The Call for Corporate Action: NYU Stern Student Voices, Vol. 9, Spring 2022

EDITED BY

PROFESSOR JEFFREY J. YOUNGER, HANRAY LIU, AIDAN KATZ, JINNY KIM, ANVITI SURI, AND DENALIA ZHI DESIGNED BY

JINNY KIM AND DENALIA ZHI PHOTOGRAPHY BY

FOR CORPORATE ACTION

NYU STERN STUDENT VOICES

VOL. 09 / SPRING 2022

Front and back cover photos by Denalia Zhi, NYU Stern ‘23 Left photo by Leon Liu / Unsplash

JO TONG AND DENALIA ZHI

contents

4 6

The Buzz in Central Valley: Honeybees and Almonds JEFFREY JIANG

12

Letter from the Dean

DEAN ROBERT WHITELAW

Titanium Dioxide: Providing a Structure for More Efficient Production Processes AMY CHEN

5

Introduction to Business and Society

PROFESSOR MATT STATLER

Digital Districts and Plotted Provinces: How Blockchain Technology Can Enable Land Titling in Informal Settlement Communities Across Latin America

18

ARION FARHI

24

Transporting into a More Sustainable Future JOHN SACHENIK

BancO2: Incentive-Based Conservation in Medellín

42

AMAN KUMAR

30

Sea Change and Pekalongan: One Step Toward Sustainable Batik

48

Business Strategies for Combating Desertification in Northwestern China

NICOLETTE HENDRAWINATA

36

Improving Sustainability in Metal Production ANDREW SLEDESKI

Sparking Minority Ownership in Cannabis

54

SUNEET DESAI

BRIAN XU

Saving Lives in Delhi: Kiverdi and Graviky Labs

60

YAJAS SHAH

67

Acknowledgements PROFESSOR JEFFREY J. YOUNGER

Photo by Ajay Suresh/Flickr CONTENTS / 03

letter from the dean I Am pleased to share with you the ninth edition of The Call for Corporate Action.

It is my particular pleasure to do so this year as we mark a special milestone, eleven years of The Call serving as a vehicle to showcase essays by Stern undergraduate students.

It is evident through these inspirational articles that our students are eager to invest time, energy, and intellect into finding solutions to the most pressing challenges of our global society. From the examination of a sustainability initiative in Medellín to Delhi’s air pollution problem, I am truly impressed with our students’ innovative thinking and thoughtfulness.

We are so proud of them as they build the skills they will need to become the well-rounded leaders that are critical in today’s complex world.

These essays are a beautiful illustration of the importance of the Social Impact pillar, one of the five pillars that guide the Stern Undergraduate College experience. This pillar states, “We’re eager to use business to create a positive impact, and we take this responsibility seriously.”

All students participate in our unique Social Impact Curriculum, which allows them to explore how business,

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social impact, and sustainability intersect with issues of personal and professional ethics, and corporate social responsibility.

This curriculum is a starting point for our students to see how with the right tools and mindsets, business leaders can make a positive social and environmental impact.

While we celebrate the ongoing importance of this commitment to social impact, this year has also truly been one of new beginnings and firsts, from welcoming students back to campus to launching our BS in Business, Technology and Entrepreneurship and First Year London Opportunity programs. It is this combination of a commitment to our core values with a willingness to embrace and drive change that creates an environment where inspirational projects such as The Call for Corporate Action can flourish.

Regards, Robert Whitelaw

ROBERT WHITELAW Dean of the Undergraduate College Edward C. Johnson 3d Professor of Entrepreneurial Finance NYU Stern School of Business

introduction to

business and society in the spring of 2021, Business and Society happened entirely on Zoom. The plenary sessions took place as "webinars,” with distinguished guest speakers joining us from across the globe, and the discussion sessions took place as "meetings,” with students similarly connecting from all over the world. And while the COVID-19 pandemic disrupted the institutional rhythms of higher education and displaced the NYU Stern community, it had the effect of emphasizing the importance of what students learn in Business and Society and how they learn it.

What they learn includes an ability to think critically about the complexity of the relationship between business and society, an awareness of the global challenges that face businesses as well as all other sectors of society, and a capacity to think creatively about how business strategies can address those challenges and create economic, social, and environmental value. The pandemic tragically illustrates the need for business leaders who have these skills, and it thereby shines a sharp light on the importance of Stern’s Social Impact Core Curriculum.

As the first of four courses in that curriculum, Business and Society gives all Stern undergraduate students an

occasion to engage with each other in reflective dialogue about the most important economic, social, and environmental issues of our time. The seminar format of the course enabled such dialogue by design for years before the pandemic. But during a year of Zoom fatigue, it provided a smallscale forum in which students could keep their cameras on to recognize familiar faces, including faculty who knew their names and voices and perspectives. Again, the pandemic disruption made the approach to learning in this course feel even more vital and productive.

As co-coordinator (with Jeff Younger) of this course, I am exceedingly grateful to the students, faculty, and guest speakers for the resilience that they exhibited during the spring of 2021. We didn’t fall behind, or just hold ground—instead, we moved forward together, engaging in inquiry with the pragmatic hope of creating a more sustainable future for business and society. The essays collected in this volume exhibit excellence, and yet they represent only a small sample of all the great work that Business and Society students did under circumstances that we hope never to experience again. Hurrah!

MATT STATLER Richman Family Director of Business Ethics and Social Impact Programming Clinical Associate Professor of Business and Society

Matt Statler

INTRODUCTION TO BUSINESS AND SOCIETY / 05

THE BUZZ IN CENTRAL VALLEY HONEYBEES AND ALMONDS

Jeffrey Jiang proposes a seed distribution and retail product certification program to encourage residents to plant pollination gardens and help save bees that are vital to many crops in the Central Valley of California.

ESSAY BY

JEFFREY JIANG

H

oneybees are a marvel of nature—one teaspoon of their honey provides them with enough energy to produce 130 times their body weight in new honey. 1 However, honeybees are also becoming increasingly endangered. Society has made little progress in pinpointing solutions to help our friendly pollinators. Their critical role in maintaining ecosystems is especially apparent in California’s Central Valley, a long strip of primarily agrarian land. As the almond hub of the world responsible for producing up to 80 percent of the global supply, the Central Valley’s almond cultivation relies heavily upon the work of 1,500 beekeepers and 30 billion bees during pollination season.2 The mass pollination of these honeybees lays the foundation for an $11 billion almond industry and contributes $15 billion to the United States economy through the pollination of other crops.3 Despite honeybees’ vital importance to the environment and economy, the general health of honeybees has been gradually declining in recent years. Winter survival rate, a metric used to monitor general honeybee health, plummeted to a record low—only 70 percent of total honeybees survived the winter of 2018.4 There is a multitude of factors that are responsible for the decline in honeybee health, notably poor diet.5 This rise in the endangerment of pollinators poses severe implications for all stakeholders involved: farmers, beekeepers, local residents, and businesses such as Blue Diamond Growers, who rely on honeybee pollination for their products.

Blue Diamond Growers is a prominent producer of almond products in the Central Valley.6 While there may not yet exist any permanent solutions to the pollination crisis, Blue Diamond Growers can adopt a three-pronged approach to address the inadequate honeybee diet and initiate a step toward sustainability: pollination gardens, seeds, and certification, or simply PGSC. This approach calls for Blue Diamond Growers to encourage Central Valley residents to plant pollination gardens and use nutrient stimulating seeds in exchange

08 / JEFFREY JIANG

for a “Bee Friendly” rewards program. By leveraging PGSC, Blue Diamond Growers can produce shared value to benefit all stakeholders, and shift toward a circular economy business model to bolster the sustainability of honeybees.

WHAT’S HAPPENING IN THE CENTRAL VALLEY

With enough almond groves in the Central Valley to blanket the equivalent area of the entire state of Delaware, a vast number of honeybees are required to pollinate the area. This mass pollination event accounts for roughly half of the yearly revenue for farmers and beekeepers.7 The loss of honeybees, therefore, puts many of these farmers and beekeepers at financial risk. Cindy Dang of the Hillsborough Department of Sustainability is currently researching the impact of honeybees on local ecosystems. Dang notes that beekeepers and farmers “are already facing many problems, because many live on razor-thin margins.” 8 Similarly, this issue threatens local residents and businesses. A feeble honeybee population leads to a potentially unstable supply of almonds—a market crisis that can alter market prices and crush business revenue.

Local residents of the Central Valley may suffer declines in business confidence and even tourism if there are doubts surrounding the longevity of honeybees and the almond market.

WHERE OTHER APPROACHES FALL SHORT

In the past, Blue Diamond Growers has implemented bee sustainability programs such as Water for Bees, which places hydration stations around orchards— colloquially referred to as “bee baths.”9 While this approach may aid honeybees from a nutritional standpoint, it lacks shared value for other stakeholders involved. Water for Bees calls upon Blue Diamond Growers to dig into its profits purely for the sake of honeybee health and fails to incorporate the efforts of local residents and beekeepers.

Other approaches are simply too ambitious or forthright in their

methodology. For example, in 2008, the French government announced the €500 billion “Ecophyto” plan (~$560 billion U.S.) to cut chemical pesticide usage in half within a mere ten years, hoping that the initiative would help preserve honeybees’ health. However, this abrupt shift instigated shortages in crops and amplified tensions between farmers and the government. Instead of decreasing pesticide usage, national pesticide usage actually increased by 12 percent.10 While the intentions of approaches like the “Ecophyto” plan are noble, they may be too insular by brushing aside select stakeholders.

The careful examination of these past mistakes and weaknesses paves the way for a flexible and multifaceted solution.

Unlike previous approaches, PGSC utilizes the dynamic between select stakeholders in creating shared value, linking all parties to a driving force toward sustainability.

PGSC AND GENERATING SHARED VALUE

The first component—pollination gardens—is the cornerstone of the PGSC approach. Pollination gardens are small chemical-free gardens, typically composed of nectar-producing flowers that provide shelter and food for honeybees. The gardens not only serve as a sustainable food source but also provide a point of access for humans to help nurture honeybee populations. The non-profit Project Apis m. (PAM) has specifically designed seeds that are not only packed with nutrients but also bioengineered to bloom in the winter when nourishment and shelter are scarce. 11 Consequently, planting PAM seeds in these pollination gardens increases the supply of sustenance and protection for honeybees during harsh winter conditions. To incentivize local residents to plant pollination gardens, Blue Diamond Growers can create a “Bee Friendly’’ rewards program for planting pollination gardens which provides possible discounts for its products and spreads awareness about the pollination crisis. Ultimately, this approach creates shared value for Blue Diamond Growers,

farmers, beekeepers, and local residents.

While Blue Diamond Growers may not be able to boost sales in the shortterm with these changes, the benefits hold potentially greater longer-term value in providing security for future production and a higher environmental, social, and governance rating (ESG).

By implementing PGSC, Blue Diamond Growers can promote stable production of almond products in the future. This approach can also serve as a springboard in shifting away from a linear economy and toward a circular one. Blue Diamond Growers can reap all the benefits from honeybees while helping the environment through pollination gardens.

According to a study conducted by the McKinsey Center for Business and Environment, researchers found that adopting a circular economy could generate cost savings of €600 billion a year (~$680 million U.S.) and €1.8 trillion more in other economic benefits in 28 European business industries (~$2 trillion U.S.). 12 Closely related to this principle of circular economy is the ESG rating—a set of standards used to quantify the social impact of a business and its relationships with stakeholders. By using the PGSC plan, Blue Diamond Growers can associate its product with the values of environmental activism and increase its ESG score, projecting an appealing tone for investors. For example, Trillium Asset Management, with over four billion dollars in assets under management, uses a selection of ESG factors to help identify companies positioned for robust longterm performance.13 The PGSC approach not only contributes to the future supply chain of Blue Diamond Growers, but it also has the strong potential to attract shareholders and investors who recognize the value of corporate shared value and sustainability.

Farmers and beekeepers will also benefit from the PGSC approach. A greater volume of food for honeybees allows beekeepers and farmers to spend less on providing ample nutrition to their honeybees. This aims to lessen the financial stress on beekeepers, as they will

“

The Central Valley’s almond cultivation relies heavily upon the work of 1,500 beekeepers and 30 billion bees during pollination season.”

CONCLUDING CONCUSSIONS: AN END TO HEAD TRAUMA IN SOCCER / 09

not have to shoulder the full burden of a global honeybee problem. PGSC can also serve to spotlight the struggles farmers and beekeepers face; such attention may help rake in more customers. According to a study conducted by IBM, roughly two-thirds of North Americans prefer locally grown eco-friendly goods from small organic vendors. 14 While the interest among consumers for sustainable products certainly exists, consumers may be unaware of how or where to contact and buy from local beekeepers and farmers.

PGSC can help patch the disconnect between the consumers and local farmers by using Blue Diamond Growers’ platform to direct the attention of customers toward organic producers. The PGSC approach can benefit farmers and beekeepers by raising greater awareness of how deeply affected they are by the declining honeybee population.

Lastly, the local residents of the Central Valley that build pollination gardens will realize benefits from not only Blue Diamond Growers but the pollination gardens themselves. PGSC calls for a “Bee Friendly” rewards program that can financially incentivize local residents to plant pollination gardens.

The efforts by local residents toward an upstanding cause can translate to instore credit and other advantages at Blue Diamond Growers. Most importantly, the pollination gardens can provide a fresh and cheaper alternative to consuming vegetables and fruits opposed to storebought products. Cindy Dang of the Hillsborough Sustainability Office in Hillsborough, New Jersey is currently working on the implementation of a pollination garden at her public library.

Dang observes, “pollination gardens can help thwart invasive pests . . . and educate people about our ecological footprint.”15 Hence, pollination gardens culminate in a joint benefit for all stakeholders, which reflects PGSC’s ability to create shared value while tackling the issue of the decline in honeybees.

10 / JEFFREY JIANG

small garden for honeybees. While this concern is valid, it does not undermine the chief principle of the PGSC approach.

That is, though the steps toward honeybee sustainability may start small, any effort is better than no effort at all; or in this instance, any number of pollination gardens is better than zero pollination gardens. The PGSC approach does not require all residents to take part; rather it is an initiative to garner traction toward honeybee sustainability while generating shared value.

WHERE DO WE GO FROM HERE?

POTENTIAL DRAWBACKS

While the PGSC approach may generate communal value in helping honeybees, it is not a sufficient global solution for the honeybee crisis. The pollination gardens and PAM seeds are only scratching the surface of necessities honeybees require for greater sustainability. In fact, entomologist expert Samuel Ramsey identified “three ‘P’s: parasites, pesticides, and poor nutrition,” which are the primary factors plaguing honeybees.16 Despite multiple bans and public condemnation from various research organizations, the United States Environmental Protection Agency approved neonicotinoids in 2019: a class of pesticides detrimental to honeybees' nervous system.17 Furthermore, a study

by Iowa State University indicated that a particular parasite accounted for a 44 percent decline in beehives.18 While the PGSC plan may help with poor nutrition, the other two “P”s of parasites and pesticides still pose an extremely lethal threat to honeybees.

Furthermore, the notion of individuals spending their own resources on pollination gardens may not be accommodating to those from a lower socioeconomic status. Understandably, individuals who are a paycheck away from the poverty line may be hesitant to spend their time, money, and space to create a

PGSC aims to orchestrate fruitful connections between stakeholders, and in the process, generate value for Blue Diamond Growers, farmers, beekeepers, and local residents who plant pollination gardens. Blue Diamond Growers can improve its ESG rating to attract investors, shift toward a circular economy, and promote greater stability for future production. Meanwhile, farmers and beekeepers can spend less on feeding their honeybees should local residents be granted certification within a “Bee Friendly” rewards program that promotes individual pollination gardens.

The time to act is now. There is significant uncertainty over how much more stress honeybees can endure before honeybee population restoration is no longer a possibility. Honeybee malnutrition is one element in an intricate web of anthropogenic, biological, and natural factors chipping away at honeybee health. PGSC may not be the Central Valley’s deus ex machina, but it builds the framework for a sustainable business model and offers a path toward a more environmentally and socio-economically secure future.

DISCUSSION QUESTIONS 1.

The author discusses the importance of honeybees’ role of pollination to the Central Valley ecosystem. Do you think there needs to be more awareness about this pivotal role honeybees play?

2.

What ESG factors (environmental, social, governance) do you think are most relevant to the author’s proposed PGSC initiative for Blue Diamond Growers?

Apiaries, Tassot. “Honey Bees Are Amazing.” Tassotapiaries, www.tassotapiaries.com/honey-bee-facts.

2 FitzGerald, Emmett. “California's Almond Farmers Depend on Beekeepers - and Billions of Bees.” The World from PRX, 20 Mar. 2016, www.pri.org/stories/2016-03-20/californias-almond-farmers-depend-beekeepers-and-billions-bees.

3 “We Need Bees.” Planet Bee Foundation, www.planetbee.org/ why-we-need-bees.

4 Neilson, Susie. “More Bad Buzz for Bees: Record Number of Honeybee Colonies Died Last Winter.” NPR, 19 June 2019, www.npr.org/sections/thesalt/2019/06/19/733761393/morebad-buzz-for-bees-record-numbers-of-honey-bee-coloniesdied-last-winter.

5 Schildgen, Bob. “Why Are Honeybees Dying Off?” Sierra Club, 8 May 2018, www.sierraclub.org/sierra/ask-mr-green/ why-are-honeybees-dying.

6“ Blue Diamond Growers Celebrates 110-Year Anniversary with Key Expansions at Its Central Valley Facilities.” PR Newswire, 6 May 2020, www.prnewswire.com/news-releases/blue-diamond-growers-celebrates-110-year-anniversary-with-key-expansions-at-its-central-valley-facilities-301054316.html.

7 Armstrong, Lewis. “California's Almond Trade Is Exploiting One of Nature's Most Essential Workers,” IFIS, 5 June 2020, www.ifis.org/blog/californias-almond-trade-exploiting-bee-population.

8 Jiang, Jeffrey, and Cindy Dang. “Honeybee Interview.” 26 Mar. 2021.

9 “Sustainability Bees.” Blue Diamond Growers, www.bluediamond.com/sustainability/bees.

10 Stokstad, Erik. “France's Decade-Old Effort to Slash Pesticide Use Failed. Will a New Attempt Succeed?” Science, 11 Oct. 2018, 1

JEFFREY JIANG

www.sciencemag.org/news/2018/10/france-s-decade-old-effort-slash-pesticide-use-failed-will-new-attempt-succeed.

11 “About Project Apis m.” Project Apis m., www.projectapism. org/about-project-apis-m.html.

12 Rossé, Morten. “Mapping the Benefits of a Circular Economy.” McKinsey & Company, 14 Mar. 2019, www.mckinsey. com/business-functions/sustainability/our-insights/mapping-the-benefits-of-a-circular-economy.

13 “Firm Overview.” Trillium Asset Management, 30 Sept. 2021, www.trilliuminvest.com/documents/firm-overview.

14 Bekmagambetova, Dinara. “Two-Thirds of North Americans Prefer Eco-Friendly Brands, Study Finds,” Barrons, 10 Jan. 2020, www.barrons.com/articles/two-thirds-of-north-americans-prefer-eco-friendly-brands-study-finds-51578661728.

15 Jiang, Jeffrey, and Cindy Dang.

16 Sofia, Maddie. “Honeybees Need Your Help, Honey.” NPR, 2 Apr. 2020, www.npr.org/transcripts/825305756.

17 Donley, Nathan. “Trump EPA Used 'Emergency' Loophole to Approve Pesticides Toxic to Bees on 16 Million Acres in 2019.”

Center for Biological Diversity, 2 Jan. 2020, www.biologicaldiversity.org/w/news/press-releases/trump-epa-used-emergency-loophole-to-approve-pesticides-toxic-to-bees-on-16million-acres-in-2019-2020-01-02.

