013 No Ordinary Business with Rainforest Alliance

The Highlights

·       Environmental and social aspects are interdependent. Rainforest Alliance’s mission is to conserve biodiversity and ensure sustainable livelihoods through transforming land-use practices, business practices, and consumer behaviour.

·       Most, if not all, nonprofits should probably be considering mergers as part of their strategy.  [The Rainforest Alliance and UTZ merger] is playing out in terms of greater efficiency and is streamlining more interest in creating deeper and more ambitious partnerships from key partners who were previously working with each separately.  

·       The greatest threat to all of us is climate change. The science is so strong now we have to transform the global economy in the next decade or so to have a reasonable chance of avoiding catastrophic impacts of climate change.

·       There are far more companies out there that have not made [zero deforestation and responsible production] commitments than those that have. There is still a tremendous amount of work that needs to be done including through advocacy and some of that should be hard-hitting advocacy. That’s extremely important and historically been the most effective way to generate commitments and action. 

·       Each organisation has to find its way through financial sustainability and growth, and there are many different ways of doing that, many different combinations of streams of earned and raised income to do that.

* * *

Gina: Today’s guest on No Ordinary Business is a globally recognised authority on forest, ecology, climate change and development. Nigel Sizer holds Bachelor’s, Master’s and Doctoral degrees in Natural Sciences and Tropical Forest Ecology from the University of Cambridge. He’s lived and worked in Brazil, Africa and spent ten years in Indonesia. Nigel is currently based in New York and recently completed a two year term as President of Rainforest Alliance where he helped lead the successful merger with the Dutch based nonprofit UTZ.  Following the merger, Nigel has shifted to his current role as Chief Programme Officer of Rainforest Alliance

Nigel, welcome to No Ordinary Business!

Nigel: Thanks very much Gina, great to be here.

Gina: Would you share a little bit about your own story and how you got to where you are today?

Nigel: I’d love to. I grew up in England, in the southeast of England which is ecologically quite devastated part of the world in some ways. From an early age, I had a strong interest in the natural world and had the opportunities to travel across Africa when I was in my teens. That really opened up my eyes to what a complex and interesting world we live in and how challenging issues are in other parts of the world. Basically from there, I knew that I would develop a career in helping to address the social and environmental issues, particularly in the tropical regions, which I fell in love with. So I studied at Cambridge and during my vacations, kept going back to Africa, I ended up going to Brazil to do my PhD field work, and have continued to be very engaged with the tropical world ever since.

Gina: My understanding is that Rainforest Alliance is focused heavily on increasing sustainability across the commodity sectors and that your mission is to conserve biodiversity and ensure sustainable livelihoods through transforming land use practices, business practices and consumer behaviour. That’s a pretty broad ambition for a conservation group. Would you share a little bit about how you’re targeting that mission?

Nigel: We’re pretty unusual as far as environmental and social organisations go and part of the reason I came to work here is that we see the environmental and social aspects as completely and inexplicably interdependent upon each other. As you heard in the mission statement you just read out, we view achieving social and environmental objectives as equally important. The other organisations I’ve worked for have elevated one or the other, mostly environmental issues. 

So yes, it’s a broad mission but within that, we tend to focus on key commodities sectors that are linked with very serious social environmental challenges including coco, coffee, palm oil, forest products, tea, bananas and tropical fruits and we focus on some key countries. Through our certification programme, we’re active more or less globally but our heavier investments on the ground and landscapes and communities where we have to go beyond the supply chains to wider landscapes and jurisdictions tend to be focused in about eight or nine countries around the world. 

I think what we really bring to this is a very deep experience and understanding of the needs along the entire supply chain of those communities. Starting with the farmers themselves and we’re currently working with millions of farmers around the world and understanding what they need and how we can drive incentives to support their behavioural change and working right through their supply chains to some of the world’s largest retailers including companies like Tesco and Walmart. 

Gina: Would you illustrate how you’re supporting these different stakeholders starting from the smallholder farmer up to the large retailers?

