Wealth Creation in Rural Communities A Framework for Deep Collaborations and theArkansas Biofuels Story

Presented byShanna Ratner, Yellow Wood AssociatesInes Polonius, alt.Consulting

Shanna Ratner• Principal, Yellow Wood Associates, Inc., consultants

in rural community economic development since 1985

• Managing grantee for Wealth Creation in Rural Communities – Building Sustainable Livelihoods

Ines Polonius – alt.Consulting, Inc.• Arkansas Green Energy Network (AGEN)• Systems Change: From energy crop to micro-bio-

refinery to new buyers• Active collaboration of 22 organizations and

individuals

Introductions

• Learn about the wealth creation approach to rural development through story and discussion.

• Appreciate the role of value chain intermediaries in the wealth creation approach.

• Define the fundamental elements of the approach including wealth creation value chains and the use of the wealth matrix as a tool for planning and evaluation.

Objectives of this Webinar

• Wealth, broadly defined, is the foundation for prosperity.

• Poor places and people will stay poor unless they are connected to larger economies.

• Poor rural places have assets which, if properly developed, can contribute to larger regional economies.

Why a Wealth Creation Approachto Livelihood Development?

• Those assets can be developed and linked to markets in ways that create multiple forms of wealth.

• Structures exist and can be created that will cause that wealth to stick in rural areas instead of being extracted.

• Wealth that sticks leads to improved livelihoods.

Why a Wealth Creation Approachto Livelihood Development?

#1 Wealth creation is demand driven.#2 Wealth creation is intentionally inclusive.#3 Wealth is tied to place by wealth creation value

chains.#4 Measurement is integrated into the entire process as

a tool for planning and adaptive management.#5 Wealth sticks in rural areas through attention to

structures of ownership and control.#6 The wealth creation approach is strategically flexible

while doing no harm.

Guiding Principles

Principle #1:

Wealth creation is demand driven.

Guiding Principle

Local Demand:• Purpose: Price stabilization for vulnerable

budgets• Municipalities and county governments

want stable fuel prices• Example: St Francis County judge commits

to purchase total output of refinery

AGEN: Identifying Demand

Regional / Urban Demand:• Purpose: Bring new money into rural

communities, allow wealth creation• FedEx made commitment to purchase

50,000 gallons of biofuel per day• Valero needs biofuel to meet blending

requirements per EPA RFS2

Principle #2:

Wealth creation is intentionally inclusive.

Guiding Principle

Wealth Creation Opportunities

AGEN: Creating Wealth Intentionally

• Winter crop for soybean and cotton farmers Focus: Minority and small

farmers• New Entrepreneurial Opportunities

Micro-Bio-Refineries Waste Oil Collection Seed Management Seed Crushing Manufacturing of Refineries

• Example: Intentional focus on minority farmers during meeting about TA for farmers to grow Camelina

Principle #3:

Wealth is tied to place by wealth creation value chains developed within sectors.

Guiding Principle

• A business model that delivers economic, social, and environmental values in response to market demand.

• Buyers, processors, producers and other transactional partners work together for mutual benefit to create value in response to market demand.

• Includes direct engagement by supporting players who may not be direct transactional partners –educators, researchers, technical assistance providers, financers, policy-makers, etc.

A Wealth Creation Value Chain is…

Traditional Supply ChainChain starts with producer supply

Measured by net income produced

Everyone is in it for him/herself

Power determines who gets paid how much for their role

Participants try to pass on costs to others within or outside of chain

Tries to influence policy to create advantage and maximize short‐term income

Wealth Creation Value ChainChain starts with consumer demand

Measured by wealth created/retained

Everyone is in it together

Intentionally balances mutual benefit of all in chain

All known costs are considered and addressed 

Tries to influence policy to level the playing field and maximize long‐term and widely shared wealth

Value Chains vs. Supply Chains

AGEN: Deep Collaborations

• Seeking larger systems change

• A move beyond partnerships focused on specific projects

• Deep collaboration built on each member’s self interest

• Self interest creates momentum!

• Example: Initial conversations with individual members identified their self interest. “What is in it for YOU?”

15

Disadvantaged Farmers grow seed

Restaurants generate used oil

Oil Collection Biz

Researchers test seed

Seed collection, storage, cleaning Micro‐

Refinery

Two‐Year College Training Program

Meal Collection / Processing

Glycerin Collection / Refining

MidSouth ASTM Testing

Fuel Aggregator

Non‐Commercial UseFedEx

Biodiesel Stations

Farmers On /Off Road

Livestock Farmers

Cosmetic Mfgs

Green Financing Network

Bioenergy Value Chain

Manufacturer of Micro‐Refinery

©alt.Consulting 2011www.altconsulting.org

Guiding Principle

Principle #4: Measurement is integrated into the entire process as a tool for planning and adaptive management.