18 Ambrose, John. “Managing Varroa Mites in Honey Bee Colonies.” Iowa State University, 1 Sept. 1970, www.extension.iastate.edu/smallfarms/managing-varroa-mites-honey-bee-colonies.

Photo Credits: Jason Leung/Unsplash—page 7 Bianca Ackermann/Unsplash—page 9 Marcia Cripps/Unsplash—page 10

CLASS OF 2024, MATHEMATICS AND COMPUTER SCIENCE

“I hope that my paper sheds light on how we are so close to biological and economic calamity, yet we are so blinded.

One of the most rewarding parts in constructing this paper was seeing the applications of advanced technology being used for social good.

I read about researchers prototyping pollination drones and robots to take some load off honeybees, and also about genetic engineering techniques being employed for honeybee resistance. I was amazed to see the many domains of scientific research unifying toward a collective effort in saving honeybees.”

THE BUZZ IN CENTRAL VALLEY / 11

TITANIUM DIOXIDE PROVIDING A STRUCTURE FOR MORE EFFICIENT PRODUCTION PROCESSES ESSAY BY

AMY CHEN

The production of titanium dioxide, a common white pigment used in several consumer goods, is both a financially and environmentally costly process. Author Amy Chen suggests that the licensing of proprietary technologies by American firms to Chinese producers could ease tensions among these competitors and reduce pollution in the industry.

T

itanium dioxide, a white pigment used in numerous consumer goods, comprises the largest segment of the American dye and pigment manufacturing industry. A full 54 percent of the pigment industry is dedicated to titanium dioxide – a substance that creates whiteness or opacity in paints, plastics, papers, and some cosmetics.1 From the coating of cars to the whiteness of paper, TiO 2 plays a largely unknown role in most consumers’ lives. Just as unknown is the pigment’s resulting environmental d a m a g e . T h e U n i t e d N a t i o n s 1 2 th Sustainable Development Goal (SDG) outlines responsible consumption and production.2 Numerous issues plague TiO2 manufacturing and challenge the United Nations’ goal of responsible production– while finding a solution may be difficult, it remains possible.

A SUPERIOR AND INFERIOR MANUFACTURING PROCESS

Production of titanium dioxide consists of one of two methods: the sulfate process and the chloride process. The older sulfate process creates batches of pigment individually, which inherently creates a higher overhead for production.3 It also processes cheaper and lower grade ores, typically ilmenite, and produces a low quality, yellow-undertone titanium dioxide.4 Sulfate manufacturing demands a lower initial outlay of capital to set up but offers few long-term savings; the opposite is true for chloride manufacturing.5 The newer chloride process runs continuously, saves money, and produces much less waste by rec ycling the chlorinated raw material. 6 The sulfate process generates around 3.5 tons of toxic waste per ton of feedstock while the chloride process generates only about 0.2 tons.7 The chloride process uses more expensive ores, typically rutile, but creates higher-quality, blue-undertone pigments.8 The setup costs for chloride manufacturing are higher, but savings in the long term are superior to the sulfate method.

As with most manufacturing processes, titanium dioxide production causes

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serious consequence of environmental pollution. With no suitable alternative product, titanium dioxide manufacturing waste remains practically inevitable.

Historically, many coastal production plants in Europe that used the sulfate process dumped large amounts of their sulfuric acid waste into bodies of water such as the North Sea.9 Research conducted into the effects of these actions found that the “sulfuric acid [caused] a sudden drop in the pH value of the receiving water and [reduced] the oxygen content of the water, thereby decimating marine life.” 10 Landlocked plants disposed of their waste just as dangerously; although they neutralized the acids before dumping them into the ground, this step still released potential carcinogens into the air. 11 While this research primarily examines the older sulfate process, byproducts of the chloride process have proven just as toxic.

The irreplaceability of titanium dioxide makes this pollution practically inevitable, but the chloride process offers the next best solution. Instead of attempting to eradicate pollution entirely, the chloride method’s efficient operation significantly mitigates the amount of waste per unit of titanium dioxide. With its long-term cost savings, higher quality pigment, and lower level of pollution, the chloride process stands out as the superior process.

THE TRAGEDY OF CHINA’S PRODUCTION

Though plants around the world produce titanium dioxide, China and the United States encompass the majority of titanium dioxide manufacturing, responsible for around 47 percent and 23 percent of total production respectively.12 Proprietary technology, however, confines most high-quality chloride production to the United States.

While the chloride process comprises only around 65 percent of total titanium dioxide manufacturing, it holds over a 98 percent market share in North America.13 Nearly all of China’s production of titanium dioxide stems from the less

efficient sulfate process. Compared to their American counterparts, Chinese firms lack infrastructure and investment for the chloride process.14 As a result, the combination of China’s concentration in sulfate manufacturing and position as the world’s largest producer poses a significant environmental threat.

During past attempts, inaccessibility to technology has prevented Chinese firms from successfully implementing chloride technology. First, steep competition has discouraged western companies from forming corporate partnerships with Chinese producers. With intense rivalry even among western firms themselves, all have been discouraged from partnering with Chinese producers out of fear of losing control over the technology. An expert from Tronox Holdings, the largest titanium dioxide producer in the world, corroborates that management feared that the firm “would lose control and the technology would be used [in China].”15 Western firms have no incentive to help potential competitors overseas and relinquish their current advantage.

The complex nature of manufacturing titanium dioxide requires firm management with years of production experience. Further, with the current lack of cooperation between Chinese and western firms, Chinese producers find adopting the chloride process difficult.

Even in existing Chinese chloride plants, the utilization rates, or the frequencies at which the plants operate, remain below 50 percent compared to the 90 to 99 percent utilization rates of western ones.16 Since plants using the chloride process require at least 70 percent utilization for stable production and consistent quality, these low rates prevent the plants from reaching ideal production efficiency.

The newest chloride technologies are heavily protected by the patents of western companies.17 As a consequence, China, the world’s largest titanium dioxide producer, lacks access to efficient chloride technology, meaning that its continued operation poses a substantial threat to the environment. With the inaccessibility of technology as a major

issue, the licensing of process patents owned by western producers to Chinese producers could offer a solution.

LICENSED PATENTS AS A SOLUTION

Patents protect against intellectual property (IP) theft. Patent licensing refers to assigning patent ownership to a third party either exclusively or non-exclusively.

Traditionally, licensed patents provide the patent holder with royalty payments and the licensee with access to the invention.18

licenses. 21 In the face of music piracy, licenses provide a means for songwriters to earn a royalty or some compensation for their work. Moreover, licenses allow artists to exercise greater control over the conditions of the license, including media, term, territory, exclusivity, and fee. 22 Ultimately, if priced effectively, licenses provide value to all parties involved: artists through compensation, licensees through access, and consumers through accessibility.

“

patent licensing demonstrate the positive externalities that can result from the sharing of advanced technology.

Though the issue of titanium dioxide manufacturing pollution does not share nearly the same ramifications as the coronavirus pandemic, the benefits of vaccine compulsory licenses demonstrate the value of licensing patents. Releasing patent licenses will allow advanced technology from developed countries to spread to developing countries. In doing

The widespread benefits of patent licensing demonstrate the positive externalities that can result from the sharing of advanced technology.”

For independent inventors, these deals typically require large amounts of work to find customers, police the market, and finally sell the patent. 19 However, western titanium dioxide manufacturers actively police the market for IP theft, and strong demand already exists in China for successful, efficient chloride technology.20 With these concerns addressed, a licensed patent that shares exclusivity between the western firm and a Chinese licensee, along with high royalties built into the terms, could offer a solution.

Examples of licensed patents in the music industry offer insights for potential chloride process licensing.

After Napster’s file-sharing service used a loophole to enable easy music piracy, Apple launched iTunes “to provide consumers a legal option for purchasing individual songs online” through song

Coronavirus vaccine patent licensing also demonstrates analogous widespread benefits of licensing. In terms of coronavirus vaccines, many governments have implemented compulsory licenses, which “[allow] someone else to produce a patented product,” overriding the consent of the patent owner.23 In the case of this global crisis, compulsory licenses have allowed companies and countries to move quickly. Elias Mossialos, a representative for international organizations dealing with the coronavirus pandemic, elaborates on the idea: “If companies like Pfizer, Moderna and AstraZeneca can… meet the demand, then there is no problem.”24 However, if these companies are overwhelmed by demand, “they could be paid extra, to grant their IP rights and share the vaccine production with other companies.”25 The widespread benefits of

so, these novel technologies can improve the lives of individuals beyond the original country, whether through coronavirus recovery or sustainable manufacturing and its environmental benefits. Granted, chloride technologies provide western companies with an important competitive advantage against international producers. 26 However, these licensors can learn from the example of the music industry, which offers options for firms to maintain control and earn enough royalties to make licensing worthwhile.

BENEFITS TO STAKEHOLDERS IN THE MANUFACTURING PROCESS

Among Chinese producers, a strong demand exists for access to chloride technology. Lomon Billions, Asia’s largest titanium dioxide producer, has attempted numerous times to successfully

TITANIUM DIOXIDE / 15

success.27,28 In 2014, a lawsuit arose between DuPont, an American manufacturer specializing in the chloride process, and an American technology consultant who was accused of stealing trade secrets to recreate the process in China.29 Even before this incident, a 2013 study estimated that China accounted for $240 billion worth of losses from stolen intellectual property sustained by American companies, representing 80 percent of total losses from American IP theft. 30 With strong Chinese demand for the chloride process and western firms already taking large losses from stolen IP, licenses can provide value to Chinese producers by helping them unlock the chloride process and value to western firms through royalties.

With China continuously growing its titanium dioxide industry and edging closer to successful chloride technology each year, experts agree that it is only a matter of time before it unlocks the process. 31,32 In the meantime, the continued use of sulfate technology by Chinese producers creates a considerable

environmental threat. From this environmental perspective, the sulfate process contributes unnecessarily high pollution costs compared to the “cleaner” chloride process. From a financial perspective, however, Chinese firms unlocking the chloride process could result in significant losses for western firms. If Chinese firms enter the chloride-produced titanium dioxide market, western companies such as Tronox or Chemours will lose their competitive advantage. Licensing their IP could allow these companies to preemptively limit future losses through commensurate royalties, determined by the high demand for their IP. At the same time, sharing their advanced technologies would align their goals with Chinese firms, enable China’s sustainable industrialization, and reduce the total pollution from industrial activities.

efficient production processes while addressing risks to the license owners.

Evidently, Chinese producers will benefit greatly from access to chloride technology. A predetermined license with strict conditions, heavy consequences for misuse of technology, and high financial incentives through royalties will provide economic value to western licensees. Beyond these benefits to corporate stakeholders, the chloride process’s ability to use less feedstock and result in exponentially less pollution provides definitive benefits to the environment. In conjunction with the licensed patent system, this business approach offers a way for the global economy to produce more responsibly.

THE FUTURE OF RESPONSIBLE TITANIUM PRODUCTION

Sharing proprietary chloride technology to companies abroad through licenses ultimately offers a structure for more

DISCUSSION QUESTIONS 1. Why might licensing incentivize firms to share technology with competitors if they already possess a competitive advantage?

2. How might western firms enforce the terms of their licenses with titanium dioxide producers in China?

3. How might licensing be applied to other existing societal issues?

Ross, Gavin. “Dye & Pigment Manufacturing in the US.” Ibis World, Jan. 2021, www.ibisworld.com/united-states/market-research-reports/dye-pigment-manufacturing-industry.

2 “Goal 12: Ensure Sustainable Consumption and Production Patterns.” United Nations, sdgs.un.org/goals/goal12.

3 Lichtarowicz, Marek. “Chemical Reactors.” Essential Chemistry Industry, www.essentialchemicalindustry.org/processes/chemical-reactors.html#batch_reactors.

4“ Titanium Dioxide.” Essential Chemistry Industry, www.essentialchemicalindustry.org/chemicals/titanium-dioxide.html.

5 Chen, Xuming. “TiO2 Chemical Processes and Patents.” 18 Mar. 2021.

6 Lichtarowicz.

1

16 / AMY CHEN

Whitfield, Ron, et al. “The Economic Benefits of Chlorine Chemistry in Titanium and Titanium Dioxide in the United States and Canada.” American Chemistry Council, June 2016, chlorine.americanchemistry.com/Chlorine-Benefits/Economic-Benefits/Titanium-and-Titanium-Dioxide.pdf.

8 Ibid.

9 Lane, Deidre A. Pollution Caused by Waste from the Titanium Dioxide Industry: Directive 89/428, 14 B.C. Int’l & Comp. L. Rev. 425 (1991), lawdigitalcommons.bc.edu/iclr/vol14/iss2/16.

10 Ibid.

11 Ibid.

12 “ Titanium Dioxide.”

13 “North America Titanium Dioxide Market Size 2026, Industry Research Report.” Graphical Research, Nov. 2020, www. graphicalresearch.com/industry-insights/1509/north-america-titanium-dioxid-market.

14 Viswanathan, Arun, and Daniel DiCicco. “The Chemours Company: Structural Fluoro Growth and Optionality on TiO2; Initiate at Outperform.” RBC Capital Markets, 18 Jul. 2018.

15 “Former EMEA Sales VP Believes the Current Environment Is the Normal Low Part of the TiO2 Cycle Based on Depressed Global Economic Conditions.” Mosaic Research Management, 13 Oct. 2020.

16 Ibid.

17 Chen.

18 “Patent Licensing: Everything You Should Know.”

GreyB, 23 Sept. 2020, www.greyb.com/patent-licensing-101/#What-Is-Patent-Licensing.

19 Yang, James. “How to Use Patents to Make Money?” OC Patent Lawyer, 17 Aug. 2019, www.ocpatentlawyer.com/patentsmake-money/#route-1-police-the-market.

20 Wilber, Del Quentin. “Stealing White How a Corporate Spy Swiped Plans for DuPont’s Billion-Dollar Color Formula.” Bloomberg, 4 Feb. 2016, www.bloomberg.com/features/2016-stealing-dupont-white.

21 Scherer, Dana A. “Money for Something: Music Licensing in the 21st Century.” Congressional Research Service, 23 Feb. 2021, fas.org/sgp/crs/misc/R43984.pdf.

22 Briggs, Josh, and Sunny Eckerle. “How to Get Your Music 7

AMY CHEN

Licensed for Films, TV, and Beyond.” The Creative Independent, 24 Oct. 2019, www.thecreativeindependent.com/guides/howto-get-your-music-licensed-for-films-tv-and-beyond.

23 “Compulsory Licensing of Pharmaceuticals and TRIPS.” World Trade Organization, www.wto.org/english/tratop_e/ trips_e/public_health_faq_e.htm.

24 Koukakis, Nasos. “Countries Worldwide Look to Acquire the Intellectual Property Rights of Covid-19 Vaccine Makers.”

CNBC, 22 Jan. 2021, www.cnbc.com/2021/01/22/countrieslook-to-acquire-the-ip-of-vaccine-makers-to-fight-pandemic. html.

25 Ibid.

26 “2020 10-K – Tronox Holdings Plc.” BamSEC, www.bamsec. com/filing/153080421000005?cik=1530804.

27 “Chloride Process TiO2 Plant Update.” Lomon Billions Group, 13 Mar. 2017, www.lomonbillions.global/chloride-process-tio2plant-update.

28 “Lomon Billions Invests $Millions in Additional Chloride Titanium Dioxide Pigment Production Capacity at Its Chloride Production Site in Jiaozuo, Henan Province, China.”

Lomon Billions Group, 20 Feb. 2018, www.lomonbillions. global/lomon-billions-invests-millions-in-additional-chloride-tio2-pigment-production-capacity-at-its-chloride-production-site-in-jiaozuo-henan-province-china.

29 Wilber.

30 Ibid.

31 “Respondents’ Replies to Complaint Counsel’s Post-Trial Proposed Findings of Fact And Conclusions Of Law.” Federal Trade Commission, 11 Sept. 2018, www.ftc.gov/system/files/ documents/cases/d09377_rs_replies_to_cc_post-tr_proposed_ fof_and_col_public592135.pdf.

32 “Former EMEA Sales VP Believes the Current Environment Is the Normal Low Part of the TiO2 Cycle Based on Depressed Global Economic Conditions.” Mosaic Research Management, 13 Oct. 2020.

Photo Credits: Meowcyber/Shutterstock—page 12 RHJPhtotoandilustration/Shutterstock—page 14

CLASS OF 2024, FINANCE AND DATA SCIENCE

“The titanium dioxide industry acts as a microcosm for numerous global industrial businesses. Sustainable titanium dioxide production methods use proprietary technology, and I explored the financial competitive advantages reconciled with the environmental ramifications of firms keeping the technology to themselves. Though the paper focuses on the titanium dioxide industry, its implications can reflect a dilemma in the wider industrial sector.”

TITANIUM DIOXIDE / 17

DIGITAL DISTRICTS AND

PLOTTED PROVINCES HOW BLOCKCHAIN TECHNOLOGY CAN ENABLE LAND TITLING IN INFORMAL SETTLEMENT COMMUNITIES ACROSS LATIN AMERICA ESSAY BY

ARION FARHI

Many countries in Latin America have informal settlements that are not officially recognized and devoid of essential public services. By partnering with BanQu, a startup that leverages blockchain technology for land and property titling, Latin American governments can counter poverty and improve living conditions for those marginalized communities.

M

ore than four billion people live in urban areas around the globe, and that number is expected to balloon by 20 percent near the end of the next decade.1 Making human settlements safe and resilient is core to a functioning society; in other words, people need reliable shelter to thrive. Known by a different term in each country—favelas in Brazil, barriadas in Peru, and villas miserias in Argentina—informal settlements host some of the highest poverty rates and most inhumane conditions in Latin America. 2 Built on illegally occupied land without any oversight from a public authority, informal settlements are devoid of essential public services and formal recognition of land titles.3,4 These distinctly unsustainable communities exist throughout the world but are especially prominent in Latin America, where the growth in demand for urban services and state support outpaces the market’s capacity to supply them. 5 For example, 25 percent of Chile’s urban population lives in informal settlements, a sizable increase from a decade earlier.6 To counter this crisis, policymakers across Latin America are working to transition informal communities in a process called “regularization.” Regularization is largely centered around the strategy of titling, which involves the process of awarding formal property titles to occupants of informal settlements.7 For those living in informal settlements, property titles are a tool for socioeconomic advancement.

Unfortunately, current titling programs are proving to be costly and largely ineffective.8 Latin American governments should form a partnership with BanQu, a blockchain technology company, in order to catalyze the titling process efficiently and effectively.

THE CHALLENGES OF INFORMAL SETTLEMENTS

The regularization of Latin America’s informal settlements is a complicated and tedious process that is unique to every country. The regularization process revolves around two major strategies, particular to two different Latin 20 / ARION FARHI

American countries: awarding formal property titles to inhabitants in Peru and both awarding titles and improving public services in Brazil.9 The first strategy has been the primary focus of regularization efforts in Peru. From 1996 to 2006, Peru was able to grant 1.6 million titles to previously informal households. Peru established these “freehold titles…[at an] average cost of $64 per household.”10 Still, titling reflects one major flaw: the lack of usable data. Although Peru invested in research and mapping to generate a “cadaster,” an official register detailing ownership, boundaries, and value of real property, the absence of legal de jure documentation in informal communities greatly hindered both the identification of its inhabitants and their proof of land ownership. Brazil also invested heavily in its cities with similar effect.11 Titling became an intensely bureaucratic and time-consuming process, requiring large numbers of accurate data points to succeed.

These expenses illustrate the freerider dilemma, where public goods become overutilized by those who did not originally finance them. Throwing public tax money at a problem does not necessarily make it go away. Yet, while many land ownership records remain unavailable or unusable, Peru’s titling strategy has proven to act as a viable first step toward formalizing and advancing public services with one point almost universally agreed upon: titling is tremendously beneficial to both the inhabitants of informal communities and the country as a whole.