Nigel: Starting with the production side, we work with small, medium and large producers. So for example, last week I was visiting with tea farmers in Kenya, in the uplands of Kenya, around Mt. Kenya. In that country, we work with a partnership with the Kenya Tea Development Agency, which is a huge cooperative of small holders. 600,000 tea farmers are in that cooperative and they are just about all Rainforest Alliance certified producing some of the highest quality tea in the world and also complying broadly with our comprehensive sustainability standards. Over many years, we’ve worked with that organisation and with its members to provide training and support. And by becoming certified, they have better access to market and they receive a premium for their tea from the major companies that they’re supplying including companies like Unilever and Tata Global Beverages, two of the largest tea buyers in the world. 

Another example would be Chiquita Corporation, the largest banana company in the world. We’ve worked with them over a 20 year period to help their plantations transition to compliance with our agricultural sustainability standard. A very long journey but very successful. 

And then if you move up to supply chain from the producers, you’ve got the trading companies. We’re working with them to help them with issues like traceability and chain of custody through to the consumer goods companies like Unilever, Mars Corporation, and Nestle who are of course manufacturing consuming goods with these commodities. Working with them, again, on traceability and addressing risk on their supply chains, advising them on how to address some of those risks and through our certification programme, helping them with assurance that what they’re buying meets a certain standard of production including dealing with some particularly tricky issues like deforestation and child labour, chemicals usage, and so on. 

We have quite a significant global communications team who work with retailers and directly through social media and other media to communicate with millions of consumers who use products that are Rainforest Alliance certified or coming from areas where we’re working each day. We work with players all along that supply chain or value chain to help them achieve the changes that they would like to see. 

Gina: When Rainforest Alliance was initially established, I do believe it was about 30 years ago, was the intention at that time to create a certification system?

Nigel: That emerged fairly soon after the organisation was created. We celebrated our 30th anniversary last year. And within a few years of its establishment, while still very small, Rainforest Alliance set up one of the first, maybe the first system to certify sustainable forest product particularly sustainable wood products. Working with producers in Latin America, in particular, Central America who were supplying wood products into the U.S. market primarily. We setup a programme called Smart Wood, which in turn helped to inspire the founding members to then establish another global certification me called the Forest Stewardship Council, FSC, which many people would have heard of, it’s now the largest forest products certification programme in the world. So we were involved from the beginning and continued to support the FSC’s programme and Rainforest Alliance became one of the largest certifiers within the FSC programme. 

Subsequently, 10 or 15 years after that, we then helped to setup and run an agricultural product certification programme and an organisation called the Sustainable Agriculture Network and a standard that’s now called The Rainforest Alliance Sustainable Agriculture Standard. In parallel with that, UTZ whom we merged with, a Dutch based NGO, they also set up a standard and have their own programme going back about 15 years, in their case starting with coffee. We brought those two organisations together at the beginning of this year and we’re now in the process of learning from that combined nearly 50 years of experience running agriculture certification programmes to create a new system in which we hope and expect to be far better than either of the current systems. That new programme will be launched in a couple of years’ time.

Gina: How are you navigating the complexities that come with bringing together two different cultures, systems, and operations? 

Nigel: It’s an extraordinary process and those of us who led the two organisations and now lead the new Rainforest Alliance. Neither side have never done anything like this before and most nonprofit leaders who we know have never done anything like this before. We received a lot of great support and advice from some consultants with experience, which is key to navigate the process. It is a complex process but it’s very doable. You just have to work through that complexity step by step and there are pretty well established ways and approaches to doing that. Broadly speaking, the transition has gone very smoothly. The post-merger in particular, once all the negotiation and legal work was done and signed off, we could really get on with becoming one organisation. We see many benefits already come from this change.

Gina: Seeing as we don’t have many examples of mergers across the nonprofit world, what indications or opportunities would you recommend nonprofits look out for to identify whether a merger with another organisation would be appropriate or conducive to furthering the mission?

Nigel: That’s a great question. To start off, I would propose that most, if not all, nonprofits should probably be considering mergers as part of their strategy. I think every nonprofit leader, anyone managing a nonprofit is aware of other nonprofits who have a very similar or wholly overlapping mission with their own. And where that’s the case, especially if there’s some sense of competition, which there often is or it’s often a friendly and collegiate competition that then demonstrates there could be potential to come together rather than continue to compete with each other. So I would start by looking at the missions of the organisations and where they’re overlapping.

