business

Behavioral Economics and Corporate Sustainability

By John Byrd, PhD and Kent Hickman, PhD The likelihood of meaningful legislation supporting a shift towards more sustainable practices by business and individuals seems miniscule. Without government policies or incentives the move to sustainability depends largely on the voluntary actions of companies. Companies choose the types of products they produce–the materials they are made of, their recyclability, their energy consumption, their durability–and how the products are manufactured–production efficiency, working conditions and so on. In theory individuals, through their consumption choices, can send a message to companies about the types of products they want. But if the range of choices doesn't include price competitive green alternatives this message never gets back to corporate decision makers.

Some companies include sustainability in their strategic planning, but the adoption rates appear well below those required to address the most urgent problems related to climate change, biodiversity loss, fisheries depletion and water availability. Abrupt changes in climate and increasingly expensive raw materials and energy threaten the ability of companies to continue to create value for stakeholders. So, why aren’t companies doing more?

We think that behavioral economics provides some insight into this lack of corporate initiative toward sustainability, and also offers some suggestions on how to overcome these impediments. Behavioral economics enriches the neoclassical economic model of rational profit maximization by recognizing that social and psychological factors play a role in decision making. This evolving discipline has uncovered systematic differences between the results predicted by models based on rational agents and what people actually do. This more nuanced view of decision making can be a valuable tool to help managers and policy makers shift organizations and individuals toward sustainability.

Heuristics: People use ‘rules of thumb’ to sort through complex problems. For the most part this is an efficient and effective approach to making decisions. Over time, the rules of thumb, or heuristics, evolve to be efficient and become embedded into the Standard Operating Procedures of organizations, such as simple rules about when to offer a new customer credit.

Some researchers argue that the use of heuristics leads to better decisions than those based on extensive data collection and formal modeling. Dr. Gerd Gigerenzer, the director of the Max Planck Institute for Human Development in Berlin, claims that relying on intuition produces quicker and better decisions because too much information prevents decision makers from focusing on the most important aspects of a problem (1). This is similar to the ‘thin-slicing’ approach to decision making made popular by Malcolm Gladwell in his book Blink (2). There he has a chapter titled, "The Theory of Thin Slices: How a Little Bit of Knowledge Goes a Long Way." But he admits that gut-feelings can lead to poor decisions as well as good ones. In his book he discusses the Warren Harding effect, in which a tall, handsome man is elected President mainly because people intuited that his good looks implied good leadership. This bias persists, as Gladwell documents, with Fortune 500 CEOs being on average nearly 3 inches taller than average American men. Moreover, Gladwell says the greatest likelihood for thin-slicing errors is found among overconfident decision makers, a trait well documented among CEOs.

Heuristics, rules of thumb, and thin slicing work because people have acquired some expertise in recognizing patterns or traits within the decision framework. However, if the external environment changes–resources become scarcer, legislation about climate change occurs, consumers become concerned about the long-term impact of products, the life-cycle impact of a product begins to matter–then existing rules of thumb may not be appropriate. In fact, relying on old rules will almost guarantee that companies are not prepared for shifts to new ways of thinking.

Framing: The behavioral economics literature argues that the outcome of the decision process depends on how a decision is framed or articulated. Much of the conversation about sustainability centers on what companies should do and the extra costs they should bear. Framing sustainability as a cost center creates a natural aversion to examining sustainability initiatives carefully. Decision makers know that there are costs involved.  Therefore, it is easier for them to defer analysis than to promote a costly solution to the problem. Examples of companies that have begun to embrace sustainability show that they have changed the framing of their initiatives. General Electric’s "eco-imagination" was created as a revenue center. Wal-Mart embraces sustainability, and avoids framing their action as costly to the firm by pushing these costs onto its supply chain. Framing can also impact the acceptance of sustainable products, helping to create market driven demand for progress. For example, studies of consumer behavior have found that green products sell better when advertising focuses on the product’s benefits to individuals rather than their benefits for the overall environment (3).