Without fully recognized land titles, individuals are deprived of basic citizenship rights. They would otherwise have access to key privileges such as access to credit, basic home services like electricity and gas, and security of tenure. Between 2004 and 2006, nearly 150,000 evictions occurred in Latin American countries, illustrating the lack of homeowner security by those living on undocumented land. 12 Beyond the individual level, communities without formal title deeds are barred from outside investment and government support,

rendering them vulnerable. As a result, widespread crime, elevated poverty rates, and environmental hazards from substandard urban design are all realities in informal communities.13 Inhabitants of informal settlements, furthermore, are often excluded from the political process, further silencing an already marginalized population.14 In addition to the burdens experienced within these communities, informal settlements destabilize all inhabitants of a country. Money that governments invest across the whole can be inefficient and unsustainable, demonstrating the idea that regularizing local communities could save money in the long run.

To compound the issue, a sizable portion of informal households do not pay taxes, as the lack of legal property documentation hinders local governments’ ability to collect. 15 The importance of titling is further emphasized when acknowledging that large-scale relocation of informal inhabitants is entirely unsustainable— the monetary and social costs would far outweigh any benefits. 16 Again, titling emerges as a preeminent tool of granting utility and stability to informal settlements at an individual, community, and national level.

HARNESSING THE POWER OF BLOCKCHAIN

Moving toward a tech-based solution, Latin American governments can speed up the titling process by partnering with blockchain technology firm BanQu, which can more readily and cost-effectively record an influx of reliable data. BanQu is uniquely equipped to respond to tracking and validating information about individuals in developing countries, as one of the firm’s core operations involves the storage and verification of economic transactions—and this ability can be extended to include recording impoverished farmers on the blockchain.

Information on the blockchain cannot be altered or deleted, as the entered data are stored on many computers owned by other random blockchain “participants.”

These participants choose to clean and

store the data in exchange for digital payment. Not owned by a single entity but rather permanently shared by all parties on the network, blockchain is often described as a “decentralized” and “immutable” ledger.17 In many developing countries, farmers have no formal proof of their transactions. By recording transactions verifiably via BanQu’s free website, farmers are given an economic identity and, consequently, may be granted increased leverage in banking and lending.18

A PARTNERSHIP THAT BENEFITS MULTIPLE STAKEHOLDERS

By arrangement, BanQu can share data garnered from residents of informal settlements with Latin American governments. From these data, Latin American governments could expedite the titling process by using an individual’s purchase history as a form of identification. As many informal settlement occupants lack any form of legally recognized identity, such a record would undoubtedly accelerate the granting of property titles, which hinges on personal identification to succeed.19 BanQu’s blockchain ledger would be able to verify and track the sale and purchase of land in informal communities after its implementation. Once established,

this ability would streamline the process that is central to titling by clearly and efficiently identifying the rightful property occupant. With BanQu’s platform, a property’s current occupant can be instantly identified by examining the most recent transaction of a given property. This process starkly contrasts the current method of delineating ownership of an informal property through a tedious and costly inspection. Implementation of BanQu’s blockchain would also greatly reduce subsequent costs of titling, as titling ’s initial costs stem from data mining.20 A partnership between BanQu and Latin American governments could firmly facilitate the titling process of informal settlements.

The benefit to BanQu is that the firm is able to monetize data from any financial transactions, which also incentivizes the company to maximize its user base. 21 Residents will participate willingly in the system once they recognize the opportunity to benefit economically from their property and receive protection from forcible evictions by the government.

Other advantages of titling, like security of tenure, offer informal residents more community investment. Studies have

proven that titling directly correlates with decreasing poverty levels.22

ADDRESSING THE POTENTIAL RISKS OF REGULARIZATION

Despite the numerous advantages of titling, some disincentives may prevent informal residents from titling their properties, as formal titling often comes with the obligation of paying taxes.

Occupants of informal residencies may view this requirement as unjust, believing that society owes, “a historical debt to the urban poor, which should not be penalized further.” 23 Given the above perspective, some opponents see the regularization processes as supporting tax scofflaws, promoting benefits that might incite further unauthorized immigration. 24 Either way, steps in the regularization process can disincentivize residents of informal communities from titling their land.

Regularization policies can be divisive for current land-owning taxpaying citizens as well, since these taxpayers may not want to assume liability for public services they will not be receiving.

Regularization programs can “cost up to three times more than new licensed urban development,” and this expense i s e s p e c i a l l y b ot h e r s o m e s h o u l d

DIGITAL DISTRICTS AND PLOTTED PROVINCES / 21

“

For those living in informal settlements, property titles are an impartial tool of socioeconomic advancement.”

Logically, however, the initial cost of regularizing informal settlements is dwarfed by its long-term positive impact on Latin American taxpayers. Informal communities seldom transact business outside their borders, which restricts economic opportunity and growth. 27 Giving individuals formal ownership of their properties without demanding taxes gives them the ability to become participating members of their country’s economy. Formalizing communities provides increased opportunities to generate tax revenues through indirect taxes, which are taxes on services or consumption. Although some community members will be unable to afford direct taxes such as income or property tax after regularization, studies suggest that

the majority of lower income people still contribute substantially to local governments’ budgets through indirect taxes.28 In addition to the country-wide economic benefits of regularization, formalizing communities has been also shown to increase a nation’s sense of wellbeing.29 All of these factors suggest that the benefits of regularization strongly outweigh any potential costs.

THE ULTIMATE LAND TITLING METHODOLGY

A partnership between blockchain software firm BanQu and Latin American governments can greatly expedite the process of titling informal communities.

The most conspicuous flaw of titling, a lack of usable and cost-effective data,

would be substantially alleviated by utilizing BanQu’s blockchain ledger.

From this partnership, both BanQu and the people of Latin America gain value.

BanQu can expand its usership and benefit from increased revenues, while Latin American governments will be able to regularize informal communities with a faster and more cost-effective titling process. Despite some opposing opinions regarding titling, evidence proves that titling has a beneficial impact on both informal settlements and countries as a whole. Overall, titling in Latin American countries proves essential to conquering the unsustainability stemming from urbanization.

DISCUSSION QUESTIONS 1. What difficulties do you see in implementing blockchain to record property titles?

2. What other public issues might blockchain address?

3. Are there any foreseeable risks or downsides to the potential users of the public-private partnership proposed by the author? How might these problems be addressed?

22 / ARION FARHI

“Urbanization.” United Nations Population Fund, 2016, www. unfpa.org/urbanization.

2 Fernandes, Edésio. “Regularization of Informal Settlements in Latin America.” Lincoln Institute of Land Policy, 2011, https:// www.lincolninst.edu/sites/default/files/pubfiles/regularization-informal-settlements-latin-america-full_0.pdf, 9-10.

3 “Inside Rio’s Favelas, The City’s Neglected Neighborhoods.”

YouTube, uploaded by Vox, 1 Aug. 2016, www.youtube.com/ watch?v=c3BRTlHFpBU&ab_channel=Vox. 4 Fernandes, 11.

5 Magalhães, Fernanda, et al. “Slum Upgrading and Housing in Latin America.” IDB Publications, 2016, publications.iadb.org/ publications/english/document/Slum-Upgrading-and-Housing-in-Latin-America.pdf .

6 Mac Donald, Joan. “Poverty and Precarious Habitat in Cities of Latin America and the Caribbean.” Economic Commission for Latin America and the Caribbean, 2004, www.cepal.org/sites/ default/files/publication/files/5602/S0410827_es.pdf.

7 Monkkonen, Paavo. “Land Regularization in Tijuana, Mexico.”

UC Berkeley: Institute of Urban and Regional Development, 10 Jan. 2008, escholarship.org/uc/item/1g91m29w.

8 “Inside Rio’s Favelas.”

9 Fernandes, 3.

10 Ibid, 34, 37.

11 Ibid, 5-6, 31.

12 Sohr, Olivia. “How Property Titles Can Change People’s Lives in Latin America.” Pulitzer Center, 19 June 2018, pulitzercenter. org/projects/how-property-titles-can-change-peoples-liveslatin-america.

13 “Informal Settlements: The Road Towards More Sustainable Places.” FIG Publications, 2014, www.fig.net/resources/publications/figpub/pub42/figpub42.asp.

14 Fernandes, 12-13.

15 Durand-Lasserve, Alain. “Benefits of Regularizing Informal Settlements.” Habitat Debate, vol. 5, no. 3, 1999, www. nzdl.org/cgi-bin/library?e=d-00000-00---off-0cdl--00-0---0-10-0---0---0direct-10---4-------0-1l--11-en-50---20about---00-0-1-00-0-0-11-1-0utfZz-8-00&a=d&c=cdl&cl=1

ARION FARHI

CL3.19.1&d=HASH0154178fd931fa13cd195e2d.6.2.

16 “Informal Settlements.”

17 Zhong, Cyan. “Innovator BanQu Builds Blockchain and Bridges For Traceability, Small Farmers’ Livelihoods.” GreenBiz, 14 Aug. 2019, www.greenbiz.com/article/innovator-banqu-builds-blockchain-and-bridges-traceability-small-farmers-livelihoods.

18 Ayala, Tatiana. “Banqu Seeks To Transform the Lives Of Millions by Empowering Them With An Economic Identity.”

Social Fintech, 24 Feb. 2021, socialfintech.org/banqu-seeks-totransform-the-lives-of-millions-by-empowering-them-withan-economic-identity.

19 Fernandes, 27.

20 Ibid, 45-46.

21 “What BanQu Does.” BanQu, 2021, www.banqu.co/our-platform-solution-technology.

22 Sohr.

23 Fernandes.

24 Levinson, Amanda. “Why Countries Continue to Consider Regularization.” Migration Policy Institute, 1 Sept. 2005, https://www.migrationpolicy.org/article/why-countries-continue-consider-regularization .

25 Abiko, Alex, et al. “Basic Costs of Slum Upgrading in Brazil.”

Global Urban Development, Nov. 2007, https://www.globalurban.org/GUDMag07Vol3Iss1/Abiko.htm.

26 Fernandes.

27 “Inside Rio’s Favelas.”

28 Fernandes.

29 Abiko.

Photo Credits: Thiago Japyassu/Unsplash—page 6 Daniel Lozano Vales/Unsplash—page 9 Sergio Souza/Pexels—page 10

CLASS OF 2024, FINANCE AND DATA SCIENCE

“On a macro scale, my paper demonstrates how evolving technologies can combat the sustainability issues within contemporary society. When I found that a lack of usable data was preventing members of developing informal communities from properly claiming ownership of their land, it seemed that an application of blockchain technology would be fitting to solve the problem.”

DIGITAL DISTRICTS AND PLOTTED PROVINCES / 23

TRANSPORTING INTO A MORE SUSTAINABLE FUTURE ESSAY BY

JOHN SACHENIK

The waste associated with the disposal of lithium-ion batteries has been a long-standing issue threatening the value proposition for electric vehicles. Author John Sachenik proposes that a leading electric car manufacturer acquire a battery recycling company to demonstrate a commitment to sustainability for the transportation sector.

A

s concerns rise over climate change and global warming, sustainability is being brought to the forefront of company agendas. Sus-tainable investments are vital for the transportation sector, which alone accounts for 24 percent of all carbon dioxide emissions.1 As a potential market solution, the public is embracing electric vehicles, with companies like Tesla seeing immense demand and growth.2 These electric options, however, come with new caveats to overcome—specifically relating to lithium-ion batteries. According to the Institute for Energy Research (IER), lithium requires enormous resources to mine and process, with approximately 500,000 gallons of water required per metric ton of lithium. The IER also highlights that lithium can contaminate soil, water, and air if it is improperly discarded.3 Lithium presents numerous environmental risks at all stages of its life cycle, from harvest to disposal. To reach a truly sustainable system, we must ensure lithium batteries do not create an even greater problem than the one that they were made to solve. Corporations must aim for a circular economy in electric transportation to avoid replacing one problem with another.

THE PROBLEM WITH LITHIUM ION BATTERIES

Though many consumers assume electric vehicles are more sustainable than their gas-powered counterparts, this comparison is not as clear-cut as it may seem.

The lithium required for the cars’ batteries is being harvested at rapidly growing and unsustainable rates. NS Energy Business, a magazine covering energy supply chains for over 60 years, projects the demand for the metal to rise to 117 kilotons by 2024, more than double the 43.7 kiloton demand in 2020.4 The rise in lithium demand is attributed directly to the rise in electric vehicles, which are expected to reach 140 million units worldwide by 2030.5 Although lithium-ion technology already exists in devices such as laptops and phones, cars take significantly more energy to power than these smaller products.

26/ JOHN SACHENIK

The rate of lithium extraction and processing is projected to increase substantially, but current production is already creating numerous environmental problems. To start, lithium batteries should not be disposed of in landfills. Republic Services, the second largest solid waste collection company in the United States, warns of the dangers of improper lithium disposal on its website. Lithium’s extremely corrosive nature, when exposed to the elements, can cause underground fires to burn for years, damaging air quality and environmental health. In addition, the company warns that corroded batteries leak toxic chemicals like nickel and cadmium into soil and groundwater to damage the environment even further.6 With such risks present, we may hope that most of these batteries are not ending up in landfills, but the opposite has been the case. Chemical and Engineering News states that fewer than five percent of these batteries are being recycled in the United States.7 For the rest, left in landfills, they continue to threaten air quality similar to traditional carbon emissions. If the risks are so obvious, why have we continually failed to recycle these materials?

The failure to recycle lithium batteries is due to the difficulty of the recycling process. Linda Gaines outlines this process in her research for the Argonne National Laboratory. She explains that there are two main steps for recycling lithium: pyrometallurgy and hydrometallurgy. Both steps are complex, with extremely high temperatures needed for pyrometallurgy and specific acids needed for hydrometallurgy. She states that such complex processes are needed because lithium is highly reactive and corrosive, making it notoriously difficult to recycle.8 The recycling process is intensive and requires serious investment to be effective. These challenges explain why, while production of lithium is ramping up, recycling has been pushed to the wayside.

TESLA’S ROLE IN BATTERY PRODUCTION

Tesla is the leading electric car manufacturer in the United States and has

made enormous strides in this development over the past decade. According to its website, the company delivered half a million units in 2020, far exceeding its competition.9 Tesla has ambitious goals for the future, with a 1.2 million square foot Gigafactory currently under production in Buffalo, New York.10 These developments put Tesla at the forefront of innovations in the electric vehicle space. As the company leading the transition to a more sustainable future, it has a responsibility to its stakeholders to deliver on this promise. However, Tesla cannot just focus on expanding and optimizing its technologies; it must do so in a way that provides a sustainable long-term solution.

Consumers are buying electric vehicles in the hopes they are doing good, not creating an entirely new waste problem.

A study conducted by IBM reflects this sentiment, finding over two-thirds of Americans and Canadians who were surveyed agreed that brand sustainability is important. 11 So far, Tesla has fared well, but its success will not continue if it does not handle growing concerns over production. In the case of lithiumion, “those rare metals come from somewhere—often, from environmentally destructive mines.”12 Therefore, Tesla’s operations and harvesting of materials are not as eco-friendly as the brand image suggests. The company does not yet offer an all-encompassing solution to gaspowered vehicle emissions.

REDWOOD MATERIALS REVOLUTIONIZING LITHIUMION RECYCLING

Redwood Materials, a start-up based out of Carson City, Nevada, is currently looking to solve the problems that lithium-ion technologies have created.

Recognizing the troubling trends of future lithium-ion production, Redwood is acting preemptively to recycle those materials. But, as mentioned earlier, it is no easy process—so what is Redwood doing differently?

An interview with Redwood Vice President Alexis Georgeson details how Redwood plans to tackle the problem.

Georgeson states that Redwood hopes to operate by “creating circular supply chains, turning waste into profit, and developing a solution for a fully closedloop recycling system for energy storage and electric vehicle batteries before hundreds of thousands of vehicles start returning from the field in a few years.”13 Unlike previous efforts, Redwood’s advanced technologies have made the firm a leader in the emerging recycling field. Company CEO J.B. Straubel states that its recycling capabilities have reached more than 80 percent for lithium and 95 to 98 percent for nickel, cobalt, and copper.14 In only two years, Redwood has already become a leading battery recycler in the United States, striking partnerships with top companies like Panasonic and Amazon.15

AN ACQUISITION TO CLOSE THE LOOP

By acquiring Redwood Materials, Tesla could ensure a consistent supply of recycled lithium and other precious metals for years to come. Stakeholders from both companies have much to gain from such a deal. To start, Tesla has an enormous number of liquid assets; public interest and financial investments have skyrocketed. From 2018 to the end of 2020, the company’s cash on hand grew from $3.9 billion to $19.4 billion.16 This increase has put Tesla in a state of quick expansion where investing this money is key to ensuring future growth and success.

What better investment can Tesla make than in this supply of lithium essential to the manufacturing of its product?

An acquisition would also help Tesla to achieve its mission and appeal to the shareholders who have invested for this purpose. As stated on its website, “Tesla’s mission is to accelerate the world’s transition to sustainable energy.”17 Still, The New York Times addresses some of the ways in which electric vehicles fall short of this goal, emphasizing how collecting the raw materials necessary for production are more problematic than those necessary for gas-powered vehicles. It states that cobalt is being mined by children due

“

Though many consumers assume

electric vehicles to be more Though many assume sustainable thanconsumers their gas-powered electric vehicles to be more suscounterparts, this comparison is not than their astainable clear-cut as it maygas-powered seem.” counterparts, this comparison is not as clear-cut as it may seem.

SAVING LIVES IN DELHI: KIVERDI AND GRAVIKY LABS / 1*

to little regulation in the Democratic Republic of Congo, risking their health. It further points out how massive amounts of groundwater needed to extract lithium puts electric vehicle production far behind in terms of environmental sustainability.18 Materials recycled by Redwood could help put an end to these practices.

With similar goals and visions in mind, Tesla and Redwood could capitalize on synergies between their employees and executives as well. Tesla currently relies on partnerships with other companies to recycle materials, but CEO Elon Musk has always preferred to do things his way.

A former senior executive at the company stated that “Elon does not want any part of his business to be dependent on someone else” since “he thinks he can do it better, faster, and cheaper.”19 By integrating the Redwood staff and facilities into Tesla operations, Elon Musk could continue this trend of internal optimization. Redwood CEO Jeff Straubel is no stranger to Tesla, having co-founded and worked as CTO for the company for 15 years. The Wall Street Journal emphasizes that Straubel’s work is the foundation of Tesla’s technology, and despite stepping down, the two CEOs are still on good terms.20 By reuniting and combining their efforts at sustainability, both companies could help fulfill their visions for a more sustainable future.

A CIRCULAR FUTURE

After the industrial revolution and introduction of gas-powered combustion

vehicles, we may never recover from the resulting environmental damage. With a new age of electric vehicles on the horizon however, we have an opportunity to never make that same mistake again. Even in its current operations, Tesla has made great strides in the right direction. However, a crisis is looming, and without action, we will have 11 million metric tons of lithiumion battery waste by 2030.21 What will we do with these 11 million tons? Will they end up in our rivers, our air, and our soil, further worsening the environment? Or will we do right by the world this time, use this new technology, and ensure a sustainable future?

With electric vehicles, a circular economy in transportation is possible.

Gas-powered vehicles create a linear economy: oil is extracted and refined, pumped into vehicles, and emitted and released into the atmosphere. Once gas burns, the damage is done. Lithiumion technology could be the same, but with big players like Tesla prioritizing recycling, a new environmental disaster can be avoided. An article from the Sierra Club, an environmental organization operating in all 50 states, mentions the most vital part of a circular economy: “The whole point, the only point, of reusing and recycling is so we make less new stuff. And that [is] just not happening.”22 This situation boils down to the same conclusion: we can recycle all the lithium we want, but if the amount we mine is not reduced, the result will be the same.

This transition will not be easy, and the process will be by no means simple.

