MASS-SPECC General Assembly Meeting

Theme: “Cooperative Relevance and Stability amidst Challenging Times”

FSSI Session Topic: "Ensuring Coop Relevance by Adopting the Environmental Agenda"

When I was asked by Ibing to make a presentation today about ensuring cooperative relevance by adopting
environmental management systems, I have set for myself two goals: first, that through my sharing today,
cooperators of MASS-SPECC will realize and better understand the value of integrating environment as a
business concern; and second, that I would be able to provide you with the practical and strategic steps on
how environment can be adopted as a cooperative agenda.

I am sure that you will ask me the most basic question: Why should environment be in the coop agenda?
Cooperatives are supposed to provide its members and the immediate community with financial services to
advance their economic well-being. Thus, environment is not your cup of tea. You will argue perhaps that
your relevance as cooperatives is in being able to provide your members quality services and financial
products; generate economic returns through dividends and patronage refunds for their hard-earn
investments in the cooperative.

I would say: TRUE! But, that is only one part of the entire equation. I am sure you would remember that the
th
7 cooperative principle talks about concern for the community. Who is your community? Where is your
community?

Almost everybody now is concerned with the on-going global economic crisis. But we may not be realizing
enough that the other more significant crisis of our time is the issue of CLIMATE CRISIS and the
ENVIRONMENT. We all live in the same place called planet EARTH. There is none of us today that have the
option or the privilege to transfer to another place to live in. Undeniably, as global warming worsens, so too
are its impacts. Let me briefly remind you of where we are now in this place called EARTH.

According to the various studies, the world already lost 80% of its original forest. In the Philippines alone, we
lost more than 50% of our in forest cover for a period of 10 decades only (70% forest cover in 1900 to 18.3% in
1999). Every year 75 billion tons of top soils are eroded exacerbating lost of productive land. The world lost
half of its coastal wetlands including mangroves and marshes. With the world’s current rate, 5-10% of tropical
forest species will become extinct every decade; and in the next 30 years, as many as one-fifth of all species
alive today will become extinct.

While the Philippines remains to be one of those with highest percentage in bio-diversity and natural
resources, the rapid depletion happening due to a variety of mutually reinforcing negative factors is pulling
down the regenerative capacity of our environment. Among these negative factors are: (i) high population; (ii)
advancing industrialization without due regard to environmental impacts for short-term profits (i.e mining,
logging); (iii) weak if not absence of political will among authorities to enforce effective regulatory policies; and
(iv) low consciousness towards environmental protection or conservation among the citizenry.

These is widely demonstrated with all our current environmental problems to just name a few: (i) 58% of
ground water supply is contaminated; (ii) 40% of our country’s solid wastes remains uncollected; (iii) Metro
Manila was ranked by the WHO as one of the five most polluted cities in the world.

However, the environment and its concerns should not be appreciated in its purely bio-physical context. We,
as people are interconnected with nature. And because more than 70% of our population lives in poverty, this
puts pressure to our natural ecosystems where the poor derives their income and sustenance. Poor people are
usually forced to move to the uplands marked by fragile eco-systems thus they become more vulnerable to
natural calamities such as landslides. Environmental degradation actually worsens the poverty cycle, because
the use of the natural resources is a key activity for survival among the marginalized. Moreover, the poor are
victims as much as contributors to environmental degradation.

FSSI Presentation: Ensuring Coop Relevance by Adopting the Environmental Agenda 1

Cooperatives being self-help organizations owned and controlled by its members, can be the best and most
effective organization to integrate environment as a business agenda. The idea of planet stewardship is a
strong incentive.

But perhaps the skeptics among you would say: coops support only small businesses and livelihood
activities—these definitely do not have significant negative impact to the environment.

On the contrary, micro-enterprises have negative impacts to the environment. We all have our ecological
footprints, even our own savings and credit operation. If we perhaps consider individually the microenterprise
that we are supporting, it might seem that the impacts would be negligible. However, if we consider the scale
and the growth of micro-credit and micro-finance operation, the cumulative effects can be significant. About
94 million clients were accounted for as of end of 2004 at an average annual growth rate of 12% posted
between the periods 1998 to 2004.

It has been observed by some studies that microenterprises usually impact the environment in these three
areas: (i) unsustainable use of the natural resources; (ii) pollution (air, water and solid waste) due to poor
waste management or inefficient production technologies; and (iii) occupational health and safety. These are
further exacerbated by relatively lack or limited knowledge about environmental safety, health issues and
mitigation options.

A few examples of microenterprise activities that have adverse impact to the environment are as follows:

1. Brick and tile manufacturing

2. Agriculture
3. Aquaculture
4. Metal working and electroplating
5. Small-scale mining
6. Painting and printing
7. Automobile and motor repair
8. Wood processing and metal finishing
9. Charcoal making
10. Food processing
11. Animal slaughtering
12. Trade of exotic rare plants and animals

Likewise, since most microenterprises operate informally outside the bounds of environmental and legal
regulatory system, they are not subject to environmental enforcements or incentive structures that can
promote adoption of environmentally sound practices or minimize environmental damage.