Status Quo Bias and Groupthink: Behavioral economists have found that decision makers exhibit a bias toward established regimes or ways of doing things. Significant or disruptive change only occurs if there are strong reasons to change. Reinforcing this bias is the structure of corporate boards and management teams. Corporate directors and high-level executives tend to have very similar backgrounds and worldviews (c.f., 4 5). For example, Chhaochharia and Grinstein (6) show that the vast majority–well over 60 percent–of directors of US companies are employed in industry. If those categorized as being in financial fields or retired are added to this group the proportion approaches 80 percent. O’Hagan and M. Rice (7), looking at companies in the northeastern US, find that high-level managers have a long personal history in the region, which may limit their ability to respond or adapt to new circumstances. This can lead to a ‘groupthink’ mentality in which there is a reluctance to pursue alternatives, especially alternatives that vary from the established perspective. Robert Shiller, an economist at Yale, explained how groupthink played a role in the US housing crisis that contributed to the current recession (8).

Groupthink is related to herd behavior. Herd behavior is common in business and has implications for the adoption of sustainability activities. In essence, people can hide in herds. If a decision is similar to those made in other companies (i.e., acting like the herd) then poor decisions are justified as conforming to what everyone else was doing. An unusual initiative (i.e., different than the herd) that fails risks being blamed on an individual’s incompetence leading to potentially serious repercussions. The herd mentality is strong. In 1997 John Browne, then Group CEO of British Petroleum, gave a speech at Stanford University acknowledging the potential seriousness of climate change. BP was the first major corporation, other than reinsurance companies, to take a position on reducing greenhouse gas emissions. This anti-herd behavior was so surprising, especially from an oil company, that his speech has been hailed as ‘groundbreaking,’ and became the subject of several academic articles (c.f., 9, 10, 11).

Loss aversion: The concept of risk aversion that underlies much of economics says that people assign a larger value to a loss than they assign a benefit of an equivalent size. This lop-sided valuation effect produces the risk aversion that explains the existence of the insurance industry. Conversely, behavioral economists have found that risk aversion is largely limited to uncertainty at a given level of positive wealth changes, and in cases of negative wealth changes, individuals may systematically turn to risk-seeking behavior (12). Thus, if environmentalists pose a picture of dire hopelessness, the average citizen and consumer may opt for increased consumption with less attention to its environmental consequence. The effect is aptly portrayed in the well-known Gary Larson cartoon depicting two fishermen in a boat with a mushroom cloud in the background…one fisherman says to the other, "I'll tell you what this means, Norm.  No size restrictions and screw the limit!"

How To Overcome Behavior Impediments

We have argued that several aspects of behavioral economics create impediments for companies to become more sustainable. The shift to sustainability asks companies to think and operate differently, but psychological and organizational bias slow this process.  What can employees, shareholders and consumers do to overcome these impediments?

Within The Firm

Employees and sustainability advocates need to frame sustainable initiatives in both a positive and a personal light. Avoid doomsday forecasts as the motivation for action. An advocate can make the business case for sustainable initiative by explaining why they are profitable opportunities or will reduce risk. Value is created by increasing revenue and/or by reducing risk. By enabling the firm or organization to avoid shocks that negatively affect its cost structure or the integrity and authenticity of its brand name, sustainability helps create durable and profitable organizations. Moreover, individual motivation is likely greatest when benefits are seen as having a personal impact. It is critical, therefore, to link benefits first to the individual and family, next to the firm or organization, and finally to society and the environment in general.

Employees and sustainability advocates need to learn the skills of being effective change agents. An employee who wants to implement green changes in an organization needs a well-stocked toolkit. First, they need to be knowledgeable about the particular sustainability issues they want to advocate.  This could be technical knowledge about a process, product or material that can be improved, or more general information about broader programs like re-cycling or flexible scheduling. They also need to develop communication skills so they can quickly and clearly explain the benefits of adopting the changes. They need to be politically aware of how changes occur in their company, and generous about sharing credit. Finally, they need to be willing to persevere: change rarely happens on the first try.