We will have to make new considerations regarding the recycling process itself and what happens to the chemicals needed for it to take place. In addition, competing companies could try to take shortcuts in the process, sacrificing sustainability for profitability. To remain a viable market solution in a competitive economy, companies must be able to justify the costs of recycling. Simply claiming a product or process is more sustainable is not effective if shareholders of the company are losing money on the investment. However, the opportunity is there, the companies are there, and with the right steps taken, we can transport ourselves into a cleaner future.

DISCUSSION QUESTIONS 1.

From a business perspective, what challenges may arise when aiming for a circular economy?

2.

How do you think similar ideas could be applied to other industries beyond transportation?

3.

Where else have you observed a value proposition’s deterioration as a solution was scaled, and how was the issue rectified?

28 / JOHN SACHENIK

“New Technologies for Sustainable Transport.” Eni.com, 1 Oct. 2021, www.eni.com/en-IT/sustainable-mobility/green-business.html.

2 Harper, Justin. “Tesla: Soaring Share Price Creates Army of ‘Teslanaires.’” BBC News, 29 Dec. 2020, www.bbc.com/news/ business-55391571.

3 “The Environmental Impact of Lithium Batteries.” Institute for Energy Research, 12 Nov. 2020, www.instituteforenergyresearch.org/renewable/the-environmental-impact-of-lithium-batteries.

4 Fawthrop, Andrew. “Global Lithium Demand to More than Double by 2024, Say Analysts.” NS Energy, 9 Oct. 2020, www. nsenergybusiness.com/news/industry-news/global-lithium-demand-2024.

5 Jacoby, Mitch. “It’s Time to Get Serious About Recycling Lithium-Ion Batteries.” Chemical and Engineering News, 2019, www.cen.acs.org/materials/energy-storage/time-serious-recycling-lithium/97/i28.

6 “Battery Recycling Is Important for Environmental Health.”

Gallegos Sanitation, 20 Jan. 2020, www.gsiwaste.com/battery-recycling-is-important-for-environmental-health.

7 Jacoby.

8 Gaines, Linda. “Lithium-Ion Battery Recycling Processes: Research Towards a Sustainable Course.” Sustainable Materials and Technologies, vol. 17, Sept. 2018, www.doi:10.1016/j. susmat.2018.e00068.

9 “Tesla Q4 2020 Vehicle Production & Deliveries.” Tesla, 2 Jan. 2021, ir.tesla.com/press-release/tesla-q4-2020-vehicle-production-deliveries.

10 “Tesla Gigafactory 2.” Tesla, www.tesla.com/gigafactory2.

11 Bekmagambetova, Dinara. “Two-Thirds of North Americans Prefer Eco-Friendly Brands, Study Finds.” Barrons, 10 Jan. 2020, www.barrons.com/articles/two-thirds-of-north-americans-prefer-eco-friendly-brands-study-finds-51578661728.

12 Wade, Lizzie. “Tesla’s Electric Cars Aren’t as Green as You Might Think.” Wired, 2016, www.wired.com/2016/03/teslaselectric-cars-might-not-green-think.

13 Karidis, Arlene. “Redwood Materials Works to Close 1

JOHN SACHENIK

the Loop on Lithium-Ion Batteries.” Waste360, 9 Mar. 2021, www.waste360.com/recycling/redwood-materials-works-close-loop-lithium-ion-batteries.

14 Carney, Dan. “Ex-Tesla CTO Straubel Is Recycling Batteries at Redwood Materials.” Design News, 2 Mar. 2021, www.designnews.com/materials/ex-tesla-cto-straubel-recycling-batteries-redwood-materials.

15 Alamalhodaei, Aria. “Recycling Startup Redwood Materials Is Partnering with Proterra to Supply EV Battery Materials Sustainably.” TechCrunch, 29 Mar. 2021, www.techcrunch. com/2021/03/29/recycling-startup-redwood-materials-is-partnering-with-proterra-to-supply-ev-battery-materials-sustainably.

16 “Tesla Cash on Hand 2009-2021.” Macrotrends, www.macrotrends.net/stocks/charts/TSLA/tesla/cash-on-hand.

17 “About Tesla.” Tesla, www.tesla.com/about.

18 Tabuchi, Hiroko, and Brad Plumer. “How Green Are Electric Vehicles?” The New York Times, 2 Mar. 2021, www.nytimes. com/2021/03/02/climate/electric-vehicles-environment.html.

19 Lienert, Paul, et al. “The Musk Method: Learn from Partners Then Go It Alone.” Reuters, 17 Sept. 2020, www. reuters.com/article/us-tesla-batteryday-technology-insight-idUKKBN2680K4.

20 Higgins, Tim. “One of the Brains Behind Tesla May Have a New Way to Make Electric Cars Cheaper.” The Wall Street Journal, 29 Aug. 2020, www.wsj.com/articles/one-of-thebrains-behind-tesla-found-a-new-way-to-make-electric-carscheaper-11598673630.

21 Jacoby.

22 Cline, Elizabeth L. “Will the Circular Economy Save the Planet?” Sierra Club, 23 Dec. 2020, www.sierraclub.org/ sierra/2021-1-january-february/feature/will-circular-economy-save-planet.

Photo Credits: Ilija Erceg/Shutterstock—page 24 Roman Babakin/Shutterstock—page 26

CLASS OF 2024, FINANCE AND DATA SCIENCE "I’ve always been fascinated by technological innovations like electric cars. They give us an optimistic view of a future where problems like emissions can be outsmarted by new tech.

However, in the case of sustainability, the solution is rarely that simple. By anticipating the new problems that may arise with electric vehicles, I hoped to show that we must refocus on the entire picture.”

TRANSPORTING INTO A MORE SUSTAINABLE FUTURE / 29

SEA CHANGE AND PEKALONGAN ONE STEP TOWARD SUSTAINABLE BATIK

ESSAY BY

NICOLETTE HENDRAWINATA

In Indonesia, a thriving industry has grown out of a traditional art form known as batik, or wax-resist printing on fabric; however, the waste from these textiles threatens marine ecosystems near major producing cities. Author Nicolette Hendrawinata explores a partnership between the government of Pekalongan and a wastewater treatment startup as a potential solution to this issue.

F

or many Indonesians, the age-old tradition of wearing batik remains alive and well.

Though intricately designed batik fabrics were once reserved for Javanese nobility, batik is now worn by Indonesians from all backgrounds as a way to cherish their rich cultural and historical identity.

Batik’s popularity as a contemporary commodity has given rise to a flourishing industry sustained by home-based producers operating in cities across Java.

One of the largest batik-producing cities, Pekalongan, originated as a seaport and marine fishing center but has prospered as a notable batik trading center since the early 19th century.1 Currently, with 585 small and medium enterprises (SMEs) spread over 18 urban communities, the batik industry has outgrown nearly all other business sectors in Pekalongan. Batik enterprises around the city employ a total workforce of about 8,200 people, which comprises a little over 70 percent of Pekalongan’s industrial labor force.2 The extensive expansion of the batik industry has allowed it to serve as the

32 / NICOLETTE HENDRAWINATA

backbone of Pekalongan’s economy; however, it is also the cause of a growing environmental problem. Most modern batik production methods generate liquid waste containing toxic synthetic dye residuals that must undergo treatment before it can be released into the environment. Unfortunately, the limited capacities of communal wastewater treatment plants (WWTPs) and the high cost of household-scale treatment systems induce batik producers to discharge wastewater directly into sewers.3 This method of disposing liquid waste has significantly reduced water quality in Pekalongan. A 2018 study revealed alarming levels of heavy metals in the groundwater of Jenggot, one of Pekalongan’s largest batik-producing urban communities. 4 In addition, Pekalongan Mayor Saelany Machfudz has recently expressed his concern that water pollution produced by the batik industry will negatively impact the city’s fisheries sector.5 The problem of batik-based pollution in Pekalongan requires a solution that considers both the industry’s harmful

effects on the environment and the important role batik plays in the city’s economy. The local government of Pekalongan has initiated various efforts to tackle the issue with these considerations in mind, including constructing communal wastewater treatment plants and holding sustainable batik-related events. However, as technical and funding limitations still challenge the effectiveness of these initiatives, the local government should complement its efforts to fight batik pollution with a business-centric solution: a strategic partnership with SeaChange Technologies, a wastewater treatment startup based in North Carolina.

PRIOR GOVERNMENT INITIATIVES AND THEIR LIMITATIONS

Despite being hindered by technical and funding issues, the local government of Pekalongan has moved toward enforcing sustainability in the batik industry. In recent years, two notable government initiatives have aimed to address the root of the pollution problem by increasing access to liquid waste treatment: the construction of communal WWTPs in

batik industrial areas and the organizing of clean production seminars for batik entrepreneurs.

To date, the local government has finished the construction of communal WWTPs in four batik industrial regions: Jenggot, Kauman, Pringlangu, and Banyurip. Even though the installation of communal WWTPs drastically increased access to water treatment, the four existing facilities still did not hold enough combined capacity to fully process liquid waste from all of the batik-producing urban communities in Pekalongan. In a 2019 interview, Environmental Pollution Control Official Erwin Setiawan disclosed that the communal WWTPs only have the capacity to treat 45 percent of the five million liters of wastewater generated by batik production each day.6 Moreover, wastewater treatment in existing communal facilities has been hindered by technical difficulties that occur when the plants are put into action. Slamet Budiyanto, a public health official and researcher from Diponegoro U n i ve r s i t y, e x p l a i n e d t h a t t h e s e technical complications arise because Pekalongan is located in a coastal region with relatively flat terrain. This kind of landscape is unsuitable for the current Constructed Wetlands treatment system, which requires some degree of change in elevation so that water can spread evenly throughout the wetlands. As a result, water treatment infrastructures in batik industrial centers, especially communal WWTPs with irregular maintenance, frequently experience leaks and blockages that decrease their efficiency.7 In response to the limited capacities and technical issues of the communal treatment system, the government of Pekalongan organized a clean production seminar in 2019 to convince batik SMEs not to rely only on communal WWTPs, but also to invest in individual householdscale treatment plants.8 Further research revealed, however, that the solution proposed during the 2019 seminar still had its shortcomings. To install and maintain a household-scale wastewater treatment plant with a capacity of 150

cubic meters, batik SMEs would need to invest approximately $70,000 with an operating cost of $6,000 each year. As the estimated average revenue of batik production is only $23,000 per year, most SMEs likely could not afford to install or maintain adequate household-scale wastewater treatment systems even if they intended to do so.9 T h e i n st a l l a t i o n o f c o m m u n a l WWTPs and the holding of informational seminars could provide a foundation for a more sustainable batik industry by increasing access to water treatment and raising producer interest in individual treatment systems. Nonetheless, for these initiatives to be fully effective, the local government must enhance its campaign with complementary strategies that can overcome the limited capacity of communal facilities and the high cost of household-scale water treatment systems.

PARTNERSHIP WITH SEACHANGE TECHNOLOGIES: A COMPLEMENTARY STRATEGY

The local government of Pekalongan has previously relied on internal resources and funding to sustain its fight against batik pollution. In light of the limitations posed by this dependency, the government should complement its efforts with support from external firms who are working in the field of sustainable production. Specifically, the government should pursue a partnership with North Carolina based startup SeaChange Technologies to supply batik SMEs with low cost household-scale wastewater treatment plants.

SeaChange Technologies specializes in developing wastewater treatment systems for apparel and textile manufacturing.

In its pilot project report, the company recognized dyehouse operations as the most damaging component of apparel production because it generates toxic sludge that cannot be disposed of safely without expending tremendous costs.

In response to this issue, SeaChange developed a solution in the form of Starling: a water treatment prototype designed to treat toxic sludge generated

by dye houses in an energy efficient, single step process.10 The Starling system produces a final byproduct of dry mineral solids, which is safer and easier to handle since it eliminates the need for replaceable filters or membranes.11 S e a C h a n g e ’s i n n ov a t i v e w a t e r treatment system would serve as a promising waste management alternative for batik SMEs that do not have access to communal facilities or cannot afford conventional WWTPs. With its straightforward single step process and solid final byproduct, the Starling system promises a lower logistical cost that will be well-suited for a batik SME’s limited budget. Aside from being cost efficient, Starling is also an attractive treatment option because its compact and scalable apparatus can be more easily integrated into the highly specialized manufacturing process of traditional batik.12 The presence of this practical and affordable WWTP in the market will induce more batik SMEs to install household-scale wastewater treatment systems, thus decreasing the workload of communal facilities and reducing batik-based pollution in Pekalongan.

While SeaChang e’s role in the partnership is to act as a WWTP supplier, the government will help by acting as a middleman between SeaChange and local batik producers. Government involvement in this case is crucial because, notwithstanding its immense market potential, SeaChange’s status as a foreign firm means that its integration into a highly traditional industry like batik manufacturing requires some degree of internal support. As Pekalongan’s frontrunner in the fight against batik pollution, the local government is currently the best candidate to provide this kind of sponsorship. The government can incorporate its support of SeaChange into ongoing and future initiatives, with viable strategies including providing a platform for SeaChange in sustainable batik seminars or helping to facilitate discussions with local batik entrepreneurs.

With each side playing its respective role, the partnership between SeaChange

SEA CHANGE AND PEKALONGAN / 33

“

With its straightforward single step process and solid final byproduct, the Starling system promises a lower logistical cost that will be well-suited for a batik SME’s limited budget.”

and the local government can become an effective strategy in building a more sustainable batik industry. The presence of SeaChange in the market for householdscale WWTPs can help reduce batik SMEs’ reliance on communal wastewater treatment systems. Meanwhile, the promotion of a specific WWTP supplier like SeaChange in sustainable batik seminars could further strengthen producer interest toward household-scale wastewater treatment.

PARTNERSHIP WITH SEACHANGE TECHNOLOGIES: POTENTIAL RISKS

Even though the partnership between Pekalongan and SeaChange Technologies promises considerable value for the city, the venture has some potential risks.

From the perspective of SeaChange, the greatest risk lies in entering the Indonesian market. In February 2020, students from Imperial College London analyzed opportunities for SeaChange to enter the market in five countries— including Indonesia—but concluded that the company should focus on entering markets in Taiwan and Vietnam. The students advised SeaChange to maintain

34 / NICOLETTE HENDRAWINATA

relationships with key Indonesian stakeholders but delay market entry because Indonesia still has relatively low levels of environmental regulation, which may result in lower consumer interest in wastewater treatment.13 Despite the local government’s role in the partnership, low environmental regulation in Pekalongan and Indonesia is not a problem that can be solved swiftly. Research from Diponegoro University, for instance, reveals a poor level of local compliance amongst small batik producers required to apply for a wastewater disposal permit.14 By agreeing to supply wastewater treatment for the batik SMEs of Pekalongan, SeaChange runs the risk of business losses by ignoring the recommendations of its Imperial College advisors.

A PARTNERSHIP FOR THE FUTURE OF BATIK

The potential partnership between SeaChang e Technologies and the Pekalongan government demonstrates how businesses can help to mitigate pollution caused by batik production.

Due to ongoing technical and funding

limitations of government solutions, support from a sustainable technology company like SeaChange is necessary for the city of Pekalongan to achieve a fully sustainable batik industry. To provide a higher incentive for foreign firms, partnerships with the private sector must be paired with efforts from the local government to enforce higher levels of environmental regulation within the region. With this public-private partnership, the beautiful clothing and designs that are unique to Indonesia can continue to flourish without harming the environments of batik-producing cities.

DISCUSSION QUESTIONS 1.

Should SeaChange Technologies enter the Indonesian market given the current state of environmental regulations in the country?

2.

Can you think of another instance in which the preservation of tradition has led to unintended downsides?

How might this conflict be resolved?

Hayati, Chusnul. “Pekalongan Sebagai Kota Batik.” Lensa, vol.

2, no. 1, 2012.

2 Astuty, Ernany Dwi. “Conditions of the Existence of Cluster Development Business Batik Pekalongan City, Central Java, Indonesia.” European Journal of Business and Management, vol.

6, no. 12, 2014.

3 Romadhon, Yuki Aliffeneur. “Kebijakan Pengelolaan Air Limbah Dalam Penanganan Limbah Batik di Kota Pekalongan.”

Insignia, vol. 4, no. 2, 2017, pp. 49-64.

4 Budiyanto, Slamet, et al. “Environmental Analysis of the Impacts of Batik Waste Water Pollution on the Quality of Dug Well Water in the Batik Industrial Center of Jenggot Pekalongan City.” International Conference on Energy, Environmental and Information System, 2017.

5 “Gandeng Unsoed, Pemkot Pekalongan Tangani Limbah Batik Pakai Jamur.” Protokol, 20 Nov. 2020, www.protokol.pekalongankota.go.id/berita/gandeng-unsoed-pemkot-pekalongan-tangani-limbah-batik-pakai-jamur.html.

6 Susanto, Budi. “DHL Kota Pekalongan Sadari Baru 45 Persen Limbah Batik Terolah IPAL, Sisanya Terbuang ke Sungai.” Tribunjateng, 9 Apr. 2019, www.jateng.tribunnews. com/2019/04/09/dlh-kota-pekalongan-sadari-baru-45-persen-limbah-batik-terolah-ipal-sisanya-terbuang-ke-sungai.

1

NICOLETTE HENDRAWINATA

Budiyanto, Slamet. Personal interview. 15 Mar. 2021.

“Pencemaran Limbah Cair Industri Diseminarkan.” Pemerintah Kota Pekalongan, 17 Dec. 2019, www.pekalongankota.go.id// berita/pencemaran-limbah-cair-industri-diseminarkan.html.

9 Sulthonuddin, Ihya, et al. “Sustainability of Batik Wastewater Quality Management Strategies: Analytical Hierarchy Process.”

Applied Water Science, Feb. 2021, 9.

10 “A Ground-Breaking Innovation in Wastewater Treatment.”

Fashion For Good, July 2020, www.fashionforgood.com/ wp-content/uploads/2020/07/Wastewater_Treatment_Pilot_ Fashion_for_Good__SeaChange.pdf.

11 “Our Solution.” SeaChange Technologies, www.seachangetechnologies.com/solution.

12 Ibid.

13 “A Ground-Breaking Innovation in Wastewater Treatment.”

14 Nurhidayat, Andry. “Kebijakan Pemerintah Kabupaten Pekalongan Dalam Pengelolaan Limbah Batik.” Departemen Politik dan Pemerintahan FISIP UNDIP Semarang, 14.

7

8

Photo Credits: Raditya/Shutterstock—page 30 Camille Bismonte/Unsplash—page 32 Anonymous/PxHere—page 34

CLASS OF 2024, ACCOUNTING

“When I was in high school back in Indonesia, I learned how to batik on a small scale, but even then, I was conscious of how difficult it is to dispose of the waste created. Environmental conservation should not come at the expense of preserving traditional arts. Governments and private companies should work together to find a solution that can protect both.”

SEA CHANGE AND PEKALONGAN / 35

IMPROVING

SUSTAINABILITY IN METAL

PRODUCTION

ESSAY BY

ANDREW SLEDESKI

A nickel-excavating company operating in Russia, Norilsk Nickel, has the means to reduce the substantial environmental damage it does through its operations by turning to cleaner energy sources and an improved nickel smelting method.

M

ining stands out as one of the world’s most environmentally damaging industries, accounting for four to seven percent of global greenhouse gas emissions annually.1 The energy-intensive process of extracting metal from impure ore contributes to high levels of carbon dioxide emissions through electricity usage and the burning of fossil fuels.

Removing raw materials from below the earth’s surface and smelting out impurities inherently create conditions for air pollution. As impurities evaporate and chemically bind with gas particles, trapped gases and pollutants in the ore are emitted into the atmosphere.

Numerous steps in the process of mining and refining nickel emit pollution.

Excavating ore releases toxic dust clouds of crushed metals, transporting and melting ore requires massive amounts of energy, and removing impurities results in clouds of sulfur dioxide as byproducts. These challenges demonstrate that cleaning up the complex and outdated operations of a mining corporation requires a multipronged approach.

