Why Sustainability should be measurable
Sustainability is en vogue. No other concept seems to be used that excessively and thoughtlessly at present. Everything should be sustainable, if it is thought to be good. That’s the way world trade and world view, as well as detergents and development politics might altogether be sustainable. In this foggy and phoney situation it might help to reflect upon the concept and its meaning.
What do we mean with „sustainable”?
As far as it is known the first use of the word was made by the German Hans Carl von Carlowitz in his book „Anweisung zur wilden Baumzucht” (introduction to wild arboriculture) in the year 1713. Von Carlowitz was not a forester but chief mining engineer in the city of Freiberg in the principality of Saxony. Leading the whole mining industry in Saxony he served the legendary prince “August dem Starken”. He realized where it would lead to, if one continued to exploit raw materials like wood in an unrestrained way and would not take care about replanting them. He rejected the unrestricted use of resources without any plan, any economic and social responsibility with regard to future generations, calling it “careless” (“nachlässig”). He claimed to use these resources in a sustainable way, and he coined the German word “nachhaltend” for this, meaning to hold (halten), to reserve the resources in our present and for the future world. To use our resources sustainably means to deal with them responsibly and carefully and restore and renew them for our children, grandchildren and great-grandchildren. It’s exactly 300 years ago now that von Carlowitz defined “sustainable” this way, being still remarkably precise and concise nowadays.
How can we define sustainable development projects?
Sustainable development projects should enable the beneficiaries to generate enough income to make a living and to sustain the achievements and institutions of the project in the long run. That is, at least, what we understand under sustainable development. In other words, we help people to help themselves not only in these days but also in the days to come. Just donating something without asking them to maintain it and produce added value out of it, makes them depending on gifts and begging for more. They will not be able to sustain the donated good.
It is essential to retain and to maintain what has been given and achieved. Therefore the beneficiaries need a good part of economic reasoning and planning, thus bringing up questions like, with which means and efforts, in which period of time they can generate income? They have to plan their sales, their expenses and profit. And also they have to plan savings and reserves in order to save what has been achieved and built up. These savings e.g. serve to maintain a solar pumping and irrigation system or a sheep’s house, they also serve to reinvest in seeds or in traded goods, or to maintain and repair a tractor. All these reserves should be planned. This sort of planning is the hard core of doing sustainable business, because it is aimed to the prospective maintenance of what was built and achieved by the project.
Therefore, in order to start with sustainable business we have to do some planning. But planning is a peculiar business, as the German poet Bert Brecht found out in his Threepenny Opera:
Now just you make a plan,
Just be a shining light,
And then make still a second plan,
None will come out right.
Well, that’s common knowledge: plans usually don’t work 100 per cent at first, and perhaps also not in a second or third step. Plans always have to be changed and adapted in the course of a project, meaning there will be a plan B or a plan C or even a plan D. Because plans are always rushing on ahead, one always will be behind.
In order not to get lost, one might follow budget versus actual figures. Following them regularly, one can actually see when the path in real life deviates from the one in virtual life and then update the plan or change something in real life. This usually helps. For example: In the Gambian village Dutabullu we support the development of milk production. The village has 500 residents and 1,500 cows. We thought this to be an asset and together with the villagers we developed a plan for 2013. The Excel sheet shows three groups of figures in the columns, the revenues, the expenses and the reserves month by month from January to December. The amounts are in Dalasi, the national currency of The Gambia. The actual monthly figures show an increasing deficit from January to December, because we already inserted the compulsory monthly reserves in the actual columns. When the actual sales and income figures are available, we will see in which direction the project is moving to. In any case, we are going to watch closely the sales, the expenses and the reserves.
Let’s take another example: With our microcredit project in Offinso in Ghana we support poor women, who want to build up a small business. The loans usually are about 100 EURO and run 12 months. In many cases the business they want to start is some sort of petty trading on the local markets, in other cases it is the production and sales of donuts or snacks on the streets or even a tailor’s business. The women report monthly their sales, their expenses for procurement and transporting and also their costs of living and savings. These savings constitute the hard core of the various business activities of the women. They show us their credit slips, so that together we can see, if the business will sustain itself after 12 months. Actually it sustains itself in almost all cases. Even after that, one year and two years later, we stay in touch with the women and ak them, if they still in business. Indeed, they are. Out of more than 300 borrowers in the last 3 years less than a handful failed.
In all cases it is vital to inform beneficiaries and borrowers before implementing the project about the role of reserves, which means that they have to build up savings and reserves if they want their businesses to be sustainable and if they want to carry it on on their own. Reserves are the backbone of this type of development projects. We communicate this issue in the very beginning to our project partners and elaborate it in written agreements; see e.g. the memorandum of understanding with Dutabullu, especially paragraph 9 under On behalf of RDO and paragraph 5 under On behalf of the people of Dutabullu. Without building up these reserves the projects would collapse sooner or later. In such a case it would have been better nothing would have ever begun. For the people engaged in the project such failure would be disastrous. By the way, with regard to the mentioned RDO it was Stiftung Sabab Lou which registered an own Gambian NGO called Rural Development Organization (RDO) in 2012. The organization is intended to plan and manage the Dutabullu project and other similar projects in the Baddibu district in The Gambia.
How can we measure sustainable development projects?
By the end of the year we count and add up the achievements of a project and sum them up under several indicators. These indicators are not altogether new, they are the same business categories and criteria by which we plan and manage our projects. They may vary from project to project, but within a project they have to be kept constant through the years.
For example our indicators for agricultural projects are:
(1) number of village residents
(2) number of residents participating in the project
(3) sales revenue and other income
(4) operating expenses
(6) distributable profit/income = (3)-(4)-(5)
(7) benefit-cost-ratio = (3):(4+5+6)
(8) net-migration (immigration minus emigration)
With regard to sustainability the indicators (3), (4), (5), (6) and (7) are highly significant. An agricultural project can only be said to be sustainable, if the reserves generated by sales and other income sources cover the expenses for maintenance and repair, renewal of the operating capital and new investments as well as the payback of loans. Last but not least, the project should generate income for the people engaged in it. To ensure all these “musts” the benefit-cost-ratio should be more than 1 in the long run (7). In other words, there must be enough sales and income, to run at a profit.
Our indicators for micro-projects are:
(1) number of loans in the observed year
(2) value of loans in the observed year
(3) number of women still in business 1 year after the loan
(4) number of women still in business 2 years after the loan
(5) number of failures in the observed year
(6) value of failures in the observed year
(7) failure rate by number of loans = (5):(1)
(8) failure rate by value of loans = (6):(2)
According to above indicators micro-loans can be called sustainable, if the borrowers stay in business 1 and 2 years after the loans or even longer, and if there aren’t much failures with the payback.
Finally, it comes down to straight and austere business indicators, telling us, if, what we do, is sustainable and to what extent it is sustainable. We like it this way. We are deeply convinced that sustainability can be quantified and must be quantified. Otherwise, as we insinuated in the beginning, the talk of sustainability will be no more than trivial gossip.