Outside The Firm

Shareholders have a role to play in moving companies toward more sustainable practices.  They can use their proxy power to elect a more diverse board. The first step might be to raise the issue of more diversity among director nominees. Groups such as Catalyst.org actively push for board diversity, so following that group’s activities would be a good starting place for modeling diversity advocacy. The SEC (US Securities and Exchange Commission) has been modifying rules regarding director nominations (13).  The new rules allow investors or groups of shareholders who have owned three percent of a company for at least three years to include a director candidate(s) on proxy statements for shareholder vote. The ownership threshold is substantial, but it is a first step toward more shareholder democracy.

A second route that shareholders have to changing companies is through shareholder proposals. The ownership threshold to submit a proposal is about $2,000 (or alternatively 1% of the company’s stock) held for at least a year. Proposals that satisfy the SEC’s requirements are included in company proxy statements and voted on at annual meetings.  These proposals make it very clear to directors what shareholders are concerned about.  While votes on shareholder proposals are non-binding (the board can ignore even a majority vote) they do have an effect. Byrd and Cooperman (14) found that in response to shareholder proposals about climate change reporting, about 20 percent of the companies took action despite the non-binding nature of the vote. Often, companies facing a shareholder proposal negotiate with the initiator to find an acceptable solution and have the proposal withdrawn. Byrd and Cooperman also found that over 50 percent of withdrawn proposals resulted in the companies taking action regarding the proposal topic within two years.

Just as internal change agents need to make the business case for sustainability, shareholder proposals must show how the company benefits from making the proposed change. Shareholders must also be willing to negotiate and withdraw a potentially embarrassing proposal, if it helps a company become more sustainable.

Conclusion

Behavioral economics offers important insights into why companies may be reluctant to embrace sustainability. Advocates for corporate sustainability, both within and outside of the corporation, may be more successful if they recognize the behavioral bias decision makers have, and recast their efforts to reduce the effect of those behavioral habits.

References

1. Worstall, T. (2011, December 26) Why Rules of Thumb, Intuition, Gut Feelings, Work in Business Decisions. Forbes. Retrieved March 27, 2012 from http://www.forbes.com/sites/timworstall/2011/12/26/why-rules-of-thumb-intuition-gut-feelings-work-in-business-decisions/

2. Gladwell, M. (2005). Blink: the power of thinking without thinking. Boston: Little, Brown, 2005.

3. Okada, E. & Mais E. (2010) Framing the "Green" alternative for environmentally conscious consumers. Sustainability Accounting, Management & Policy Journal, Vol. 1 (2), 222 – 234.

4. Davis, G., Yoo M. & Baker W. (2003) The Small World of the American Corporate Elite, 1982-2001. Strategic Organization, Vol. 1 (3), 301-326.

5. Nguyen, B. (forthcoming) Does the Rolodex Matter? Corporate Elite's Small World & the Effectiveness of Boards of Directors, Management Science.

6. Chhaochharia, V., & Grinstein Y. (2007) The Changing Structure of US Corporate Boards: 1997-2003. Corporate Governance: An International Review, Vol. 15, (6), 1215-1223.

7. O’Hagan, S., & Rice, M. (forthcoming) The Geography of Corporate Directors: Personal Backgrounds, Firm & Regional Success, The Professional Geographer. DOI:10.1080/00330124.2011.614567

8. Shiller, R. (2008, November 2) Economic View: Challenging the Crowd in Whispers, Not Shouts. The New York Times,  (Page BU5).

9. Lowe, E., & Harris, R. (1998) Taking Climate Change Seriously: British Petroleum’s Business Strategy. Corporate Environmental Strategy, Vol. 5 (2), 22-31.

10. Rowlands, I. (2000) Beauty & the beast? BP’s & Exxon’s positions on global climate change. Environment & Planning C: Government & Policy, Vol. 18 (3), 339 – 354.

