In Business, Creating Sustainable Enterprises & Communities

NEW APPROACH TO ECONOMIC DEVELOPMENT IN VERMONT

In Business, March/April, 2004, Vol. 26, No. 2, p. 24

“Looking within” is proving to be the best strategy - investing in people by supporting local entrepreneurs with vision and a passion for their work.

Tim Traver

THE OLD STAND-BY economic development strategy of trying to lure big companies to your region with tax credits and other incentives, never really worked as a rural economic development practice. The quest for the large, high impact company, often leaves small businesses, that are the foundation for healthy local economies, overlooked or stepped on. Silver bullet recruitment strategies can also lead to unwanted tradeoffs to environmental and community qualities of life. And then there's the economic instability of putting too many eggs in one company basket.
The Vermont Sustainable Jobs Fund (VSJF) practices a community-based approach to economic development. VSJF was created by the Vermont legislature in 1995. They focus on small value-oriented businesses that are established or envisioned by an entrepreneur. The Vermont legislative mandate was simple and unencumbered: create sustainable jobs for Vermonters that also benefit communities and the environment. According to VSJF's executive director Wayne Fawbush, “We grow jobs by helping businesses make more money in value- added markets. We work at the grassroots level with entrepreneurs passionate about their businesses and with communities willing to develop an economic development plan that is sustainable. We also work at the state level with large institutions to help them purchase material from local businesses.. Vermonters have a strong sense of place,” said Fawbush. “We believe that there are exciting economic opportunities in that loyalty and in the resources available to our rural communities. Here in Vermont strong communities, economic prosperity and a healthy environment go hand-in-hand.”
Serving the dual needs of both private entrepreneurs and disadvantaged rural communities, while keeping an eye on the ecological health of Vermont's natural resources, led VSJF in innovative program directions - going places conventional development authorities and lending agencies have not gone before, and often yielding surprising collaborations. “Everything changes when you focus on strengthening local economies from the inside out,” said Fawbush. “People are always surprised to learn about the resources they already have on hand. In Vermont that often means forest and farm resources, skills, small community infrastructure - safety, neighbors you can rely on, a strong sense of place, good schools, health care, strong land use regulations, and clean air - things we took for granted before. We don't necessarily have to turn to big interests beyond our borders.”
VSJF responds to sustainable development needs and opportunities in a number of ways depending on the unique qualities of communities and entrepreneurs. It routinely provides small grant monies to business groups to make their networks more effective. Networks help small business achieve economies of scale. Networks can bring new value-added products to market more quickly and can market more effectively than a single small business entity can. Specialty food producers, organic meat producers, can work cooperatively to market their wares, buy refrigerated trucks or storage, or create training modules.
GROWING SMALL BUSINESS NETWORKS
VSJF is probably best known in the business community for supporting business networks. It has financed dozens of networks in a handful of key Vermont manufacturing and agricultural subsectors. For example, in VSJF's work with the Vermont Cheese Council, it joined specialty cheese makers and family farms throughout the state, and devised a new way of conducting business. With a vision of making Vermont the “Napa Valley of cheese, “ these 16 cheese makers wanted to unite their strengths and specialties to enlarge the national reputation and market for Vermont-made cheeses. VSJF provided two grants totaling $25,000 to fund initial exploration and to provide the necessary expertise to guide the group through the organization process. In 1996, the Vermont Cheese Council was formed. VSJF helped by providing grant money that enabled the cheese makers to present their products in the national marketplace by leveraging the “Vermont brand” and the exceptional quality they brought to their craft.
“The Cheese Council brought Vermont cheese makers together as a community and has invited more sharing of information and resources than we would have done on our own. It was very helpful having VSJF organize this effort. We couldn't have gotten the Cheese Council off the ground without the VSJF grant,” said Cindy Major, owner of Vermont Shepherd, LLC.
Today, with 31 cheese makers in its membership, the Vermont Cheese Council demonstrates that collaboration, rather than competition, can be the key to growing a thriving industry.
REBUILDING A SUSTAINABLE FOREST MANUFACTURING SECTOR
Doing sustainable economic development in rural Vermont means working with the forest products industry. One-third of all manufacturing jobs in Vermont are linked to this sector. But global economic change is causing significant job losses in forest-based industries in Vermont and rural communities are often hardest hit when plants close. Since imports now account for 34 percent of furniture purchases, up from 23 percent in 1995, furniture plant closings are more and more frequent in Vermont. Primary milling operations meanwhile have moved north to Canada where government subsidies support wood manufacturing industries. The irony in the forest products industry is that 80 percent of Vermont is forested and 95 percent of Vermont's forests are classified as merchantable. In other words, Vermont has a working forest that is on the verge of not working anymore, except as a scenic backdrop to a growing tourism industry.
