this food waste campaign, Whole Foods must market its own surplus products as the synthesis of affordability, quality, and sustainability. Its innovative displays must make consumers not only feel good for saving money but also for doing good—all while guaranteeing the same great Whole Foods taste. If this proposal is properly implemented, Whole Foods can effectively end the stigma against ugly and almost-expired foods and holistically alter wasteful consumption patterns. EVALUATING THE RISKS Before officially presenting this proposal to Whole Foods, potential
pitfalls should be considered. As a premium supermarket chain that traditionally caters to an upper echelon of consumers, Whole Foods may be unwilling to launch a campaign that may be perceived as “low quality” or “lowincome.” However, this is unlikely given that Whole Foods is already shifting from its traditional customer acquisition mo d e l i n r e s po n s e to i n crea s i n g competition (in-store and online) and decreasing revenue. 34 Its new “365” budget chain, for example, specifically targets cost-conscious millennials. 35 Furthermore, its price reductions will most likely bolster customer loyalty and attract any consumer looking for a better deal. Following its price reductions after the Amazon-Whole Foods acquisition, Whole Foods saw a 17 percent increase in foot traffic primarily due to returning customers and the “wealthiest regular customers of competing stores” such as Trader Joe’s, Kroger, and Sprouts.36 Another potential problem with this new line of ugly, almost-expired foods is that it may not meet Whole Foods’ promised “quality standards.”37 This is a minor concern, though, considering it is rooted in the false assumption that unaesthetic produce is inherently unwholesome. Critics may also point out that Whole Foods will lose profit for swapping out higher-margin products with cheaper ones. Conversely, its food waste sections will attract more cost- and environment-conscious shoppers into its stores. Whole Foods can mitigate this effect with the revenue generated from increased foot traffic. A final potential pitfall lies in the legal ramifications of selling foods deemed “inedible” by industry standards. This problem is addressed with the recognition that the term “industry standards” is simply doublespeak for “consumer preferences.” The USDA does not explicitly deny the selling of cosmetically damaged or perishable produce and, in fact, would likely encourage it in support of its own attempts to curb food waste.
“WHOLE FOODS, WHOLE PEOPLE, WHOLE PLANET” While other minor risks may still exist, Whole Foods’ surplus displays would be a viable, economically desirable, a n d e nvironme nta l l y s usta ina b l e solution overall. WHOLE FOODS Food waste sections would benefit Whole Foods in many ways. First, it would further bolster Whole Foods’ reputation as an environmentally sustainable supplier. Second, it would generate mass media coverage that could increase Whole Foods’ sales, especially given the growing trend towards more conscious eating.38 Third, it would give Whole Foods an additional revenue stream at relatively low cost, as the company would simply be selling otherwise wasted produce it already possesses. Finally, it would increase foot traffic in all participating stores, attracting not only millennials and other cost-conscious shoppers but also “anyone who is concerned about food waste in general.”39 WHOLE PEOPLE In addition to giving Whole Foods a competitive advantage, this business solution would create shared value for other industry stakeholders. By offering safe, organic, and nutritious produce at more affordable prices, food waste displays allow new and returning consumers alike to enjoy quality Whole Foods products at lower costs.40 By ending the stigma around ugly produce and food labels, it would also save each U.S. household $1,365 to $2,275 annually in unnecessary food waste costs.41 This “Wholesome” transformation in consumer behavior benefits other stakeholders as well. With loosened industry standards, producers would be able to harvest more and throw out less; distributors would face fewer rejected shipments; and suppliers could prioritize inventory efficiency over overstocked product displays. Thus, by shifting market demand, Whole Foods’ food waste solution combats inefficiencies
REINVENTING WHOLESOME / 33
We can’t sell a perfectly good banana that doesn’t look good . . . so we toss it.”
and cuts costs along the supply chain, maximizing returns. WHOLE PLANET On a broader scale, these food waste installments strive for a more sustainable earth. Whole Foods’ motto—“Whole Foods, Whole People, Whole Planet”— is a “declaration of interdependence” that rests on “satisfied stakeholders” and a “flourishing environment.”42 This proposal balances both components, shaping consumer preferences in a way that creates shared value for society at large. If implemented successfully, this proposal could help redirect the $218 billion spent annually “growing, processing, transporting, and disposing
food that is never eaten;” salvage the 35 million tons of food lost to supply chain inefficiencies; repurpose the 25 percent of all freshwater, energy, and land wasted during production; and cut the 16 percent of methane gases produced by food in landfills.43 , 44 As levels of waste rise and resources grow increasingly scarce, industry leaders—especially suppliers—can no longer afford to ignore the consumer preferences driving this unsustainable externality. While Whole Foods may be unable to end all food waste by itself, it can certainly spearhead the movement to combat it. As the leading supermarket chain in quality organic foods, a “dynamic leader” of sustainability, and a recently
“As a food lover, food blogger, and someone who really cares about not wasting food, I wanted to tackle the issue of U.S. food waste to see where its roots lay and why it is still an ever-growing headache. My ultimate goal was to find a business solution that would both educate people about the issue and stop it.”
CLASS OF 2020 FINANCE and SUSTAINABLE BUSINESS with a minor in FOOD STUDIES 34 / AMY DONG
acquired partner of Amazon, Whole Foods has the ability to change a complex industry that “really needs to” and convince other suppliers to follow suit too.45, 46 To do this, it must stop “wooing shoppers” in an attempt to meet “quality standards” and instead define the standards themselves.47 By offering customers wholesome products of all shapes and sizes, Whole Foods can begin the long-overdue overhaul of a grossly inefficient industry. By launching this new wave of retail, it can create shared value from farm to fork, bringing every stakeholder closer to its vision of “Whole Foods, Whole People, Whole Planet.”
Siegel, RP. “Food Waste Is a Bigger Problem Than You Think.” Triple Pundit: People, Planet, Profit, Triple Pundit, 07 Feb. 2015. Web. 02 Apr. 2017. <http://www.triplepundit.com/2014/10/food-wastebigger-problem-think/>. 2 “Fighting Food Waste with Food Rescue.” Feeding America, Feeding America, n.d, Web. 30 Apr. 2017. <http://www.feedingamerica.org/ our-work/our-approach/reduce-food-waste.html>. 3 Gunders, Dana. “Wasted: How America Is Losing Up to 40 Percent of Its Food from Farm to Fork to Landfill.” National Resources Defense Council, National Resources Defense Council, Aug. 2012, Web. 2 Apr. 2017. <https://www.nrdc.org/resources/wasted-how-americalosing-40-percent-its-food-farm-fork-landfill>. 4 Ibid. 5 “Recycling.” United States Department of Agriculture, United States Department of Agriculture, n.d. Web. 02 Apr. 2017. <https://www. usda.gov/oce/foodwaste/resources/recycle.htm>. 6 “Recovery/Donations.” United States Department of Agriculture, United States Department of Agriculture, n.d, Web. 02 Apr. 2017. <https://www.usda.gov/oce/foodwaste/resources/donations.htm>. 7 Gunders. 8 ReFED Steering Committee and Advisory Council. “A Roadmap to Reduce U.S. Food Waste By 20 Percent.” ReFED Roadmap (2016): n. pag, ReFED, 2016, Web. 2 Apr. 2017. <https://www.refed.com/ downloads/ReFED_Report_2016.pdf>. 9 Worland, Justin. “U.S. Aims to Cut Food Waste in Half by 2030.” Time, Time, 16 Sept. 2015, Web. 30 Apr. 2017. <http://www.cookinglight. com/healthy-living/u-s-aims-to-cut-food-waste-in-half-by-2030>. 10 Tsui, Bonnie. “Getting Over Our Preference for Perfect Produce.” Newsweek, Newsweek, 22 Apr. 2014, Web. 02 Apr. 2017. <http:// www.newsweek.com/2014/05/02/our-preference-perfect-producemaking-us-sick-248213.html>. 11 Wee, Heesun. “We Chuck out 31% of Our Food Supply: How to Stop the Waste.” CNBC, CNBC, 04 Mar. 2016, Web. 02 Apr. 2017. <https:// www.cnbc.com/2016/03/04/how-to-stop-american-waste-of-food. html>. 12 Ibid. 13 Safran Foer, Jonathan. Eating Animals, New York: Little, Brown, 2009, 172. 14 Tsui. 15 Ibid. 16 Hirsch, Jesse and Harmanci, Reyhan. “Food Waste: The Next Food Revolution.” Modern Farmer, Modern Farmer, 30 Sept. 2013, Web. 02 Apr. 2017. <https://modernfarmer.com/2013/09/next-foodrevolution-youre-eating/>. 17 Husted, Kristofor. “Supermarkets Waste Tons Of Food As They Woo Shoppers.” NPR, NPR, 25 Sept. 2014, Web. 02 Apr. 2017. <http://www.npr.org/sections/thesalt/2014/09/25/351495274/ supermarkets-waste-tons-of-food-as-they-woo-shoppers>. 18 Ibid. 19 Wystrach, Michael. “Grocery to Landfill: Confronting What We Waste.” CNBC, CNBC, 11 May 2016, Web. 02 Apr. 2017. <https:// www.cnbc.com/2016/05/11/grocery-to-landfill-confronting-whatwe-waste-commentary.html>. 20 Cheeseman, Gina-Marie. “Solutions to Grocery Store Food Waste.” Triple Pundit: People, Planet, Profit, Triple Pundit, 19 Nov. 2015, Web. 02 Apr. 2017. <http://www.triplepundit.com/special/foodwaste/solutions-to-grocery-store-food-waste/>. 1
Ibid. Cheeseman. 23 Barry, Erin. “Daily Table Sells Healthy Food at a Deep Discount.” CNBC, CNBC, 12 Mar. 2016, Web. 30 Apr. 2017. <https://www.cnbc. com/2016/03/11/daily-table-sells-healthy-food-at-a-deep-discount. html>. 24 Peters, Adele. “Whole Foods Is Launching A Budget Store That Will Aim To Be Sustainable And Zero Waste.” Fast Company, Fast Company, 12 Apr. 2016, Web. 02 Apr. 2017. <https://www. fastcompany.com/3058732/whole-foods-is-launching-a-budgetstore-that-will-also-be-sustainable-and-zero-waste>. 25 Gunders. 26 “Our Core Values.” Whole Foods Market, Whole Foods Market, n.d, Web. 30 Apr. 2017. <http://www.wholefoodsmarket.com/missionvalues/core-values>. 27 Ibid. 28 Ibid. 29 “Whole Foods Market, Inc. Balance Sheet.” NASDAQ.com, NASDAQ, n.d. Web. 30 Apr. 2017. 30 Bhattari, Abha. “Amazon Vowed to Make Whole Foods Cheaper. Let’s See How That’s Going.” Beta.latimes.com, Los Angeles Times, 03 Oct. 2017. Web. 30 Apr. 2017. <http://www.latimes.com/business/ la-fi-whole-foods-prices-20171003-story.html>. 31 “Wefood.” DanChurchAid, DanChurchAid, n.d, Web. 30 Apr. 2017. <https://www.danchurchaid.org/wefood-old>. 32 Matharu, Hardeep. “Denmark’s Food Waste Supermarket Proves Huge Success as Shoppers Strip Shelves of Surplus Produce.” The Independent, Independent Digital News and Media, 03 Mar. 2016, Web. 30 Apr. 2017. <http://www.independent.co.uk/news/world/ europe/shoppers-strip-shelves-at-opening-of-denmarks-first-foodwaste-supermarket-a6908881.html>. 33 Bhattari. 34 “U.S. Grocery Shopping Trends 2016.” Food Marketing Institute, The Hartman Group, n.d, Web. 30 Apr. 2017. <https://www.fmi. org/forms/store/ProductFormPublic/u-s-grocery-shoppertrends-2016>. 35 Peters. 36 Berr, Jonathan. “Amazon’s Whole Foods Is Stealing Customers from Everybody.” CBS News, CBS Interactive, 09 Oct. 2017. Web. 30 Apr. 2017. <https://www.cbsnews.com/news/amazon-whole-foodscustomers-walmart-kroger-target/>. 37 “Our Core Values.” 38 “U.S. Grocery Shopping Trends 2016.” 39 Matharu. 40 Gunders. 41 Ibid. 42 “Declaration of Interdependence.” Whole Foods Market, Whole Foods Market, n.d, Web. 30 Apr. 2017. 43 ReFED Steering Committee and Advisory Council. 44 Gunders. 45 “Our Core Values.” 46 Wystrach. 47 Husted. Photo Credits: armandfrasco/Flickr—page 30 comedynose/Flickr—page 33 The Photographer/Wikimedia Commons—page 34 21
REINVENTING WHOLESOME / 35
CORPORATE SOCIAL ACTION:
ADDRESSING THE GUTTER OIL ISSUE IN
Substituting gutter oil for edible cooking oil is one of Chinaâ€™s largest and most concerning food safety issues today. In her essay, Sienna Chen explores how a new business venture that focuses on collecting and recycling used cooking oil can transform this corrupt industry.
