Partnerships are key to CSV but they are not easy to implement, especially at a national scale. “We had about 200 meetings over 6 months before the Memorandum of Understanding was approved, including diverse groups ranging from Government Ministers, members of Parliament, civil service officials, farmer representatives, and senior spiritual leaders.” remembers Law. While the idea behind Mountain Hazelnuts resonated with the concept of GNH, months of negotiation and trust-building were needed in a nation which was learning the ropes of both democracy and international investments.
Spitzer and Law initiated the idea of MH as a public-private-community partnership, undertook detailed joint feasibility studies with the Ministry of Agriculture and Forests, laying the foundation for an open and collaborative partnership with the RGoB. The investors demonstrated their deep CSV commitment by pledging 20% of its net profits to the Hazelnut Trust Fund to benefit Bhutan’s communities, culture and environment.
Beyond the national government, Mountain Hazelnuts engages with many levels of stakeholders – from growers to international investors – whose goals need to be aligned. The Company has a targeted approach for each group, providing regular updates on the vision and progress of MH. Besides these “formal” communication channels, it has established a comprehensive system of “informal” relationships with key stakeholders at a local level.
Mountain Hazelnuts has identified two main stakeholder groups: the local government branches – the company works in 18 of the 20 Dzongkhags (districts) of Bhutan – as well as the growers and communities (including monasteries, nunneries, etc.) within which it works. The Company has trained a strong network of managers leading local teams in each Dzongkhag. MH deploys 150 field extension workers who visit growers every 60 days to provide orchard management support and collect data, and 300 community lead growers (farmers who take a lead in their communities). Furthermore, MH has developed an innovative mobile phone application, coined the “Field Companion”. This provides a direct interface with growers and allows smooth communication between growers and Mountain Hazelnuts to tackle crop issues as soon as they arise.
Financing the US$30 million impact venture was another key challenge. To prove the viability of the project, the couple funded the Company for its first five years of development. Mountain Hazelnuts then relied on blended finance, which mixes public, philanthropic and private capital to achieve maximum social impact. The public financing with below-market interest rates cushions risk and boosts investment returns, allowing the leveraging of private capital. Blended financing thus brings positive results for both investors and communities and is often used in frontier markets.
However, even with its strong economic proposition, Mountain Hazelnuts encountered a few hurdles when looking for funding from institutional investors. Many potential investors found the structure too risky as the Company neither owns the trees nor the land the hazelnuts are grown on. Its success depends on the success of its grower partners, and it must work closely with the government to resolve logistical issues in a country with unique infrastructure challenges.