The overall percentage of wood manufacturing jobs is highest in the Vermont's Northeast Kingdom, the name given to Vermont's three heavily forested northernmost counties. Wood harvesting and processing have long been cornerstones of the Kingdom's economy, but globalization has forced the region to reinvent its economy. Recreation-based tourism and the creative economy are on the rise, and wood processing remains a key sector. Strategies to keep it that way include down-scaling wood manufacturing businesses but up-scaling market niches, and focusing on adding value in new ways, including building a regional identity and linking it to green certified brands - products derived from sustainably managed and harvested forests and manufacturing systems.
Forestlands are certified in Vermont by SmartWood, an organization that certifies forests worldwide using stewardship standards developed by the Forest Stewardship Council, the most rigorous, independent, and credible forest certification system in the world. Over 41 million hectares have been certified by FSC worldwide. Some 200,000 acres have been conserved and certified in the Northeast Kingdom alone, and the region is gaining a reputation now for sound forest stewardship.
One of VSJF's most interesting partnerships in the region is with a group of unemployed furniture makers in a small town called Island Pond. When the Ethan Allen Furniture plant announced the closure of its Island Pond facility in 2001, 200 workers lost their jobs - a significant blow to the local economy. Shortly after the closure, a group of former Ethan Allen employees met to discuss how they might go into business on their own. They were skilled furniture makers, but had no training in management, business start-up and financing, or marketing. VSJF provided this group with funds for a feasibility study and helped secure USDA funding for business planning and marketing. VSJF brought the Vermont Employee Ownership Center in to develop an employee-ownership structure for a new company to be named Island Pond Woodworking (IPW). Taking on the name of town was more than incidental for IPW. The workers lived in Island Pond and intended to stay. The town played an active role in the process of creating the new business from the start: the business and town knew their futures were connected.
New small business start-ups and rural towns need outside help to thrive. They can't go it alone. VSJF connected IPW to a supply of certified Vermont timber from Vermont Family Forests for IPW products. VSJF, with support from Vermont Senator Leahy's office helped develop new end markets for IPW furniture. Signed contracts with Middlebury College, the University of Vermont, Dartmouth College and the Appalachian Mountain Club gave lenders the assurances they needed to make loans for a new building, and state of the art equipment. Island Pond Woodworkers, Inc. began operations in February of 2003. Today IPW employs 16 people and anticipates growing to 20 employees within a year. Conservative estimates suggest that IPW has pumped between $1 and $1.5 million into the region's economy since they started. Sales are projected to each $1.2 million in 2004.
“To build our state's economy, it has to be locally-based…VSJF helped the whole community, using the skills, people and resources an area already has so families don't have to pack up and leave,” said Bruce Wilkie, vice president of marketing and sales for IPW.
SEEDS OF ECONOMIC OPPORTUNITY
In 2002, the passage of the National Organic Certification Law fueled an increase in the demand for certified organic seed. Though Vermont is not a major seed-growing region now, many Vermont farmers believed that growing organic seed could help diversify their farms, and increase marginal profits. They had the land and equipment needed for seed growing but lacked the know-how.
VSJF worked with Enid Wonnacott, executive director of the Northeast Organic Farmers Association of Vermont (NOFA-VT), and Tom Stearns, owner of High Mowing Seeds to establish a training program for organic seed growers. Thirty-five farmers are now part of the program, growing everything from organic broccoli to sunflower, and spinach seed. Orders for organic seed in Vermont have increased eightfold in the past two years and growers on average are pocketing an extra $2,200 in farm sales to seed companies nationwide, helping to sustain family farms in Vermont and grow a new seed industry.
VSJF is really part of a new force for economic development and change sweeping rural America. Globalization has been the mother of invention and regions are scrambling to reinvent economic security and stability. Looking within is proving the best strategy. Using resources at hand; empowering citizens to become involved; investing in people by supporting local entrepreneurs with vision and a passion for their work and training local leaders are proving successful strategies. Not separating economic from environmental and social well-being, but treating them together appears to be the only way to grow healthy rural places. Economic progress is occurring all over the Vermont working landscape: less by giant leaps forward and more by incremental baby steps, as community-based businesses and civic institutions adapt - with help - to changing global economic conditions.

Tim Traver is the communications and development director with the Vermont Sustainable Jobs Fund based in Montpelier.