STICKY SITUATION The widespread use of gutter oil as edible oil in China has become one ...of the countryâ€™s biggest food safety concerns, and the capital city, Beijing, has been most scrutinized for the practice. Incidents surrounding gutter oil have triggered widespread social anxiety, especially after research has shown how gutter oil directly threatens consumer health. This oil contains chemicals that cause digestion problems, food poisoning, and even liver cancer under long-term consumption, which has led many
organizations to call this issue a growing public health crisis. The government, NGOs, and various corporations in Beijing have all attempted to address the issue, yet none of them has achieved sustainable progress. One possible solution that can effectively address the problem involves a social venture that utilizes home delivery service as its business model. It would recycle used oil and turn it into a renewable biofuel energy, benefitting society while still generating profits. While there are a few risks and complex dynamics within the gutter oil business
that we cannot underestimate, such a proposal is our best hope in solving the gutter oil issue. LOOKING AT A LUCRATIVE TRADE The fundamental dynamics of the gutter oil industry are intricate and, thus, not easily resolved. Most notably, an integrated, profit-driven production chain drives the constant stream of supply and demand. Restaurants in Beijing profit from providing discarded cooking oil to underground oil recyclers, with compensation ranging from $4,500
to $7,000 per year.1 Illegal collectors and underground companies then turn this gutter oil into edible oil through a series of processes that involve mixing, filtering, boiling, and refining, and ultimately sell the oil at a cheaper price: $1,200 a ton compared to regular edible oil at $1,500 a ton. 2 As a result, gutter oil is often preferred over regular oil, and those who provide it earn as much as $28.6 million per year.3 CURRENT GOVERNMENT AND NGO ACTIONS In recent years, local authorities in Beijing have issued new regulations to tackle the gutter oil issue. Food Safety Regulations require that food services clearly label and store waste grease and use oil-water separation devices for greasecontaining wastewater.4 Furthermore, the 2011 Beijing Solid Waste Management Ordinates requires commercial food services to properly manage food waste and use authorized haulers.5 However, these efforts have so far been largely ineffective because of the lack of coordination among different authorities. For instance, the Industry and Commerce Bureau of Beijing is responsible for preventing the selling of gutter oil; the Food and Drug Administration is responsible for supervising food services; and the Health Department in Beijing is responsible for overseeing oil testing.6 With such scattered responsibilities, these organizations are slow to react to potential illegal activities, which in turn leave loopholes for gutter oil operations.7 As a result, government regulations in Beijing have been unable to curb the growing substitution of safer edible oil for gutter oil. Because authorities have failed to stop these illegal oil transactions, nonprofit organizations have stepped in to try to control their primary sources. Enviro Friends, a Beijing-based eco-NGO, sets up experimental cleansing systems in which people can safely dump their leftover oil. Enviro Friends’ device boils gutter oil at extreme temperatures in order to kill off its toxins and then mixes
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it with ingredients to produce products similar to detergent.8 However, Enviro Friends lacks the resources and capital to broaden its operations, and it faces indifference when offering to sell its soapdispensing, gutter-oil sanitizing device to various Beijing eateries. Unfortunately, statistics have shown that the recipe for gutter oil is still less expensive, and thus more profitable, than Enviro Friends’ products. 9 Indeed, according to one popular restaurant manager, it makes “little sense” to swap cooking oil for cheap soap when he could instead sell it for a huge profit on the black market.10 Another environmental NGO in Beijing, Green Beagle, estimates that restaurants in the city produce at least 600 tons of kitchen waste, yet only 100 tons of this makes it to the organization’s two waste treatment facilities. Some of the untreated oil is littered with facial tissues, disposable chopsticks, and plastic bags, and thus cannot be used; the rest is sold to private individuals.11 Thus, without the connections and financial support needed to disrupt the gutter oil market, Beijing nonprofits will remain unable to compete with profit-seeking traders. ADDRESSING BIODIESEL Converting gutter oil into biodiesel is one of the recommended pathways for reuse, and biodiesel companies in Beijing have demonstrated the possibility to profit from turning waste cooking into biofuel energy. For example, after subtracting costs, Beijing Hailiang Hongxin Bioenergy can make a profit of ¥500 to ¥800 (about $70 to $115) from each ton of used oil turned into fuel.12 Moreover, potential clients exist. China has seen the first successful flight of a commercial airplane, the Boeing 737800 aircraft operated by Hainan Airlines, powered by biofuel made from cooking oil waste. Clearly, China possesses the means to both monitor and use its own biofuel production technology. However, the biodiesel industry still suffers from price competition and inadequate feedstock, which make such investments undesirable for large-scale
expansion. Indeed, one ton of biodiesel used to blend in edible oil can be $400 to $500 more expensive than regular fuel, and the majority of cooking oil is funneled into the illegal gutter oil business rather than into biodiesel fuel production. 13 As a result, for biodiesel companies like Hailiang Hongxin, resource procurement is difficult while production costs remain high.14 In the face of such obstacles, these companies struggle to survive. OUTLINING A SOLUTION Although different stakeholders have their own obstacles in dealing with gutter oil, it is evident that the root cause of their failed approaches is the profit motive driving the entire gutter oil business. “Economic incentives are typically the drivers for food-safety violations,” according to Sang Liwei, a Beijing director at the nonprofit organization Global Safety Forum. “It’s likely that most of those involved have no direct intention to hurt others, but they do so in attempting to protect their pocketbooks.”15 Thus, to mitigate the gutter oil issue in Beijing, an equally profitable business venture must be created to incentivize the sustainable recycling of used cooking oil. REDEFINING RECYCLING A social enterprise that connects restaurants—the suppliers of cooking oil waste—to biodiesel fuel companies could potentially serve as an effective solution. Its business operations should take the form of a door-to-door recycling service that collects restaurant oil from various restaurants and then delivers it to affiliated biodiesel companies. Market researcher EnfoDesk indicates that China’s internet-based restaurant delivery services fulfilled 176 million orders in the first quarter of 2015, up by more than 340 percent year-on-year.16 This finding suggests that Chinese consumers prioritize convenience and are likely to pay more for delivery service businesses. Therefore, any proposed oil recycling enterprise should collect and deliver restaurant cooking oil to biodiesel companies to ensure similar convenience
Restaurants in Beijing profit from providing discarded cooking oil to underground oil recyclers, with compensation ranging from $4,500 to $7,000 per year.”
and generate sustainable profit. To streamline the collection process, employees should be able to both fulfill orders on a prearranged schedule and operate on a single-demand basis. GOING PUBLIC WITH DIANPING To incentivize restaurants to use the proposed service and broaden its scope of social influence, the company should display its business records on an online platform like Dianping (China’s version of Yelp) that shows restaurant ratings and reviews. From DMR Statistics, the average monthly Dianping page views have reached 12 billion, and the number of merchants registered on the app is approaching 10 million. Furthermore, in Beijing, almost 85 percent of customers ages 18 to 40 use this app, suggesting that Dianping substantially influences public opinion in the foodservice industry.17 Indeed, a survey report by China Cuisine Association reveals that apps and foodreview websites have become the most important channel for Chinese diners to choose a restaurant.18 Beyond looking at Dianping ratings, rising awareness of various health concerns have Chinese consumers increasingly concerned about the wellbeing of their families.19 In a 2012 survey that asked urban residents in 16 major Chinese cities to list “the most worrisome
safety concerns,” food safety topped the list with an 81.8 percent consensus.20 Considering both factors together, one should see the promising viability in a social venture that both utilizes a mobile rating system to increase its popularity, and addresses health concerns by reducing the use of gutter oil in food preparation. Restaurants may view oil recycling as an investment in their own businesses, and biodiesel companies will have a greater supply of cooking oil to transform and sell, thus increasing profit margins on both ends of the supply chain while also benefiting society. In major cities like Beijing, growing incomes and changing preferences in the middle-class can drive drastic changes in the food sector. Today more than ever, people are willing to pay higher prices for better quality in terms of convenience and health.21 Who will earn consumers’ trust and capture this emerging market share? Who will lead the next wave of industry transformation and consolidation? Companies that invest in their various stakeholders’ interests today will be the champions of tomorrow. What better way to achieve this goal than to prove that they have a social purpose? Those who succeed will improve both quality and efficiency, earn the trust of loyal customers, and grow their bottom line, while those who fail will put the health of consumers at risk and depreciate their brand value.