The responsibility of a single sector for such a large proportion of global pollution indicates the long-term lack of sustainability of traditional mining methods. As the demand for nickel grows in the coming years, the nickel mining industry will need to employ strategies to prevent emissions from rising proportionally to demand. Sustainable mining practices and controlling emissions are integral to the industry’s longterm stability and profitability. Mining corporations such as Norilsk Nickel can lower their environmental footprint and generate value for stakeholders by fully adopting cleaner smelting technologies and finding innovative sources of renewable energy to power their production lines.

CURRENT PRACTICES ENDANGER HUMAN HEALTH

Historically, Nornickel has demonstrated an abysmal track record by causing widespread environmental damage both around

38 / ANDREW SLEDESKI

its headquartered city of Norilsk in Siberia, as well as on a global scale. Airborne metals, gas emissions, and oil spills have led to local spikes in respiratory illnesses and mortality rates as well as the destruction of large tracts of tundra land.2 Even more alarmingly, Nornickel is regarded as the single greatest source of sulfur dioxide pollution in the world, accounting for around half of Russia’s total sulfur dioxide emissions through its Norilsk smelting plant alone.3 High levels of atmospheric sulfur dioxide are responsible for a host of documented environmental and health hazards. Airborne gaseous sulfur dioxide combines with rain particles to create acid rain, which leads to the destruction of forests, harm to aquatic ecosystems, and damage to building materials. High concentrations of sulfur dioxide also cause respiratory damage, irritation of the eyes, and aggravate existing respiratory illnesses.4

LEVERAGING FLASH SMELTING TECHNOLOGY

Flash smelting stands out as a promising technology already implemented by many nickel mines around the world to both reduce sulfur dioxide emissions and increase smelting efficiency. Compared to a traditional electric furnace, flash smelters combine the roasting and melting stages in one furnace. Doing so allows the furnace to efficiently capture the sulfur dioxide emissions formed when the molten metal mixture reacts with air in the smelter.

Flash smelters also require much less energy to operate and come with reduced operating costs and down time.5 Replacing the outdated sulfur dioxide capture methods currently used in Nornickel’s plants with flash smelters can substantially mitigate global sulfur dioxide emissions. Currently, an estimated 80 percent of Nornickel’s sulfur dioxide byproducts are released into the atmosphere, resulting in around two million tons of sulfur dioxide emissions leaving the company’s factories annually.6 Past examples of updating other mining companies with flash smelters have led

to a 99.9 percent capture rate of sulfur dioxide from furnaces.7 If Nornickel can replace outdated furnaces in all of its production facilities with flash smelters, it could capture most of its sulfur dioxide emissions, effectively eliminating the equivalent of the entire annual sulfur dioxide pollution of the United States.8 The largest barrier to the widespread implementation of flash smelters for Nornickel is the high cost of such an upgrade. Recently, Nornickel announced a contract of $110 million with smelter c o m p a ny Met s o O u t ot e c f o r t h e replacement of outdated furnaces with flash smelters.9 This contract will result in the modernization of one of two smelting lines in a single smelting plant in Norilsk. Expanding this project outward to cover all of Nornickel’s operations would mean spending over $100 million per smelting line. More recently, one of Nornickel’s proposed sulfur capture plans for two of its plants is anticipated to cost the company $4.1 to $4.3 billion in the process of retrofitting gas-cleaning units and expanding emission neutralization infrastructure. 10 This investment constitutes about nine percent of the company’s entire market capitalization.

SHIFTING TO RENEWABLE ENERGY FOR POWER

In addition to improving sulfur dioxide capture methods, mining companies can also make a significant reduction in their environmental footprint by reducing carbon emissions with renewable energy investments. These companies can seek renewable energy from various local sources to offset some of the high carbon emissions generated in the smelting process. For Nornickel, renewable energy can be found in the form of hydroelectric power generated in one of the many dams connected to the Siberian electric grid.

Mines in other countries or even other parts of Russia with different geographical features can find renewable energy through other sources like solar, wind, or geothermal power plants.

Hydropower is on average considered to be one of the cheapest sources of

“

Flash smelting stands out as a promising technology already being implemented by many nickel mines around the world to both reduce sulfur dioxide emissions and increase smelting efficiency.”

electricity at an estimated $0.039 per kilowatt.11 This sum falls below the price of electricity sourced from natural gases or fossil fuels, meaning Nornickel can reduce its operating costs by deriving a greater proportion of its energy requirements from renewable hydropower.

Recently, Nornickel has expanded its use of hydropower, with some plants sourcing up to 45 percent of their electricity from hydropower.12 Nornickel’s current source of hydropower comes from large plants built on the nearby Yenisei River, which generate hundreds of megawatt-hours each. 13 Research has shown, however, that smallscale plants may be able to provide even cheaper electricity than larger plants and do not require active personnel watching them.14 Investing in a combination of smallscale hydropower plants in combination with current large-scale plants could lead to lower electricity prices and a decreased reliance on fossil fuels.

Compared to large hydropower plants which generate hundreds of megawatts of electricity, small-scale plants are those which generate only up to ten megawatts in total. These small-scale plants offer several benefits in their flexibility of installation compared to larger plants. Although they generate less electricity, smaller plants

require a smaller change in the elevation of water in a river, otherwise known as the gross head. Often, only around ten feet is required to generate a relatively significant amount of electricity.

These smaller projects simply use a pipeline that runs through a power station, rather than a large dam. This difference means that small-scale hydropower causes less environmental damage and requires less oversight and management of the various factors, such as temperature changes and water oxygen depletion, that a conventional hydroelectric dam would need to consider.15 Even though smaller hydropower plants generate significantly less electricity per unit, they are far easier to install than dams and have greater flexibility in their placement on a river.

Their simpler design means installation expenses and operating costs will also be lower than larger plants. By installing multiple small hydropower units around the Yenisei River between the larger dams, Nornickel could improve hydropower generation at a proportionally cheaper upfront cost and operating expense. This strategy could allow the company to use a greater proportion of hydroelectric energy over fossil fuel-derived electricity, saving

money and reducing environmental damage at the same time.

Harnessing environmentally friendly technologies like flash smelters and hydropower holds the potential to bring Nornickel both long-term and shortterm profits. The increased efficiency and decreased operating expenses of flash smelters will lower costs for years to come. Increased hydropower will do the same by providing a cheaper and cleaner alternative to fossil fuel-derived electricity.

A PLAN THAT CREATES VALUE FOR STAKEHOLDERS

Another major factor to consider concerns the increased desirability for Nornickel’s products that will arise from reversing its environmentally disastrous image. Electric vehicles, for example, are a major market for Nornickel, as highlighted in its annual reports. Electric car batteries require high-grade nickel as a component.16 Nornickel is currently well-positioned to capture a large portion of this growing electric vehicle battery market.

Most electric car manufacturers depict themselves as an environmentally friendly alternative to traditional vehicles,

IMPROVING SUSTAINABILITY IN METAL PRODUCTION / 39

NORNICKEL AS A CATALYST FOR CHANGE

W h i l e e xt r e m e e nv i r o n m e n t a l pollution from companies like Nornickel has historically faced relatively low backlash, governments, social groups, and global business coalitions place greater importance on sustainable management today. Upgrading to flash smelting production lines and building small-scale hydropower plants will come with high upfront costs; however, shareholders should understand that the stability and long-term financial benefits these investments present outweigh the steep initial costs required. Gradual investments in hydropower and flash smelting are fully possible given Nornickel’s sizable market capitalization. By expanding investments in cleaner smelting and renewable energy, Nornickel will generate profit for its shareholders and simultaneously bring value to local and global stakeholders affected by its current environmental pollution.

so having a sustainable corporate image that agrees with this portrayal would be essential to a potential supplier like Nornickel. Revising Nornickel’s image as a company focused on minimizing environmental pollution in its operations can appeal to potential customers who are seeking cleanly sourced high-grade nickel. Tesla founder Elon Musk has already promised a lucrative and longterm contract to companies that can produce sustainable and environmentally friendly nickel.17 Securing deals with more electric vehicle companies can provide a financial windfall for Nornickel once it demonstrates a reduced environmental footprint from widespread flash smelting adoption and increased hydropower.

Nornickel can publicize its environmental cleanup efforts to market its cleaner highgrade nickel to environmentally conscious electric vehicle companies.

In addition to providing tangible financial benefits to Nornickel, investing in flash smelting and hydropower will

40 / ANDREW SLEDESKI

result in significant improvements for other stakeholders affected by Nornickel.

The community surrounding Norilsk, specifically the company’s workers and their families, will benefit from safer environmental conditions as the reduced levels of atmospheric sulfur dioxide lower artificially high levels of respiratory illnesses. The population around Norilsk and the nearby tundra also includes indigenous tribes, who stand to gain improved hunting and fishing grounds as a result of cleaner rivers and forests.

Investments in Nornickel’s smelting lines can make significant advancements in the United Nations Sustainable D e ve l o p m e n t G o a l s. S p e c i fi c a l l y, Nornickel can work to improve the goals focused on good health and wellbeing, responsible consumption and production, climate action, life below water, and life on land. Cleaner production methods will lead to cleaner ecosystems and better health for populations around Norilsk and beyond.

DISCUSSION QUESTIONS 1.

What market conditions have incentivized companies to focus on their carbon footprint?

2.

As the author notes, metals (and metal mining) are essential for transitioning to a future that relies on renewable energy. A majority of metal mining is conducted on indigenous land. Can we find a balance between protecting the rights of indigenous peoples and a clean energy future?

Delevingne, Lindsay. “Climate Risk and Decarbonization: What Every Mining CEO Needs to Know.” McKinsey & Company, 28 Jan. 2020, www.mckinsey.com/businessfunctions/sustainability/our-insights/climate-risk-anddecarbonization-what-every-mining-ceo-needs-to-know.

2 “Norilsk, Russia.” Pure Earth, www.worstpolluted.org/ projects_reports/display/43.

3 Nilsen, Thomas. “Norilsk Tops World’s List of Worst SO2 Polluters.” The Barents Observer, 21 Aug. 2019, www. thebarentsobserver.com/en/2019/08/norilsk-tops-worlds-listworst-so2-polluters.

4 “Sulfur Dioxide.” Queensland Government, 27 Mar. 2017, www.qld.gov.au/environment/pollution/monitoring/air/airpollution/pollutants/sulfur-dioxide.

5 Moats, Michael S. “Flash Smelting.” ScienceDirect, 2014, www. sciencedirect.com/topics/engineering/flash-smelting.

6 Inozemtsev, Vladislav. “How Nornickel Became the Arctic’s Biggest Polluter.” The Moscow Times, 28 Sep. 2020, www. themoscowtimes.com/2020/09/28/how-nornickel-becamethe-arctics-biggest-polluter-a71572.

7 “Outotec Flash Smelting Technology.” Metso Outotec, 2014, www.mogroup.com/globalassets/210617_mo_flash_smelting_ technology_brochure_update-hr.pdf.

8 Inozemtsev.

9 Gleeson, Daniel. “Metso Outotec to Modernise Norilsk Nickel’s Nadezha Smelting Line.” International Mining, 17 Dec. 2020, www.im-mining.com/2020/12/17/metso-outotec-to1

ANDREW SLEDESKI

modernise-norilsk-nickels-nadezhda-smelting-line.

10 “Sulphur Programme.” Nornickel, www.nornickel.com/sustainability/environment/sulphur.

11 “Your Guide to Renewable Energy.” Renewable Energy Sources, 2019, www.renewable-energysources.com.

12 “Use of Renewables and Energy Efficiency.” Nornickel, 2019, www.ar2019.nornickel.com/sustainable-development/climatechange/use-renewables-energy.

13 “Gas and Energy Assets.” Nornickel, 2019, www.ar2017. nornickel.com/pdf/ar/en/business-group_gas-and-energy.pdf.

14 “Hydropower.” RusHydro, www.eng.rushydro.ru/industry/history.

15 “Small Hydropower Systems.” U.S. Department of Energy,July 2001, www.nrel.gov/docs/fy01osti/29065.pdf.

16 “Key Trends in the Nickel Market.” Nornickel, 2019, www. ar2017.nornickel.com/metals-market/nickel.

17 Nilsen, Thomas. “Russian Indigenous Groups Call on Elon Musk Not to Buy Battery Metals from Nornickel.” The Barents Observer, 7 Aug. 2020, www.thebarentsobserver. com/en/ecology/2020/08/russian-indigenous-peoples-callelon-musk-not-buy-battery-metals-nornickel.

Photo Credits: Alexander Chizhenok/Shutterstock—page 36 Usoltev Kiril/Shutterstock—page 39 Paul Pix/Shutterstock—page 40

CLASS OF 2024, FINANCE AND BIOLOGY

“I have always been interested in studying the effects and degree of climate change and pollution, of which mining is a major culprit. Specifically, I am most curious about the ways in which new technology can help drastically lower our environmental footprint.”

IMPROVING SUSTAINABILITY IN METAL PRODUCTION / 41

BANCO2 :

INCENTIVE-BASED CONSERVATION IN MEDELLÍN

In his essay, author Aman Kumar calls on BancO2, a sustainability initiative run by Colombia’s largest bank, to lift Medellín’s displaced population out of poverty by compensating them for environmental conservation efforts.

ESSAY BY

AMAN KUMAR

T

hirty years ago, Medellín, Colombia was one of the m o st d a n g e r o u s c i t i e s in the world. As the city struggled with uncontrolled crime, poverty, and underdevelopment, the government was compelled to act, and Medellín rebranded itself over the next two decades. 1 In 2011, Medellín introduced the Metropolitan Green Belt, an “extensive urban park” around the city’s outskirts designed to improve living conditions and combat climate change.

The trade-offs became apparent, however, when the initiative displaced over 14,000 local families, limiting their access to employment and public services.2 Environmental gentrification—the phenomenon by which environmental initiatives increase property values and displace underserved communities— holds new relevance for Medellín and its most vulnerable residents.3 In response to the Green Belt issue, Medellín’s government rolled out the Metrocable, an aerial tram system that connected excluded remote communities to the city center.4 This solution, however, was costly and time-consuming and did not solve the root cause of the issue.5 A new business solution that compensates underserved communities for protecting the natural ecosystem where they reside should be implemented to reduce economic instability and inequality for the displaced while improving Medellín’s climate change preparedness.

THE ROOT OF INEQUALITY

Acclaimed as a testament to successful “green urbanism,” Medellín’s Green Belt initiative quickly became associated with environmental injustice. While the construction of the 72-kilometer p a r k e xt e n d e d p e d e st r i a n p a t h s, controlled urban sprawl, and improved accessibility, it simultaneously displaced thousands of low-income families. 6 Beyond physical displacement, the initiative hurt long-term socioeconomic mobility as well. Displaced communities suffered high unemployment and lost direct access to services like healthcare,

education, and groceries.7 Nevertheless, these are consequences of Medellín’s environmental gentrification and not its root cause.

Medellín faces a striking wealth and power gap. Its comunas, poor and overpopulated settlements along the outskirts of the city, remain a physical indicator of class divide.8 In prioritizing the “pleasure and recreation” of affluent communities over the “livelihood” of the underserved, the introduction of the Green Belt simply exacerbated this inequality problem.9 Reminiscent of the povertystricken, cartel controlled Medellín of the 20th century, the Green Belt highlights the futility of environmental initiatives without a focus on equity. Solutions to gentrification ought to prioritize the needs of the underserved over the desires of the more privileged.

Most concerningly, gentrification perpetuates a dangerous cycle of displacement. Already facing reduced purchasing power due to lack of employment and resource inequity, displaced communities are especially vulnerable. The new living situation these communities were forced into only worsened these issues. Located right outside the Green Belt, Medellín’s El Poblado comuna contains large buildings built on “unstable sandy soil.”10 Its residents are not only economically disadvantaged, but they are also at high risk of natural disasters such as landslides.

The economic and environmental hazards faced by these underserved populations can lead to lasting damage. Potential solutions need to put a complete stop to this cycle rather than simply mitigate its consequences.

Medellín’s underserved face the environmental cost of gentrification: losing out on green amenities like the Green Belt. For instance, as Green Belt developers displaced several “farming communities,” low-income farmers lost easy access to the city center and faced higher distribution costs.11 To further complicate this issue, many low-income residents were forced into comunas, overcrowded neighborhoods that are

BANCO2: INCENTIVE-BASED CONSERVATION IN MEDELLÍN / 43

often situated along steep mountains.12 Especially vulnerable to climate realities, these underserved communities arguably have a much greater need for green resources than their affluent counterparts.

Future solutions to displacement must account for these spatial and environmental inequalities.

The inefficient allocation of green resources appears to be a common theme.

Had Medellín better accounted for class divide or the socio-environmental consequences of displacement in constructing the Green Belt, it could have addressed inequities rather than perpetuating them. Today, communities around the world use the “just green enough” metric, which assesses a community’s green infrastructure to encourage environmental investment, but not to the point of gentrification.13 Medellín should consider such measures in implementing future green initiatives.

Further, sustainable solutions to the city’s gentrification problem must directly address long-standing inefficiencies in the allocation of green resources.

PAST SUCCESSES AND FAILURES

Medellín has implemented several policies to address its deep-rooted poverty and inequality. Notable initiatives include a “slum-upgrading program,” aimed at infrastructure improvements in Medellín’s comunas, as well as an allocation of five percent of the municipal budget to underserved communities. 14 However, while Medellín’s social urbanism initiatives offer short-term reprieve, they fail to offer lasting community improvement benefits.

Despite efforts to improve socioeconomic mobility for the underserved, over 30 percent of Medellín’s population lives in poverty and its Gini coefficient—a measure of income inequality—continues to be over nine times higher than Colombia’s average.15 Seeking to implement a long-term solution to the Green Belt issue, the government of Medellín launched the Metrocable in collaboration with publicly owned Medellín Metro.16 First introduced in 2004, the cable car system reduced

44 / AMAN KUMAR

commute times and transportation costs for displaced communities living on the city’s outskirts.17 Unlike past social urbanism initiatives, the Metrocable addressed the needs of marginalized communities more directly. After the Metrocable was introduced, Medellín’s poverty rate fell by two-thirds. 18 Considering Medellín’s challenging past, the Metrocable is evidence of the city’s renewed commitment to inclusive and sustainable development.

The Metrocable initiative’s greatest shortcoming is its high underlying costs in the short-term. The Medellín government spent over $70 million over ten years before the cable car reached full operational capacity.19 The government could have partially reallocated these funds toward quicker and more cost-efficient means of addressing displacement. As a point of comparison, in American communities with hazardous substance contamination, the EPA Brownfields Program provides immediate funding and job opportunities. 20 Ultimately, given the day-to-day economic stability and employment concerns of Medellín’s underserved, solutions to displacement ought to account for both the immediate and long-term needs of marginalized communities.

The Metrocable holds serious longterm implications. While the Metrocable improves urban connectivity, it risks exacerbating gentrification in regions around Metrocable stations, perpetuating the displacement it set out to solve in the first place.21 Medellín’s social urbanism programs have historically faced criticism for ignoring the “structural causes of previous unrest,” specifically the poverty and inequality that have long plagued the city.22 Therefore, in the context of the Green Belt initiative, the Metrocable offers a temporarily beneficial solution that disregards the root cause of displacement: the inefficient allocation of green resources. The Metrocable’s high short-term costs coupled with an inability to solve the underlying issues of inequality and gentrification suggest the need for a more tailored approach. Enter BancO2.

A NEW REMEDY TO DISPLACEMENT

BancO2, a Colombian sustainability initiative, compensates marginalized and indigenous communities for helping conserve their natural ecosystem.23 Led by Colombia’s largest bank, Bancolombia, the initiative could directly benefit displaced underserved communities living on the outskirts of Medellín. BancO2 has already compensated over 2,000 families and conserved 61,000 hectares of land.24 BancO2 requires relatively fewer resources compared to past initiatives.