11. van den Hove, S., Le Menestrel M. & de Bettignies, H.-C. (2011) The oil industry & climate change: strategies & ethical dilemmas. Climate Policy, Vol. 2, (1), 3-18.

12. Kahneman, D., & Tversky, A. (1979) Prospect Theory: An Analysis of Decision under Risk. Econometrica, Vol. 47 (2), 263-291.

13. US SEC (2011, Septemebr 15) Facilitating Shareholder Director Nominations. 17 CFR PARTS 200, 232, 240 & 249 [Release Nos. 33-9259; 34-65343; IC-29788; File No. S7-10-09]

14. Byrd, J., & Cooperman B. (2011) Do Shareholder Proposals Affect Corporate Climate Change Reporting and Policies? University of Colorado Denver working paper.

Contributor Biographies

John Byrd is Senior Instructor in the Finance and Managing for Sustainability MBA programs at the University of Colorado at Denver.  He has been involved in population, environmental and sustainability issues since attending the UN Conference on Population and Development in Cairo, Egypt, in 1994.  His teaches courses in corporate governance and business and climate change. He is on the board of The dZi Foundation, which does development work in rural Nepal. With his family, he lives in Durango, Colorado.

Kent Hickman is Professor of Finance at Gonzaga University, where he initiated the school's first course in sustainable business.   Dr Hickman has published in the area of behavioral economics in Journal of Economic Behavior an Organization.  He and Dr. Byrd have co=authored a textbook in Corporate Finance, and they team-teach sustainable business courses at the Rouen Business School, in Rouen, France.

Manufacturing: The Key to Sustainable Business Innovation in the U.S.

By Daniel Riley and Jacob Park When President Barack Obama gave his State of the Union Address (1) last month, he made the case that U.S. economic revival is tied to a healthy manufacturing sector. Of course, he is not the first to triumph the importance of manufacturing to the economy. The key question, however, is what type of manufacturing the U.S. should have in the future. The answer, for the economy and for sustainable business innovation, may lie in advanced 3D printing technologies (2) or what some technology analysts refer to as, "additive manufacturing whereby machines based on advances in electronics and laser technology build complex materials from granules of plastics or metal" (3).

While not usually touted as a traditional sustainable technology, additive manufacturing processes can dramatically reduce the amount of waste created in the production of items from furniture to packaging. As compared to traditional manufacturing technologies, 3D printing technologies have relatively small capital requirements. MakerBot Industries (4), for instance, sells 3D kits designed for hobbyists for around $1,000.

According to the UN Environmental Program, the typical car wastes about 10,000 kg of raw materials during production (5). For example much of the bulk of a fender, because of uniform thickness requirements of typical manufacturing processes like welding and molding, is completely unnecessary. To Jim Kor of KOR EcoLogic who wanted to create the most efficient car possible, that unnecessary material increased drag and decreased fuel economy. "If you look at a cross section of a bird bone, you'll see that there is bone only where the bird needs strength," Kor explained. "The bone looks like chaotic webbing. [3D printing] is the only process that can replicate a bird bone." This logic led to the creation of the Urbee, the world’s first 3D printed car (6).

Like stacking bricks to build a house, 3D printing creates objects in layers, from the base up, without the limiting constraints of molding requirements or human error in welding. The result maximizes material usage, ensuring that no material needlessly goes from welder’s torch to junkyard. Even in smaller 3D printing projects, material use efficiency is an automatic consideration. The small scale of production typical of most 3D printing efforts means that, unlike with large-run manufacturing the cost of wasted material does not have to be ameliorated through economies of scale.

Shapeways, a company that allows customers to design custom products like furniture and household objects that might be hard to replace otherwise, actively encourages customers to save money by using less material (7). By prompting their customers to actively think about the materials that go into the production of their products, 3D-printing businesses like Shapeways foster consumer awareness of cost and material wastes involved production. This transparency is increasingly relevant as consumers demand that products be not only cost competitive (obviously an important factor in our current economic times) but also designed and produced with environmental sustainability in mind (8).

