8. Regenerative business as a driver for landscape restoration
The degradation industry has brought us a lot but is now a severe threat to human wellbeing, the global economy, trade, and society. New business models have to move beyond certification and Environmental Impact Assessments. A business should not only work on reducing its negative impacts, you should also move towards no net loss strategies, eventually creating positive impact. This positive impact means restoration of primary economic assets—ecosystem services—as a result of well-functioning ecosystems.
Moreover, business cases that take a more holistic 4 Returns approach toward setting up their business can actually move from ‘doing less harm’ to ‘doing more good’ and regenerate the very ecosystem it is operating in. In order for restoration of degraded lands around the world to accelerate, we need the power of business to transform toward more regenerative business cases and business models. Business cases may be based on regenerative agriculture, agroforestry, real estate, tourism, carbon and water services, and other value drivers.
What is a 4 Returns business?
Sustainable business cases are a core part of the work of Commonland and its partners. Since 2014, we have been enabling the restoration of four large-scale degraded landscapes globally based on sustainable business cases. At Commonland we see two flavours of business opportunities:
- Business case for regenerative farming -> reduce costs/increase outputs/increase profits on-farm
- Creating (new) value-adding business models and other types of business activities that catalyze/support landscape restoration.
This document focuses on the second flavour. It brings together the lessons learned from the businesses that have been developed and promoted through the work of our core partners in the landscapes. Every business is different, and this section is not a business development course. It will, however, give a brief overview of the main elements that bind 4 Returns businesses together.
We recently organised a ‘Mountain Trail’ learning journey with our partners to harvest lessons learned on regenerative business development. Listen to the public event in which these lessons were shared here:
What defines a 4 Returns business?
What makes a business a ‘4 Returns business’, and where does it differ from a ‘regular’ business? The 4 Returns framework is foremost a landscape perspective. This involves taking into account what the key challenges and opportunities are in the landscape and creating value through a landscape partnership. Next to that, some specific features that are found in a 4 Returns business can be identified.
- Social entrepreneurship is not ‘added’ onto the business, it is really engrained in the business philosophy. A 4 Returns business is actively looking how they can use their revenues to create more social value/impact locally.
- Financial returns are not necessarily the primary goal for a 4 Returns business. The main priority of the business should be to create maximum long-term value for its stakeholders. However, the business needs to make economic sense.
- A landscape perspective. A 4 Returns business does not only consider its own business in isolation, but in the full system of a landscape (socio-economic and ecological)
- As a result of this landscape thinking, a 4 Returns business has a more collaborative mindset rather than a competitive, closed mindset. An important question asked here is ‘how can we together with other organisations create even more impact/value for the local community?’
- Farmers commit to a journey to make their farms more and more regenerative. For example, they can receive the premium price from the start, as long as they make steps each year to become more regenerative. This is different from ‘organic’ certification (on purpose) where you have to invest before you are audited and receive the certificate and the premium. Transparency, trust and an open relationship with the customers (which can replace the need for certification).
I live and breathe 4 Returns
Can a business deliver all 4 returns at once?
This is a complicated question in which the experiences and views differ slightly. For example, the Australian 4 Returns company Wide Open Agriculture have struggled to keep focus while trying to deliver on all 4 Returns and realised that they cannot achieve all 4 Returns by themselves. They are now part of a growing network of partners in the Western Australian Wheatbelt which all bring their own focus towards achieving some of the returns, while sharing a vision for the landscape. On the other hand, sometimes focusing on one return can help achieve the others. For example, Wilder Land works with a social workplace which has financial benefits and a substantial return of social capital.
However, it is clear that no one business can achieve the 4 Returns in isolation. A 4 Returns business will always need to be part of a landscape partnership or collaborative effort which has a common vision for the landscape. A business can contribute to this vision, but it cannot realise it alone. So, while a 4 Returns business can certainly contribute to all 4 Returns, it will help the viability and resilience of the business to enter a landscape partnership.