A BancO2 official simply “surveys” an individual’s property, devises measurable environmental goals, and issues monthly payment upon completion of those goals.25 Moreover, its reliance on donations from businesses and individuals circumvents the millions in government spending allocated toward past initiatives.26 BancO2 can help address the underpinning factors of Medellín’s displacement. The Green Belt initiative revealed affluent residents’ desire for green amenities, even at the expense of marginalized communities. By empowering these same underserved communities to take initiative in the fight against climate change, BancO2 can mitigate Medellín’s long-standing class struggles. In aligning the socioeconomic needs of the underserved with the goals of the climate movement – and therefore the desires of affluent residents – BancO2 can generate shared value.27 For instance, BancO2’s recent partnership with farm management organization Solidaridad allowed thousands of struggling coffee farmers to supplement their wages. 28 In improving farmers’ socioeconomic standing, the partnership simultaneously benefits broader society, helping conserve the natural ecosystem in one of Colombia’s “biodiversity hotspots.”29 BancO2 also mitigates the cycle of displacement resulting from Medellín’s Green Belt. In displacing over 14,000 families, the Green Belt hurt employment opportunities and limited access to resources like healthcare and education, which can harm social mobility for generations.30 By pushing for

environmental improvement, BancO2 can increase property values in underserved communities and improve green resource allocation across underdeveloped parts of Medellín. In Colombia’s Santander region, BancO2 conserved over 4,800 hectares of forests, water bodies, flora, and fauna. 31 BancO2’s ability to spur long-term development in underserved communities suggests it can avoid the gentrification effects of initiatives such as the Green Belt.

Finally, BancoO2 addresses the environmental opportunity cost of

of the underserved. Alternatively, BancO2 directly increases underserved communities’ access to green amenities.

By incentivizing them to reduce dependency on unsustainable farming and deforestation practices, BancO2 improves climate change preparedness in the long-term.33

A QUICK FIX OR A LASTING RESOLUTION?

Despite the numerous advantages of BancO2’s model, the proposed solution also carries potential risks. One major

ineligible to receive remuneration from BancO2. BancO2 addresses this situation by allowing families to conserve any land area at risk of degradation—such as a forest or water body—as long as they inhabit it.35 By providing financial and non-financial incentives to families and businesses alike, BancO2 empowers underserved communities to defend against future threats of displacement.

Furthermore, the threat of potential conflicts between stakeholders still remains. Environmental gentrification in Medellín persists largely due to the

“

The Green Belt highlights the futility of environmental initiatives without a focus on equity.”

gentrification. Displaced families not only lose out on employment and key resources but also on green amenities such as the Green Belt’s antilandslide safeguard.32 BancO2 uniquely differentiates from past initiatives. While Medellin’s slum-upgrade program and the Metrocable improved quality of life in the short-term, they disregarded the long-standing environmental concerns

risk is the lack of incentive for businesses to donate. Businesses may feel the program’s reputation and marketing benefits do not justify its financial costs.

BancO2 mitigates this issue by providing a 25 percent tax deduction for donor businesses on top of intangible benefits like brand recognition.34 Another risk is faced by comuna families without large tracts of land, who may worry about being

divide between underserved and affluent communities. Though BancO2’s initiative would help reduce this gap, it would likely not drastically change the mindset of affluent residents, at least in the short-term.

Real estate developers’ prioritization of affluent home buyers is also part of the problem. In developing the Green Belt, low-income families were targeted

BANCO2: INCENTIVE-BASED CONSERVATION IN MEDELLÍN / 45

to be displaced while “higher-income neighborhoods and gated communities” remained untouched.36 BancO2 is unlikely to persuade utilitarian developers to prioritize equity in their decision-making process.

Beyond its advantages for local communities and businesses, BancO2 can benefit society as a whole. Its recent partnership with Solidaridad helped develop a “scalable mechanism” to compensate farmers, with wide-ranging benefits such as improved productivity and consistency in crop quality and yield.37 This approach increases the perunit income of Colombia’s coffee farmers, benefiting vendors or employers reliant

on their labor. Ultimately, BancO2’s focus on equity can produce a powerful “shared value” model linking company success to social progress.

COLLABORATION AND SUSTAINABILITY FOR THE FUTURE

The proposal to leverage BancO2’s unique model to aid displaced communities can alleviate poverty and inequality in Medellín while adding value for key stakeholders. As the Green Belt initiative displaced thousands of local families, communities have grown further apart, with only brief respite coming from government-run solutions.

By empowering and incentivizing

underserved communities to conserve their land—with help from businesses and individual donors—BancO2 provides a more sustainable solution to Medellín’s gentrification crisis. From marginalized to affluent communities, from local to state governments, and from small businesses to large corporations, parties across the board can expect to benefit from this shared value strategy. BancO2’s combination of climate action and inclusion serves as a powerful paradigm with potential to produce a scalable model for cities struggling with gentrification around the world.

DISCUSSION QUESTIONS 1. What different ways might stakeholders be affected by increasing property values in underserved communities?

2. What is the value inherent in “green resources” such as forests, water bodies, and flora and fauna?

AMAN KUMAR

CLASS OF 2024, FINANCE AND DATA SCIENCE

“I have witnessed the firsthand consequences of gentrification in developing countries. In my research, I came across Medellín and its unique environmental gentrification problem. Though past environmental initiatives may have failed the citizens of Medellín, I argue that an incentive-based approach is key to long term community improvement…Medellín proves that environmental initiatives often fail absent a focus on equity and long-term economic mobility.”

46 / AMAN KUMAR

“The Medellin Miracle.” Rapid Transition Alliance, 19 Dec. 2018, www.rapidtransition.org/stories/the-medellin-miracle.

2 Hart, Maria, Jillian Du, and Caroline Coccoli. “How to Prevent City Climate Action from Becoming ‘Green Gentrification.’” World Resources Institute, 12 Dec. 2019, www.wri. org/blog/2019/12/how-prevent-city-climate-action-becoming-green-gentrification.

3 “Can Neighborhoods Get Greener Without Gentrification?”

University of Minnesota Hubert H. Humphrey School of Public Affairs, 3 Oct. 2019, www.hhh.umn.edu/news/can-neighborhoods-get-greener-without-gentrification.

4 Hart, Du, and Coccoli.

5 “The Metrocable: Transport by Urban Cable Car in Medellín.”

Centre For Public Impact, 25 Mar. 2016, www.centreforpublicimpact.org/case-study/urban-cable-car-medillincolombia.

6 Anguelovski, Isabelle, Clara Irazábal-Zurita, and James J.T. Connolly. “Grabbed Urban Landscapes: Socio-Spatial Tensions in Green Infrastructure Planning in Medellín.” International Journal of Urban and Regional Research, Vol. 43, no. 1 (2018): 133–56. doi.org/10.1111/1468-2427.12725.

7 Hart, Du, and Coccoli.

8 “Metrocables in Medellin, Colombia.” Oxfam, Jan. 2021, www.oxfamilibrary.openrepository.com/bitstream/ handle/10546/621119/cs-metrocables-medellin-colombia-270121-en.pdf.

9 Anguelovski, Isabelle, James Connolly, and Anna Livia Brand.

“From Landscapes of Utopia to the Margins of the Green Urban Life” 22, no. 3 (2018): 417–36. doi.org/10.1080/13604813.2018.1 473126.

19 Anguelovski, Irazábal-Zurita, and Connolly.

11 Anguelovski, Connolly, and Brand.

12 Anguelovski, Irazábal-Zurita, and Connolly.

13 Eldridge, Matt et al. “Investing in Equitable Urban Park Systems.” Urban Institute, 2019. www.urban.org/sites/default/ files/publication/100520/investing_in_equitable_urban_park_ systems.pdf.

14 Sotomayor, Luisa. "Dealing with Dangerous Spaces: The Construction of Urban Policy in Medellín." Latin American Perspectives, Vol. 44, no. 2 (2017): 71-90. http://www.jstor.org/ stable/26178811.

15 “Medellin.” Colombia Reports, 20 July 2019, www.colombiareports.com/medellin.

16 “The Metrocable: Transport by Urban Cable Car in Medellín.”

17 Ibid.

18 Freedman, David H. “How Medellín, Colombia, Became the World's Smartest City.” Newsweek, 18 Nov. 2019, www. newsweek.com/2019/11/22/medellin-colombia-worlds-smart1

est-city-1471521.html.

19 “The Metrocable: Transport by Urban Cable Car in Medellín.”

20 Kelly, Cathleen, and Mikyla Reta. “Building Equitable, Healthy, and Climate Change-Ready Communities in the Wake of COVID-19.” Center for American Progress, 8 Oct. 2020, www.americanprogress.org/issues/green/reports/2020/10/08/491371/building-equitable-healthy-climate-change-ready-communities-wake-covid-19.

21 Hart, Du, and Coccoli.

22 “Metrocables in Medellin, Colombia.”

23 “What Do We Do at BancO2?” BancO2, 11 Mar. 2021, www. banco2.com/que-hacemos-en-banco2.

24 Ibid.

25 Oliveros, Leonardo Favio. “El 'Banco' Ambiental Que Protege Los Bosques De Norte De Santander.” La Opinión, 14 Feb. 2021, www.laopinion.com.co/zona-verde/el-banco-ambiental-queprotege-los-bosques-de-norte-de-santander.

26 “What Do We Do at BancO2?”

27 Porter, Michael E., and Mark R. Kramer. "Creating Shared Value." Harvard Business Review, 25 Aug. 2015, 28 “Solidaridad Ensures the First Transaction to Pay Producers for Their Environmental Services within Sustainable Landscapes in Colombia.” Solidaridad Network, 26 Mar. 2021, www.solidaridadnetwork.org/news/solidaridad-ensures-the-first-transaction-to-pay-producers-for-their-environmental-services-within-sustainable-landscapes-in-colombia.

29 Ibid.

30 Hart, Du, and Coccoli.

31 Oliveros.

32 Anguelovski, Irazábal-Zurita, and Connolly.

33 “What Do We Do at BancO2?”

34 Ibid.

35 “La Estrategia Que Le Paga a Los Campesinos Por Cuidar Los Ecosistemas De Colombia.” El Espectador, 11 Oct. 2017, www. elespectador.com/ambiente/la-estrategia-que-le-paga-a-loscampesinos-por-cuidar-los-ecosistemas-de-colombia-article-717493.

36 Anguelovski, Connolly, and Brand.

37 “Solidaridad Ensures the First Transaction.”

Photo Credits: USA-Reiseblogger/Pixabay—page 42 Bernard Gagnon/Wikimedia Commons—page 45

BANCO2: INCENTIVE-BASED CONSERVATION IN MEDELLÍN / 47

FROM DESERT TO OASIS BUSINESS STRATEGIES FOR COMBATING DESERTIFICATION IN NORTHWESTERN CHINA ESSAY BY

BRIAN XU

The Gobi Desert is rapidly encroaching on northwestern China, uprooting the lives of local residents and threatening agriculture in the region. Current government-led initiatives are not enough to stop the sand. In response, author Brian Xu proposes a public-private partnership to effectively address the issues underpinning desertification.

I

n northwestern China, desertification is rapidly eroding arable land vital to thousands of people. The encroaching desert has destroyed productive farmlands and swallowed villages, forcing many locals to relocate. Unsustainable agricultural practices and land exploitation have been the main culprits, as local peoples rely upon the land and water-intensive subsistence agriculture for their livelihoods. 1 Combating desertification is a priority not only for China’s domestic policy but also for the United Nations Sustainable Development Goal, “Life on Land,” which aims to eliminate land degradation by 2030.2

AN ENCROACHING GOBI DESERT

The public sector currently leads the fight against desertification in northwestern China. Ecological restoration and afforestation projects have been funded mostly by the national government or international non-profits and staffed by government employees. Private sector involvement has been limited to one-time tree planting projects to build goodwill or protect investments threatened by desertification.3 This imbalance between public and private sector contributions suggests a potential for public-private and private-community partnerships, opening profit opportunities for companies willing to take on the challenge of making an oasis from the desert.

The drylands of northwestern China are prone to desertification due to water scarcity, extreme rainfall variability, and a long border with the Gobi Desert. While desert encroachment began thousands of years ago, it has accelerated dramatically in the past century as the human population and activities have strained the local ecosystem. Decades of environmental degradation have caused the Gobi and surrounding deserts to expand rapidly and cover nearly a quarter of China in the sand.4 Unsustainable agricultural practices such as deforestation, groundwater overuse, and overgrazing are the greatest contributors to the problem.

50 / BRIAN XU

In res pons e to the inc re a s ing population, farmers expanded their subsistence farms by flattening forests.

More people and farms required the construction of more drinking and irrigation water wells which depleted groundwater. Similarly, herdsmen overused common grazing grounds to raise more livestock, resulting in heavy overgrazing. The disappearance of trees, groundwater, and grass created conditions that greatly accelerated natural soil erosion, leading to desertification.5 The actions of local farmers and herders reveal the root problem of poverty and underdevelopment in northwestern China, one of the most remote areas in the country. Without other economic opportunities, local communities have resorted to aggressive subsistence farming and herding, overexploiting the land to feed their families.

While the expanding desert has been devastating to local peoples, the environmental consequences have much wider implications. Sandstorms occur more frequently, covering villages and cities with a dense layer of dust that pollutes the air and disrupts daily life.

Desertification also threatens the fertile Yellow River basin, the breadbasket of China, risking the food security of the entire nation. The dire consequences of desertification have prompted local and national governments to act.6

PUBLIC SECTOR EFFORTS HAVE ROOM FOR IMPROVEMENT

Historically, the fight against desertification in northwestern China has been driven by the public sector. To limit the negative environmental impact of human activity, local governments have imposed restrictions on grazing and deforestation. Additionally, the national government and international organizations like the World Bank have funded ecological restoration and afforestation projects, which are led by the local governments and staffed by party cadres, volunteers, and local peoples.7 While government-led efforts have been moderately successful, they have

caused several undesired consequences.

First, well-intentioned laws that restrict grazing and farming have threatened the livelihoods of locals in some of China’s most rural and poverty-stricken regions. And while salary supplements from employment in government afforestation projects have helped, bans on grazing and intensive farming have reduced the incomes of local peoples already suffering from poverty and lack of opportunity. Second, afforestation efforts have been complicated by scarce groundwater supply and the dry climate.

Inadequate groundwater has stunted the growth of saplings, and many planted trees have required continuous human intervention, such as drip irrigation, to survive.8 In 2008, a study found that almost one-fifth of trees planted that year died during the subsequent winter without human support.9 Furthermore, the limited species of trees that can survive in dry conditions make tree diseases much more destructive, as one deadly strain could spell doom for huge swaths of afforested land.10 This situation demonstrates the need for biodiversity and more creative strategies that can build a more sustainable environment.

Efforts by the public sector have been sluggish and lacking in innovation. Costs for current public sector-led projects are substantial—the newest phase of the “Green Great Wall” tree-planting initiative requires an estimated ten billion dollars.11 Further, the methods used to grow trees and the species of trees that are planted have not changed for decades, despite historically low survival rates that suggest a need to shift strategies.12 Government agencies often are unwilling to change approaches that once worked even if they result in cost overruns and slower progress when compared to newer alternatives.

AN OPPORTUNITY FOR THE PRIVATE SECTOR

These deficiencies highlight how the private sector is uniquely positioned to disrupt an ineffective paradigm. While governments have deep pockets and are

“

With greater incentive to innovate, private businesses can lead scientific research and practical implementation toward desertification solutions.”

result-oriented, companies value costeffectiveness and efficiency. With greater incentive to innovate, private businesses can lead scientific research and practical implementation toward desertification solutions. Private sector investment can also bring higher-paying jobs beyond government-subsidized employment that are more economically sustainable and effective in alleviating poverty.

The China Forestry Technology Service Company (CFTSC) is well-positioned to capitalize on this opportunity. As both a biotechnology and forestry company, its current research activities focus on seeds and genetic modifications for different tree species to accelerate their growth. It also cooperates with lumber companies in applying various technologies to grow commercial wood forests. CFTSC has both the capacity and experience to develop innovations as well as implement afforestation projects. Its current research on water-retaining seed coating is crucial for developing droughtresistant seed technologies that allow trees to survive better in drier climates. Its genetic modification division’s research and expertise on rust resistance can be applied to developing disease-resistant

traits in trees that could improve survival rates. CFTSC’s unique technologies and industry experience give it an advantage over other competitors and government actors, providing it with multiple avenues to profitability.13

STRATEGIES FOR COMBATING DESERTIFICATION

One strategy to address desertification is a private-public partnership that utilizes emissions trading. Also known as carbon cap and trade, emissions trading is a market-based approach to controlling pollution where a central authority sets a limit on the emissions allowed over some amount of time. Polluters must purchase carbon credits that represent allowed emissions from companies that have reduced net carbon emissions to continue or increase operations. China already has a nationwide emissions trading scheme (ETS) for its heavy industries and has plans to roll out the scheme to the entire economy by 2025. 14 This creates an economic incentive for companies to reduce net carbon emissions, even if they are not in actively polluting industries themselves. Under this system, carbon credits that can be traded in the national

ETS would be awarded to any company that plants a minimum number of trees.

There is precedent for this strategy.

In 2012, a company that completed an afforestation project in the southern Guangxi province earned carbon credits awarded by the World Bank’s BioCarbon Fund. 15 The Chinese government has also been awarding carbon credits to forestry companies for their contribution to decarbonization, even in commercial lumber operations.16 The terms of this plan would allow sustained private afforestation operations in northwestern China to receive carbon credit compensation from both national and international bodies. As for the future viability and growth of this business model, carbon credit prices in China are around 41 yuan per ton of CO2 as of 2021, are expected to rise to 66 yuan per ton in 2025, and may hit 77 yuan by 2030. This price accounts for almost a 90 percent increase in less than a decade.17 Given that trees have lifespans often surpassing five decades, companies planting trees today can capitalize on rising carbon credit prices as the country applies policy toward reducing carbon emissions.

FROM DESERT TO OASIS / 51

Tree-planting also generates economic value by reclaiming arable land lost to the desert. As a means of compensation, reclaimed land can act as the basis of a profit-sharing ownership model between local peoples and a company like CFTSC, a private-community partnership designed to develop sustainable highvalue agriculture through investment and training. This model may seem unconventional, but the Elion Resources Group, an alternative energy company, has demonstrated its potential value. The company used a profit-sharing agreement to secure land for investment in Ordos, Mongolia, an inner-city threatened by desertification. Under the agreement, the local peoples agreed to grant ownership of the land to Elion in exchange for the construction of a solar farm and an algae production venture. 18 While the agreement is profit-sharing in name, it represents more of a responsibilitysharing agreement in nature, as the company has committed to creating a set number of long-term jobs and employing locals through the overall investments.

Through this model, both investing companies and invested communities benefit from sharing the land. CFTSC can utilize a similar type of agreement, which will eliminate the need to purchase land and import labor.

While not directly related to forestry, a commercial investment that could be made under this arrangement is wine production, which could thrive in the region’s dry and hot climate. Furthermore, this initiative would produce a high-value good that uses less water and land than subsistence farming, easing the strain on the local environment by reducing the need for unsustainable agricultural practices. Investments in an area such as winemaking are particularly effective since this activity complements the existing skills of the local peoples, so little retraining is required. Other investments that are compatible with the labor skillsets of locals and the regional climate include vegetable greenhouses and rabbit breeding, both of which use significantly

52 / BRIAN XU

less land and water than subsistence agriculture.

These strategies combat the environmental and social issues linked with desertification both individually and by mutual reinforcement. Planting more drought-resilient trees accelerates the fight against desertification and expedites the reclamation of arable land. Using this land in investment projects under a profitsharing ownership model to create better jobs for local people, in turn, alleviates poverty and eliminates the need for continued unsustainable subsistence farming that caused desertification in the first place.