In addition, the U.S. is still dominated by the business model of making as many products as cheaply as possible, which often means outsourcing the actual manufacturing.A truly innovative feature of the additive manufacturing model is that it brings the possibility of scale to the emerging "hyperlocal" trend that can be seen from Northern California to Vermont. There are many emerging sustainable business enterprises that attempt to build on the growing consumer interest in all things local (e.g. food, energy, economic development, etc) and additive manufacturing provides a market template from which to scale a local business model to greater competitive advantage.

Case in point: what if a small community-oriented bookstore like Northshire Bookstore in Manchester, Vermont, had a machine that allowed consumers to print books that were in the Public Domain (i.e. do not have copyright protection)? All you would have to do is search and find the book of your choice and, if it were in the Public Domain, order the number of copies you want at a fraction of the cost of going through traditional book retailers. Through what Northshire Bookstore refers to as "print on demand technology"(10), this small but innovative business can now more effectively compete with large e-retailers like Amazon.com and chain book retailers like Barnes & Noble.

The argument that the future of the US economy lies in sustainable business has been made before, and additive manufacturing cannot substitute for well-designed tax and other policy incentives for green energy technologies. Rather, there is a strong case for building a well-articulated U.S. additive manufacturing strategy to complement current green technology research and development efforts, such as solar and wind energy. This could have a major impact on the entire American business system By using 3D printing technologies to promote local production and advances in material sustainability, U.S. manufacturing has a real opportunity to be reborn as a hub of 21st century sustainable business innovation (11).

As Cory Doctorow, author of Makers, suggests in an influential 2010 Wired magazine article (12): "The days of companies with names like ‘General Electric’ and ‘General Mills’ and ‘General Motors’ are over. The money on the table is like krill: a billion little entrepreneurial opportunities that can be discovered and exploited by smart, creative people."

References

(1) President Barack Obama State of the Union Address (January 24, 2012)

http://www.nytimes.com/interactive/2012/01/24/us/politics/state-of-the-union-2012-video-transcript.html

(2) "The Fundamentals of 3D Printing," The Future of Open Fabrication, n.d., http://www.openfabrication.org/?page_id=29

(3) March. P. (2011) "Production Processes: A Lightbulb Moment", Financial Times, December 29, p. 5.

(4) http://www.makerbot.com/

(5)  "Waste and car production - Maps and Graphics at UNEP/GRID-Arendal," Maps & Graphics, n.d., http://maps.grida.no/go/graphic/waste_and_car_production

(6) "URBEE car - 3D Printed Body," Resources: Case Studies, n.d., http://www.stratasys.com/Resources/Case-Studies/Automotive-FDM-Technology-Case-Studies/Urbee.aspx

(7) "Shapeways | creating hollow objects," Creating Hollow Objects, n.d., http://www.shapeways.com/tutorials/creating-hollow-objects

(8) OgilvyEarth research is one important source http://www.ogilvyearth.com/thought-leadership/latest-research

(9) Alexa Clay and Jon Carnfield, "5 Big Ideas for a New Economy", Co.Exist Blog http://www.fastcoexist.com/1679221/5-big-ideas-for-a-new-economy

(10) http://www.northshire.com/books_on_demand.php

(11) 3-D printer is featured in Fortune Magazine’s "Brave New Work: The Office of Tomorrow" photo essay (pg. 49-55) in its January 16, 2012 "The Future Issue"

http://money.cnn.com/magazines/fortune/fortune_archive/2012/01/16/toc.html

(12) http://www.wired.com/magazine/2010/01/ff_newrevolution/all/1

Contributor Biographies

Daniel Riley (email: rileyd@greenmtn.edu) is a senior studying Environmental Management at Green Mountain College. After graduation he plans to start a business using 3D printing as a way to solve current environmental issues of resource use and material efficiency.

Jacob Park (email:parkj@greenmtn.edu), Associate Professor of Business Strategy and Sustainability at Green Mountain College, specializes in the business of social and environmental innovation and entrepreneurship in emerging economies.