I learn a lot from Wilder Land, because they really take it step by step
Examples of 4 Returns businesses
Since 2014, Commonland and our landscape partners have been involved in business development in the landscapes, either by setting them up from scratch or by supporting existing businesses. Each of them has had many successes, failures, and lessons learned. Be inspired by their stories and let’s keep sharing our stories to help each other grow.
- Baviaanskloof DevCo
- La Almendrehesa
- AlVelAl Foods
- La Sabina Milenaria
- Wide Open Agriculture
- Dirty Clean Food
- Noongar Land Enterprise Group
- Wilder Land
- Boeren van Amstel
How to develop a 4 Returns business?
It is almost impossible to capture the full range of activities needed, as we would have to describe the entire process of business development, which is a field in itself. This section is not meant to explain how to go about business development. Rather, it describes those elements that are unique to a 4 Returns business, as well as the lessons learned from our partners that have set up 4 Returns businesses.
Key steps for setting up a 4 Returns business
The steps listed here should not be seen as a recipe, rather, they can be seen as an inspiration for the steps you could follow. The process is different for each business, and also the order of the steps can differ.
- Map the current ecosystem of business activities in the region. Starting something new from scratch is very difficult and has a much higher chance to fail than adapting something that’s already there. Instead, if you can find existing companies willing to change or collaborate, you already have existing knowledge and structures to work with.
- Identify the main challenges and impacts of the existing businesses in the landscape. In a landscape, often farmers are a very important stakeholder, so business challenges are often in purchasing/sourcing of inputs for farms, processing and/or marketing of produce.
- Develop a business idea which could solve such a challenge and reverse the negative impact. Almost always, there are opportunities somewhere in the value chain to develop solutions through business activities. Interesting developments to look into are also more direct sales (shorter value chains) of products and payment for ecosystem services. It’s often better to not start a new business case, but to improve an existing one. For example, in the Baviaanskloof, Living Lands and Grounded faced many challenges with the new aromatics crops. It may have been easier to build on what was already done in the area: sustainable grazing. Similarly, in the Wheatbelt, WOA’s new business of vegetables in shade houses did not work so well, while working with farmers in their existing activities (focus on supply chain and creating more value add for the farmers) worked much better. Useful design and workshop tools for this step could be the innovation test and prototype toolkit or the business model innovation grid.
- Validating the idea. This consists of 4 steps: validating the problem, validating the market (with thorough market analysis and trend mapping), validating the product, and validating the willingness to pay. You can find help on these steps in the Lean Validation Playbook. When your idea involves regenerative agriculture or landscape restoration, this article in SER (Society for Ecological Restoration) News can be a useful resource to show the validity of investing in ecosystem restoration.
- Bring the business idea to a business model by considering all key business elements. A useful tool for this is the Business model canvas. There are several business model canvases that you can use. First, there is the classic business model canvas, which is well-known and widespread. A more holistic canvas is the triple-layered business model canvas by Joyce & Paquin (2016). Finally, Commonland has developed a 4 Returns Landscape Business Model Canvas which expanded from those models to specifically serve business models that have a landscape approach and wish to deliver 4 Returns.
The 4 Returns business model canvas helps to think from a landscape perspective while bringing a business idea to a business model
- From your filled in business model canvas, identify which skills and resources are still missing in your business (see skills section below).
- Find key partners to work with. Because this is part of the 4 Returns approach, because we want to positively impact the whole landscape, and because the company is going to be part of a system/chain.
- Map and stay aware of the business cases of your partners (farmers, processors, investors). How can you continually be of value to them?
- Get started! Start small and create good quality while making the business work, then scale up. After establishment, actually making the business work (before the infamous ‘scale up’ phase) is often the most difficult phase of all.
- Storytelling and marketing. The regenerative story is a powerful one which many consumers will feel connected to. Tell the story of your specific brand. Don’t oversell; rather, be honest and also share the struggle. Consumers will appreciate that.
