Sustainable businesses in Nepal: In between sustaining and surviving

Small sustainable businesses that sell Nepal-made products are steadily making a mark in the market. Some are social media hits with their marketing gimmicks, which have risen especially in the post-pandemic scenario. Netizens, too, are seemingly buying the idea of effort, ethics, and sustainability, which many mass-produced goods often flout. 

However, with consumers perceiving them to be pricier and substandard, small sustainable businesses have a long way to go before securing a reassuring market position. Producers argue there are structural factors in play, the products are long term investments as their unique products take time to establish and an economy of scale is almost impossible for them during the early stages. 

On the other hand, the pandemic is making their survival harder as they lack financial might to weather the storm of the current scale while climate risks are deepening and posing threats to all types of businesses. 

Are small sustainable businesses really expensive and substandard? How Nepali market is not ready for conscious consumerism due to the lack of an enabling environment for their businesses? How are the pandemic and climate risks jeopardizing businesses?

What is sustainable business really?

Sustainable and/or eco-friendly businesses usually come with the connotation of environmental responsibility, energy efficiency, and green jobs into the process of production and distribution of goods. While there is a clear distinction in the two facets of not damaging the environment and not perpetuating exploitation of labor, now if a business calls itself sustainable, they cannot choose one and leave out the other. 

Pujana Pokharel, an environmentalist explains, “Sustainability is about transformation - creating growing, profitable companies that approach zero/negative and even net positive environmental and social footprints and encouraging and helping their suppliers and consumers to follow the suit. It enhances the safety of employees, communities, and the product itself.”

It is safe to say that sustainable businesses encapsulates no harm to the environment and ethical treatment of the labor with respect to wages, working hours and working conditions and anything that ensures well being of the people involved in their production and distribution processes.

Enabling environment for sustainable businesses

In the wake of the first lockdown post pandemic, Amira Ghimire, a manufacturer of trousers and shirts made with Nepali fabrics, had to shut down her business after she failed to pay the outstanding rents.

“One morning, I found my factory shutters clamped under different locks. I paid almost one hundred thousand rupees for the period of lockdown that didn’t earn a single penny for my business,” says Ghimire whose business supported two other women in her factory who are now laid-off.  

With the second wave, her business is in further risk and with no support from the government, Amira is now struggling to make ends meet. Amira laments, “When the market re-opens for the garment industry, prices are going to rise because everybody will be thinking about compensating for the time lost and their loan settlements, so businesses are going to be unfeasible for many and livelihood even harder.”

Nepal has implemented the Enabling Environment for Sustainable Enterprises (EESE) process that was developed by the International Labor Organization (ILO) after the 96th International Labor Conference in Geneva 2007. The EESE classifies the enabling environment for businesses into four broad categories of political, economic, social, and environment.

Under the economic category, access to financial services is recognized as one of the enabling environments for sustainable enterprises. But in the economy where access to finance is already a major hurdle for small businesses (there’re several research works that substantiate this), the current post-pandemic scenario adds another layer of complexity.

Many businesses complain that they were compelled to shut down for a long time, their overheads such as rent, bank interest and losses still accumulating while the government support (reliefs and stimulus) to cope with the pandemic effects has been almost absent. 

In this context, the Founder and CEO of Makkuse Nepal and former Miss Nepal, Anuskha Shrestha explain, “One reason locally produced goods are relatively expensive is they lack safety net to fall back upon during the rainy days.” 

Makkuse Nepal produces luxury desserts with locally sourced raw materials and believes in ethical labor practices.

 

 

 

 

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EESE identifies limited human capital as one of the main challenges in Nepal for small sustainable enterprises. The socio-economic parameter of the ILO evaluation report identifies Nepal's abject poverty and rural-urban divide, mainly arising from unequal linkage with communication and transportation infrastructure, as another major bottleneck to the growth and development of local markets. 

Jit Bahadur Thapa, an organic farmer from Dal Bhanjyang, Gorkha says, “There is no functional collection centre for the villagers to sell their organic vegetables. We produce surplus fresh organic vegetables but much of it goes to waste.” Thapa reasons that many of the cultivable lands are left barren due to shortage of helping hands in the field and demotivation from market inaccessibility.

“One way the local governments can bridge the gap between the farmers and the market is by establishing collection centres across the rural regions in the country,” explains Raghunath Sapkota who trains rural communities on entrepreneurship development.

However, physical market linkage alone is not enough to retain young workforce to the fields. Lack of critical rural infrastructures (similar to Providing Urban Amenities to Rural Areas (PURA) as advocated by former President of India Late Abdul J Kalam) such as road, electronic and knowledge connectivity, quality healthcare facilities and educational opportunities is another prominent reason why villages have failed to retain or draw working individuals anymore, many experts argue. 

Growing Climate Risks

Many rural entrepreneurs in Nepal are also severed by the disaster prone landscape and infrastructures which further worsen the enabling of small scale local enterprises. The EESE report highlights that small businesses in Nepal are heavily agriculture reliant and thus unstable geography and substandard infrastructure induced disasters risk the growth of rural entrepreneurs. 