I think a lot of it then comes down to personalities. The personalities of the leaders of the organisations and the leaders of their boards and how open they are to considering merging with other organisations and putting, being prepared to put aside at least some of their own identity as organisations, some of their own egos as leaders, and sit down and explore what a merger might bring. 

In our case, when I sat down with the head of UTZ, within a couple of hours, we could both see the benefits of a potential full merger and integration of our two organisations, but we had no idea how we would do it. We agreed that we should explore how it could be done and see whether our leadership teams and boards might like to consider this as a possibility. It took 18 months to go through the process, so it’s a very substantial undertaking, but we’re already seeing very good dividends from the merger already within the first six months.

Gina: How are you seeing the benefits unfolding?

Nigel: It is playing out in terms of greater efficiency, streamlining more interest in creating deeper and more ambitious partnerships from key partners who were working with each of us separately before.  They are now viewing us perhaps more seriously because we’re larger and they are impressed and intrigued with what we’ve done and where this is going so they see us as a more innovative player in this space and therefore one that’s worth spending more time developing partnership with. We have nearly a universally positive reaction to the merger from our partners, donors, stakeholders and staff.

Gina: For those nonprofits that may not necessarily identify merger opportunities, what are your thoughts on seeking out opportunities for collaboration with other players? 

Nigel: All the nonprofits I interact with certainly talk about and welcome partnership and collaboration.   We as an organisation depend upon that for our effectiveness even though we’re now medium to large in scale. There’s no issue that we’re working on where we don’t need to work in partnership with other organisations to be effective. Some organisations are much better and much more effective as partners than other organisations, here at Rainforest Alliance, we’re endeavouring to position ourselves to be a partner of choice for many other organisations and to structure ourselves and work in a way that ensures that’s the case, and we walk the talk on that. 

I’ve worked with several other nonprofits, they’ve all been very involved in partnerships but to varying degrees have been able to put aside their own institutional egos to enable that to flourish.  I think they will continue to evolve in that way as well. We’re aiming to go above and beyond here and are very committed. I’m convinced that that will set us up for great success.

Gina: Would you illustrate some of the challenges that Rainforest Alliance has faced over its lifespan and how you’ve overcome or working to overcome or mitigate some of these challenges?

Nigel: Let’s caveat that by saying I’ve only been here for less than 10% of that history so others would have a deeper understanding than I do. There were longstanding challenges that we continue to struggle with so, fundamentally perhaps and as many now say, the greatest threat to all of us is climate change. We continue to struggle to generate sufficient political leadership whether it’s in the companies that we’re partnering with, the governments we work with, wider society, awareness and understanding of that issue to translate into the very necessary actions needed to address that. The science on that issue is so strong now we have to transform the global economy in the next decade or so to have a reasonable chance of avoiding catastrophic impacts of climate change. That’s the scientific consensus, it’s a pretty sobering situation and yet it feels like we’re still far away from doing that so far away from even having a reasonable chance addressing that change. 

We can say similar things about biodiversity laws and other things on the social side, which of course we’re very active on as well. We see some tremendous progress in the basic addressing of extreme poverty around the world, with China particularly leading the way on that with extraordinary statistics there, hundreds of millions of people lifted out of extreme poverty. But we also see continuing and in some cases, expanding issues around slave labour in supply chains and child labour linked with products that we are all using and consuming every day or every week such as palm oil or cocoa, coffee. 

Very significant challenges remain and part of our response to that here, of course apart from just generally trying to continue to grow the organisation and continuously hone our focus and strategy to be as effective as possible is facilitating an increased awareness. That is the importance of advocacy. In our new strategy post-merger, one of the more dramatic changes is to create and invest in a team specifically working on advocacy globally and supporting advocacy in key countries with our local teams around the world. That is a change for us. We’ve had a very active communications programme going back decades, but we’re now going to select some very significant and tough issues to work on advocacy and potentially become more outspoken about these issues.

Gina: How you foresee balancing your role as a consultant helping companies either achieve certification or improve their practices with the advocacy component that could potentially put Rainforest Alliance in conflict with the companies that you’re working with?  We’ve seen challenges in navigating this balance before for instance between Greenpeace and Asia Pulp & Paper. 