In many of these steps, from problem discovery to strategy to business model validation, the innovation tools by the Board of Innovation may be useful.
Don’t set up a new business, improve an existing one!
Key lessons to keep in mind
- Don’t’ go too big too fast. Start small and create good quality, then scale up.
- Stay flexible: prototyping and adapting to the circumstances.
- Don’t set up a new business, improve an existing one. Business development in an existing product chain offers opportunities for a staged approach, while learning and adapting.
Skills needed in the team
There is a lot of key person risk involved in business development – ‘95% of due diligence of investor is directed at team, 5% at the plan’. A crucial step in setting up the business is developing the team, as no one person can cover all the skills. Local ownership and core expertise is crucial.
Below you’ll find a list of skill mentioned by our interviewees to be particularly important in 4 Returns business development. Of course, this is not an exhaustive list, but it might nevertheless provide some focus.
- An entrepreneurial mindset: you need to be willing to take risks.
- Technical expertise on the product.
- Local knowledge: someone who understands the local context really well and can connect with the farmers and other stakeholders
- Market knowledge: someone who understands the market dynamics of the product nationally and internationally
- Financial planning/management: in agriculture, cash management is very important
- Writing Pitch decks
Challenges for 4 Returns businesses
Setting up a 4 Returns business is not easy. You’ll be a pioneer, doing things differently than ‘classic’ businesses. You’ll face challenges that cannot be seen before starting. Most of these challenges will be unique for each business. A beautiful open-hearted account of the challenges that Grounded faced in the Baviaanskloof can be found in this 3-part blog series.
However, it can be useful to learn about challenges that existing 4 Returns businesses have faced before you, so that we can learn from each other and not make the same mistakes twice. Here, some of these challenges are listed.
- Making the cooperative really collaborative. Many cooperatives are just a business where farmers are a member, but there is no real co-ownership.
- Balancing the economic pressures from investors, customers, and farmers.
- Getting a loan to purchase the bulk harvest. In some businesses, such as almonds, the harvest happens all at once, and it has to be sold over the whole year.
- To store the harvest well until you sell it.
- Because of the impact you’re trying to create there are some trade-offs compared to other businesses, you have to invest more time to set up your plans in a sustainable way and monitor your effects. At the same time there are many pros, such as softer loans, premium prices, ecosystem of partners you can rely on et cetera.
- Doing something new takes more time and you fail more often.
- While 4 Returns can be the driving force of the business, 4 Returns is not known by consumers and neither is it a certification. This makes it harder to tell as an advertorial story towards consumers. Whether we want to strengthen this 4 Returns ‘marketing’ story towards consumers is a question we still need to tackle as a network.
The landscape perspective
An identifying feature of a 4 Returns business is that it has a landscape perspective. It’s focus is not only on its own value chain, but on all stakeholders in the landscape. This broad perspective can be achieved by partnering up with other organisations and businesses in the landscape. In Business for Sustainable Landscapes by the Landscapes for People, Food and Nature initiative, you’ll learn more about the status quo and opportunities for business participation in landscape partnerships.
In this chapter, we’ll describe the different possible governance structures of businesses and other actors in a landscape.
Governance structures in a landscape
Each landscape has different intervention models and partners. Therefore, also the roles are different in every landscape. Roles and relationships between the different organisations also often evolve and change overtime. Commonland as well as some of our landscape partners are also still finding out which role fits us best. However, some general roles can be identified in each landscape:
- An entrepreneur (Grounded, Almendrehesa, Habitat, Wilder Land, etc.) develops the business. Commonland call this a ‘business partner’
- A non-profit partner (Living Lands e.g.) can facilitate that in a great way with activities that are necessary but don’t fit in the business model. Commonland calls this a ‘landscape partner’.
- Commonland offers technical and financial support in start-up phase and connects with investors and market parties. Commonland acts as a facilitator between the entrepreneur and the non-profit partner, challenging and supporting both. The network and promotion by Commonland of these local initiatives can enable the local initiatives to find funding or other partners. The knowledge exchange within the network which Commonland provides is also valued a lot. Commonland’s role is different with each business; sometimes very active, sometimes in the background (they only use the 4 Returns model and/or Commonland primarily plays a role as funder/financier).
