The Role of Businesses in Regenerating Local Economies — Part 1
Catalyzing a Business Stakeholder Ecosystem to Drive Place-Sourced Economic Development
Article 2, Part 1
By Beatrice Ungard and Ben Haggard (with The Regenerative Economy Collaborative)
This is the second article in our series exploring several practical applications of regenerative theory to local and regional economic development (you can read our first article here). This article is published in three parts.
The small village of Juluchuca, near Zihuatanejo on Mexico’s Pacific coast, is a prime destination for tourists seeking an authentic Mexican experience. The area has been inhabited for 12,000 years and has a rich human history influenced by both Olmec and Mayan civilization and later the Aztecs. This rural community located at the convergence of two watersheds and at the coastal interface between the Sierras and the Pacific presents a rich diversity of species and habitats. It is known for the production of sea salt and coconut candies and offers visitors a rich choice of experiences such as local farms and famers’ markets visit, baby sea turtle release, snorkeling, kayaking, sport fishing, and a multitude of other beautiful local excursions.
Back in 2005 however, Juluchuca was a mere shadow of what it is today, and certainly of what it was 1200 years ago during its pre-Columbian heyday. In spite of a superficial appearance of abundance, the natural environment had in fact degraded over time due to an oversimplified palm oil monoculture: key plant species had been displaced and the impoverished topsoil washed away when it rained; many animal species had disappeared; and the estuary was slowly degenerating into a marsh. The once vibrant town had difficulties supporting its 600 inhabitants and finding freshwater resources.
The rebirth of Juluchuca was catalyzed by a husband-and-wife entrepreneur team who, after falling in love with the place, purchased a 200-acre former coconut plantation located on the estuary that is formed by the Juluchuca River. On the property, they built a sustainable boutique hotel that offers its guests simple luxury experiences embedded in a pristine natural environment.
Given their passion for sustainability and community engagement, the owners realized early on that it would be possible to create a financially successful resort community by partnering with their neighbors. They dedicated significant creativity toward this end, leveraging opportunities provided by the initial capital investment, as well as the income stream from guests, to regenerate local ecosystems and communities [1]. From inception to design, construction, and now on-going operation, Playa Viva has striven to build developmental relationships with all of its stakeholders, generating significant systemic benefits in the process. As the resort states on its website: “We work with local leaders and stakeholders to develop programs that benefit these communities so that as Playa Viva grows and prospers, the communities in our local watershed do as well.”
In this article, we explore the critical role any business can play in fostering a vibrant local economy. We suggest that a business can support the achievement of this aim by building deep reciprocal and developmental relationships among the members of its business ecosystem, creating opportunities for all to flourish while contributing to the health of their local economy. When businesses see Earth and local communities as key stakeholders, they bring these considerations inside the purview of their economic activities, rather than separating them out as “externalities.” This opens up the possibility for businesses to make contributions to the potential of the places in which they operate as an integral part of their work. With this kind of business investment, places become more able to play their own value-adding role (that is, make their own contributions to potential) within larger regional systems and this helps them to secure their economic viability for their citizens.
Business as a Regenerative Engine of Local Economies
Businesses have always been understood as one of the key engines of an economy. To support economic development, many local governments build strategies to attract large companies, hoping for jobs creation, tax revenues, innovation, workforce skills development, and increased availability of affordable products and services. Unfortunately, these companies usually operate within an extractive paradigm that fails to factor in the wellbeing of the places and communities where they are implanted.
Whether they attract big box retail stores, or fast-food franchises, or high-tech companies, communities, especially smaller communities, often end up suffering a host of unintended negative consequences. For instance, small local stores cannot compete against the giants and eventually close. Traffic congestion increases, the community loses its character, and local capital leaves the community. Depending on the type of company, either low wage jobs become the norm as the capabilities of the work force decline [2], or gentrification drives the displacement of low-income populations.
In addition, the phenomenon of remote working has grown over the years and has now become a necessity during the recent COVID pandemic. This is also having mixed effects on communities. On the one hand, big cities are losing skilled professionals to smaller and rural communities, where a remote workforce is driving economic minibooms by purchasing new houses and spending money in local businesses. On the other hand, the high-tech companies that employ a remote workforce become even more disengaged from the urban communities in which they operate and do not see themselves as having a role to play in revitalizing local economies.
It has traditionally been considered the role of social and sustainable enterprises to deliver value and benefits to communities while the purpose of businesses has been to respond to the imperatives of their shareholders. However, in 2019 the Business Roundtable endorsed a Statement on the Purpose of the Company expressing that businesses should move beyond a narrow focus on shareholder returns to also deliver value to four other key stakeholders: customers, employees, suppliers, and communities.
This statement is a move in the right direction; yet two challenges must be overcome for companies to play a truly regenerative role. First, Earth must be included as a key stakeholder. Not including ecological systems as stakeholders gives companies the license to continue extracting resources and polluting natural environments without restraints. Moreover, a local economy is always embedded in a context — its place. The concept of place encompasses a community and the natural ecosystem it inhabits and represents a unique living system that is distinct from any other place. For businesses to incorporate both human and natural systems in their strategy and operation means they need to learn to understand how to work with the uniqueness of place.
Second, we need to be very clear about what “delivering value” really means. In regenerative development, delivering value means creating ableness. That is, a regenerative investment develops the capacity and the capabilities of all stakeholders (including ecological systems) to not only enhance their own lives and wellbeing, but also to make a regenerative contribution to the larger systems in which they are embedded.
A business cannot be considered independently of the context in which it operates. The vitality of a local economy directly affects the health of its business community. Healthy stakeholder ecosystems mean healthy businesses and vice versa. When local stakeholders’ activities are grounded in the unique essence and potential of place, they directly contribute to supporting local economic development. Therefore, we suggest that businesses have a leadership role to play in catalyzing healthy local stakeholder ecosystems engaged toward a shared common purpose: the regeneration of their local economies.