ENSURING EFFECTIVE ACTION

A reliance on private-public partnerships to generate profit, particularly in such an inhospitable natural environment, poses two main risks. First, a private-public business model could be more exposed to political risk and policy changes. The long-term profitability of carbon trading relies on China’s continued commitment to fighting climate change and the rise of carbon credit prices. In addition, government involvement implies that companies must meet stricter compliance requirements, especially if targets for reforestation or job creation are delayed or unmet. Since the goals of the business and the public sector align, the rewards outweigh the risks.

Building upon the United Nations SDG’s poverty eradication and climate action objectives, China has pledged to achieve carbon neutrality by 2060 and eradicate extreme poverty by 2021.19 As this business model helps move a step in the right direction toward these goals, a partnership between local, national, and international governmental organizations can provide means of support, such as generous loans from public banks, publicity in news coverage, and fasttracked regulatory approval.

A second risk is that deteriorating natural conditions and climate change could make afforestation efforts with developed technologies infeasible; however, this risk exists in all ventures

involving technological innovation.

Utilizing resources provided by the policy environment, companies like CFTSC can navigate risks and create a successful and profitable business venture.

A MORE MEANINGFUL INITIATIVE

While tree-planting in northwestern China has historically been considered an altruistic activity, private-public and private-community partnerships can allow greater recognition and reward for the economic value generated by ecological rehabilitation efforts. Through the utilization of ETS and profit-sharing ownership strategies, companies can not only make a healthy profit, but also help address the environmental consequences of de s e rtific a tion, uns us ta i nable agricultural practices, and extreme poverty.

DISCUSSION QUESTIONS 1.

The author suggests that a profit-sharing ownership model between companies and communities is “profitsharing in name, [but] represents more of a responsibility-sharing agreement in nature.” What responsibilities must be upheld by each party?

2.

What are some advantages and disadvantages of using this model?

3.

Do you agree with the author’s sentiment that private sector initiatives are more efficient and effective than public sector initiatives? Why or why not?

Lyu, Yanli, et al. “Desertification Control Practices in China.”

Multidisciplinary Digital Publishing Institute, 17 Apr. 2020, www.mdpi.com/2071-1050/12/8/3258.

2 “Desertification, Land Degradation, and Drought.” United Nations, sdgs.un.org/topics/desertification-land-degradation-and-drought.

3 Ediger, Laura. “Where Desertification Meets the Bottom Line.” Greenbiz, 17 June 2010, www.greenbiz.com/article/ where-desertification-meets-bottom-line.

4 Zhang, Zhihua and Huisingh, Donald. “Combating Desertification in China: Monitoring, Control, Management and Revegetation.” Journal of Cleaner Production, Elsevier, 3 Feb. 2018, www. sciencedirect.com/science/article/pii/S0959652618302646.

5 Feng, Qi, et al. “What Has Caused Desertification in China?”

Nature, Nature Publishing Group, 3 Nov. 2015, www.nature. com/articles/srep15998.

6 Ibid.

7 “Curbing Desertification in China.” World Bank, 4 July 2019, www.worldbank.org/en/news/feature/2019/07/04/china-fighting-desertification-and-boosting-incomes-in-ningxia.

8 Zhang.

9 Lyu. 10 Petri, Alexandra E. “China’s ‘Great Green Wall’ Fights Expanding Desert.” National Geographic, 10 Feb. 2021, www.nationalgeographic.com/science/article/china-great-green-wall-gobi-tengger-desertification.

1

BRIAN XU

Ibid.

Lyu. 13 “China Forestry Group Corporation: About Us.” China Forestry Group, 7 May 2021. en.cfgc.cn/g1155.aspx.

14 Shieber, Jonathan. “China Launched Its National Carbon Trading Market Yesterday.” TechCrunch, 2 Feb. 2021, www. techcrunch.com/2021/02/02/china-launched-its-national-carbon-trading-market-yesterday.

15 “Reforestation Pilot in China Is Earning Carbon Credits.”

World Bank, 28 Dec. 2012, www.worldbank.org/en/news/ press-release/2012/12/28/reforestation-pilot-in-china-is-earning-carbon-credits.

16 “China’s Fujian Issues 658,000 Forest Carbon Credits.” Carbon Pulse, 18 Nov. 2019, www.carbon-pulse.com/86773.

17 Shieber.

18 Lyu. 19 “China’s National Plan on Implementation of the 2030 Agenda for Sustainable Development.” Green Growth Knowledge Platform, 9 Apr. 2021, www.greengrowthknowledge. org/national-documents/chinas-national-plan-implementation-2030-agenda-sustainable-development.

11

12

Photo Credits: Planet Labs, Inc./Creative Commons—page 48 NASA/Wikimedia Commons—page 51

CLASS OF 2024, FINANCE

“By analyzing the issue of desertification from a business perspective, I wanted to show the power of public-private partnerships to align incentives and increase efficiency, rather than always being in conflict.”

FROM DESERT TO OASIS / 53

SPARKING MINORITY OWNERSHIP IN CANNABIS

ESSAY BY

SUNEET DESAI

Many states have decriminalized the recreational use of cannabis; however, the historical inequity in punishment between white and black cannabis offenders remains a dark part of the past that deserves remedy. Desai suggests a form of justice where Cresco Labs, a leading cannabis producer and distributor in the United States, would provide ownership of some of its dispensaries to entrepreneurs from minority backgrounds.

F

or years, cannabis has been surrounded by taboos and strict regulation—a combination that resulted in negative stigma in the public eye and relentless policing. Today, those walls are crumbling. The legal cannabis industry is planting its roots across the United States and taking the nation by storm. With 16 states offering recreational cannabis and a current estimated industry valuation surpassing $18 billion, there is massive room for growth.1 Recent data projects the industry value to reach $42 billion by 2025, enticing entrepreneurs to leap into the lucrative space.2 As other states begin to pass legislation legalizing the use of cannabis, rapid expansion into the industry takes the forefront of firms’ agendas.

The checkered history of cannabis, however, has left lasting impacts on millions of Americans, particularly those from minority communities. Individuals of minority backgrounds suffered greatly from stringent policing against cannabis and have been punished at a far higher rate than white Americans for their crimes; in many states, these crimes are no longer even illegal. In an attempt to make reparations to minority communities within cannabis legalization bills, state governments incorporate verbiage that promotes the ownership of legal cannabis firms by underrepresented communities.

Yet the legislation intended to encourage minority ownership has been insufficient and ineffective. 3 These unsuccessful efforts stunt the ability of minority owners to enter the emerging cannabis industry, and unless they are given stronger support soon, they may miss a major opportunity in an industry poised for considerable growth.

After multiple unsuccessful attempts by state governments to encourage minority representation, it is time for private firms to come forward and strengthen commitments to minority equity. New York state’s recent legalization serves as the ideal opportunity for successful cannabis firms to get minority communities involved in New York’s

cannabis industry. Cresco Labs, a leading cannabis firm that specializes in both medical and recreational use in the United States, has the will and means to help underrepresented owners bypass the barriers to entry.

Cresco has proven its dedication to supporting minority communities in the past. Today, it holds the opportunity to scale up its commitment by establishing a minority-led and employee-owned B Corporation under the Cresco umbrella designed to invest in minority-owned cannabis dispensaries.

THE PERSISTING INEQUITY

For decades, cannabis-related arrests and convictions have disproportionately targeted minority communities around America. In an astonishing demonstration of racial disparity, African Americans were found to be 3.64 times more likely to be arrested for marijuana-related crimes than white Americans, although white Americans consumed marijuana at a higher rate.4 Beyond imprisonment and financial burden, these arrests have a plethora of other issues attached to them. Cannabis convictions jeopardize an individual’s eligibility for social aid in many crucial areas such as public housing, student financial aid, and immigration status, among others.5 Offsetting years of unequal policing is a seemingly impossible task as well, considering the deep entrenchment that minority families have endured consequently. In an environment that is becoming steadily more cannabisfriendly, the development of minority-led firms in the cannabis industry constitutes a key step in the right direction. With the tides turning in favor of legalized cannabis, minority communities are entitled to reap the benefits of the more than $18 billion industry that they fell victim to during its illegal past.

The recreational cannabis industry remains under construction and is currently entering a massive growth phase, making the present a prime time for new entrepreneurs to dive into the space. Companies are beginning to find

SPARKING MINORITY OWNERSHIP IN CANNABIS / 55

“

In an environment that is becoming steadily more cannabis-friendly, the development of minority-led firms in the cannabis industry constitutes a key step in the right direction.”

their stride in developing marketable cannabis products, and state governments are building legislation upon the successes and failures of those who have legalized before them.

Within state legalization processes, some measures are being taken to ensure sustained minority representation in the ownership of cannabis dispensaries. Chief among these initiatives includes reserving a percentage of marijuana crop cultivation licenses for minorities and establishing social equity funds for entrepreneurs.6 Yet despite these provisions, both legal measures have inadequacies as they only provide short-term assistance and do not break barriers to access. The shortcomings of the legislation reinforce the status quo on cannabis, with minorities getting the short end of the stick.

THE GAPS LEGISLATION HAS NOT BRIDGED

In states like Massachusetts, the underlying legislation intended to support minority-owned ventures has proven to be insufficient. The most common provision in newly legalized states

56 / SUNEET DESAI

involves the reservation of cultivation and cannabis sale licenses for minority owners. Unfortunately, these reserved licenses often do not end up in the hands of the intended group. Shockingly, most of these licenses end up going to nobody.

In 2016, Massachusetts designated 122 minority individuals with an “economic empowerment” priority status, putting them on the fast track for securing cannabis licenses. However, only eight of those business owners eventually obtained licenses, and all of them have yet to conduct business.7 Michigan’s social equity program met a similar fate, with only five percent of reserved licenses distributed to minority owners.8 While this strategy proved to be ineffective in both states, it remains a step in the right direction. The unfortunate reality is that even though the licenses were set aside by the states in good faith, many of the entrepreneurs did not end up submitting formal applications for the licenses because of the high costs associated with entering the cannabis industry.9 In other words, this legislation could be useful if coupled with other

activities that improve access to capital for minority owners, whether it include private or public funding.

Only a handful of states have incorporated legislation to provide funding in the form of social equity funds. These funds would be distributed to minority background cannabis entrepreneurs through grants and low-interest loans. An Illinois program allocates $31.5 million in grants and an additional $20 million in low-interest loans, all reserved for minority entrepreneurs. 10 While this support aids in covering initial costs for cannabis entrepreneurs, it simply does not extend far enough to support businesses through the development of their products or brand.

While social equity programs are wellintentioned, they leave much to be desired.

Cannabis companies take a long time to reach the operational phase and drain funds continually throughout the set-up process. More money will be required than any social equity fund offers. 11 Cresco Labs, however, has an established nationwide cannabis footprint and can take a step toward making a sizable social

equity impact by combating this gap in the market.

THE SHOES CRESCO CURRENTLY FILLS

In November 2019, Cresco kicked off the first round of the Social Equity and Educational Development (SEED) incubator program in Illinois, which provided pro-bono courses in financial planning, business plan construction, and even dispensary floor plan modeling to interested minority entrepreneurs.12 Alice Carter, a member of Cresco’s inaugural class of SEED, described the initiative as “an amazing opportunity to take something that caused so much devastation and despair [cannabis] and turn it into something positive for areas all over our state.” 13 The group of 130 participants shared the same excitement as Carter and praised Cresco Labs for the opportunity to map out their own businesses while serving as liaisons for the communities they come from: those that have been devastated by the war on drugs. The Cresco brand has developed a strong relationship with employees and prospective entrepreneurs of minority backgrounds through the SEED program, which has seen strong support.

The SEED annual report presents a slew of equity plans for the years to follow, including step-by-step mentoring for applicants who receive a cannabis license and stretching the program into New York.14 With SEED, Cresco demonstrates its long-term commitment to minority ownership by providing greater access to the cannabis space.

THE SHOES CRESCO MUST FILL

The targeted expansion of the SEED program into New York coincides with recreational cannabis development occurring in the state. While cannabis is fully legalized in New York, it will still take an estimated 12 to 18 months before recreational dispensaries open their doors to customers.15 This timeline leaves an ideal amount of time for Cresco to lay the groundwork for a social equity strategy that goes beyond the current scope of

SEED. For members of the SEED program in New York, Cresco has an opportunity to develop an effective capital investment program. Current government social equity funds provide an underwhelming amount of capital to entrepreneurs and Cresco can fill the gap where legislation fails.

Cresco has demonstrated its appetite for risky investments since its inception, racking up eight sizable acquisitions since 2018 that total nearly $1.2 billion in capital investment.16 In line with its modus operandi of minority inclusivity and aggressive expansion, the creation of a minority-led and partially employeeowned B Corporation is a fitting next step.

This B Corporation would then invest Cresco’s capital into New York-based minority entrepreneurs and support them through expansion. Cresco Labs is in the position to extend a hand to future members of the SEED program in New York, and by directing investments into these underfunded businesses, a dire need for aspiring dispensary owners is satisfied. These investments will also help secure the longevity of minority-owned businesses, as Cresco shareholders will be tied to the businesses through their ownership stake offered by the subsidiary B Corporation.

While Cresco could directly invest in minority owners, the development subsidiary that possesses a B Corp certification allows Cresco to emphasize its commitment to improving social equity. As a minority-led and partially employee-owned B Corporation, Cresco can provide social equity from a second dimension. Within the new branch under the Cresco umbrella, there would be numerous employee roles—from entrylevel all the way to the C-suite waiting to be filled.

Assurance that these roles are occupied by underrepresented groups is essential to fulfilling an aspect of social equity.17 By giving every employee a stake in the business, more minority individuals will reap the benefits of a successful cannabis company. Employee ownership serves a two-fold purpose; not only will

there be a tangible benefit for employees, but they will also have a clear interest in the company’s success.18 Cresco would construct a complex system of local cannabis dispensaries by allocating capital toward motivated minority owners.

THE SHAREHOLDER PERSPECTIVE

Entry into new markets like the cannabis industry carries several risks, which are amplified by the early-stage nature of the cannabis space. There exists an inherent risk that the investment into these dispensaries may be unsuccessful, as well as the chance that the minority owners may not be properly equipped to enter the industry. These risks are both offset by the SEED program’s education tools; Cresco is grooming potential owners to have the skillset that they need to break into the cannabis business and simultaneously serving a consultation role. With the educational resources that Cresco provides through the SEED initiative, Cresco would ensure that individuals with adequate expertise lead dispensary operations. Additionally, Cresco’s B Corporation leaders can personally select the businesses they invest in from SEED program participants, adding a level of due diligence before capital investment.

Cresco shareholders will see two distinct benefits from investing in minority-led businesses: improved image for the Cresco brand and portfolio expansion from the businesses they back.

The main source of value for shareholders is the improved brand image through social equity fulfillment. While a majority of leading cannabis companies have social equity programs, the B Corporation will show that Cresco’s commitment goes beyond those of other companies.

This move would demonstrate Cresco’s dedication to improving the circumstance of all stakeholders, through the B Corporation’s minority-led and partially employee-owned aspects, as well as its efforts to invest in minority-background entrepreneurs whose communities have been harmed by cannabis in the past. 19 The companies that the B Corporation invests in present excellent opportunities

SPARKING MINORITY OWNERSHIP IN CANNABIS / 57

to bolster the local business aspect of Cresco’s overall portfolio. Minoritybackground owners and businesses, with consistent support from Cresco, could prove to be valuable assets.

PROVIDING SECURITY TO MINORITY OWNERS

With Cresco’s ownership stake in minority-owned businesses, there come caveats. Certain stipulations must protect minority owners from a large corporation that has the potential to exert significant influence. It is crucial that minority entrepreneurs retain creative control over their businesses without interference from Cresco’s corporate leadership. Cresco must take a backseat and not overstep its boundaries in terms of affecting entrepreneurs’ missions and goals by serving solely in the role of investor and advisor. One way to ensure entrepreneurs’ creative autonomy is to allow a certain number of board votes to Cresco, while leaving the majority of votes in the hands of minority owners.

Under this arrangement, both sides have representation in firm-wide decisions, but Cresco’s corporate management will be unable to alter the creative direction of entrepreneurs.

The negotiation processes of investment deals also leave the potential for discord between Cresco and the business owners. In order to protect the small business owners, an outside party

SUNEET DESAI

should mediate the deal and ensure the terms are conducive to a successful partnership. An organization like the Minority Cannabis Business Association (MCBA), a group dedicated to supporting underrepresented communities in the cannabis industry, would fit the bill. The MCBA has worked with Cresco in the past and cites them as a “game-changer” in encouraging minority ownership in cannabis. 20 The MCBA’s endorsement of Cresco coupled with a B Corporation certification provide strong assurances that Cresco will support a minority owner’s best interests.

A DIVERSE CANNABIS LANDSCAPE ON THE HORIZON

While remedying decades of nonequitable policing of cannabis use is a tall task, improving minority representation in the legal cannabis industry serves as a manageable starting point. State governments have been mostly ineffective in creating a more equitable industry despite reserving licenses for underrepresented entrepreneurs.

Fortunately, social equity programs, like Cresco’s SEED initiative, offer a useful resource for individuals to obtain the knowledge they need to break into the cannabis space. Still, neither of these efforts have had any sustained success in facilitating new minority-owned dispensaries. The inaccessibility of capital plagues aspiring cannabis entrepreneurs,

and because state governments have not allocated sufficient funds, the private sector seems the most feasible source of funding.

Cresco Labs holds the unique opportunity to invest in the future success of minority entrepreneurs.

As a company looking to fulfill its own social responsibility, it can create more social equity for the cannabis industry than any state government has done, while also expanding its brand into local New York communities. The creation of a minority-led B Corporation allows underrepresented New Yorkers to join the cannabis industry as a member of Cresco Labs, and then work toward investing in cannabis companies owned by individuals also of a minority background.

The B Corporation would provide employees direct equity through its partially employee-owned structure, a small contribution to diversity in cannabis ownership. Most importantly, the capital that the B Corporation would invest has the potential to change the lives of many underrepresented individuals, putting profits from the cannabis industry into the pockets of the same families that cannabis once devastated. With successful implementation and collaboration, Cresco’s efforts can pull minorities into the cannabis industry, setting the stage for a more equally represented industry in the long run.

CLASS OF 2024, FINANCE AND ECONOMETRICS “Since my sophomore year of high school, I've been watching the landscape of the cannabis industry transform and develop, particularly in terms of its acceptance from the American public. I found that the lack of minority ownership in cannabis companies comes from a lack of accessibility in many cases, setting up my paper to search for solutions to this underrepresentation.”

58 / SUNEET DESAI

DISCUSSION QUESTIONS 1.

Does the minority ownership into cannabis firms make up for the historical racial injustices committed by law enforcement in the United States? Is it a step in the right direction?

2.

What other industries do you believe have the potential to incorporate minority leadership into their ownership structure?

Dorbian, Iris. “For U.S. Legal Pot Industry In 2021, Expect to See National Brands And $24 Billion In Sales, Says Top Researcher.” Forbes, 15 Dec. 2020, www.forbes.com/sites/ irisdorbian/2020/12/15/for-us-legal-pot-industry-in-2021-expect-to-see-national-brands-and-24-billion-in-sales-says-topresearcher/?sh=564a4f5443e6.

2 Morrissey, Kacey, et al. “Cannabis in America for 2021 & Beyond: A New Normal in Consumption & Demand.” New Frontier Data, 2021, www.newfrontierdata.com/product/cannabis-in-america-for-2021-and-beyond.

3 Roberts, Chris. “Why Isn’t Marijuana Legalization Doing Any Good for People of Color?” Observer, 10 Feb. 2020, www.observer.com/2020/02/cannabis-industry-equity- programs-failing-people-of-color.