Nigel: We have served as paid advisors to Asia Pulp & Paper and some of their competitors specifically and continued to do some of that work, so we play quite a different role there from Greenpeace. But on that specific case, that’s a great example, which is why I pick it up to illustrate how we deal with this. We maintain a very good relationship with Greenpeace and value their contribution and input investigating what’s happening on the ground and being very open about that with companies and with the public generating pressure for change with their work, that’s extremely important. I would strongly encourage others to be supporting that work as we do. Our role is complementary to that. 

As companies recognise that they need to change such as leaders on sustainability like Unilever or Nestle, Mars, and others, many of them went through what they call their ‘Greenpeace moments’ historically. A lot of that’s now forgotten by many of the people working on these issues, but in some cases, you’d have to go back 10 – 15 – 20 years or more, but many of them came reluctantly to addressing these issues. When they do recognise the need to act, then we want to be able to help them to do that. So in the case of a company like Asia Pulp & Paper, that has used our audit expertise and other technical expertise to look inside their operations with their blessing, and confidentially we have provided them with information about what needs to change. Hopefully, that has helped them accelerate those processes of change within the company and its suppliers.

With our certification work, it’s a slightly different process, similar sets of skills but providing a public report and output to that process that helps the companies to gauge how well they’re doing and helps their suppliers and customers know how well what they’re doing. If we are in a situation where through our ongoing work, we feel that a company is not really aligned with our mission, is not serious about the work, first we would engage with them around those concerns, and if that continue to be the case we would stop working with them. We’re very clear about only wanting to work with companies who have seriously committed to making those changes.

Gina: You don’t feel that your advocacy mandate could be potentially compromised because of the partnerships with the corporate sector?

Nigel: Certainly not compromised by it, no, because we’re not going to adjust our message based on anything that companies might be telling us or funding, to be very clear about that. How we go about advocating and engaging all these issues to be most effective in achieving change, that has certainly influenced and informed by our deep understanding of how these companies work and operate and hopefully, that helps us to be more effective as advocates. 

An example of how we’re doing that is with something called the Accountability and Framework Initiative. We have convened and now jointly oversee a process globally with NGOs including Greenpeace, WWF, The Nature Conservancy, Forest People’s Programme, National Wildlife Federation, and several others that has created a new accountability framework for companies across all sectors around deforestation, tree commitments, and human rights commitments in their supply chains, particularly in relation to land rights and labour rights. We are helping to run that process, we’ve raised the money to support that process, and we’ll be standing behind the framework and guidelines that emerge from that together with Greenpeace and others going forward. So we’re very committed to being very public about what needs to be done to address these issues.

Gina: What do you think is required to get more private sector partnerships with yourselves or other conservation groups? Do you think it’s just a matter of time for more corporations to follow the leaders that you mention or are more efforts needed to entice and attract companies to make commitments and to implement those commitments?

Nigel: That’s a great question. There are far more companies out there that have not made commitments than that have made commitments. Hundreds have made wonderful commitments, and we’re now helping them to implement those commitments in various ways. 

Thousands of companies across the world have not made commitments. Fortunately in some sectors, although it’s thousands of companies, they account for a minority of the volume of a particular commodity, but it’s still very substantial and what I would call sort of the tier 2 companies in some of these sectors. But the small and medium-sized companies, for example in palm oil in Indonesia who are supplying the top 5 – 10 global players in that sector, those small to medium sized companies who are still in the hundreds of millions of dollars per year in terms of the scale of their business so sizable companies. Many of them have not made commitments, many of them are actively working against the commitments that have been made. So, there is still a tremendous amount of work that needs to be done. 

A good portion of that work is going continue to be through advocacy, and some of that should be very hard hitting advocacy that we’re used to from groups like Greenpeace and Rainforest Action Network, Friends of the Earth, and the local affiliates and similar organisations locally in those countries. That’s extremely important and historically been the most effective way to generate commitments and action. 