Examples from the core landscapes
So, there is no ‘ideal’ situation for a landscape partnership and the role of business, and also no recipe to follow. However, it is still useful to see the different examples in the different landscapes, because they show the different possibilities. Below these different situations in each of Commonland’s core landscapes is described.
In the Langkloof-Baviaanskloof, South Africa, entrepreneur Grounded developed businesses like the Baviaanskloof DevCo (entrepreneur) and the Langkloof Honeybush Company (entrepreneur). Non-profit partner Living Lands facilitates that in a great way with activities that are necessary but do not fit in the business model. Commonland supports both Grounded and Living Lands with funding, a network, and knowledge exchange. Commonland is also shareholder in the Baviaanskloof Development Company.
In the Altiplano Estepario, Spain, the intervention model is also bottom-up. The concept of entrepreneur Almendrehesa (almonds from integrated production ecosystem) is the start/inspiration. On that foundation different business models like Habitat (entrepreneur, olive oil)are being developed. The businesses buy produce from farmer members for a premium on the condition that they farm regeneratively. The non-profit partner AlVelAl provides technical support to those farmers on how to farm regeneratively. Businesses focus on processing and marketing the products. Almendrehesa created a market and is now able to attract funding from external investors.
Almendrehesa started as a limited company which makes it unattractive in the Spanish context for new farmers (especially the larger ones) to join. So they are going to change it to a cooperative structure. Habitat was founded as a cooperative. AlVelAl is an associación, which is similar to a ‘vereniging’ in Dutch law.
In the Western Peat Meadows in the Netherlands, non-profit partner Wij.land is operating as entrepreneur or directly supporting the entrepreneur. Wij.land supports business development and explores funding modalities such as loans and warranties. They do this in different ways. First, they support pilots of farmers on soil & cuttings, herb rich grassland, ditch sides et cetera. Second, they support start-ups through small grants (e.g. for Soil Love, Wilder Land, MOMA) or provide (co) funding (for Wilder Land and Boeren van Amstel). Finally, sometimes they are a collaborator, such as with Grutto, by thinking along about regenerative measures on the farms of their suppliers. Commonland supports Wij.land and channels funding for business cases through Wij.land (e.g. so that Wij.land can provide a loan to Wilder Land or a guarantee to Boeren van Amstel).
In the Western Australian Wheatbelt, there have been quite some developments in the landscape roles. It started with two entrepreneurs who launched a 4 Returns regenerative agriculture company Wide Open Agriculture (WOA) to create jobs in a depopulated area. They publically listed on the Australian stock exchange in 2018. From WOA, food brand Dirty Clean Food emerged. Over time, WOA realised that they had taken on too much responsibility by aiming to provide all 4 Returns in the landscape by themselves, and they started working more in partnerships with other organisations. Commonland also updated their ambition: not only generating 4 Returns through a for-profit entity, but rather through an ecosystem of partners made up of educational institutes, local NGOs, regenerative (farming) networks, Aboriginal companies and WOA.
To conclude, every landscape is different, so for a business it’s important to understand the landscape and all its stakeholders well. Also, the role of Commonland and our core partners is different in every landscape and some important questions are still open. For example, Commonland is (sometimes) closely involved in the start-up phase, but we are not the entrepreneur. Is there a role for our landscape partners such as Wij.land to act as entrepreneur, is that helpful if there are entrepreneurs present in the landscape, or new ones are about to embark? Also, Commonland does not participate through equity finance (anymore) and provides loans without interest, so there is no earning model for Commonland in the landscape anymore. Is an earning model for landscape partners like AlVelAl wished for? Or is creating a financial driver for landscape restoration sufficient? Each organisation will need to find out which role they can best play in the landscape partnership, which is definitely a learning journey.