Building Businesses through Cleaner Cooking Fuels in Ghana

by Edward Burgess, Research Editor for The Sustainability Review For this interview, we spoke with Dr. Mark Henderson, Director of the Global Resolve project at Arizona State University. We discussed some of his latest research efforts in Ghana, Africa where he and his colleagues are working with local villages to design technologies and businesses that could improve the health and well-being of the local people and their environment.

The Sustainability Review: Dr. Henderson, you direct the Global Resolve program at Arizona State University. Can you tell us about it?

Dr. Mark Henderson: The purpose of Global Resolve is to help start sustainable economic development projects in the developing world. The way our process works is that we first visit communities in the developing world to conduct interviews and really immerse ourselves there. We want to find out what the community needs and help solve the actual problems they face, usually through the development of some technology. Ultimately, we also want to convert that technology into a business venture for the community. The hope is that the community could benefit from these ventures in several ways. First, they could get employment. Second, it could solve a problem they face. Third, they could sell the products and get income. And finally, they could be a role model for other communities and spread the business.

TSR: What projects are you currently working on?smoky cooking fuel pull-quote

MH: The two latest examples we have are the "gel fuel" and the "twig light" projects. I’ll talk about gel fuel first. In a nutshell, this idea grew out of a UN development project to use ethanol as a smokeless cooking fuel and reduce the incidence of respiratory disease by replacing wood and charcoal. The main problem with liquid ethanol is that if it spills it can spread a fire throughout the whole house. In order to make it safer and a better product, we gel it—or make it like a jelly. Have you heard of Sterno?

TSR: You mean the little cans for keeping food warm?

MH: Yes it’s similar to those but using ethanol instead of methanol. Part of the reason we want to provide a new fuel source is that smoky cooking fuel is a leading cause of death among children worldwide. If we can remove the smoke from the fuel then hopefully we can save some lives. And perhaps we can also create some businesses around producing the fuel. Right now, many villages create charcoal fuel to sell by pruning branches from trees and smoldering them. But it’s very smoky and it’s also deforesting the jungle, so it’s not a sustainable solution.

The gel fuel actually is a sustainable solution if we can use biomass that can be converted to ethanol. Corn is one example that is used in the U.S., but you can also use sugarcane and many other plants. And if we can make the process of converting cellulose more affordable then we can use any cellulosic plant—maybe grass or bamboo, which grows very fast, like a weed. Using cellulose removes the competition between food and fuel.

TSR: So the technology is not quite there yet for cellulosic ethanol?

MH: You can do it, but it’s expensive because of the special enzymes needed. We’ve just concentrated on using starchy and sugary biomass like sugarcane or corn.

TSR: In terms of sustainable harvesting, are there implications for land use if this takes off?

MH: Sure, those are definitely issues we need to consider. And there are also issues to consider for social sustainability, too. If you start creating this gel fuel, you might create unintended consequences that disturb the cultural activities in the community, and we want to avoid that. For example, women often spend several hours a day gathering wood. If we try to implement gel fuel, we have now taken that social time away from the women. That time spent gathering wood is like their "coffee klatch." Interfering with this social time would be an unintended consequence of the technology and may be a bad thing.

TSR: Are there any other unintended problems with the gel fuel technology?

MH: Another problem is that if you remove smoke from houses, the incidence of malaria increases. The smoke drives away the mosquitoes that transmit the disease and they come back if you take it away. So how do we balance this? Just think—in the U.S., how do we drive away mosquitoes from your patio?

TSR: (laughing) Well, we build a whole screen around it!

MH: Yes we do! But what else might we do?

TSR: Well, maybe we could use one of those scented candles.