Deep Kiran Khadka who operated Lamtang Trout Farm at Palchowk, Helambu lost his entire facility that ran on fresh running water to the recent devastating flood in Melamchi which swept away a good number of other fisheries and farmland forever. Severe future economic hardships loom for these entrepreneurs and farmers who are yet to overcome the pandemic effects. 

While researchers are trying to trace back the 2021’s first spell of monsoon with climate change induced irregular rainfall pattern, there’s little doubt that climate risks are deepening, adding another complexity to the survival of small producers especially farmers who have high disaster vulnerability. 

Structural Challenges

Even though many social media users drool over the video of local/sustainable businesses and shower them with likes and shares, buyers are yet to trust the products. 

According to Anushka, “Nepali market could do better in terms of responding to made in Nepal products, which are thought to be expensive and low quality for no reason”.  She adds people think producers cling to the “made in Nepal” label just to justify the high price, which is absolutely untrue. 

Anushka explains that low demand compels them to produce limited goods at higher cost, and that markets for small businesses are more vulnerable to many risks like supply chain disruption. “Considering these risks and higher costs of production, small businesses charge a bit higher prices to create a safety net for themselves.” 

According to Yajaswi Rai, “the demand is definitely low in the beginning. Once the brand is established and demand rises, we can scale up the production and reduce costs. If competition grows, prices will go down further.” “Moreover, sustainable products can be produced at cheaper costs since their raw materials are natural and can be grown locally.” 

Yajaswi founded Leklekk: The Green Wave that brings alternatives to plastic products and yet achieves a fair balance of profitability, social responsibility and environmental sustainability through three phases of giving, recycling and growing. 

Ideally, naturally made, green, small scale locally sourced products should be inexpensive and easily get the market space but it is quite the opposite. The lesser demand for sustainable products means the pre-existing brands are tough to compete with, not just with respect to prices but reach too. 

A number of factors, such as competition with big brands, lack of capacity to cope during shocks, difficult infrastructural reach and high transaction costs, contribute to the setback for the green goods at both supply and demand side, and perpetuate the consumption of mass produced goods instead.

“Unlike for large producers who deal in large volumes and get better price breaks and other benefits while managing their supply,” Anushka reasons, “supply chain for sustainable products is not efficient yet.”

Ash Rajbansi, who runs a business of self-made gothic accessories of chains and faux-leathers on Instagram called Cataclysmic Chains, faces a different problem - clients who only compare price of his products, but not its value. “Lack of awareness is an issue. Clients don't recognize the effort I put into these products that are difficult to find in Nepal and constantly bargain for lower prices.” 

To add to that, Rajbanshi has been facing problematic client behavior as well. He reveals that he gets customers who provide wrong contact numbers, cancel custom-made pieces, block his page after placing orders and do not respond at the brink of delivery. “Established and larger businesses may ignore such behaviors easily, but it’s highly frustrating for small businesses like us.”

How sustainable businesses are thinking forward?

A business is only sustainable in the absence of environmental harm and labor exploitation. The way forward should not be about encouraging a few sustainable businesses. All businesses should go green because of the lasting effects of unethically mass produced goods.

Anushka opines that the local producers should work on bridging the gap between conscious consumerism versus comfort-based consumerism as people avoid conscious choices when comfort is at stake. She highlights, “All businesses should take a sustainable path now, including new businesses even if it’s at their infant stages.”

Yajaswi's LekLekk already has further green plans - her firm will strive to replenish the resources they use for production by planting equal, if not twice the number of trees. She claims they have already planted a total of 1,400 trees in Kathmandu valley in collaboration with different local governments and NGOs.

According to Yajaswi, environmental issues and concerns surrounding plastics should not be understood as the issues of certain activists and social enterprises only, but a matter of wider societal wellbeing. “Every sector should consider it as a cross-cutting issue. Only then, sustainable products and services are likely to gain traction.” 

Similarly, Ash Rajbanshi is trying to use paper and eco-friendly materials for packaging his products. Ash assures that he will eventually completely do away with plastic packaging once he sources reliable lokta paper suitable for his heavy jewelry and accessories. “I am looking forward to making my products and packaging completely vegan and environment friendly.” 

Ujjwal Upadhyay, an Environmental Economist says, “Nepal is bestowed with excellent weather conditions and climatic variability offering farmers to implement a variety of agro-practices.” He recommends, “Local and marginalized people need to be engaged in and make the most out of such practices that require low investments and yield sufficient returns.”  

Ujjwal is confident about the future of green enterprises in Nepal. He believes, “Organic agriculture, mainly fruits, vegetables and fisheries can create wonderful opportunities ensuring green jobs to women and marginalized youth.”

Environmentalist Pujana Pokharel strongly suggests, “Government agencies and civil society organizations should develop minimum consensus among the key stakeholders based on the fact that Nepal with its poverty and climate vulnerability cannot achieve the twin goal of sustainable development and poverty eradication without making some hard decisions and wise trade-offs.” “Nepal has to adapt to climate change by integrating it fully into all its development policies and plans.”  

Abandoning the western model of consumption-oriented development model altogether and adopting a low carbon, high-job, and modest growth development paradigm which entails many opportunities is a feasible alternative for Nepal, Pokharel argues.