In such a scenario, it is clear that the proposed recycling business will lead the transformation of the foodservice, benefitting all stakeholders in its attempt to address the issue of gutter oil. ADDRESSING OTHER STAKEHOLDERS In addition to increasing the r e p u t a t i o n a n d p r o fi t m a r g i n o f restaurants who choose to recycle their used cooking oil, this new social venture will create shared value for its other stakeholder groups as well. For instance, it will provide a constant supply of feedstock to biodiesel companies, meeting an unsatisfied demand and creating a new market. Since 2011, more than 1,600 commercial flights around the world have been powered by biodiesel fuel. 22 Yet, there is still untapped potential. With this new enterprise supplying companies with the resources they need to convert massive waste oil into renewable energy, companies will have the opportunity to revolutionize both the transportation and aviation industries. By linking used restaurant oil with large-scale biodiesel fuel production, this proposal offers an effective and sustainable solution to both sides of the industry. The government will likely stand behind this proposal because the enterprise will improve the traceability of used cooking oil and increase the
ADDRESSING THE GUTTER OIL ISSUE IN BEIJING, CHINA / 39
transparency in food safety regulation. Improving food safety has implications beyond public health since it can bolster public trust and contribute to social stability.23 Consumer anxiety around food stems as much from distrust of regulatory authorities as it is does from distrust of unscrupulous food producers. According to a Pew Global Attitudes Survey, 71 percent of Chinese people consider food safety to be a big problem in 2015; however, most of these respondents have little faith in the government’s ability to address their concerns.24 By posting all of its transaction records online and enabling consumers themselves to supervise proper recycling of their food waste, this proposed recycling business will solve the untraceability of the “cash-only,” underground gutter oil business. As a result, it will increase public awareness of the problem and restore public trust in Beijing ’s food security system.25 LOOKING AT THE BOTTOM LINE In terms of financial feasibility, the company should be profitable because it is adopting a similar model to currently thriving food delivery businesses in Beijing. Instead of charging a recycling fee to the restaurants, the company will charge a fee to biodiesel companies who opt to use the raw materials it provides. In this way, restaurants do not really “lose” anything; instead, they are only asked to invest in a simple water-oil separation device and arrange the collection of their waste. Statisticians estimate that Beijing has more than 60,000 restaurants, which can result in 1,200 to 1,500 tons of waste oil produced per day.26 Even if only onetenth of these restaurants were willing to collaborate with the recycling company, more than 120 tons of raw materials would be saved each day—about 36,000 tons saved annually. This amount of used cooking oil would adequately fulfill the demand of profit-seeking biodiesel refineries like Beijing Hailiang Hongxin Bioenergy Limited. As such, biodiesel companies should be more than willing
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to pay a small delivery fee to reach their full working capacity. CONSIDERING THE RISKS As a new venture in the established foodservice industry, this business may face several challenges and risks from both its internal operation and external perception. As the biodiesel-cooking oil market has yet to be defined concretely, the recycling business will start with very little public recognition. As such, marketing to restaurants may prove difficult, and short-term profit may not be guaranteed. Furthermore, water-oil separation devices may be too expensive for small vendors. These restaurant owners may be satisfied with their current numbers of customers and refuse to alter their operations to take on the additional perceived risk. Finally, safety issues could potentially be a large risk moving forward because this company is essentially “stealing” business from the black market. Illegal oil collectors or oilaffiliated gangs may threaten the stability of the company and even the physical health of workers. However, this proposal is still worth attempting. Given the intractability of the gutter oil issue, public awareness is crucial to solve the problem. If more people become aware that cooking oil can be recycled and repurposed at reasonable costs, restaurants will be more willing to make a change; local governments will be more effective in reinforcing regulations; and all supply chain stakeholders will be more likely to “do the right thing ” under public scrutiny. Without altering the supply-demand market itself, there is no fundamental way to mitigate this long-lasting headache. A WELL-OILED FUTURE Overall, this proposal represents a prime example of what Michael Porter and Mark Kramer consider to be creating “shared value” in their Harvard Business Review article about socially responsible businesses.27 By reconceiving products and markets in the gutter oil industry, the new company can generate profit
for itself and its stakeholders while simultaneously repairing the food industry in Beijing. Even though the process of creating and expanding this business venture will be tough, the end still looks promising. Reducing food
safety violations and providing greater supply chain transparency will go a long way toward restoring consumer confidence in producers, regulators, and the foodservice industry as a whole. This confidence, in turn, will be essential to
Wang, Jiang. “Debate: Gutter Oil.” Chinadaily.com, China Daily USA, 31 Oct. 2011. Web. <http://usa.chinadaily.com.cn/business/2011-10/31/ content_14005512.htm>. 2 Li J, Cui N, Liu J. “Gutter oil: An Overview of Chinese Food Safety Issues and Policies.” Sage Journals. Published April 7, 2016. 3 Shen, Andrew. “China’s Ministry of Health Just Inadvertently Green Lighted the Gutter Oil Industry.” Business Insider, Business Insider, 18 Oct. 2011. Web. <http://www.businessinsider.com/did-chinasministry-of-health-just-inadvertantly-green-light-the-gutter-oilindustry-2011-10>. 4 USDA Foreign Agricultural Service. Food Safety Law of the People’s Republic of China, 2009. USDA Foreign Agricultural Service, Washington, DC, USA. 2009. 5 Lu M, Tu Q, Jin Y. “The Gutter Oil in China.” Waste and Resource Management. Volume 166 Page 142-149. August 2013 Issue WR3. 6 Ibid. 7 Ibid. 8 Mullin, Kyle. “Ecology: Squeaky Clean Gutter Oil?” Thebeijinger. com, The Beijinger, 24 Apr. 2014. <http://www.thebeijinger.com/ blog/2014/04/24/ecology-squeaky-clean-gutter-oil>. 9 Ibid. 10 Ibid. 11 Gilbert Van Kerckhove. “Toxic Capitalism: The orgy of consumerism and waste: Are we the last generation on Earth?” AuthorHouse. August 21, 2012. Print. 12 Yu, Xie, and Hongyi Wang. “Something’s Cooking for Biofuel Gutter.” Chinadaily.com, China Daily, 15 Dec. 2011. Web. <http://www. chinadaily.com.cn/cndy/2011-12/15/content_14268076.htm>. 13 Lu M, Tu Q, Jin Y. “The Gutter Oil in China.” Waste and Resource Management. Volume 166 Page 142-149. August 2013 Issue WR3. 14 Daly, John. “China and Biofuels - Stir-Fry or Fly?” OilPrice.com, 26 Aug. 2011. Web. <http://oilprice.com/alternative-energy/biofuels/ China-And-Biofuels-Stir-Fry-Or-Fly.html>. 15 Burkitt, Laurie. “Arrests Made in China ‘Gutter Oil’ Scandal.” The Wall Street Journal, Dow Jones & Company, 13 Sept. 2011. Web. <http://blogs.wsj.com/chinarealtime/2011/09/13/arrests-made-ingutter-oil-scandal/>. 1
Beijing’s, and ultimately China’s, efforts to build a “robust consumer-oriented economy that can sustain a realistic level of growth”—one that supports rather than jeopardizes long-term socio-economic stability.28
Liu, Zhihua. “Use of Mobile Apps Skyrockets in Food Industry.” USA. chinadaily.com, China Daily USA, 26 Nov. 2016. Web. <http://usa. chinadaily.com.cn/life/2016-02/26/content_23649519.htm>. 17 “Dianping Stats and Facts.” DMR, 29 Jan. 2015. Web. <http:// expandedramblings.com/index.php/business-directory/20089/ dianping/>. 18 Liu. 19 Cai, Amy. “Building Trust in China’s Food.” Pwccn.com, PWC. Web. <http://www.pwccn.com/en/industries/food-supply-and-integrity/ building-trust-in-chinas-food.html>. 20 Huang, Yanzhong. “China’s Worsening Food Safety Crisis.” The Atlantic, Atlantic Media Company, 28 Aug. 2012. Web. <http://www. theatlantic.com/international/archive/2012/08/chinas-worseningfood-safety-crisis/261656/>. 21 Ibid. 22 Aiyi. “Aviation Industry Sees Potential Gold in ‘Gutter Oil’.” EBeijing, 24 Oct. 2014. Web. <http://www.ebeijing.gov.cn/ BeijingInformation/BeijingNewsUpdate/t1370869.htm>. 23 Fu, Lin. “What China’s Food Safety Challenges Mean for Consumers, Regulators, and the Global Economy.” Brookings, Brookings, 29 July 2016. Web. <http://www.brookings.edu/blog/order-fromchaos/2016/04/21/what-chinas-food-safety-challenges-mean-forconsumers-regulators-and-the-global-economy/>. 24 Ibid. 25 Olesen, Alexa. “China Vows Crackdown on Resold Kitchen Waste Oil.” Thestar.com, 20 July 2010. Web. <http://www.thestar.com/news/ world/2010/07/20/china_vows_crackdown_on_resold_kitchen_ waste_oil.html>. 26 Lu M, Tu Q, Jin Y. “The Gutter Oil in China.” Waste and Resource Management. Volume 166 Page 142-149. August 2013 Issue WR3. 27 Porter, Michael E., and Mark R. Kramer. “Creating Shared Value.” Harvard Business Review 89, nos. 1-2 (January–February 2011): 62–77. 28 Fu, Lin. Photo Credits: eviltomthai/Flickr—page 36 Tony Webster/Flickr—page 39 Kennington Fox/Flickr—page 40 16
“The most surprising part of my research was how big the profit margin is in the gutter oil business and how deep the chain is rooted in society. The problem is not limited to normal restaurants and street vendors; from the underground black market to big hotel chains and fancy restaurants, everyone seems to have a share.”
CLASS OF 2020 FINANCE ADDRESSING THE GUTTER OIL ISSUE IN BEIJING, CHINA / 41
CAN A SPONGE
SAVE THE DEEPWATER HORIZON? ESSAY BY
The Deep Horizon oil spill in 2010 spurred public awareness of the dangers of underwater drilling. While oil spills have numerous cleanup methods, no method seemed to “have it all”—until Jane Lin came across Oleo Sponges—a reusable, multipurpose invention that is more effective than any current oil spill cleanup procedure.
n a p r i l 2 01 0, t h e b r i t i s h Pe t r o l e u m o f f s h o r e o i l r i g , Deepwater Horizon, drilled the Macondo Well in the Gulf of Mexico approximately 40 miles away from the Louisiana coast. Unexpectedly, highpressure gas from the well expanded and burst into the Deepwater Horizon, where it ignited and exploded.1 This explosion caused more than 4.2 million barrels of oil (approximately 176 million gallons) to spill into the Gulf of Mexico2—an oil spillage roughly 19 times the amount of the oil spill from the Exxon Valdez in 1989, the largest oil spill prior to Deepwater Horizon. 3 Months after containment, the federal government and BP agreed on a $20 billion settlement to handle the costs of damage control and restoration as well as a $4 billion criminal settlement for the eleven workers who died from the explosion.4 In total, BP’s estimated pretax cost came to $61.6 billion.5 NEGATIVE EXTERNALITIES OF OIL SPILLS However, the harmfulness of oil spills extends beyond any company. Oil spills negatively affect the environment, the economy, and human health. The chemical makeup of oil is particularly problematic because oil’s low density causes most of the spill to float to the surface of a body of water. Consequently, it easily disperses and circulates across the surface by wind and natural water movement, negatively impacting the ecosystem in the process. Birds, for example, commonly float on the water and dive to target the fish below. Once trapped in oil, birds may die from hypothermia, as their feathers are unable to maintain the necessary body temperature for survival.6 Not only do oil spills affect the oceanic ecosystem, but also, they affect marine-related businesses and human health. In terms of industry, oil spills primarily interfere with fisheries, as the oil contaminates the fish and other sea creatures dwelling beneath the surface.7 Additionally, humans are the main force behind the cleanup process, and
touching the oil or inhaling the fumes is extremely hazardous. OIL SPILL CLEANUP METHODS AND THEIR SHORTCOMINGS The negative externalities of oil spills, especially those occurring after the BP catastrophe, have created the need for solutions. The primary objectives of an oil spill response are: 1) preventing the spill from reaching shore, 2) reducing the impact on marine life, and 3) quickening the degradation of any unrecovered oil.8 Many processes have been developed to combat these problems; one common method used to control the spread of the spill is the use of physical barriers called booms. This method primarily works for surface-concentrated oil where skimmer boats are employed to glide across the water’s surface to filter and recover the top layer of spilled oil. Another method is sorbents, which are used to absorb the remaining amounts of oil. An alternative method is “in situ burning,” or ISB, which involves the controlled burning of spilled oil after enough oil has physically congregated—either naturally after the initial oil spill or through the motion of boats and booms.9 The last major method involves the use of dispersants, which break the oil particles apart and prevent large slicks from forming.10 These current methods are reaction responses; they are only employed once the oil spill is reported to local authorities who then initiate the cleanup process. Not only is there a natural delay in the spread of initial information, but there is an additional delay in deploying the response-units to affected areas. All major methods—from the transportation of supplies to the physical implementation of cleanup methods—require ideal weather conditions that grant maximum accessibility and visibility so that the oil spill can be easily targeted and treated. Factors like weather conditions and the time of day may cause even further delays. Still other aspects of a cleanup may also hinder efficiency. For example, boom efficiency is contingent upon how quickly
the booms can be implemented. They are only helpful if the spill is contained within hours of occurrence, otherwise, “the area of the spill gets too large to contain even with the largest floating stoppers.”11 Furthermore, the skirts that hang beneath the floats that are intended to keep the waves from carrying oil underneath the booms are rendered useless in the case of rough waters and strong winds. Sorbents are not used in such cases, as they are typically used for smaller spills or during the ending stages of large spill cleanups. Currently, the sorbents used can absorb anywhere from 3 to 70 times their weight in oil depending on their material. However, the absorbing material cannot differentiate between liquids and absorb water and oil alike. This potentially causes the sorbent to sink, making collection difficult.12 As a different approach, ISB completely removes oil slicks, yet this method merely shifts the environmental impact from the water to air as columns of smoke are released during the process. Problems also occur with dispersants, which chemically change oil particles so that they can bond together with the surrounding water. This reaction ultimately results in oil being absorbed by local aquatic life, possibly introducing oil into the food chain. Dispersant-treatedoil is more harmful to coral reefs and sea grass than regular oil, as the oil not only “congeals around sand and other particles,” but also combines with water,