MH: Right, maybe we could add something like Citronella in the gel fuel. Right now, we’re not sure if that would be toxic since the fuel is used for cooking. I always assumed it was safe, but those are things we need to find out when we think about how to minimize the disruption in the community.efficient stove pull-quote

In addition to simply producing the fuel, we have to make sure it’s an affordable solution. Nobody is going to buy it if it’s more expensive than what they already have. Right now, harvesting wood is free, which is a hard price to beat. So instead we want to see if the village could actually sell the gel fuel to the nearest larger city where people have to pay for wood and charcoal. We’re trying to arrive at economic parity with those other fuels. There is a stove being built in South Africa that is about 15% efficient, but that wasn’t quite good enough, and the gel fuel was too expensive. To help bring the price of the fuel down, we designed and built a stove that’s more than twice as efficient as the existing South African stoves. Brad Rogers, another professor in Global Resolve was in charge of this. He’s the one who really understands the thermodynamics of the gel fuel process.

TSR: Do you have any trips planned for the near future?

MH: We’re going to the village of Domeabra in Ghana in a few weeks with the new stove design. Our plan is to find out if we can produce the stoves there. We’re also going to try to ratchet up the production of gel fuel in the village and hopefully help them start a business. We are bringing a great team including myself Brad, John Takamura in design and Dan O’Neill in technological entrepreneurship and eight students and two teaching assistants. We also have five MBA students from Thunderbird School of Global Management who are staying longer to help develop a business plan.

TSR: So are they connecting the villagers with the market in the city?

MH: Yes, eventually. Right now, we’re supplying fuel to a school that we’ve partnered with in Kumasi, Ghana. The School Director works with other schools in the area, so if we can start with her, I think the village could start using the schools to create a larger business that would be successful.

TSR: How did you get started on this type of research?

MH: Well the first step was deciding to do it. I’m an engineering faculty, and so is Brad, and we had another faculty member in Global Studies (David Jacobson) and another in Business (Rajiv Sinha). We all had coffee at Starbucks one day in 2005 and asked ourselves how we could match our interests together.  We soon realized we’d all been having similar ideas about helping sustainable development in the "base of the pyramid" countries. Once we realized we’d been thinking the same thing, we began to build upon that to create a program that would not only help the countries but could also bring in other faculty and students.

TSR: Were there any breakthroughs in technology that helped Global Resolve projects?

MH: Yes—a year ago a grad student at our Polytech campus developed the concept for the "twig light" that I mentioned earlier. It’s a device that generates electricity from heat without a battery. You don’t need the sun either. All you need is heat. In many places, a household might be cooking with charcoal as the sun is going down, and there’s a need for a light source. With the twig light, all you need to do is put a few hot coals in the top, put the bottom in water as a cooling source and in the middle there is a "thermoelectric generator." It produces enough voltage to power LED lights or a cell phone. This is different from solar devices, which can be quite expensive and which have a battery that wears out. And of course, you can’t recharge a solar device at night.

TSR: What’s the reception to having visitors? Is there any negative reaction along the lines of: "Who are these Americans that think they know all the answers to our problems?"

MH: Well, the truth is that we honestly don’t know the answers to their problems. Only they know what they need, so they help us come up with solutions, and we offer what we can by trying to help out. We enter the community as learners. It’s very important to make that distinction because we don’t have the answers, and they truly are the experts in their lives and needs.

One exercise we’ve used in the past to help convey this notion is Rural Village Appraisal, which includes a collaboration exercise to have the community help us draw a map of their village. We might use charcoal or colored paper or sometimes just twigs and leaves to have them show us where the chief’s house is, where the toilets are, the church or mosques, the water sources, the rivers, roads, etc. Through this exercise they show us something about themselves and their needs. We show that we’re there to learn, and hopefully we can become trusted partners. That’s the key—to have trust on both sides. But in general the community members are welcoming and excited about the possibilities of improving their lives.

TSR: What are the biggest challenges the projects face now?

MH: Right now, our big challenge is starting the businesses. The way people in Ghana do business is not necessarily the way we do it. Even after testing out the solutions, we still have to really see how business practices work and see if there is a way to help. Often, it can be very difficult for someone in Ghana to start a business. If someone there is living on a dollar a day, on the brink of starvation, they don’t have time to spend 24/7 starting a new business. We have to help the communities understand how to create a business at a low risk. There are ways to do that: one option is micro-finance through groups like Grameen Bank.