Seven Forms of Wealth

Individualcapital

Socialcapital

Financialcapital

Naturalcapital

Builtcapital

Intellectualcapital

Creating wealth that sticks is rarely an intentional goal, even when we define wealth broadly.

Politicalcapital

What do we mean by “Wealth?”

Type of Wealth Interventions in Value Chains

Individual How will your intervention impact the stock of skills and physical and mental healthiness of people in a region?

Social How will your intervention impact the stock of trust, relationships, and networks that support civil society?

Intellectual How will your intervention impact the stock of knowledge, innovation and creativity?

Natural How will your intervention impact the stock of unimpaired environmental assets in a region

Built How will your intervention impact the stock of fully functioning constructed infrastructure?

Political How will your intervention impact the stock of power and goodwill held by individuals, groups, and/or organizations?

Financial How will your intervention impact the stock of unencumbered monetary assets at theindividual and community level?

A wealth matrix for planning and evaluation

Type of Wealth Interventions in Value Chains

Individual # of entrepreneurs who have started micro‐refineriesBaseline: 0; Today:  1 entrepreneur in planning phase

Social # Number of groups engaged in renewable energy policy work and the strength of their relationships  Baseline:1; Today: 3

Intellectual # of requests for renewable energy installations from municipalities,      residents, and business. Baseline: 0; Today: 3

Natural # of gallons replaced by biodiesel produced in the Delta

Built# of  micro refineries functioning within the value chainBaseline: 0; Today: 1 micro‐refinery on campus of MidSouth CC fully     operational

Political # co‐sponsors on renewable and energy efficiency bill and how far the billadvances in the political process. Baseline: 0; Today: 10 legislators

Financial # of loans for refineries made through AGEN partners that are repaid on   schedule

AGEN: Examples of Measures

Principle #5:

Wealth sticks in rural areas through attention to structures of ownership and control.

Guiding Principle

Value chain meeting in January 2012focused on ownership structures:

AGEN: Ownership Models

1. Municipality owns refinery and leases it to entrepreneur with right to purchase % of output

2. Entrepreneurial Model: Individual / Local investors purchase refinery to serve local and regional markets

3. Farm Coop Model: Coop owns refinery and converts farmers’ crop into fuel for on-farm use on a contract basis

Intentionality: Focus on micro-refinery that costs $200,000 enabling investors to be local and wealth to stay in local communities

Principle #6:

The wealth creation approach is strategically flexible while doing no harm.

Guiding Principle:

AGEN: Strategic Flexibility

Transformational Benefits of a Value Chain1. Members introduce new

opportunities Solar Bioenergy

2. Problem solving together Financing barrier led to 3

potential models3. Connectedness

Community leaders Market players Political influence

Intermediary’s role: Maintain values, do no harm

Results

Supply Chain

Value Chain

Individual Capital

Social Capital

Intellectual Capital

Natural Capital

Built Capital

Political Capital

Financial Capital

The Wealth Creation Approach

Interven

tions

Interventions

Interven

tions

Interventions

Based on a diagram developed by Justin Maxson of MACED.

Value chain construction with partners in Central Appalachia

Energy efficient housing, energy efficiency, food, forestry

Value chain exploration and selected construction grants with partners in the Alabama Black Belt and Mid-South

Renewable energy, investment, forestry, food, community-based tourism

Value chain exploration grants in the Lower Rio Grande Valley region in Texas

Green housing/neighborhoods, literacy

Where are we working on the ground?

• Are you a potential wealth creation value chain intermediary?

• Would you like guidance to explore a potential wealth creation value chain in your region?

• Would you like to share what you learn with others as you progress?

If so, we invite you to join Yellow Wood Associates in a virtual value chain exploration!

What’s Next

The Wealth Creation Value Chain Exploration Webinar Series will begin in October 2012 and run October 2012 – March 2013.

The series includes 6 webinars, 6 peer calls, and up to 3 hours of technical assistance / coaching per organization. Space is limited.

If you are interested in learning more, please contact Ginger Weil at ginger@yellowwood.org, or call 802-524-6141.

Wealth Creation Webinar Series

Please visit:www.creatingruralwealth.organdwww.yellowwood.org/wealthcreation.aspxwww.altconsulting.org

Or join the Community of Practice at www.ruralwealth.org

Or contact:Ines Polonius Shanna Ratneralt.Consulting, Inc. Yellow Wood Associates870-535-0011 802-524-6141ines@altconsulting.org shanna@yellowwood.org

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