Ideas in Development

VESC’s original intentions were to back good propositions, strengthen the indigenous resource-based sectors, build a lodge and so on.

Unfortunately, in business, things don’t always go like you want. As chronicled in the CFED publication “Lessons From the Life and Death of the Virginia Eastern Shore Corporation”(2001), by Brian Dabson, Peter Plastrik and Richard Turner, VESC, though an admirable attempt at ecologically-sustainable economic development, had several fatal flaws.

The Nature Conservancy (TNC) launched VESC with $2.25 million in capital and an ambitious business plan to become profitable in four years. TNC hoped that the success of VESC would create a new conservation model—a for-profit business that preserved the Eastern Shore and simultaneously developed its weak economy. VESC proposed to generate $2 million in revenue in its fifth year by developing environmentally-compatible businesses in tourism, agriculture, arts and crafts, and real estate development. It would start by investing $400,000 in 15 small businesses, spending $700,000 to create a lodge for eco-tourism, and acquiring nearly $2.3 million worth of commercial, agriculture and residential properties

This ambitious experiment, however, ran into difficulties a mere six months in. VESC responded by ceasing real-estate and small business financing efforts and amending profitability estimates from four years to nearly 10. The company continued to lose money until dissolved in 1999. Though built on noble ideals, the work of the Jedi was not sustainable.

What lessons can we learn from this experiment? CFED’s publication lists four:

Conservation and environmental organizations can only become effective catalysts of economic development if they (a) consciously tailor the role they play to use their strengths and (b) effectively manage the tensions that inevitably will arise.

TNC’s experiment took them out of the arena where they had built up years of expertise and a sterling reputation and into areas they had little knowledge or experience of. Collaboration was also something unfamiliar to TNC at that point, and it was difficult to convince both conservationists and the community as a whole that their involvement is worthwhile. For-profit social ventures developed by guardian organizations have a much higher chance of success if the ventures are in territory the organizations know well. The organization must also carefully consider the best role for it to play—which is not always that of entrepreneur.

The strategy of developing businesses and markets to improve the environmental performance of a particular place, such as the Virginia Eastern Shore, depends crucially on understanding and obeying the fundamentals of place-based economic development.

VESC originally intended to use its capabilities to catalyze local businesses, but ended up trying to start most of its new ventures itself, placing too much responsibility on the fledgling for-profit. Other organizations can avoid these mistakes by carefully targeting initiatives to provide only what local businesses can’t. Also, as a single company, VESC could not impact economic sectors the way it would have been able to as a creator of networks and support systems for existing businesses and sectors.

To successfully learn how to integrate economic, environmental and community systems, and then to achieve scale, requires a profusion of experiments, openness to critical feedback and the continuous revision of assumptions and actions based on experience.

VESC, and TNC to an extent, lacked the nimbleness and ability to change that characterize the small companies it endeavored to start. More importantly, it sought to create a model for future organizations, but did not understand that significant experimentation would be necessary to create a robust example. Creating new systems of integration requires a management team that is receptive to feedback and willing to explore new directions.

Conservation-oriented businesses are no different from any other business in that they have to obey the disciplines of the marketplace. But the fact that they aspire to be accountable to a double- or triple- bottom-line may require them to be more disciplined in managing trade-offs between profitability and conservation goals.

Managing two or three bottom lines requires extraordinary focus about what business you are in and significant analysis of investment decisions. These decisions must be based on realistic assumptions, and decided by management with the ability to start and grow a business. To truly accomplish its mission, VESC needed to establish credibility over a long period of time by maintaining relationships with other organizations and entities in the region—instead, it chose to focus on starting myriad new businesses rather than connecting with existing ones.

Eventually, TNC got out of the economic development business for good. But the ecosystem protection work is a mainstream element of the Conservancy. It still plans to undertake 500 landscape-sized projects by 2008 and set a fundraising goal of $750 million to finance them. The Jedi’s work lives on, although Weeks and Hall are working elsewhere in the conservation field.