Also, we can’t just go and then come back and ignore the project. There has to be continued partnership with the community. We have set up a partnership with the Center for Energy the Environment and Sustainable Development (CEESD) in Ghana. It’s run by two faculty members at Kumasi Polytechnic University who did graduate fellowships with Global Resolve. It’s a great partnership because we need local partners for this to work and they can receive some funding from Global Resolve.

TSR: Where do you think this might be in five to ten years?

MH: There are so many problems in the developing world. In the past, there has been over a trillion dollars put forth to solve these problems, mostly through government aid and philanthropy. But what you often find is that this results in a lot of abandoned technology. Maybe a tractor was donated, but it stopped working, and there was no plan or funding set aside for maintenance. People have no choice but to just leave it to rust in the jungle. It could be a result of how the aid is administered. Sometimes the way aid filters down through the governments to the people doesn’t address what people need. It may never actually "trickle down" if there is corruption.

There are a few books I use to illustrate the problem to students. One is Jeffrey Sachs’ The End of Poverty, which suggests a top-down aid approach. Another is Creating a World Without Poverty by Mohammed Yunus, the founder of Grameen Bank. He supports a more bottom-up approach through micro-loans. There is also William Easterly’s White Man’s Burden, which advocates for more village-level interaction, which is primarily what we try to follow. It’s slower because you’re dealing with one community at a time, but if it’s successful, the solutions should propagate out and spread. Additionally, we’re more certain the aid gets to the people who need it. And if we’re smart, we can sit back and listen to the community's needs directly, not force our solutions onto someone else. If we get this gel fuel business off and running, we hope there would be other gel fuel businesses popping up around it.

TSR: How has your thinking about sustainability problems shifted through the course of this research?

MH: For a long time, I thought sustainability meant only environmental sustainability. But now we talk about other aspects like cultural and social sustainability. And economic sustainability—it can’t be a flash in the pan that has big success and then dies. It has to grow rationally and reasonably over a period time. We also want to have sustainability in other areas like education—giving people the opportunity to educate themselves about the business, the technology, the supply chain and so on.

TSR: So you’re really talking about building capacity here.

MH: That’s right—we’re trying to build capacity in the villages. And sometimes building capacity means doing something like providing clean water. The community won’t be able to produce gel fuel, for example, if they are primarily worried about their health. To help bring up the capacity of the village we just had donations from Desert Cross Lutheran Church in Tempe provide about 700 water filters and by holding a benefit concert to collect funds to bring electricity to the village. Sometimes, you have to provide some basic needs before people can start to think about building a business.

TSR: Are there any important skills that are helpful this type of work?

MH: We love diversity. We can’t do this with just engineering or business or sustainability students. We need English majors, film and video, nursing, global health, you name it! Anthropology is especially important since we do a lot of ethnographic work. There are no prerequisites.

TSR: Are there any memorable stories to share from one of your trips to Ghana?

MH: Probably the most memorable time was the first trip I took to Ghana. I went by myself to a small village of 500, called Fawomanye. It was somewhat intimidating since it was my first visit to Africa. When I got there, the villagers held a meeting under the large fig tree near the chief’s house.  When I talked to the chief, it was actually through a "linguist" who then communicated to the chief. I started simply by saying, "I am here from Arizona State and Global Resolve." I told the village that I was there to understand their problems and hopefully provide solutions. They said, "We need two things: clean water and lights at night. We don’t want to have to go to bed when the sun goes down. We want a social life like the rest of the world. And we want our kids to be able to do homework at night." It was an extraordinary experience just being able to connect immediately like that without going through a government or university; we just went straight to the village. That experience helped guide the approach we take now.

Contributor Information:

Mark Henderson is a professor of Engineering at Arizona State University at the Polytechnic campus. He founded the ASU Global Engineering Design Team and also is co-founder of GlobalResolve (http://globalresolve.asu.edu). His research has led to over 60 papers and a textbook in computer-aided design and global engineering.