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and creates tar balls that typically end up on the shore.13 THE SOLUTION: OLEO SPONGE Clearly, oil cleanup needs to be improved by finding a method that is both easily employable and effective. The solution may be the Oleo Sponge, a new material developed by the U.S. Department of Energy’s Argonne National Laboratory that can absorb up to 90 times its weight in oil.14 Furthermore, the new Oleo Sponge is reusable, so it is already performing better than the typical materials used as sorbents—materials that can only absorb 70 times their own weight in oil and must be disposed of after initial use.15 In the report from the laboratory, co-inventor Seth Darling highlighted that, “the Oleo Sponge offers a set of possibilities that… are unprecedented.”16 Not only is the Oleo Sponge reusable and capable of absorbing more oil, but also, the sponge goes beyond oil collection at the water’s surface, making it capable of “pull[ing] dispersed oil from the entire water column.”17 One of the key components of the Oleo Sponge that makes it a potential solution to the oil industry’s spill problem is its chemical makeup. The foundational, binding material of the sponge is polyurethane foam, a material found in everything from “furniture cushions to home insulation.”18 The foam is treated with a primer of aluminum oxide fibers that fundamentally changes the chemical
conditions of the foam surface to allow the sponge an additional chemical layer that specifically attracts oil particles.19 This process ultimately results in a sponge with interior surfaces that are oleophilic (oil attracting) and that take advantage of the foam’s naturally large surface area. Furthermore, the oil collected through the sponge can be squeezed out like a regular sponge, resulting in usable recollected oil along with a sponge that can be reused for further cleanup.20 The Oleo Spong es represent a strategic opportunity for an oil company as influential as BP. Should BP create net-like bundles of the sponges that can be stored on the deck of the oil ships, the company might be able to mitigate p ot e n t i a l n e g a t i ve c o n s e q u e n c e s associated with an oil spill. Should a spill occur, the Oleo Sponges would be readily available to be released into the water and immediately begin to absorb oil. These bundles would be connected to the ship through heavy-duty cords by which the crew could control the general movement of the sponge. Upon retrieving the sponges, the crew could run them through a machine that would squeeze and store the recollected oil. Afterwards, the sponges could return to the water to collect more oil. Oil rigs might also consider additional equipment for underwater oil recollection; this process would submerge the sponges to the desired level under the
surface. Having the Oleo Sponges onboard the ship would allow for an immediate start to the cleanup process, which would reduce the time delay drastically and decrease the free spread of oil across the water’s surface. THE BENEFITS OF OLEO SPONGE The Oleo Sponge comes with only a few risks. One potential risk of the sponge method is the inability to collect a sponge due to lack of physical transport. This problem would be relevant in situations where the original oil drill ship has exploded (such as in the BP oil spill) or where a sponge goes rogue and is lost in the body of water. However, the characteristics of the sponge provide a variety of different benefits that support its use within the oil industry. Since the entirety of the polyurethane foam is treated to attract only oil molecules, the Oleo sponge would not absorb any water particles and would therefore float on top of the surface, visible for retrieval. Furthermore, during the experiments conducted at the Argonne National Laboratory, co-inventor Seth Darling states that the material has proven to be “extremely sturdy,” hardly breaking down and retaining its ability to absorb throughout “dozens to hundreds of tests.”21 While spills are rare by nature, Oleo Sponges are meant to be a safety net for oil spills. The preemptive, apprehensive
nature of this kind of preparation may cause some oil companies to be reluctant. The materials would induce an extra cost that may not produce any benefit should no spill occur. However, the actual usage of the sponges would save the company from massive cleanup and oil waste costs in the event of a spill. Moreover, the creation of the Oleo Sponges is not an expensive process; implementing the sponge production at a major oil company could prove profitable. The key component of the Oleo Sponges, polyurethane foam, is created mainly with polyols and toluene—two petrochemicals created through the refinement of crude oil and the separation of natural gas.22 BP already focuses on “oil and natural gas exploration, field development and production” in their upstream, while their downstream focuses on “refining and marketing of fuels, lubricants and petrochemicals.” 23 Throughout its processes, BP handles petrochemicals and petrochemical derivatives, such as propylene, propylene oxide, and toluene diisocyanate, which are ultimately combined to create polyurethane foam. 24 To create Oleo Sponges for their ships, BP could partner with the creators of the sponge, providing the resources necessary for production and in return receive sponges for oil rigs at reduced prices. The alternative and more profitable solution may be for BP to collaborate with
the inventors to establish an Oleo Sponge division within BP. This division would not only mass-produce these sponges but also sell them to other oil companies or other groups and individuals, including local oil cleanup crews or mechanics. Furthermore, the concept of the Oleo Sponge is not limited to oil absorption. The aluminum-oxide-treated polyurethane foam can potentially absorb other liquids such as chemical waste, which could further expand BP’s market reach. The benefits of storing Oleo Sponges on BP oil ships outweigh production costs. Suppose that, at the time of the 2010 oil spill, the proposed idea of BP Oleo Sponges existed and had been implemented. Although some expenses paid by BP would ultimately be unavoidable, such as the $4 billion criminal settlement, many of the expenses would have been lessened. There would have been no need for BP to have “sprayed 1.8 million gallons of dispersants at [the oil spill’s] source.”25 This action resulted in a “650-foot high plume of microscopic oil compounds [that] floated 3,000 feet below the surface of the Gulf of Mexico near the well.”26 Scientists noted that the plume was unusual since the low density of oil would normally cause oil to float on the surface of water; thus, the dispersants must have caused oil droplets to remain “suspended in the water instead.”27 Using the market price of oil around the time of the BP oil spill, about $81.17 per barrel, nearly $400
Oleo Sponge, a new material developed by the U.S. Department of Energy’s Argonne National Laboratory … can absorb up to 90 times its weight in oil.”
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million worth of oil was spilled.28 Had the Oleo Sponges been used, they would have mitigated the cleanup costs, and reduced the effects of the 4.2 million barrels of oil. Furthermore, 58,000 square miles of the Gulf of Mexico would not have been closed to fishing, 29 which would have saved BP most of the $7.8 billion settlement promised to the local fishing and tourism industries for property damage and economic loss.30 On the other hand, some costs cannot be fully quantified. Although unmeasurable, consumer and general trust in the company is no less important. By the standards explored by Graham Dietz in his article, “How to rebuild trust in business,” BP proved that it failed to uphold the necessary standards. The company was not capable of safely extracting and transporting oil; the managers were more focused on timeefficiency and immediate profit than long-term sustainability and safety; and they ignored (and covered up) the accumulation of small mishaps that ultimately resulted in the explosion. Consequently, BP quickly lost its reputation as a respectable company and as a strong proponent of sustainability.31
If they had been available, the Oleo Sponges may have mitigated the loss that BP suffered in June 2010, fewer than two months after the initial spill. The loss was quantified by “over a third of [BP’s] market value, worth about $70 billion.”32 Undoubtedly, BP’s market value would have decreased after the initial oil spill, but a chance remained for BP as “trust is remade—strengthened or undermined— in every encounter.” 33 With the Oleo Sponges, BP would have had more success in cleaning up the massive oil spill that its teams caused, and proved its “technical competence to perform a task reliably (ability), benign motives (benevolence), and [adherence] to acceptable ethical principles such as fairness and honesty (integrity).”34 This would have reestablished some of society’s trust in BP and prevented the sharp downturn of BP’s market value. CONCLUSION Oil spills are a major social concern as oil continues to be a major resource. To control the extent of the damage, multiple tools are used: physical barriers to prevent the spill from spreading; skimmers and sorbents to recollect oil; in situ burning
“My paper was developed primarily through the journal entries of Cycle Two and Three and the feedback from my professors. The most surprising part of my research was just discovering the extent of the BP oil spill and the flaws in the current cleanup methods.”
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to remove the oil from the water; and dispersants to reduce congestion of oil. However, each method is flawed in one fashion or another, leaving a gap in the market for a new solution. The Oleo Sponge provides an effective solution to the problems in oil spill cleanup: not only would the sponges be easy for BP to manufacture, but also, they would provide BP with another profitable market to explore. Placing the sponges onboard oil rigs provides an immediate contingency plan in the case of an actual oil spill. O ve r a l l , t h e e f f e c t i ve n e s s a n d reusability of the Oleo Sponges have the capability of saving BP billions of dollars and rebuilding its reputation. The benefits of the Oleo Sponge go beyond the numbers. Implementation of the BP Oleo Sponge proposal would signal to other companies that BP has not only acknowledged the oil business’s potential for negative environmental impact, but also that the company has taken precaution to mitigate these externalities. The Oleo Sponge marks the beginning of a new business trend: awareness of the social value that can be created through company action—a small but critical step in inspiring change.
Barstow, David, et al. “Deepwater Horizon’s Final Hours.” The New York Times, The New York Times Company, 25 Dec. 2010. <http:// www.nytimes.com/2010/12/26/us/26spill.html?page wanted=all&_ r=0>. 2 Griffin, Drew. “5 Years after the Gulf Oil Spill: What We Do (and Don’t) Know.” CNN, Cable News Network, 20 Apr. 2015. <http://www.cnn. com/2015/04/14/us/gulf-oil-spill-unknowns/>. 3 Repanich, Jeremy. “The Deepwater Horizon Spill by the Numbers.” Popular Mechanics, Hearst Communications, 10 Aug. 2010. <http:// www.popularmechanics.com/science/energy/a6032/bp-oil-spillstatistics/>. 4 Fisk, Margaret Cronin, and Laurel Brubaker Calkins. “BP Gulf of Mexico Spill, From Disaster to Trial: Timeline.” Bloomberg, Bloomberg, 24 Feb. 2013. <http://www.bloomberg.com/news/ articles/2013-02-25/bp-gulf-of-mexico-spill-from-disaster-to-trialtimeline>. 5 Bomey, Nathan. “BP’s Deepwater Horizon Costs Total $62B.” USA Today, Gannett Satellite Information Network, 14 July 2016. <http://www.usatoday.com/story/money/2016/07/14/bpdeepwater-horizon-costs/87087056/>. 6 “Oil Spills at the Water Surface.” Office of Response and Restoration, National Oceanic and Atmospheric Administration. <http:// response.restoration.noaa.gov/oil-and-chemical-spills/oil-spills/ oil-spills-water-surface.html>. 7 “Effects of Marine Oil Pollution on Economy and Human Health.” Global Marine Oil Pollution Information Gateway, United Nations Environment. <http://oils.gpa.unep.org/facts/economy-health. htm>. 8 “Oceans.” Oil Spill Prevent + Response, API Energy. <http://www. oilspillprevention.org/oil-spill-cleanup/ocean-oil-spill-cleanup>. 9 “Oil Spill Cleanup Methods: How Do You Clean Up an Oil Spill?” Conservation Institute, ConservationInstitute.org, 19 June 2013. <http://www.conservationinstitute.org/oil-spill-cleanup-methodshow-do-you-clean-up-an-oil-spill/>. 10 “Gulf Oil Spill.” Ocean Portal, Smithsonian Institution. <http://ocean. si.edu/gulf-oil-spill>. 11 “Oil Spill Cleanup Methods.” 12 “Sorbents.” EPA, Environmental Protection Agency, 28 Feb. 2017. <http://www.epa.gov/emergency-response/sorbents>. 13 “Oil Spill Cleanup Methods.” 14 Geuss, Megan. “Oleo Sponge Invented at Argonne National Laboratory Can Sop up Oil in a Spill.” Ars Technica, Condé Nast, 19 Mar. 2017. <http://arstechnica.com/science/2017/03/oleo-sponge1
invented-at-argonne-national-laboratory-can-sop-up-oil-in-aspill/>. 15 “Sorbents.” 16 Lerner, Louise. “Argonne Invents Reusable Sponge That Soaks up Oil, Could Revolutionize Oil Spill and Diesel Cleanup.” Argonne National Laboratory, U.S. Department of Energy Office of Science, 6 Mar. 2017. <http://www.anl.gov/articles/argonne-inventsreusable-sponge-soaks-oil-could-revolutionize-oil-spill-and-dieselcleanup>. 17 Ibid. 18 Ibid. 19 “Oleo Sponge Could Make Oil Spill Cleanup More Efficient.” Wall Street Journal, 16 Mar. 2017. <http://www.wsj.com/video/oleosponge-could-make-oil-spill-cleanup-more-efficient/9E2A79EBE449-40E6-A65F-7CE98CB16DDD.html>. 20 Ibid. 21 Lerner. 22 “Understanding Polyurethane Foam Price Increases.” Skandia Inc., June 2008. 23 BP Global. BP. <http://www.bp.com/>. 24 “Understanding Polyurethane Foam Price Increases.” 25 Winerman, Lea. “Gulf Oil Plume Map Adds to Debate over Spill’s Undersea Impact.” PBS Newshour, NewsHour Productions, 19 Aug. 2010. <http://www.pbs.org/newshour/rundown/scientists-mapdeepwater-horizon-oil-plume/>. 26 Ibid. 27 Ibid. 28 Repanich. 29 Ibid. 30 Fisk, Margaret Cronin, and Laurel Brubaker Calkins. 31 Winston, Andrew. “Five Lessons from the BP Oil Spill.” Harvard Business Review, Harvard Business School Publishing, 3 June 2010. <http://www.hbr.org/2010/06/the-bp-oil-spill-top-5-lessons.html>. 32 Ibid. 33 Dietz, Graham. “How to Rebuild Trust in Business.” The Guardian, Guardian News and Media, 26 Mar. 2012. <http://www.theguardian. com/sustainable-business/rebuild-restore-recover-trustbusiness>. 34 Ibid. Photo Credits: frankhg/Flickr—page 42 Patrick Luckow/Flickr—page 44 Peter Ma/Flickr—page 45
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TRASH ESSAY BY
E x p a n d i n g H a i t i ’ s m a n u f a c t u r i n g i n d u s t r y c o u l d h e l p fix the country’s high level of unemployment. Tara Rangwani feels that Timberland, an American manufacturer of outdoor clothing, can help lead this charge by establishing a sustainable cycle of trash collection, employment, and reforestation across local communities.