What does this imply to the coops financial business operations? You may want to give a thought on the
following business considerations:

 Risks – as mentioned earlier, negative environmental impacts are more acutely felt by the poor (i.e
scarcity of inputs, sickness due to exposures to environmental hazards) and thus may put into jeopardy
the client’s ability to save or to repay loans, consequently, also the cooperatives loan portfolio
 Regulation --- the environment is expected to emerge as an increasingly important policy agenda; thus,
microenterprises may be under regulatory considerations over time
 Access to funding – as socially responsible investments becomes a mainstream business practice over
time, business operations will increasingly be evaluated according to the triple bottom-line criteria
 Competition – the microfinance industry is very dynamic and increasingly becoming competitive.
Developing new/innovative products and financial services integrating cost-saving environmental
technologies can be an opportunity to differentiate beside improving clients productivity
 Ethical Considerations – the responsibility to care for the environment

FSSI Presentation: Ensuring Coop Relevance by Adopting the Environmental Agenda 2

To the extent that cooperatives succeeds in scaling up and facilitating wide-spread growth in micro-enterprise
businesses, its potential environmental impact looms even larger over the horizon, thus the need to consider
environment as a business agenda.

The continuing relevance of cooperatives as agents of social change and development in the community relies
in its ability to not just to ensure financial discipline, provide quality services but also in facilitating the
interface between microenterprises and missing third bottom-line: the environment. Environmental
sustainability and economic growth need not be a choice of one over the other. David Brower said: “There is
no business to be done on a dead planet.”

The Stern Report released in 2006 which presented the effects of climate change and global warming on the
world economy suggested that the threats of climate change is the greatest and widest ranging market failures
ever seen. Way back in June 2003, over 40 financial institutions globally have come together to draft the first
set of the Equator Principles, which affirms their role as creditors & financiers to promote responsible
environmental stewardship and socially responsible development. Also in 2007, the Association of
Development Financial Institutions in Asia and the Pacific also integrated environmental governance and
environmental risk screening into their operating systems. It has been widely recognized that it makes good
business sense to adopt environment as a business agenda since no one can be immune to the predicted
effects of climate change. DBP President & CEO Reynaldo Go said: “Banks are not just caretakers of the
nation’s wealth, they must also be caretakers of the Earth.” Ambassador Alistair MacDonald of the EU
Delegation to the Philippines expounded the role of financial institutions in protecting the environment:
“Banks have the powerful decision on where to put funding. They have the power to directly fund projects that
support environmental and social initiatives, and they have the power to avoid financing projects that have a
negative impact on the environment”.

The business case for environmental finance suggests that concrete gains are achievable when adopting
environmental measures in the business operation at various levels: (i) direct financial gains derived through
cost savings in energy/water use and paper, cost-consciousness among employees and lower future
compliance cost; (ii) reputation/image by attracting and retaining customers and good employees and better
recognition in society and the public in general; (iii) work place benefits through proper facility management,
accident-free and healthier workplace environment; (iv) environmental/ecological gains due to clean
environmental services & access to natural resources.

Aren’t cooperatives as community financial institutions like banks? Therefore, we have the power to leverage
our funds to protect the environment. We can all start taking small steps to promote environmental finance.

The work of the Foundation for a Sustainable Society (FSSI) is anchored on the triple bottom-line agenda of
economic viability, ecological soundness and social/equity participation. FSSI have integrated environmental
criteria and parameters in our project appraisal criteria and monitoring system. We have incorporated a
negative list in our financial management and investment policies. FSSI is implementing the program
“Greening the Micro-Finance” as part of our effort to integrate environment into the agenda of community
finance institutions --- cooperatives, MFIs and rural banks. In our own operation, we have started
implementing the environmental management systems (EMS) to reduce the ecological footprints in our own
office operations. The Foundation leadership has approved the adoption of our environmental policy and we
have formed our EMS team that takes the lead in the EMS implementation. We are promoting through
trainings the adoption of environmental management accounting (EMA) as a management tool to measure
and monitor environmental performance. FSSI is committed to pursue this advocacy together with our
members and partners. FSSI looks forward to the possibility of establishing environmental standards and
parameters that can be used eventually for rating or recognizing green cooperatives or green microfinance
organizations.

According to a paper prepared on social performance of microfinance for the SEEP Network, there are three
broad approaches to mitigate the environmental impacts of microenterprises: (i) command-and-control; (ii)
economic incentives; and (iii) increased lender liability. The first approach is largely outside the sphere of
influence of cooperatives. But the second and third approach can be accommodated within the context of the
cooperatives present operations. Cooperatives as community financial institutions can pioneer the efforts in

FSSI Presentation: Ensuring Coop Relevance by Adopting the Environmental Agenda 3

providing market-based incentives among micro-enterprises to create value-changing practices that will
benefit the environment. We may not have fully recognized its potential, but the market is an arena for
change. Cooperatives as finance institutions have the opportunity to educate its market --- members as
savers, borrowers, micro-entrepreneurs and as consumers. Besides the economic contributions of
cooperatives to local economy development, it can enhance further its relevance by committing to address
environmental degradation through information and education , community networking, support for
sustainable enterprises, and at the very least become a resource-neutral organization through conservation
efforts and resource offsets.