4 Edwards, Ezekiel, et al. “A Tale of Two Countries: Racially Targeted Arrests in the Era of Marijuana Reform.” American Civil Liberties Union, 20 Apr. 2020, www.aclu.org/report/ tale-two-countries-racially-targeted-arrests-era-marijuana-reform.

5 “Reefer Madness: The Unfair Consequences of Marijuana Arrests in NY State.” New York Civil Liberties Union, 5 Jan. 2015, www.nyclu.org/en/publications/reefer-madness-unfair-consequences-marijuana-arrests-ny-state-2015.

6 Charles, Nick. “Black Entrepreneurs Struggle to Join Legal Weed Industry.” NBC News, 11 Feb. 2021, www.nbcnews. com/news/nbcblk/black-entrepreneurs-struggle-join-legal-weed-industry-n1132351.

7 Quinton, Sophie. “Black-Owned Pot Businesses Remain Rare Despite Diversity Efforts.” The Pew Research Trusts, 15 Jan. 2021, www.pewtrusts.org/en/research-and-analysis/blogs/ stateline/2021/01/15/black-owned-pot-businesses-remain-rare-despite-diversity-efforts.

8 Nichols, Anna Liz. “Michigan’s Marijuana Industry Leaves People of Color Behind.” Associated Press, 30 Jan. 2021, www. apnews.com/article/hispanics-michigan- recreational-marijuana-marijuana-db3da4e34bd1cdaecff3cd41136db43f.

9 Fertig, Natalie. “Local Rule is Undermining Massachusetts’ Attempt to Create Equity in the Cannabis Industry.” Politico, 6 Mar. 2020, www.politico.com/news/2020/03/06/local-rule-is-undermining-massachusetts-attempt-to-create-equity-in-the-cannabis-industry-122655.

1

Gray, Kathleen. “Minorities Find Themselves Almost Shut Out of Michigan's Marijuana Business.” Detroit Free Press, 21 June 2019, www.freep.com/story/news/marijuana/2019/06/21/ minority-representation-marijuana-business/1515162001.

11 Nichols.

12 “Cresco Labs Launches First Industry-Defining Incubator Program for Illinois Adult-Use Market Dispensary Applicants.” BusinessWire, 6 Nov. 2019, www.businesswire.com/ news/home/20191106006081/en/Cresco-Labs-Launches-First-Industry-Defining-Incubator-Program-for-Illinois-Adult-Use-Market-Dispensary-Applicants.

13 Ibid.

14 “SEED 2019/2020 Annual Report.” Cresco Labs, 2020, www. crescolabs.com/wp-content/uploads/2021/01/122820_SEED_ AnnualReport_WebVersion_LR.pdf.

15 Lee, Yeji Jesse. “The Ultimate Guide to Cannabis Legalization in New York.” Business Insider, 23 Apr. 2021, www. businessinsider.com/guide-new-york-legal-marijuana-timeline-stocks-investors.

16 “Press Releases.” Cresco Labs Investor Relations, 2018-2020, investors.crescolabs.com/investors/press-releases/default. aspx.

17 Posner, Michael. “Why We Need More Black Voices in the C-Suite.” Forbes, 11 June 2020, www.forbes.com/sites/michaelposner/2020/06/11/why-we-need-more-black-voices-in-thec-suite.

18 McDowell, Suzanne. King Arthur Flour. Business & Society Plenary Session, 5 Apr. 2021.

19 “Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans.’” Business Roundtable, 19 Aug. 2019, www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-topromote-an-economy-that-serves-all-americans.

20 “What is MCBA?” Minority Cannabis Business Association, 2020, www.minoritycannabis.org.

10

Photo Credits: Crystal Weed/Unsplash—page 54 Budding/Unsplash—page 56

SPARKING MINORITY OWNERSHIP IN CANNABIS / 59

SAVING LIVES

IN DELHI

KIVERDI KIVERDI AND AND GRAVIKY GRAVIKY LABS LABS

In In recent recent years, years, the the air air quality quality in in Delhi Delhi has has deteriorated deteriorated significantly.

Author Yajas Shah proposes an significantly. Author Yajas Shah proposes an innovative innovative solution to the pollution problem that merges the solution to the pollution problem that merges the carbon carbon capture and upcycling technologies of two startups. capture and upcycling technologies of two startups.

ESSAY ESSAY BY BY

YAJAS SHAH

D

elhi can be described in many ways— the capital of India, a cultural hub for South Asia, a city with rich and complex history— but recently, Delhi’s Chief Minister has been using the term “gas chamber.”1 This shocking parallel between chambers used for mass killing and the once-vibrant city in India originates from the estimated 54,000 lives lost to pollution each year.2 This air pollution primarily consists of PM2.5 particles, characterized by their 2.5-micron diameter, which makes them small enough to cause extensive damage to the alveolar wall of the human lungs when inhaled. 3 Burning crop stubble on nearby farms, vehicle emissions, and unsustainable energy production have contributed to a dangerously high concentration of PM2.5 particles in Delhi.

The concentration of these particulates can be quantified using the AQI Index, which measures PM2.5 concentration on a scale from zero to 500.4 In Delhi, AQI monitors have reached astounding readings of 999 and above, leading to stay-at-home orders and millions in lost revenue.5 The deadly and expensive effects of air pollution in Delhi reflect the broader issue of climate change as outlined in the United Nations’ 13th Sustainable Development Goal: Climate Action. Since the aerosols in air pollution increase greenhouse gasses, the disastrous consequences of rising global temperatures are deeply intertwined with air pollution.6 Analyzing the composition of PM2.5 particles, however, reveals a possible solution in this fight against air pollution in Delhi and climate change as a whole. The primary chemical in Delhi’s PM2.5 pollution is carbon, which can be elemental or organic, along with elements like nitrogen, sulfur, and trace quantities of phosphorus.7 The large percentage of carbon highlights the possibility of carbon capture, which could remove the majority of carbon particulates from the air and in turn save thousands of lives.

INNOVATIVE PLAYERS DISRUPTING THE STATUS QUO

Two startups have taken innovative

62 / YAJAS SHAH

approaches to carbon capture that, when combined, could profitably address the main causes of air pollution in Delhi.

Graviky Labs, founded in 2016 at MIT (but currently based in India), has pursued the idea of carbon upcycling. The startup has engineered a device that captures carbon from various sources of pollution and transforms it into a proprietary black ink known as AirInk. Graviky sells this innovative ink as well as other similarly manufactured products to industry players.8 Graviky’s approach is revolutionary because its technology captures carbon from the source, whereas conventional methods capture it after diffusion, which is inefficient and expensive. Graviky’s versatile devices can attach to vehicle exhausts, generators, and commercial pollution emitters. Once the device is attached to these sources, it transforms carbon from its gaseous state to a solid using a variety of chemical solvents. Since solid carbon is cheaper to transport and chemically manipulate than gaseous or even aqueous carbon, Graviky can profitably upcycle it into a variety of products such as sustainable inks, paints, coatings, plastics, and even construction materials. 9 Graviky generates most of its current revenue from the resale of these products—with sales driven by the various industrial uses of these recycled materials. The startup’s revenue stream is supplemented by the custom solutions it provides to individual companies.10 Leveraging its ability to capture carbon at the source, Graviky works with Fortune 500 companies to capture carbon from their everyday operations. This allows the companies to align with United Nations SDG carbon requirements and to use that alignment to boost marketing and sales.

Graviky’s business plan, therefore, has a two-fold approach because it capitalizes on the captured carbon and on the need for companies to reinvent their production methods.11 Carbon can be used in many ways because it forms the backbone of all organic molecules and a significant portion of inorganic compounds. Kiverdi,

the second company of interest, is a 2008 California-based startup using NASAinspired technology to capitalize on the element’s versatility. In the 1960s, NASA’s deep space travel presented the challenge of producing food without the necessary agricultural resources. Its solution was found in a class of microbes, known as hydrogenotrophs, that act like plants to convert carbon dioxide into food. The astronauts’ exhaled CO2 would be captured by hydrogenotrophs and converted into food creating a closedloop carbon cycle that resulted in endless nutrients while in space.12 Kiverdi applies the same concept on Earth to transform the overabundance of carbon into useful products. This technology is particularly innovative not only because it is capable of producing organic compounds, but also because hydrogenotrophs can multiply very quickly and do not need significant space or sunlight. As long as the microbes are suspended in a liquid solution, they can utilize carbon dioxide in the biochemical pathways required for cellular respiration and produce a variety of organic molecules within a matter of hours. Kiverdi leverages the flexible nature of these organic molecules to create a diverse set of products like protein, fish feed, soil nutrients, and reverse plastics. These various products made from the organic molecules produced by hydrogenotrophs constitute Kiverdi’s primary revenue stream.13 Like Graviky Labs, Kiverdi also offers a custom commercial solution to create closed-loop systems. Kiverdi, however, creates additional value for its customers because hydrogenotrophs recycle the waste products of commercial operation into raw materials that fit the client’s needs. This arrangement allows for the client to save costs on raw materials and market its products as sustainable while Kiverdi can use the leftover carbon in its own products. Once again, a two-sided business model emerges where Kiverdi not only capitalizes on the products made from recycled carbon but can also assist large corporations transition to carbon

neutrality in their operations.14

CREATING SHARED VALUE THROUGH A MERGER

Both startups currently address part of the pollution issue in Delhi; however, pooling resources and technologies through a merger could create a more effective and profitable solution than either startup can offer on its own. 15 Collaboration would also lay the foundation for both companies to address the three main causes of pollution: vehicle emissions, stubble-burning agriculture, and unsustainable energy production methods.

Vehicle emissions would be reduced by a merger because Graviky’s technology directly captures carbon from vehicles.

Kiverdi’s biotechnology can then be leveraged to create products from the captured carbon that address other environmental problems. This merger generates shared value by allowing the carbon captured by one startup to be used in the other’s products to generate higher profit margins and social returns.16, 17 Kiverdi’s “Revive Soil” product could address the agricultural cause of Delhi’s pollution by converting recycled carbon, gaseous nitrogen, and water into soil nutrients that can improve crop yields.18 Historically, decreasing crop yields and soil depletion from unsustainable agricultural methods like monocropping have created a significant financial burden for farmers. Farmers have resorted to stubble-burning as a cheap way to both clear fields after harvest and replenish soil nutrients. Unfortunately, this practice releases an immense amount of particulate matter into the air.19 Kiverdi’s “Revive Soil” product can incentivize farmers to stop this harmful practice by providing a way to replenish nutrients in the soil without a need to burn crop stubble.

Both Kiverdi and Graviky offer custom services that can reduce the carbon footprint of a company’s operations, which addresses the third cause of Delhi pollution: energy production.

The startups’ approaches differ in that

“

Graviky’s approach is revolutionary because its technology captures carbon from the source.”

SAVING LIVES IN DELHI: KIVERDI AND GRAVIKY LABS / 1*

and convenient, but the biotech employed

by Kiverdi currently utilizes gaseous carbon.

Still, there are a few ways this risk could be mitigated. The first would be for Kiverdi to alter the genome of hydrogenotrophs to allow for the recycling of solid instead of gaseous carbon. While this endeavor may be extremely costly or may not be biologically possible, it may be optimal to employ a simpler solution which is to burn the solid carbon in a contained unit. This method would transform the carbon back into a gas and allow for Kiverdi to properly process it.

A final risk involves potential cultural stigma around products made from recycled carbon. Since the products are essentially created from pollution, consumers might be apprehensive about potential side effects or health concerns.

This concern may limit the merger’s ability to generate profits but could be mitigated by an effective marketing strategy that ensures consumers are more educated about the safety of recycled carbon products.

Graviky captures carbon emitted from the production process and transforms it into AirInk-type products, whereas Kiverdi captures carbon from supply chain waste and recycles it into raw materials in a closed-loop system. Combining these two methods could help catalyze more comprehensive custom solutions.

Energy production expels large amounts of carbon that can be monetized, but the lack of a supply chain for these processes creates a unique challenge. It is essential to apply the combined technology of both startups to ensure a flexible solution that reduces pollution from energy production while still generating profits.

Although numerous synergies can be created through a merger between Graviky Labs and Kiverdi, some costs must be considered. The main cost associated with the merger would be to set up Kiverdi’s operations in India. Graviky Labs already has machinery and equipment in India,

64 / YAJAS SHAH

but Kiverdi has not yet entered the Indian market. Kiverdi’s headquarters and research and development are in California; however, there do not seem to be significant barriers to building its technology in India. Furthermore, such costs would likely be covered by the profits this merger would generate.

MITIGATING PROSPECTIVE RISKS

Various risks should also be addressed.

First, if the Indian government were to reform environmental law to solve the carbon pollution problem, then the startups would have far less carbon to recycle. However, this change is unlikely because conflicting interests have long prevented the government from solving the pollution problem. Another risk involves potential challenges in a smooth technological integration between the two startups. Graviky’s device produces solid captured carbon, which is cost-effective

LOOKING AHEAD TO A CLEANER DELHI

Climate change remains a pressing issue with complex and detrimental effects on the health of people and the planet. Air pollution that is produced from linear economies with unsustainable production and consumption practices worsens the issue. The proposed merger between Graviky Labs and Kiverdi aims to address this problem by closing the loop on carbon emissions in Delhi. Although this solution has distinct advantages and some disadvantages, it offers a promising route toward a more sustainable future.

It not only addresses the 13th United Nations SDG regarding climate action but also creates shared value for all stakeholders involved in making Delhi a more sustainable city.

DISCUSSION QUESTIONS 1.

What are some risks associated with the proposed merger between Kiverdi and Graviky Labs? Do you think this merger would be a good idea?

2.

How do you propose Graviky Labs distribute its carbon capture devices to achieve the scale that is needed to address pollution in Delhi?

Arora, Neha. “Air Pollution Led to around 54,000 Premature Deaths in New Delhi in 2020 - Study.” Reuters, 18 Feb. 2021, www.reuters.com/article/india-pollution/air-pollution-ledto-around-54000-premature-deaths-in-new-delhi-in-2020study-idUSKBN2AI2BY. 2 “Millions of Masks Distributed to Students in 'Gas Chamber' Delhi.” BBC News, 1 Nov. 2019, www.bbc.com/news/world-asiaindia-50258947.

3 Rizwan, SA, et al. “‘Air Pollution in Delhi: Its Magnitude and Effects on Health.’” Indian Journal of Community Medicine, vol. 38, no. 1, Jan. 2013, www.ncbi.nlm.nih.gov/pmc/articles/ PMC3612296.

4 “Air Quality Index (AQI) Basics.” U.S. Environmental Protection Agency, www.airnow.gov/aqi/aqi-basics.

5 Irfan, Umair. “The Law That's Helping Fuel Delhi's Deadly Air Pollution.” Vox, 16 Dec. 2019, www.vox.com/science-andhealth/2019/11/8/20948348/delhi-india-air-pollution-quality-cause.

6 “Goal 13: Climate Action.” The Global Goals, www.globalgoals. org/13-climate-action.

7 Sudhir, Kumar Sharma, and Tuhin Kumar Mandal. “Chemical Composition of Fine Mode Particulate Matter (PM2.5) in an Urban Area of Delhi, India and Its Source Apportionment.”

Urban Climate, Sept. 2017, www.researchgate.net/publication/317230994_Chemical_composition_of_fine_mode_particulate_matter_PM25_in_an_urban_area_of_Delhi_India_and_ 1

YAJAS SHAH

its_source_apportionment.

8 “Graviky Labs: Upcycling Carbon Emissions to Inks and Pigments.” Graviky Labs, www.graviky.com.

9 Ibid.

10 “Graviky Labs.” Crunchbase, www.crunchbase.com/organization/graviky-labs.

11 “Graviky Labs: Upcycling Carbon Emissions.”

12 “Revive Soil.” Kiverdi, www.kiverdi.com/revive-soil.

13 “Kiverdi.” Crunchbase, www.crunchbase.com/organization/ kiverdi.

14 “Revive Soil.”

15 Author’s note: In this paper, the term “merger” could constitute a wide array of business agreements or structures that may work better than an outright merger. These could take the form of a shared technology agreement, joint initiative, consulting agreement, an acquisition, or some other collaborative venture.

16 “Graviky Labs.”

17 “Kiverdi.”

18 “Revive Soil.”

19 Irfan.

Photo Credits: Graviky Labs—page 60 Sumita Roy Dutta/Wikimedia Commons—page 63 Mohd Aram/Unsplash—page 65

CLASS OF 2024, FINANCE AND ECONOMETRICS “The short-term implications of this paper are to draw more corporate attention to the declining health of both Delhi’s climate and the global climate. Looking more long-term, I would like this paper to inspire both science and business leaders to put their minds together because the two disciplines can be merged to create powerful solutions to the world’s most pressing problems.”

SAVING LIVES IN DELHI / 65

editorial team

LEFT TO RIGHT: Hanray Liu, Jinny Kim, Professor Jeffrey J. Younger, Anviti Suri, Aidan Katz, Denalia Zhi

Hanray Liu lead senior editor

Anviti Suri senior editor

Aidan Katz senior editor

Jinny Kim Denalia Zhi

senior editor, design editor

Jo Tong Denalia Zhi photographer

66 / ACKNOWLEDGEMENTS

acknowledgements I hope you enjoyed another issue of The Call for Corporate Action, NYU Stern Student Voices. I congratulate our published authors while offering a warm thank you to all the contributors to this ninth edition of The Call.

We collected over 650 essays from students enrolled in Business and Society Spring 2021 and these student authors are the ultimate inspiration for this magazine.

We hope that current and future writers are moved by the high caliber of the prose and challenging ideas proposed here.

This publication was written, assembled, and edited by NYU students—most notably

by Lead Student Editor Hanray Liu, and his fellow editorial team, Anviti Suri, Jinny Kim, Aidan Katz, and Denalia Zhi—as mentioned, all past contributors to The Call. Jinny and Denalia also double as art designers and Denalia Zhi and Jo Tong were our professional photographers. We also received additional editorial help from Management Communication Assistants, Zoe Merriman and Almas Purisic. Thank you all for your hard work and dedication.

Your editorial and artistic sensibilities grace every page.

Thank you to NYU Stern Undergraduate Dean Robert Whitelaw for his supportive opening letter and to Professor Matt Statler for his introduction to the current Business and Society course. Thank you, of course, to Sangeeta Bhojwani, Marina Ford, and Cassandra Bizarro who actually made it happen.

Most importantly, thank you to the dedicated instructors who facilitate the

weekly discussions, critical thinking, and writing sessions that make up Business and Society. Their instruction is evident within all these essays. Without their dedication, this publication would not have been possible— so thanks to the following teachers from 2021 (in first-name alphabetical order): A.J. Twombly, Alex Puutio, Amaya Rivera, Ava Sirrah, Aya Tanaka, Barbara Holt, Barbara Mink, Bob DiYanni, Bruce Meyerson, Carol Newell, Claudia Caruana, Ellen Pluta, Fadia Nordveit, Irv Schenkler, Jessy Hsieh, Kate Brideau, Keith Meatto, Larry Menna, Maria Patterson, Mark Brennan, Matt Statler, Oghene Oyiborhoro, Petria May, Reima Shakeir, Robb Shoaf, Robert Wosnitzer, Shelly London, Stephen Barr, Theomary Karamanis, Tim Gilman, Vivian Giang, and Wei Shi. Finally, for all their support and guidance, I would like to separately thank Batia Wiesenfeld, the Andre J. L. Koo Professor of Management and Director of the Business and Society Program; Susan Stehlik, Director of the Management Communication Program; Matt Statler, Richman Family Director of Business Ethics and Social Impact Programming; Mara van Loggerenberg, Associate Director of Social Impact Programming; and of course, Mrs. Janeece Lewis, Senior Administrator of the Management Communication Program.

Thank you, one and all.

JEFFREY J. YOUNGER Clinical Associate Professor, Management Communication

Warmly, Jeffrey J. Younger Faculty Editor, The Call

ACKNOWLEDGEMENTS / 67