h e s m a l l n at i o n o f Haiti is one of the poorest countries in the Western Hemisphere despite being geographically close to one of the most prosperous superpowers, the United States of America. One of the issues that plagues Haiti is the misallocation of internal labor resources, which, in turn, exacerbates the nation’s pre-existing problem of widespread unemployment and underemployment. In this context, underemployment refers to people who wish to work full-time but only have a part time job.1 Haiti’s startlingly high unemployment rate of 40.6 percent can partially b e a tt r i b u t e d t o t h e f a c t t h a t a disproportionate amount of the country’s population is either unemployed or employed by the agricultural sector. 2 More specifically, although agriculture is the primary employment sector with 38 percent of the population, the industry only contributes to 21 percent of the country’s GDP.3 These statistics indicate an over-reliance on agriculture and deliver additional side effects: erosion, soil exploitation, environmental degradation, and ultimately, deforestation. All these negative externalities of the agriculture business endanger soil fertility and, sadly, are further worsened by Haiti’s temperamental climate. The nation is prone to floods, droughts, earthquakes, and other natural disasters— all of which can destroy crops and lead to uncertain incomes for those dependent on the land for their livelihoods. The demand for agricultural commodities is also intrinsically inelastic, contributing to fluctuating prices and, as a result, fluctuating incomes for Haitian farmers.4 Clearly, with the negative consequences and volatile returns, an alternative source of income and revenue is worth Haiti’s investment. The obvious solution to curing Haiti’s financial dependence on agriculture is to promote other industries in the nation. One such industry is manufacturing— the second largest employment sector— and one that is less susceptible to
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environmental forces. Manufacturing is, therefore, a more reliable source o f i n c o m e f o r H a i t i a n c i t i z e n s. Currently, Haiti exports unprocessed primary commodities as well as locally manufactured goods, such as clothing, textiles, and scrap metal.5 Id e a l l y, w h e n p r o m ot i n g t h e manufacturing industry, locally sourced raw materials would be processed. Value would be added to the Haitian economy through a procedure called “vertical diversification,” which has proved successful when boosting the incomes of workers in some developing countries like Malaysia, China, and Chile. 6 A vertical diversification strategy involves moving into manufacturing activities that make a new use of locally sourced raw materials—even materials currently considered waste.7 Based on Haiti’s current exports, it is most viable to promote the budding textile industry. Textile manufacturing allows for vertical diversification using non-agricultural raw material as input and furthers efforts to reduce Haiti’s dependence on its agricultural industry. While these alternative raw materials may initially seem implausible, there have already been initiatives that have successfully used local waste to manufacture consumer goods. The best local example of trash being the raw material for a finished good is the recent “Thread x Timberland” initiative undertaken by Timberland, an American retailer and manufacturer of outdoor apparel. In 2017, Timberland released its first collection of clothing and footwear created entirely from trash collected from the streets of Haiti (discarded plastic bottles, to be specific). 8 This practice of creating footwear from recycled materials was pioneered by Adidas, which recently created shoes made entirely from recycled ocean waste.9 While the “Thread x Timberland” i n i t i a t i v e s u c c e s s f u l l y e m p l oy e d more than 1,300 Haitians to collect trash and deliver it to collection and recycling centers, these jobs were only temporary and could not be considered
sustainable employment. 10 Such jobs have contributed to the present condition of underemployment in Haiti, and while under-employment is an improvement from un-employment, the situation is still not ideal. Furthermore, the plastics collected are only minimally processed, creating a raw material called “flake,” which is sent back to the US to be integrated into the finished product. 11 This gap in the supply chain, where raw materials are transported from their source to another country to be processed in the final stage, represents a potential benefit, if returned to Haiti. Manufacturing goods made from waste provides Haitians with the added benefit of reducing the dependence on their agricultural commodities for export revenues and instead focusing on diversification to reduce the volatility of local incomes. If Timberland expanded a similar waste collection process to include local manufacturing in permanent facilities, it would create greater value for all the stakeholders involved: Timberland, its customers, and the citizens of Haiti. While setting up operations in a new country might initially represent a large startup cost to Timberland, over time they would benefit from Haiti’s cheap labor costs and lower transportation costs—as the entire process would take place in Haiti. The solution is readily implementable since Timberland already operates a factory in the Dominican Republic that has been running since 1982.12 Given Haiti and the Dominican Republic’s close proximity, it would be straightforward either to expand operations to Haiti or set up new operations using those in the Dominican Republic as a template. Because of the local political, environmental, and socio-economic similarities between the two countries, the template would likely prove comparable. In addition, this particular waste-to-shoe process involves minimal raw material costs. Establishing new operations would be a less expensive investment for the organization. Timberland can benefit from Haiti’s convenient geographic
location as well; the organization is close to its production activities in the Dominican Republic and proximate to its customers in the United States. Further, Timberland is not alone in Haiti. South Korean clothing retailer SAE -A runs a large-scale apparel production there. It currently employs 8,600 people in their Haitian factories of which an impressive 70 percent are women. 13 SAE-A also engages in community development programs by funding a school in Haiti. The company has also managed to keep revenues high. Its export revenue in 2015 was an impressive $96 million USD, an increase of 88 percent from the previous year. 14 Reportedly, SAEA’s employees earn more than triple Haiti’s GDP per capita, which indicates a superior quality of life. 15 Including families of employees and beneficiaries of the positive externalities created by SAE-A’s community involvement, an estimated 32,000 people have been positively affected by SAE-A’s corporate presence in Haiti.16 SAE-A’s success can be used as a benchmark to prove that economic profit and social ventures are not mutually exclusive. Further, its success should incentivize other organizations to explore Haiti’s untapped potential and positively influence the community as well. In Timberland’s case, the company can emulate SAE-A’s efforts in Haiti and implement a similar system of production on the island nation. Timberland is the most appropriate company for the job—but not just because it has prior experience running operations in the Dominican Republic. The organization has been involved in environmental activities in Haiti since the 2010 earthquake, culminating in a celebration in 2015 when Timberland employees helped plant millions of trees in the nation.17 This reforestation program demonstrates an alignment of intentions between Timberland and the people of Haiti as they work together to promote both corporate and community value.
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The practice of creating footwear from recycled materials is becoming increasingly more common...”
In order to better market its existing social impact initiatives, Timberland might create a rewards program in which it plants a specific number of trees for a certain number of products sold from the collection. Furthermore, this business venture may create further value for the community by encouraging similar businesses, and, ultimately, Haitian cluster development—specifically of the textile and apparel industries.18 Indirect effects of creating local clusters would create positive externalities by better training employees, which would lead to a more skilled labor force and, in turn, helps address the problem of unemployment. By capitalizing on the newly developed method of creating products from waste, Timberland also has the opportunity to reinvent its brand by establishing a mutually sustainable cycle: taking the refuse from the land and turning it into something marketable by “adding value” and then returning something good to the land by reforestation. This undertaking not only promotes brand image to an increasingly socially conscious consumer base but also helps ensure long-term
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focus on both Haitian unemployment and deforestation. Potential risks and drawbacks include the unfamiliarity of setting up operations in a new location with a different set of regulations, which could lead to difficulties in management. However, this risk is greatly minimized for Timberland based on its prior experience in the Dominican Republic. Additional investments in infrastructure might be necessary in order to make sure any facility built is structurally sound enough to withstand the natural disasters, specifically earthquakes, to which Haiti is prone. However, the Timberland facility in the Dominican Republic has survived more than 30 years on the same island despite environmental calamities, demonstrating that such a feat is possible to achieve and replicate.19 Timberland has created value for local communities as far back as 1982 when it first established a Dominican Republic operation that addressed local unemployment.20 It is about time Timberland set up roots that are just as permanent in Haiti to reinforce the
company’s ongoing contributions to the nation. For Timberland, setting up long-term production activities is only preponing the inevitable. This initiative would simultaneously create value for Timberland and its future Haitian employees by exposing them to a slew of benefits that only a well-paying job can provide. Ultimately, the environmental externalities of this waste-to-riches story would be positive, a feat rarely seen in manufacturing activity. It is only fitting that Timberland should be the one to build its business and, at the same time, alleviate social and environmental issues. The only issue that remains is not if Timberland should set the plan into motion, but rather, when.
Tragakes, Ellie. Economics for the IB Diploma. Cambridge: Cambridge U Press, 2012. Print. 2 “The World Factbook.” Central Intelligence Agency, Central Intelligence Agency, 30 Apr. 2017. <http://www.cia.gov/library/ publications/the-world-factbook/geos/ha.html>. 3 “Haiti.” Forbes, Forbes Magazine, Dec. 2016. Web. 30 Apr. 2017. <http://www.forbes.com/places/haiti/>. 4 Tragakes. 5 “Haiti Exports 2008-2017.” Haiti Exports, Trading Economics. Web. 30 Apr. 2017. <http://www.tradingeconomics.com/haiti/exports>. 6 Ibid. 7 Tragakes. 8 Rueckert, Phineas. “Timberland’s New Shoes Are Made From Haiti Street Trash.” Global Citizen, 13 Mar. 2017. Web. 30 Apr. 2017. <https://www.globalcitizen.org/en/content/timberland-shoesrecycled-trash-haiti/>. 9 McCarthy, Joe. “Adidas Is Making 1 Million Running Shoes Out of Ocean Plastic Waste.” Global Citizen, N.p., 25 Apr. 2017. Web. 30 Apr. 2017. <https://www.globalcitizen.org/en/content/adidas-makes-1million-running-shoes-ocean-plastic/>. 10 “Timberland Collaborations: Thread International.” Timberland USA - English. Web. 30 Apr. 2017. <https://www.timberland.com/ markmakers/thread.html>. 11 Ibid. 1
“Timberland Brings Clean Water to Santiago, Dominican Republic.” Timberland USA - English. Web. 30 Apr. 2017. <https://www. timberland.com/responsibility/stories/bringing-clean-water-todominican-republic.html>. 13 “Engagement - SAE-A.” Main - SAE-A. Web. 30 Apr. 2017. <http:// www.sae-a.com/eng/engage/overview>. 14 Ibid. 15 Ibid. 16 Ibid. 17 “Timberland Celebrates Five Years of Economic and Environmental Progress in Haiti Resulting From Commitment to Plant Five Million Trees.” Timberland USA - English. Web. 30 Apr. 2017. <https://www.timberland.com/newsroom/press-releases/ timberland-celebrates-five-years-of-economic-and-environmentalprogress-in-haiti.html>. 18 Porter, Michael E., and Mark R. Kramer. “Creating Shared Value.” Harvard Business Review 89, nos. 1-2 (January–February 2011): 62–77. 19 Hellqvist, David. “At Work: Timberland’s Dominican Republic Factory.” Port-Magazine. Web. 30 Apr. 2017. <http://www.portmagazine.com/fashion/at-work-timberlands-dominican-republicfactory/>. 20 Ibid. Photo Credits: Pexels/Pixabay—page 48 Marshall Segal/Flickr—page 50 Alberto Ziveri/Flickr—page 52 12
“My approach was to focus on how simple business solutions could be at dealing with complex issues through spillover benefits alone. My paper simply advocates for one firm to expand its operations to arrive at a mutually beneficial solution that simultaneously makes economic sense to the firm.”
