Monday, February 19, 2018

INTERVIEW: Alex Highstein of 'Aerofarms'

For this blog post, I interviewed Alex Highstein: a friend who serves as the Corporate Development Manager at Aerofarms. Aerofarms is building the world’s largest indoor vertical farm based in Newark, NJ. They aim to address the global food crisis by leveraging technology to “grow flavorful, healthy leafy greens in a sustainable and socially responsible way” without sunlight or soil.

My goal in this interview was to share information about Aerofarms’ work to our class, as well as link their strategic goals to some of the concepts we have already discussed.

Hi Alex, thank you for taking the time to join us today. Some of us in 'Business & Environment' are unfamiliar with indoor vertical farming and would love to learn more about what Aerofarms does. In what ways is vertical farming superior to how we traditionally think of farming, and what problems does it aim to solve?

Vertical farming delivers a product that has been given the white-glove treatment in every sense: inputs such as nutrients, water, and light are delivered in qualities, quantities and intervals ideal for the specific plant. This results in a product with optimal taste, texture, appearance, and nutritional content. Vertical farming can significantly reduce the carbon footprint of our food: AeroFarms uses 50% of the fertilizer, zero herbicide and pesticide, and 90% to 95% less water than traditional field farming. We also locate our farms close to cities, eliminating the emissions from refrigerated trucks. These trucks often drive across the country, resulting in serious carbon monoxide emissions, and poorer product quality. Indoor farming is a natural barrier to pests, but the controlled process also de-risks contamination from deadly pathogens as well; you don't have to look far to find examples of dangerous listeria or E. Coli outbreaks, which seem to be more and more common. One significant challenge that vertical farming aims to tackle is population growth. Coupled with the loss of arable land, by 2050 we will have twice as many mouths to feed with significantly less land to do so. Vertical farming is much more efficient: AeroFarms is 130 times as efficient as a field farm. Finally, we want to connect people with their food: by locating close to or within cities, we have a unique opportunity to engage with our customers and help promote understanding of what people are eating, and where it comes from.


Aerofarms is currently building the world's largest indoor vertical farm, and is known for a patented aeroponic growing system. What are the most challenging aspects of delivering sustainably-farmed produce on such a large scale?

Technology is rapidly evolving, which presents both challenges and opportunities for vertical farming. Adapting to new, efficient, techniques takes time and there is often a learning curve. Although consumer acceptance and understanding also takes time, we have found that people respond very positively to our product: its environmental benefits are outstanding, and the taste speaks for itself. Financing can be a challenge as well: we are a relatively nascent company in a very young industry, and access to traditional capital is often difficult. Fortunately there is a lot of interest in the space, and global recognition that we need to figure out new ways of producing healthy food.

In class recently, we discussed whether a firm's level social responsibility can be positively correlated with profitability. Do you think it pays to be green?
I believe it does. In the short term, being green allows us to position our product as a premium alternative to traditional field farmed salads. People care about what they're putting in their bodies, and want a product that is grown without herbicides or pesticides, and with more nutrients and a better taste. In the long term it almost certainly will: we need to take better care of our environment; the degradation of our land and water will almost certainly catch up to us, and when stricter regulations are put on farmers so that they pollute less (70% of fresh water goes to agriculture, and 70% of water pollution comes from agriculture), we will be well ahead of the competition.


Posted by Shahed Serajuddin

Additional Reading: BCG's "New Lens for Strategy"

Last quarter, I attended the Boston Consulting Group’s “Day’s on the Job” event -- an afternoon where Anderson students could visit the firm’s Downtown LA office for a taste of a day in the life of a management consultant. Instead of briefcases and business suits, however, I was surprised to find consultants wearing ripped blue jeans, faded old t-shirts, and packing brown bag lunches.

Intrigued, I asked a staff member why everyone was dressed down. As it turned out, after the day’s DOJ programming, they were heading to a local park to plant trees as part of an environmentally-minded community event. I recall wondering how exactly BCG envisioned the role of social responsibility among their overall strategic goals. With the publication of ‘Total Societal Impact: A New Lens for Strategy’, I soon had my answer.

The main premise of BCG’s new research publication is that all else being equal, investors tend to reward top performers in ESG metrics with valuation multiples that are between 3% and 19% higher than average performers. As a result, BCG recommends that to maximize long-term profitability, firms should increasingly integrate environmentally responsible activities into their strategic missions.

Although ‘Total Societal Impact’ echoes many of the points we’ve already discussed in class pertaining to the correlation between ESG metrics and investment decisions, there were a few items that struck me:

1. BCG’s recommendations are based purely on pressure from stakeholders and the opportunistic goal of maximizing shareholder value, rather than the intrinsic motivation to be more environmentally friendly. As such, many of their recommended strategies have the potential to manifest as “greenwashing.” For example:

“Companies are under mounting pressure from a range of stakeholders to play a more active role in addressing social and environmental issues... Employees -- millennials, in particular -- not only want their employers to have a greater sense of purpose but also seek an active role in companies’ societal impact efforts.”
Also: “A strategy that considers societal impact can give a company access to new locations and markets, and to underserved customer segments in existing markets… Although these new markets may not be immediate money makers, entering them is often a preemptive or strategic move that leads to long-term, profitable growth opportunities.”

2. The publication mentions that SRI assets have hit $23 trillion, or 1/4th of all investments -- which is up from $18T only two years prior. This is due in part because of strides made towards the reliability of ESG data like we have discussed in class, and also because asset managers have increasingly recognized the correlation between these metrics and company valuation, thereby devoting an increasing portion of their portfolios towards them.

Overall, it will be interesting to see how strategies such as these manifest in the coming years, especially when recommended by firms like BCG that are trusted more in the context of driving profitability than they are for maximizing environmental benefit.
- Will these initiatives lead to a long-term decrease in harmful emissions, or an increase in greenwashing?
- As more firms jump on the environmentally-friendly bandwagon, will shareholders reward authenticity or marketing spend?
- As social responsibility becomes more commonplace and the accompanied “bump” in valuation recedes, will firms sustain their efforts or chase another profit-driven strategy?

Only time will tell...

Posted by Shahed Serajuddin

Thursday, February 15, 2018

Walmart's Project Gigaton


Almost one year ago, Walmart launched its project Gigaton
Considering that Walmart is only committing to reducing their own emissions (Scope 1 and 2) by 18%, and putting most of the pressure on its supply chain, do you think this is a great initiative... or is it just greenwashing?

"Walmart is the first retailer with a verified science-based target emissions-reduction plan. The company aims to reduce its absolute Scope 1 and 2 emissions by 18 percent by 2025. The retailer will also work to reduce CO2e, or carbon dioxide equivalent, emissions from upstream and downstream Scope 3 sources by one billion tons (a gigaton) between 2015 and 2030."

https://news.walmart.com/2017/04/19/walmart-launches-project-gigaton-to-reduce-emissions-in-companys-supply-chain

Posted by Paloma Giottonini

Sunday, February 4, 2018

J&J SDG 2030 Promise


I interned with the UNDP last summer in Istanbul and worked on several SDG related projects. There's a lot of buzz about the role of the private sector has to play in achieving the SDGs. Business Call to Action + the UN Global Compact are both rallying businesses to get on board. 

I think J&J has a great example of how to adapt the SDGs to their business goals: https://www.jnj.com/caring-and-giving/our-2030-promise

Posted by Sana Rahim

Imperative - Transforming Careers and Teams by Activating Purpose

Along the discussion of employee satisfaction and happiness from Week 9, there is a Seattle-based startup called Imperative that is using a...