Regulation by government is also key. What’s happening on the market side, in Europe, North America, Japan, or Australia and so on is very important. China is increasingly flexing its muscles in this regard and being helpful as well. Tidying up the regulations on the market side sends a very strong signal. 

On the production side, we’ve seen very significant steps from Brazil over the last 10 – 15 years, which led to dramatic declines in deforestation in Brazil, although it has picked up again recently. Indonesia has also seen a decline in deforestation over the last couple of years, hopefully, that will stick. Also linked partly with tightening resolve by the Indonesian government to address what was rampant illegal forest clearing including in very sensitive peat land areas and so on. Working with governments and supporting governments as they tighten that regulation is very important. 

In our case, we also work with the end consumers, so the ultimate buyers of these products. Millions of people around the world see and read our communications on these issues, and as part of our new strategy, we’re working to strengthen that because ultimately, companies do listen to their customers but they don’t hear enough from those customers. And when they do, they pay attention, so that’s another key piece of this that we’re redoubling our efforts on. It’s a very tricky area because it’s quite hard to reach millions of consumers in a cost-effective way.

Gina: What role do you see civil society playing to facilitate informed consumer choices so that people are getting the information that they need to make more responsible decisions?

Nigel: It’s tricky to try to change the awareness and attitudes of individual consumers. They are bombarded with so much information every day on things that companies want us to buy, on political choices, the news, advertising generally, and so on. Breaking through all of that with information about sustainable buying choices and options is extremely difficult. 

For us, our success has been more around working with companies who are in turn communicating with those consumers. An area where there’s a lot of potential for more work is through more partnership with major retailers. We have, for example, partnerships with Tesco and Little in Europe, two of the largest retailers in Europe, with Walmart here in the U.S. and with some retailers in emerging economies in Mexico and Brazil as well. We’ve done some work with them helping them to communicate with integrity with people coming into their stores and visiting their websites about some of the choices that they can be making. I think there’s potential to do a lot more of that. 

There’s maybe greatest potential in the online space with some of those companies and potentially with companies like Amazon who can more actively provide consumers with a choice when they’re buying a product. If you shop for groceries on Amazon, you can already see, for example, options to select more sustainable choices or for certain labels and screen out certain products. It’s just beginning. We’re in early conversations with them and others about this opportunity. 

Really the leverage or the scaling to reach hundreds of millions of customers comes more through working with companies who aren’t communicating to their customers about those choices and helping educate their customers about the decisions that they can make as is currently done about food health. This is driven in part by regulation around food and labour and labelling of fat and sugar and salt content for instance. Ultimately, consumers are rather overwhelmed and confused by all of this, and we need to be careful not to make that worse. 

That comes back to our merger. Fundamentally, this is the first major merger, maybe the first significant merger really at all between two major sustainability labels or eco-labels as they sometimes call it so this is a big deal for the sector. We are greatly simplifying the potential for customers and companies to choose which label they want to support. 

Gina:  What are your views on advocacy at the investor level?  Institutional investors are looking to sustainability issues when curating their portfolios from a risk mitigation perspective. I wonder if we are fully utilising or empowering the institutional investors them to exercise their influence through shareholder proxy to help encourage corporations to move in the right direction?

Nigel: I agree with the premise behind your question, Gina. A lot is going on there and much more needs to be done. We have elevated that in our new strategy broadly, engagement with the financial investment world is now more exclusive part of our strategy going forward. We’re in the process of figuring out what that means in practice for us and getting some good advice on that, but absolutely, it’s a significant area. We see growing interests there. There’s more and more money going into socially responsible investment funds, more and more specialised funds and more screening programmes emerging. These options enable investors to make that choice without having to do all the research and legwork themselves. The datasets that drive that are getting stronger and better. Global Forest Watch Finance is an example of that. Global Forest Watch Pro from World Resources Institute is helping generate some of the more systematic datasets that are needed to support those kinds of screening programmes. We’re very committed to being very active in that space and supporting that as we learn more about it.

Gina: I want to switch gears for a minute and talk about your process of achieving sustainability as an organisation. You have a revenue-generating model that’s diverse. You are a registered charity and solicit donations, but also, through your certification fees and consulting services, you generate revenue from these sources. One of the challenges that we find in the nonprofit world is donation dependency. Would you elaborate on the evolution of your revenue model and your thoughts on nonprofits following a similar course, obviously adopted to their expertise areas?