CLASS OF 2020 FINANCE and COMPUTING & DATA SCIENCE COULD TRASH CURE HAITI’S EMPLOYMENT CRISIS? / 53
POWER TO THE
PERIOD ESSAY BY
Without sanitary pads, monthly menstruation is more than inconvenient; it can be unsafeâ€”even dangerous. In this essay, Melissa Alvarez proposes a way in which a local business in rural India dedicated to helping women can partner with multinational corporation P&G to address this issue.
..omen in rural India use cloth, ashes, or husk sand to stop their monthly menstrual bleeding.1 As of 2010, only 12 percent of women living in India used sanitary napkins during menstruation, leaving 88 percent of women to use alternative products.2 Reusable cloths, as one example, offer a poor substitute. After use, cloths are generally washed in unclean water and dried away from open air and sunlight, inviting bacteria to fester. 3 A further problem: around 70 percent of Indian households do not have access to working toilets.4 This lack of facilities reduces women’s ability to properly dispose of their waste and further reduces their ability to clean themselves during their periods. All of these factors result in poor menstrual hygiene, which studies have found leads to increased risk of reproductive tract infections. 5 In all, the shortage of safe feminine hygiene
products poses a risk to the average rural Indian woman’s health. Economic restrictions and poverty in rural areas only worsen the problem. Minimal use of sanitary napkins can be partly credited to their high cost. In fact, a survey concluded that 70 percent of rural Indian women cannot afford to buy sanitary napkins.6 With a limited amount of money, women must make choices between necessities, such as groceries or sanitary napkins. Logically, it seems better to benefit the entire family with satisfactory meals than to splurge on sanitary napkins—especially when cloths offer an accessible alternative. Women make these trade-offs and simultaneously endanger their own health. Undeniably, menstruation is not a onetime deal that occurs for a week and then goes away forever. Women menstruate monthly, and they require a constant supply of menstrual hygiene products throughout their period. Moreover, feminine hygiene products—sanitary
napkins, commonly referred to as pads— are a necessity for women on their periods. Not having proper protection to stop blood leads to soiled clothing and potential humiliation. The stigma of menstruation in rural India works against women’s chances at proper menstrual hygiene. Menstruation is often talked about in hushed tones, as speaking of periods, of bleeding from such a private area, is taboo. A study of Indian women in 2000 concluded that most young girls were scared when they first started their periods, unaware of the bleeding’s meaning.7 As explanation, the girls cited not being able to discuss their periods with their mothers because they also were uninformed and uncomfortable speaking about the topic. 8 Bleeding inexplicably will undoubtedly instill fear in anyone, and not knowing what it means brings on confusion and anxiety. Additionally, menstruation in Hindu tradition disrupts the lives of both practicing women and of those affected by deep-rooted beliefs. Approximately 80 percent of the Indian population is Hindu.9 That means that a large portion of Indian women practice Hindu beliefs that dictate what women on their periods should and should not do. Hindu belief states that touching menstruating women is inappropriate. 10 Women on their periods are also not allowed to enter kitchens or temples, sleep in the daytime, bathe, wear flowers, have sex, touch other males or females, talk loudly, or even touch pickles.11 It is believed that these acts would pass on impurity from the menstruating woman to her surroundings. Women on their periods are effectively branded as dangerous, and beliefs like these single them out as unnatural. More than dangerous, menstruating women are seen as impure and are ostracized for something they simply cannot control. After all, menstruation is just that—out of a woman’s control. Menstruation is a natural process that should not bring shame to women. Alienating others based on something so raw and human only serves to strengthen gender disparities.
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Although not all rural Indian women and their families are strict in following this mythology, the repercussions of such beliefs are still prevalent. As previously mentioned, women who use cloths during their periods often wash and dry them away from fresh air and oxygen.12 They do this out of embarrassment, not wanting others to see their bloodied rags. 13 Associating menstruation with uncleanliness leads women to be ashamed of their own bodies’ natural cycles. In a recent blogpost on The Times of India website, Avani Bansal shares her personal experience in a household that isolated her during her period. 14 Bansal wrote, “...for the first two days of my menstrual cycle, every month, my existence at home depended on remembering every second that I was not allowed to touch anything.” 15 It is heartbreaking to read that a young girl was forced to stay away from her own family, from what was familiar to her, because she was menstruating once every month. Considering all of this, the idea of not having feminine hygiene products does not seem so far off now. Adequate and safe feminine hygiene products are not a priority in these areas because discourse on menstruation occurs rarely, if at all. Women deserve to be educated about their own bodies. Menstruation naturally occurs for healthy women. It begins as early as eight years old and lasts into a woman’s fifties. Clearly, menstruation occurs through most of a woman’s life, and proper knowledge on how to deal with periods is necessary for lifelong health. Bringing all of this information together, we may consider that the glaring reasons rural Indian women lack access to satisfactory menstrual hygiene products relate to a lack of economic power and an excess of ignorance. An arrangement where rural Indian women gain economic power while receiving education on proper menstrual hygiene sounds ideal—and is plausible. In 1998, Arunachalam Muruganantham discovered his wife used cloths instead of sanitary
napkins during her period. Shocked but determined, Muruganantham set off on a quest to produce sanitary napkins effectively and cheaply so that more women could access them. He went as far as testing his prototypes on himself using a pretend uterus and goat’s blood to imitate menstruation. 16 After four years, Muruganantham discovered the answer using cellulose from tree bark prepared by his own innovative machinery.17 The process is complete in four steps and takes an hour to learn. A machine breaks down the hard cellulose into fluffy material that is then packed into rectangular cakes with another machine. Next, the cakes are wrapped in non-woven cloth and disinfected in an ultraviolet treatment unit. 18 Using this design as his main product, Muruganantham founded Jayaashree Industries, which distributes machines to women’s self-help groups around India.19 One machine costs 75,000 Indian rupees, around $1,170. Each machine provides employment for ten women, and they can produce two sanitary napkins per minute, which sell for an average of about 2.5 rupees each or $0.04.20 His method is effective and generous, as his main goal is female empowerment. Be that as it may, Arunachalam Muruganantham previously mentioned not wanting to sell his invention to a large corporation.21 He believes in giving power to women to brand and sell their own sanitary napkins at lower prices. However, Muruganantham should not limit himself or the women he claims to help. By reconsidering the value of established influence and pre-existing loyal customers, Muruganantham might accept a partnership with a large distributer. In this way, he can immediately achieve his g oal—to positively impact women across India. Procter and Gamble (P&G), through its own brand of sanitary napkins, is uniquely positioned to help resolve this issue. P&G sells its Always brand sanitary napkins as Whisper in India at high prices that most rural women cannot afford. The high rates are due to the
Women on their periods are also not allowed to enter kitchens or temples, sleep in the daytime, bathe, wear flowers, have sex, touch other males or females, talk loudly, or even touch pickles.”
high cost of machinery and materials required to produce sanitary napkins. 22 There’s a link that can be made between Jayaashree Industries and P&G that may benefit both corporations. If P&G were to implement Jayaashree Industries’ machinery in production sites around India, it could cut costs and sell Whisper pads at lower prices. In addition, P&G would still be honoring Arunachalam Muruganantham’s mission throughout India by employing only rural Indian women at these sites. Muruganantham’s primary goal is to help locals in rural and urban communities make and distribute the sanitary napkins themselves. 23 P&G would work as an extension of an already existing supply chain. Allowing P&G to buy and use Jayaashree Industries’ machinery in larger production sites across Indian towns would strengthen the foundations of Muruganantham’s plan. In this new venture, P&G’s usual production and distribution style requires disruption. P&G would have to commit to employ only rural Indian women and to respect their rights. Transparency would be key, ensuring that consumers remain aware that the company was being honest about employment and that Muruganantham’s original message was not replaced. P&G might agree to this partnership
to give Whisper more of a purpose. Rather than just providing women with sanitary napkins, P&G would be able to give women a second chance at educating themselves about their bodies. The company already offers menstrual hygiene initiatives in developing areas. In India specifically, P&G started a menstrual education program. On their website, the company states: “P&Gs ‘Parivartan’ (transformation) program reaches over 2.5 million girls each year with timely menstrual education and protection that helps keep them in school.”24 A program like this shows P&G’s willingness to make positive change. It has already taken the necessary steps to protect young girls. Muruganantham may take this initiative as P&G’s testament to bettering the lives of women, thus changing his stance on big corporations. With a partnership in India, P&G and Arunachalam Muruganantham may elevate their message, reaching generations of women. P&G should apply this menstrual education model in a vocational setting. As mentioned, P&G would provide proper training for the sanitary napkin machines. Along with that, women would be taught about their periods and personal hygiene much like in the Parivartan program. Young girls are provided with this education, and they pass on the
knowledge to their mothers, aunts, and other maternal figures. Particularly in India, the reason why rural women and girls use old cloths and rags is lack of knowledge. The company would be wise to intertwine training and education for all rural women it employs. Carrying out practices like those used in the Parivartan program works to destigmatize menstruation, beginning with those who are affected by it most: women. This way, women learn how to produce sanitary napkins while effectively learning about their own bodies and how to properly care for themselves during menstruation. Ultimately, this method should inspire women to share their knowledge. This kind of preparation might equip women with enough know-how to educate their female relatives and friends. Though culture is hard to change, and taboos are deeply rooted in societal structures, there is no harm in trying. A chain reaction of shared knowledge might inspire women and successfully empower and enlighten them to gain more control over their own bodies and natural processes. P&G, under Whisper, ran a 2015 ad known as “Touch the Pickle” in India. The commercial portrays a young girl touching a pickle jar while wearing white jeans, going out, and playing sports—all
POWER TO THE PERIOD / 57
things that Indian women warn against during menstruation. 25 The star of the advertisement wraps up with, “Girls, let’s break the taboos, go ahead and touch the pickle jar.”26 Whisper made massive waves with this advertisement—enough to win the Glass Lion Grand Prix award at the Cannes Lions International Festival of Creativity.27 As a matter of fact, Whisper’s share of voice grew from 21 percent to 91 percent in its category.28 The commercial succeeded at creating a conversation in India. Still, the commercial merely highlighted the average urban girl and woman. More specifically, it targeted women well-off enough to afford sanitary napkins. Perhaps this was not done purposefully, but rural women are still left out of the picture. While those who can afford sanitary napkins use them, rural Indian women continue to use unsafe methods of protection during menstruation. Nevertheless, the company actively shows interest in advocating for Indian women who are restricted during their periods. Whisper and Jayaashree Industries have the opportunity to create what Michael Porter and Mark Kramer call “shared value.” 29 They explain that businesses can, and should, make
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choices that benefit both society and business. Porter and Kramer go on to state, “Typically, the more closely tied a social issue is to a company’s business, the greater the opportunity to leverage the firm’s resources—and benefit society.” 30 This quotation specifically fits the relationship between Whisper, Jayaashree Industries, and rural Indian women. Whisper and Jayaashree Industries are intimately tied with the production of sanitary napkins. The two firms have the resources to make a greater positive impact on women in need. Whisper has the power to reach a wider audience, Jayaashree Industries has the machinery to make it possible, and rural Indian women have the potential to gain economic mobility and access to sanitary napkins. There exists a real chance to benefit business while catering to women in need. The partnership proposal is not free of flaws, of course. There are inherent problems and considerations. First, when Always opens production sites and employs women, heavy supervision and transparency is required. Alongside that, humane standards and wages for workers must be set immediately. The company’s main goal for this venture
is female empowerment, not cheap labor. As education is a key component of this proposal, educators should be well versed in menstrual hygiene and prepared to answer any questions that may arise. Additionally, there exists the possibility that these women could go unsupervised. There could be foul play in which women might take sanitary pads for free instead of paying for them, distributing them without affiliation with Whisper. In another case, women might not be inclined to work or not allowed by a husband or father because of the taboo placed on menstruation. These are extreme cases, but they should not be considered a detriment to any serious proposal. Through dedication and a common goal, all three stakeholders— P&G, Jayaashree Industries, and rural Indian women—can cooperate to unlock great potential. In the words of Arunachalam Muruganantham, India should be a 100 percent sanitary napkin using country.31 In today’s globalized, innovative world, women should have access to sanitary napkins whenever they need. They deserve to have adequate and safe feminine hygiene products to help them get through their periods. Although old
rags, ashes, or husk sand might do the job, they don’t work like sanitary napkins. With the help of Whisper and Jayaashree Industries, rural Indian women may
potentially earn an honest living. At the same time, they’ll become informed about proper menstrual hygiene and spread their knowledge to other women.
