Photo credit: Reid Yalom
Social Enterprise in the Himalayan Kingdom of Bhutan: Mountain Hazelnuts
BY PAKSY PLACKIS-CHENG
Daniel Spitzer spent three years in the Himalayan Mountains with Tibetan refugees and revered Tibetan masters. He left the mountains for the world of high finance, but the mountains never left him.
In 1993, Spitzer co-founded Plantation Timber Products (PTP), which he built into the leading manufacturer and distributor of sustainable wood products in China. PTP engaged 700,000 Chinese subsistence farmers in growing trees, generating a profit of $45 million annually. In 2004, PTP was sold, becoming one of the first major international investments in China to complete the full cycle from greenfield development to successful investment return. This confirmed Spitzer’s vision of for-profit social entrepreneurship.
Spitzer’s wife, Teresa Law, previously held senior roles for J.P. Morgan and Citibank across Asia and the United States. Together, they are realizing a second social enterprise. This time the setting is the Himalayan Kingdom of Bhutan, and the project is Mountain Hazelnuts.
Hazelnuts bring Happiness
As we were meeting in Mill Valley, California, in August 2014, Turkey, the world’s top hazelnut producer, was experiencing one of its worst harvests in years, causing a spike in hazelnut prices. According to Business Insider, the price of a kilo of hazelnuts has reached $5, compared to $2.75 in 2013. This poor harvest made headlines in Europe. Having grown up in Holland, I know hazelnuts bring happiness. Hazelnut spreads such as Nutella®, hazelnut butter, paste for cake, praline, and chocolate truffles are hugely popular. The hazelnut is the second most important tree nut in total value behind the almond. Worldbulletin reported that during the last 10 months, Turkey earned $1.69 billion exporting 221,731 tons of hazelnuts.
Mountain Hazelnuts is committed to growing 10 million hazelnut trees in Bhutan. The company is charged to be a significant commercial producer in a few years. Between 10,000 to 15,000 farm households and monasteries will be involved in the planting program, approximately 15 percent of Bhutan’s population. Currently, Mountain Hazelnuts employs over 500 people, and engages 6,000 farm households. An additional 1,200 Bhutanese earn their incomes from the company’s activities.
Even though the financial return on the initial investment is a few years out, Mountain Hazelnuts is achieving two out of the three bottom line objectives—the social and environmental returns are clear.
The company is providing farmers with higher incomes, training local employees, reducing internal migration, and empowering women. Teresa Law said, “About half of our employees are female—many of the households are headed by women. Bhutan is more gender neutral than many countries in the world. The country encourages women’s participation in government and in policy. Her Majesty the Queen is very active. The head of the anti-corruption committee is a woman.”
Coached by experienced agriculture scientists, the Bhutanese farmers grow hazelnuts on mountain slopes, while continuing to grow their traditional crops in their fields. The program also provides practical experience for Stanford University students, who get an insider’s look at a social venture.
Then there are the environmental benefits—carbon sequestration and erosion control by growing trees on degraded hillsides. Additionally, the company is investing in renewable fuel sources.
Mountain Hazelnuts is a true private social enterprise—a venture that achieves its social and environmental mission using solid business practices. The company collaborates with the Royal Government of Bhutan, Non-Governmental Organizations (NGOs), the private sector, and universities. Daniel Spitzer explains how they make cross-sector collaboration work, “We think of our business as a platform working with communities and individuals.”
Similar to any community in the world, there are issues with health, nutrition, water, education, and banking.
Spitzer continues, “Because we engage with almost everybody in the communities, we have some perspective on these different kinds of issues. Fortunately, as a platform we can bring in or collaborate with government, NGOs, or individuals who have the ability to provide benefits. Actually, it becomes incredibly organic. When you are living with people on a day-to-day basis, you end up seeing what the issues are. We are trying to be an integrated part of the community.”
Teresa Law brought in her experience as former Chair of AIDS Relief for China (ARFC) and thus Mountain Hazelnuts became the first private company to provide voluntary testing for STDs and HIV in Bhutan. Other community interests became part of Mountain Hazelnuts’ activities. Law told me, “We have a wonderful employee dance troupe. For religious festivals, we will give them time off and provide transportation for them to go perform. In Bhutan, there are Tshechus held in different communities, which are multi-day festivals. In our area, it had not been held for five years due to lack of interest and resources. Last year, 5,000 people attended. Much of the support came from us and from our employees; and so, with 5,000 people attending, it became a great source of pride for the community.”
Law and Spitzer have seen many projects in the social and environmental realm. However, there are very few successful true triple bottom line ventures. In a podcast for Stanford Social Innovation Review, Spitzer comments that social ventures are hard-core, sometimes more difficult than traditional businesses.
Support for Social Enterprises
One of the unexpected challenges has been attracting investors. Spitzer states, “We have a great group of investors, however it is surprising that there isn’t more financial support for enterprises that are really trying to hit all three objectives—good for people, planet, and profits. Potential supporters have an easier time donating money than investing in a social enterprise.” Spitzer added, “How could there not be people beating a path to our door because even if we are 50-percent successful, that’s already so terrific?”
Spitzer continues, “It is a large and ambitious business that could not achieve the kinds of economies of scope and scale, unless you do it all at once.” Unfortunately, Mountain Hazelnuts found that there is not much risk capital available for social enterprises. Spitzer adds, “At the end of the day, very few asset managers are willing to compromise on their percentage of income in order to try to achieve good.”
Business and Philanthropy
Mountain Hazelnuts’ end goals are clear and lofty. According to Spitzer, “We and our shareholders have committed to give 20-percent of the business’ profits. We expect this will amount to many tens of millions of dollars. There will be a trust, which we will administer together with His Excellency the Prime Minister and the Minister of Agriculture and Forests. The mission is to preserve this agriculture culture. Frankly, Mountain Hazelnuts have to be very much focused on performance. We’re combining best business practices with social impact ideas.”
How does the couple think people could make a difference? Law says, “It’s not always a matter of money. I think it’s often using your skills. We’re not wealthy—we didn’t start up a foundation just to give money away. We started a business to do a lot of things that we’re interested in because that’s our skill set.”
An Expression Of Love
Spitzer tells me that, “Fundamentally, what we did is an expression of love and working with our hearts on many levels. Taking risk with capital is in some ways easier than taking a risk with your emotions. What makes us stay up very, very, very late talking with people and making sure they understand our mission and how they could fit in the organization, is an expression of emotional and personal commitment.”
In the meantime, Mountain Hazelnuts is busy preparing for commercial-grade production. A bountiful hazelnut harvest will not only benefit the Bhutanese farmers, the company, and its investors. Parents around the world are in need of hazelnuts to keep their children happy!
For more information: mountainhazelnuts.com
The interview is part of Impact X.