Nigel: As you imply, each organisation has to find its way through financial sustainability and growth, and there are many different ways of doing that, many different combinations of streams of earned and raised income to do that. 

The old Rainforest Alliance was primarily supported by donations then as the certification work evolved, when I took over here nearly three years ago, about a fifth or a quarter of our revenue was earned through certification services and related work. That did not generate a surplus though, for most years, that was just covering the cost of doing that work itself, it did cover those costs. Some units were subsidised by raised revenue as well. 

With our merger, the numbers changed significantly because, for UTZ, about 90% of their revenue was earned through certification services, mostly through royalties through use of their seal on products in the cocoa and coffee sectors. They had some raised revenue, a handful of grants, one being very large one from the Dutch government. When we merged, this led to a lot of discussion about what we want this to look like going forward. What we agreed is to try to maintain a balance, so roughly 50 – 50. 

Our total budget for this year and next is between roughly 60 – 65 million US dollars and roughly half of that is earned from work, mainly related to certification and use of seal and royalties and fees associated with that and about half we raised from foundations, bilaterals and other development agencies, individuals and events, board members, and so on. So we aim to keep that balance and feel that that’s a pretty healthy balance to have. 

There’s a good synergy between each of those. The companies who are paying fees and also in some cases providing some additional revenue to us through grants, grant funding and contracts, they like the fact that we’re raising other money that helps to leverage what they’re providing, helps cover the overall expenses of the organisation. Our more traditionalised, semi-traditional donors, the foundations and bilaterals and so on, they like the fact that we get leverage from the private sector. They’ve seen the fact that we earn money from the private sector as being proof of the relevance of what we’re doing. Businesses wouldn’t pay for products or services unless they have real value and generated some return to them and some impact. I’ve seen increasing demand from the companies to demonstrate that impact, so they are investing more in the measurement and monitoring. 

Other organisations need to figure out how to do this, and for some, all of one and none of the other or some combination may make sense. In the U.S., fortunately, there’s a very vibrant and lively philanthropic community. Many organisations, some of them far larger than ours support themselves entirely by donations and do very well by that. That’s extremely admirable and a model that can work very well, so I wouldn’t advocate one way or the other but the way we do it, we find works quite well.

Gina: I would argue that there are advantages to diversifying revenue sources not only from a risk management perspective but also in terms of preserving the autonomy of the organisation because donations tend not to be unrestricted. I think that the indirect consequence of that is that donors drive programme and strategies, and the infrastructure of the organisation suffers as a result of a tendency to want to maximise donated dollars towards programming rather than supporting the organisation as a whole. 

Nigel: I agree with your observations on the funding mix. The resilience is very important. The counter balance to that is you don’t want to be over-diversified either because you want to get really good at certain types of fund raising or revenue generation so getting the right balance is key. 

Gina: What opportunities, that you have not mentioned yet do you feel that we should be focusing to drive sustainability forward?

Nigel: A key area that we haven’t talked about specifically is to also be investing in helping organisations operating in those regions generally underserved by civil society, development agenencies and foundations become stronger. Thanks to a Dutch government grant called the Sector Partnerships Programme which we’re trying to expand with other donors, we’re able to provide several million dollars a year in grants to local and in some cases, global organisations in the places where we work. 

A lot of those grants are for core support, they’re not restricted to specific projects and activities. They are designed to help organisations become stronger in their own right, to be more effective as advocates locally on the key issues that we care about, to grow and strengthen, and nurture other organisations in their wide ecosystem. 

I think that’s a very important area for any medium to large nonprofit to be systematically looking at and working on. Helping others who are less well placed in terms of being able to raise resources, helping them to become stronger and more effective as organisations. Investing in the wider civil society around us to help further the mission.

Gina: That’s great Nigel. I want to thank you very much for your time today; I always enjoy speaking with you. I wish you and Rainforest Alliance continued success!

If readers want to reach out to you, what is the best way to connect?

Nigel: Thank you.  Our website is www.rainforestalliance.org and lists our social media and email contact details.