Goyal, Vishakha. “Scope and Opportunities for Menstrual Health and Hygiene Products in India.” International Research Journal of Social Sciences, vol. 5, July 2016, pp. 18–21. <http://www.isca.in/IJSS/ Archive/v5/i7/3.ISCA-IRJSS-2016-044.pdf>. 2 Ibid. 3 Das, Padma, et al. “Menstrual Hygiene Practices, WASH Access and the Risk of Urogenital Infection in Women from Odisha, India.” PLoS ONE, Public Library of Science, 30 June 2015. <http://www. ncbi.nlm.nih.gov/pmc/articles/PMC4488331/>. 4 Chatterjee, Rhitu. “In India, Access to Toilets Remains a Huge Problem.” Public Radio International, PRI’s The World, 12 May 2016. <http://www.pri.org/stories/2016-05-12/india-access-toiletsremains-huge-problem-worst-all-women-and-girls>. 5 Das. 6 Goyal. 7 Garg, Suneela, et al. “Socio-Cultural Aspects of Menstruation in an Urban Slum in Delhi, India.” Reproductive Health Matters, vol. 9, no. 17, 2001, pp. 16–25. <http://www.jstor.org/stable/3776394>. 8 Ibid. 9 Office of the Registrar General & Census Commissioner, and C. Chandramouli. “Provisional Population Totals.” Provisional Population Totals, Office of the Registrar General & Census Commissioner, India, 2011. <http://www.censusindia.gov.in/2011prov-results/data_files/india/paper_contentsetc.pdf>. 10 Bhartiya, Aru. “Menstruation, Religion and Society.” International Journal of Social Science and Humanity, vol. 3, no. 6, Nov. 2013, pp. 523–527. <http://www.ijssh.org/papers/296-B00016.pdf>. 11 Ibid. 12 Das. 13 Venema, Vibeke. “The Indian Sanitary Pad Revolutionary.” BBC News, BBC, 4 Mar. 2014. <http://www.bbc.com/news/ magazine-26260978>. 14 Bansal, Avani. “My Menstrual Blood: There Are Overwhelming Taboos around Menstruation in India, Which Make a Girl’s Life Miserable.” Times of India Blog, The Times of India, 17 Feb. 2017. <http://blogs.timesofindia.indiatimes.com/toi-edit-page/ 1
Any step taken toward helping women feel comfortable and empowered is a step in the right direction.
my-menstrual-blood-there-are-overwhelming-taboos-aroundmenstruation-in-india-which-make-a-girls-life-miserable/>. 15 Ibid. 16 Venema. 17 Ibid. 18 Ibid. 19 Ibid. 20 Ibid. 21 “Welcome to New Inventions.” New Inventions, Jayaashree Industries. <http://newinventions.in/>. 22 Bhattacharjee, Yudhijit. “How an Indian Innovator ReverseEngineered the Making of Sanitary Pads.” The New York Times, The New York Times, 10 Nov. 2016. <http://www.nytimes.com/ interactive/2016/11/13/magazine/design-issue-sanitary-pads-india. html?_r>. 23 Ibid. 24 “Sustainability Journey in India.” P&G India. <http://www.pg.com/ en_IN/sustainability/pg-india-sustainability-journey.shtml>. 25 Wentz, Laurel. “P&G Whisper’s ‘Touch the Pickle’ Wins Glass Grand Prix.” Ad Age, Josh Golden, 23 June 2015. <http://adage.com/ article/special-report-cannes-lions/p-g-whisper-s-touch-picklewins-glass-grand-prix/299182/>. 26 Ibid. 27 Ibid. 28 Ibid. 29 Porter, Michael E., and Mark R. Kramer. “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review, Harvard Business Review, 25 Aug. 2015. <http://hbr.org/2006/12/strategy-andsociety-the-link-between-competitive-advantage-and-corporatesocial-responsibility>. 30 Ibid. 31 “Welcome to New Inventions.” Photo Credits: Nevil Zaveri/Flickr—page 54 WASH United/Wikimedia Commons—page 56 Jayaashree Industries—page 58
“I wanted to show that adequate feminine hygiene products are not a luxury, but a necessity. Menstruation is a natural process; women shouldn’t be shamed for it and, in turn, risk their health. There’s a way to help women who lack access to these products and a way to remove the stigma against periods.”
MELISSA ALVAREZ CLASS OF 2020 MARKETING
POWER TO THE PERIOD / 59
ONE STEP TOWARDS A GREENER CHINA:
BEIJING ENERGY PARK
B e i j i n g , C h i n a i s s u f f e r i n g f ro m a n a i r p o l l u t i o n crisis, yet much of the population is unaware of its associated health implications. That is why Judy Kam is arguing for the creation of the Beijing Energy Park, a self-sustaining center for community recreation and environmental education. With its innovative design, this park could be the future of all â€œsmart parks.â€?
IR QUALITY IN CHINA As China’s economic boom and rapid population growth lead to increasingly high levels of pollution, China’s socioeconomic stability is threatened by the lack of awareness surrounding the dangerous health effects of airborne particulate matter. Airborne particulate matter is the component of pollution that is measured to determine air quality. PM2.5 is an air quality measurement referring to atmospheric particulate matter that is less than 2.5 micrometers— approximately 30 times smaller than a human hair.1 Average daily PM2.5 levels in Beijing regularly surpass 400 micrograms per cubic meter (µg/mg3), even reaching 800 on certain days—more than five times the level deemed safe by the World Health Organization.2 The lack of awareness surrounding airborne particulate matter stems from inadequate education. Chinese citizens, born and living with poor air quality, are unaware that long-term exposure to PM2.5 particles can be extremely dangerous. Exposure to these particles can be a contributing factor to asthma, respiratory illnesses, developmental delays in children, and even obesity. Children born in periods of bad air quality also show small head sizes, lower IQs, and higher levels of pollutant-related DNA disruptions. 3 Simply put, 1.6 million people in China die each year as a direct result of worsening pollution.4 HOW CITIZENS ARE UNKNOWINGLY EXPOSED Due to lack of awareness, Chinese citizens do not generally feel the urge to protect themselves against air pollution. Some elders, who would gather in local parks to exercise in the past, do fear the effects, so choose to shut themselves indoors. To address both issues, the government and societal institutions have attempted to implement protection methods, but these were neither efficient nor accessible to low to medium income families. Often, citizens who are aware
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of the health concerns, wear surgical masks, which actually have no filtration efficiency when it comes to blocking out particles measuring PM2.5.5 Students too are at risk. They spend an average of eight hours in school every day, exposing themselves to unfiltered air when indoors and pollutant-filled air when outside. Schools aware of what’s at stake either attempt extreme protective measures, such as building a $5 million air filtration dome for students to exercise in or cancel physical education classes entirely.6 The problem extends beyond students and elders as well, affecting hospital care and urban tourism. Hospitals are forced to allocate valuable resources to cure
government and corporations. This gap demonstrates the need for social ventures to build sustainable businesses that tackle this unique public health challenge by promoting healthy living among students and elders, while creating shared value for all societal institutions involved. One such proposal is the Beijing Energy Park. The Beijing Energy Park aims to combat air pollution by shifting China towards renewable energy resources, encouraging healthy lifestyles, and raising awareness about health risks associated with air pollution. Approximately the size of NYU Stern’s Gould Plaza, The Beijing Energy Park will be located within Beijing’s Chaoyang Park—the biggest park in Beijing. The Chinese government will
Students … spend an average of eight hours in school every day, exposing ...