Let me share some of the concrete actions points that can be undertaken by cooperatives to integrate
environmental agenda in its business operation:

1. Reduction of ecological footprint in office operation

We should practice what we preach. This is the first basic step towards integrating the environmental
agenda. Institutional commitment should be manifested through adoption of environmental policy,
formation of environmental champions and implementation of environmental management systems. To
implement the EMS, it is essential that an environmental impacts assessment (EIA) is undertaken to
determine the office environmental aspects and impacts.

2. Greening the Savings and Credit Operation

Cooperatives can have various parallel tracks in mainstreaming environmental concern in its core business
operation. Conducting a baseline study of the microenterprises supported would be a good step in
understanding the environmental conditions, aspects and impacts of these projects. This will also
facilitate clustering of projects in similar sectors that have same environmental concerns. Developing and
integrating environmental parameters and criteria in loan application and evaluation processes manifest
the cooperatives capacity to leverage its resources in support of microenterprises that benefits the
environment. In the process, new and innovative product mix may be developed both for savings and
credit as market-based incentives towards environmental protection and conservation.

The paper prepared for the SEEP Network social performance noted several challenges in using financial
services to encourage micro-enterprises to adopt environmentally-friendly practices and technologies. On
the supply side, there are issues of unavailability of relevant technologies, inadequate distribution
networks, quality and capacity limitations of technology providers and the quality of the technologies
themselves. On the demand side, challenges include affordability, inadequate knowledge about
appropriate technologies by target clients, uncertainty about returns. These are further compounded by
cooperative and microfinance institutions own lack of familiarity of technologies, reluctance to finance
assets that do not clearly relate to income generation and risk-averse attitude to innovate and
experiment.

3. Environmental Information, Education and Research

Cooperatives through the Member and Education Committee can pursue continuous information and
education campaigns through various channels such as the pre-membership seminars, ownership
meetings, or specially mandated trainings and seminars. Investing in environmental information and
education is a strategic intervention that can pave the way for environmental adoption at the
microenterprise and even household levels in the long run. Studies and researches may be pursued as
investment consideration in new sub-sectors and enterprises, geographical areas or market locations.

4. Partnership and Networking

Cooperatives should continue to build partnerships and networking with other institutions to improve
capacity in environmental education and management or promoting policy reforms. Engagement through
partnerships also facilitates involvement in bigger community environmental projects, sharing of expertise
and resources in undertaking activities that may not otherwise be possible alone.

5. Sustainability Reporting
While public reporting and disclosures are not yet widely implemented among cooperatives, sustainability
reporting signals transparency and increased accountability not only on financial performance but

FSSI Presentation: Ensuring Coop Relevance by Adopting the Environmental Agenda 4

 including social and environmental aspects, with relevant stakeholders aside from the membership.
Sustainability reporting drives better stakeholder engagement, enhanced organizational reputation, helps
minimize risks and provides avenue for sharing best practices.

Concluding Remarks

24 hours a day, we consume air for breathing, water to drink and food to eat. Every choice we make reveals
how much we care for our world. Every individual action can make a difference.

Cooperatives are a potent force to create that collective action and impact based on a vision of sustainability
and social justice. Cooperative relevance will be defined in the long-term by how well it can respond to
important and critical challenges of its time. The call to make this world a better place is all the more real in
this present time.

A better world is possible and it is all up to us to make it happen!

“We did not inherit the earth from our parents, but we borrowed it from our children” – an Indian Chief

References:
1. http://worldcentric.org/conscious-living/environmental-destruction
2. http://www.delphl.ec.europa.eu/docs/cep%20Philippines.pdf
3. http://www.equator-principles.com/faq.shtml
4. http://worldcentric.org/conscious-living
5. The State of Microfinance – Outreach, Profitability, and Poverty by Adrian Gonzalez (MIX/CGAP) and Richard Rosenberg (CGAP)
6. The Missing Bottom Line: Microfinance and the Environment: The SEEP Network Social Performance Working Group, Social
Performance MAP 2008
7. Presentation of ADFIAP Secretary General Octavio Peralta during the 2009 EPIF Conference

i
This paper is prepared by Emma Lim-Sandrino, Executive Director of the Foundation for a Sustainable Society (FSSI) for
presentation at the 40th Mindanao Coop Leaders Congress and 35th MASS-SPECC General Assembly held on May 01-03,
2009 at the Family Country Hotel and Convention Centre, General Santos City

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