preventable respiratory diseases while the plunge in Beijing tourism shows that locals and foreigners avoid this heavily polluted city. SOLUTION: BEIJING’S FIRST ENERGY PARK Such a large-scale social issue is one that affects everyone in China, but there is room for innovation. Economic opportunities abound as the possibilities are largely untapped by the Chinese
take partial ownership of the project since there is no privately owned land in China. The park aims to target younger and older generations because these populations are the most vulnerable to smog-related diseases and, with the most leisure time, the most willing to visit the park. One innovative design component of the Beijing Energy Park will be Vitro, reflective outside glass, used artistically to portray the detrimental environmental issues in China. Before visitors enter this
indoor park, they will see a reflection of the current environmental state of Beijing juxtaposed against the clean air they are about to experience when they enter the park. Vitro technology can also help preserve energy and lower air conditioning usage as this reflective solar control glass allows in the perfect amount of natural light and reflects the rest of incoming solar radiation.7 Another component of the park— its central element—will be its selfsustainable energy source: kinetic energy tiles. The Beijing Energy Park will partner with Pavegen, a company whose tiles generate kinetic energy and data through footfall. Pavegen’s vision for “smarter,
park can implement a rewards program to promote healthy lifestyles, while boosting foot-traffic, and creating more energy for the complex. These tiles can also detect and analyze the flows of foot-traffic during peak times to better maintain the park operations. BUILDING HEALTH AND COMMUNITY The Beijing Energy Park goal is to become an iconic meeting spot for citizens and build a stronger sense of community in Beijing. In China, parks are known to be places where senior citizens can come together and “plaza dance,” bond, and exercise. In addition to the renewable
themselves to unfiltered air when indoors and pollutant-filled air when outside.” more sustainable built environment which empowers and connects people”8 aligns perfectly with the Beijing Energy Park’s mission to foster the Chinese recreation culture and redefine pollution education. Pavegen tiles are also unique because a transmitter is embedded into each tile that can record and transport data to a phone tracker. This opens the door for Beijing Energy Park fitness applications, which have become quite popular. By providing data for visitors who use the Pavegen fitness tracker, the
technology in the park, other factors can be of benefit. The park will have an indoor grass perimeter for citizens to use in all weather conditions, especially when the PM2.5 levels are extreme. There will also be a recreation center inside the park where children can learn about pollutionassociated health risks and how to protect themselves through interactive programs led by volunteers. These interactive educational programs will incentivize volunteers through the distribution of community service hours. Nearby schools
that do not have the resources to install filtration systems or exercise domes can rent out space and host physical education classes during field trips to Beijing Energy Park. The park will also incentivize students to bring in waste to reuse, recycle, and upcycle in exchange for other park benefits. VIABLE PARTNERSHIPS FOR THE PARK Another aspect of the park involves partnerships with local sustainable businesses and corporations who share the same values—namely, those that want to make the world a better, greener place. Companies will be able to pay for a booth in the park to exhibit new technology, or demonstrate products that might interest park visitors. In this case, the park will serve as a medium, connecting social impact businesses with guests who want to, for instance, implement filtration systems in homes, support renewable energy-based products, or make a change in their behavior. The Beijing Energy Park can help foreign companies such as Pavegen, Tesla, Vitro, and Unilever begin or expand their businesses in the Chinese market. In exchange, companies such as these who pay for exhibition booths will help attract more foot traffic to run the park’s energy source. The park will also aim to boost tourism and the economy overall as the pollution crisis has, directly and indirectly, caused an annual 6.5 percent plunge in China’s GDP. 9 This park is not an ordinary park—this park can bring shared value to all stakeholders of the PM2.5 crisis. In exchange for land and funding, the Beijing Energy Park will give partial ownership to the Chinese government— similar to how the Shanghai government owns 57 percent of Shanghai Disneyland.10 Other potential institutional partners include TerraCycle and the Minnesota Mining and Manufacturing Company, now known as 3M. TerraCycle has vast expansion plans for China while 3M already has a strong presence. The N95 Particulate Respirator Masks sold and distributed by 3M have become
ONE STEP TOWARDS A GREENER CHINA: THE BEIJING ENERGY PARK / 63
increasingly popular among citizens who are aware of the ineffectiveness of surgical masks. This particulate mask has proven to be the most affordable and efficient pollution mask on the market as it blocks 95 percent of PM2.5 particles.11 Although the recent weakening of China’s economy has slowed down 3M’s growth, 10 percent of 3M’s 2015 global revenue did come from China.12 In the Beijing Energy Park, 3M can partner with TerraCycle, placing a series of Zero Waste Boxes throughout the park. As listed on TerraCycle’s website, there is already a Zero Waste Box collection program specifically for “safety equipment and protective gear.” 13 Ideally, these Zero Waste Boxes will be placed in the park so citizens can bring in used cotton masks that were initially headed for the garbage bin and exchange them for 3M N95 masks. Through this partnership, TerraCycle will collect surgical masks, cleanse them, and break them down into raw materials, so that 3M can utilize the recycled raw material for new mask production. The new N95 masks will also include the TerraCycle logo in its design so that TerraCycle will benefit from advertisement and publicity. The 3M Company will benefit from decreased raw material cost and increased exposure in the Chinese market. This mask-recycling program will create shared value for the Beijing Energy Park and its partners as visitors who bring in old surgical masks will also boost foot traffic. Although the park’s funding mainly comes from the Chinese government, TerraCycle, and 3M, the Beijing Energy Park hopes to partner with other sustainability-focused companies in the future and attract socially conscious investors who see the social and monetary value of this idea. The park has an exponential revenue model; the longer the park sustains itself, the more people visit the park, and the lower the costs will be. Although the park is open to all, guests are encouraged to donate when they enter and exit the park. The park can also receive
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revenue from sports equipment rentals, recreation center rentals, exhibition booths rental, and by monetizing any surplus of electricity generated through the Pavegen tiles. Although costs will decrease in time, the initial startup cost will be high. Approximately 480 square feet of Pavegen technology costs $400,000 for installation. Vitro Glass technology on four surrounding sides costs approximately $200,000. Exercise equipment and components of the recreation center cost $7,000. Construction of the park and maintenance will be around $100,000 annually. An air filtration system that filters out the PM2.5 particles to ensure the safety of visitors will be $20,000 per year. The park also assumes $10,000 of miscellaneous expenses. With property expenditures related to the Chinese government, the rest adds up to around $740,000. Although the total budget for Beijing Energy Park is high, it does not take into account partial funding from companies such as TerraCycle and 3M. Moreover, with help from the Chinese government and with Pavegen kinetic tiles cutting energy costs, maintenance remains the park’s only variable cost. Because the Beijing Energy Park runs on a selfsustaining business model, the costs to run the park will decrease over time while its utility and social impact will increase exponentially. CONCLUSION Although the concept of the Beijing Energy Park is complex and the start-up cost is high, the utility and practicality of such a park far outweigh the cost. This park will benefit the government, hospitals, schools, corporations, and everyday citizens. It will raise awareness, offer protection, and help shift the dependency on fossil fuels to renewable energy. After receiving funding from the government, TerraCycle, and 3M, the maintenance costs are minimal—especially when compared to the benefits. Risks involving safety measures and management exist
as it is a public park, but the Beijing Energy Park will seek to overcome these risks in later developmental stages. The Beijing Energy Park depends heavily on the commitment and involvement of its stakeholders because so many parties are involved. This collaboration requires that the park management align its social impact incentives with its different partners. In the bigger picture, the Beijing Energy Park serves as a center for innovation, community, recreation, awareness, and environmental protection. This park was designed through a stakeholder-driven model that integrates culture, unique public amenities, educational programs, and renewable technology into a public recreational space that promises revenue and sustainability. With a global vision to reduce greenhouse emissions and to improve public health, China needs to leap into the future of sustainability, and the construction of the Beijing Energy Park would be a step in the right direction. The Beijing Energy Park’s mission is to engage recreation culture and to transform existing pollution culture. Let us hope visitors learn that it is possible to reduce emissions, improve the PM2.5 health crisis, and preserve a sense of community and heritage all at the same time through creating shared value.
“Department of Health.” Fine Particles (PM 2.5) Questions and Answers, New York State, Feb. 2011. <http://www.health.ny.gov/ environmental/indoors/air/pmq_a.htm>. 2 Kuo, Lily. “Six Years of Beijing Air Pollution Summed up in One Scary Chart.” Quartz, Quartz, 10 Apr. 2014. <https://qz.com/197786/sixyears-of-bejing-air-pollution-summed-up-in-one-scary-chart/>. 3 Gardner. “Eye-Stinging Beijing Air Risks Lifelong Harm to Babies.” Bloomberg.com, Bloomberg, 07 Feb. 2013. <https://www.bloomberg. com/news/articles/2013-02-06/eye-stinging-beijing-air-riskslifelong-harm-to-babies>. 4 Levin, Dan. “Study Links Polluted Air in China to 1.6 Million Deaths a Year.” The New York Times, The New York Times, 13 Aug. 2015. <https://www.nytimes.com/2015/08/14/world/asia/study-linkspolluted-air-in-china-to-1-6-million-deaths-a-year.html>. 5 Galbraith, Kate. “Doctors Push Scrutiny for Smog Masks.” The New York Times, The New York Times, 19 Mar. 2014. <https://www. nytimes.com/2014/03/20/business/energy-environment/doctorspush-scrutiny-for-smog-masks.html>. 6 Doane, Seth. “Beijing Pollution Forces Students to Play under Dome.” CBS News, CBS Interactive, 17 July 2013. <https://www.cbsnews. com/news/beijing-pollution-forces-students-to-play-underdome/>. 7 “Heated Glass Comparison.” Vitro Glass Education Center, Vitro Architectural Glass. <http://glassed.vitroglazings.com/glasstopics/
heated_glass.aspx>. “Pavegen – About.” Pavegen - The Next Step, PAVEGEN. <http://www. pavegen.com/about/>. 9 Gustke, Constance. “This Is What’s Choking the Chinese Economy.” CNBC, CNBC, 16 Feb. 2016. <https://www.cnbc.com/2016/02/11/ pollution-crisis-is-choking-the-chinese-economy.html>. 10 Barboza, David, and Brooks Barnes. “How China Won the Keys to Disney’s Magic Kingdom.” The New York Times, The New York Times, 14 June 2016. <https://www.nytimes.com/2016/06/15/ business/international/china-disney.html>. 11 Biswas, Jonaki. “Why 3M N95 Anti-Pollution Face Masks?” PureLiving China. <https://www.purelivingchina.com/2013/02/ why-3m-n95-anti-pollution-face-masks-what-is-the-right-fit-foryou/>. 12 Trefis Team. “What Is 3M’s Plan With Regards To China?” NASDAQ. com, NASDAQ, 01 Apr. 2016. <http://www.nasdaq.com/article/whatis-3ms-plan-with-regards-to-china-cm600649>. 13 “Safety Equipment and Protective Gear Zero Waste Box.” TerraCycle, TerraCycle, 2017. <http://www.terracycle.com/en-US/zero_waste_ boxes/safety-equipment-and-protective-gear>. Photo Credits: Jonathan Kos-Read/Flickr—page 60 Global Panorama/Flickr—page 62 Scott Meltzer/Wikimedia Commons—page 63 8
“Growing up in Beijing, I was able to experience firsthand the dangerous health effects of pollution. I chose pollution as the topic of this paper because it is an environmental issue that is very close to my heart. I knew it would be nearly impossible to come up with a feasible and short-term solution, so I decided to tackle the problem from an innovative standpoint.”
CLASS OF 2020 FINANCE and MARKETING with a co-concentration in SUSTAINABLE BUSINESS ONE STEP TOWARDS A GREENER CHINA: THE BEIJING ENERGY PARK / 65
THE CALL FOR
Amy Dong SENIOR EDITOR
Catherine O’Connor SENIOR EDITOR
Dorit Sosnowik SENIOR EDITOR
Jessica Marion Modi GRADUATE SENIOR EDITOR
Kelly Xie DESIGN EDITOR
Jonny Byrne PHOTOGRAPHY EDITOR
LEFT TO RIGHT: Kelly Xie, Dorit Sosnowik, Professor Jeffrey J. Younger, Jessica M. Modi, Catherine O’ Connor PICTURED LEFT: Amy Dong, Jonny Byrne
66 / ACKNOWLEDGEMENTS
ACKNOWLEDGEMENTS we heartily congratulate the ten student writers published here and extend a warm thank you to all the numerous contributors to this fifth edition of The Call. I thank all for their hard work and dedication. We collected more than 1,000 student essays from Business and Its Publics 2017 (BIP), and all these writers are the ultimate inspiration for this magazine. It is our hope that current and future writers are moved by the high caliber of their prose and the challenging ideas contained in their work. We selected ten winning essays primarily based on compelling content and powerful composition. Evidence of critical thinking, too, was paramount. We looked for specific “calls for corporate action” that were realistic, creative, passionate, and unique. We tried to display a mix of current student thinking within a complementary collection of topics. Finally, to demonstrate the complexity of societal connections, we looked for interesting insights into the interrelations between business, society, and government. This publication was written, assembled, and edited by NYU students - most notably by our editors Amy Dong, Catherine O’Connor, Dorit Sosnowik, and Jessica Marion Modi – with timely editorial help from Greta Li, Jenny Yae, and Kyle Lai; thank you. We also could not have completed this publication without our talented art designer, Kelly Xie, and our skilled graphic artist and photographer, Jonny Byrne. Their work is present on every page, and the dramatic results speak for themselves. Thank you to NYU Stern Undergraduate Dean Geeta Menon for her gracious opening letter and to Professor Batia Wiesenfeld for her introduction to the BIP course. Thank you
also to the dedicated instructors who facilitate the weekly discussions, critical thinking, and writing sessions that make up Business and Its Publics: Inquiry and Discourse. Their instruction is evident within all these essays. NYU Stern’s professional faculty lead the smaller “inquiry” discussions and thanks are due to all: Azish Filabi, Barbara Holt, Batia Wiesenfeld, Bruce Buchanan, Caroll Newell, Casey O’Connor, David Segall, Jeff Carr, Joe Foudy, Larry White, Maria Patterson, Mark Brennan, Matt Statler, Mira Dewji, Rachel Kowal, Shelly London, Sophie Rifkin, and Tara Wadhwa. Discourse instructors lead the critical writing portion of the class, and without their dedication, this publication would not have been possible. While I facilitate much of the discourse curriculum, I collaborate with numerous colleagues who help put the plans into play. Thank you to Alec Applebaum, Aya Tanaka, Brian Hanssen, Bruce Meyerson, Caroll Newell, Claudia Caruana, Ellen Pluta, Jessy Hsieh, Larry Menna, Laura Noren, Matt DeBord, Paul Melton, Rob Lyon, Robert DiYanni, Robert Wosnitzer, Tim Gilman, Tim Glencross, Tim Wood, and Irv Schenkler. Finally, for all their support and guidance, I would like to thank Bruce Buchanan, the C.W. Nichols Professor of Business Ethics and Director of the Business & Society Program; Batia Wiesenfeld, the Andre J.L. Koo Professor of Management and Chair of the Management and Organizations Department; and Professor Susan Stehlik, Chair of Management Communication. Thank you, one and all.
JEFFREY J. YOUNGER Clinical Associate Professor, Management Communication
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This issue of "The Call" includes the best NYU Stern student essays from the 2017 course, Business and Its Publics: Inquiry and Discourse.
Published on Feb 16, 2018
This issue of "The Call" includes the best NYU Stern student essays from the 2017 course, Business and Its Publics: Inquiry and Discourse.