Krutika.mp3

Hello and welcome to the profit meets Impact podcast, where we explore the intersection of doing well and doing good in the world. I'm your host, Morgan Bailey, and I'm excited to bring you the wisdom of entrepreneurs and thought leaders that are using business to create sustainable and meaningful change across the globe. All right, excited for this conversation with Krutika Rabhishankar, who is the co founder of Farmers for Forests, an organization that makes biodiverse forests financially viable for communities. They help farmers and communities protect standing forest or a forest land. They first incentivize and fund this work via cash transfers to communities, and they increase incomes in the long term by helping farmers sell forest produce from agroforesty forest, agroforestry, excuse me, and access to carbon revenue. Krutika has spent over a decade working in rural India and across sectors like the public distribution system, health, agriculture, and forest. She's deeply passionate about wildlife, forests, growing food, rural livelihood, and financial markets. Before co founding farmers for forest with two of her closest friends, she worked in the international development space in the equity markets.

She studied economics and environmental studies in college and continues to be fascinated with how the two can interact and intersect better. Krutika, lovely to have this conversation with you.

Thank you for having me, Morgan. I'm excited to be here.

All right, so, Kartika, you and I have known each other a little bit as we work together through the Miller center. So it's exciting to have this conversation because I feel like I really have a deep understanding of your business. But before we get into the business piece, one of the things I like to ask people is how did you actually start to get into the social impact space that led you to founding the company?

That's a great question. So I don't really have one answer for this, and I usually say different things depending on what I'm feeling. But my, the first memory I have about wanting to do something was when I was really small and I read this book about extinction, like, species going extinct, animals dying out, pollution. And I remember I must have been about five or six years old, and that kind of stayed with me. And it's still like, it's still somewhere in the back of my head. And I think that was one of the first really strong motivations that I had that I remember of for wanting to do something for the environment, for the community, and particularly in, like, rural areas, areas where there are forests, farms. So I sort of just had this, like, vague feeling of wanting to do something there. But then it took me a while to figure out what that should be.

How did you land specifically within the forestry or agroforestry space?

So I think I first went towards rural development. So when I was in college, I looked a lot at, like, community based models of rural development. I spent a while studying this social reformer called Anna Hazare, who did a lot of work on watershed management, reforestation, working with the community, village development, things like that. But then when I graduated from college, I had loans to pay, so I sort of worked in the private sector for a bit in the equity markets and business research. And then I was at J Pal, which is an organization that does a lot of economic research. And while I was at J Pal, I was working on a project that looked at giving cash transfers to people instead of giving them subsidized food through the public distribution system. And it was at that time that there was a paper, a randomized control trial that came out.

So you grew up in India and has most of your work been primarily focused on rural, like rural India?

Yes, that is correct.

Are there challenges you think are specific to India in terms of the rural areas?

I guess these were challenges, probably more like 1015 years ago, but just lack of access to resources, no electricity, bad roads. But I think all of that is changing quite rapidly now. But I think one of the biggest challenges in rural India that we see is just, like, lack of economic or job opportunities for people living there. And I think that continues to remain a challenge.

And what are the primary economic drivers in rural India?

Id say agriculture is a big one. Small businesses. So, like, setting up grocery shops or small, like motorbike garages or working in factories. So at least in some of the areas where we work, there are, like, small factories or these small industrial clusters where a lot of people end up going to work. Yeah.

And so, and that kind of matches. You know, it's been a little while. It's been, you know, about a decade since I spent some time, say that one more time.

I said you spent a lot of time in India as well.

I did. Well, I mean, a portion of time, but I feel like I was kind of very steeped in a sense, because I was in a rural area for about five or six weeks working with communities, and it was very agricultural based. And so I guess when we talk about your work with farmers for forests, it seems like the agriculture piece is really important. So I'm curious. It sounds like you were drawn to the rural areas and drawn into the agriculture piece. Talk to us a little bit about how did you start to get interested in carbon markets, right?

Yeah. So I think this paper that I was talking about, it actually looked at payments for ecosystem services, which is essentially like paying people for the ecosystem services their lands provide. So that could be carbon, that could be biodiversity, it could be fresh water, better soil, all of these things. So we actually got interested in payment for ecosystem services because we thought thats a great scalable way of getting more money in the hands of people that are conserving forests, that are conserving nature. And then I think carbon just makes sense because it is the money that is, it is the largest pool of money that is available right now. But we are hopeful that it can move beyond carbon. Right. So you have biodiversity markets, water markets.

We're seeing plastic markets, a whole bunch of these credits coming up.

And so to help our listeners. So maybe those who don't have a lot of experience in what a carbon market is, talk to us a little bit about what a carbon market is. And where does that play? Where are the economics of that system?

Right. Actually, on the one hand, you have companies that are emitting a lot of carbon through the course of their business. In a lot of cases, what a company would first try to do is decarbonize to the extent possible. And then when you're not able to decarbonize and you essentially want to reduce your carbon emissions to zero or even negative, you have the option of buying carbon offsets. So one carbon offset is essentially one ton of carbon that is either removed from the atmosphere or prevented from being emitted. Im sorry.

No, no. Thats really helpful. So thats perfect. All right. So in essence, the reason why carbon market exists is because people who are producing an excess want to reduce that. So in essence, they're buying this carbon credit from someone else who either is pulling carbon out of the atmosphere or preventing it from going into the atmosphere, period.

Right. So, yeah, I mean, on one hand, you have companies that are doing this voluntarily, and then on the other hand, you have companies that are also regulatorily required to not emit carbon. Right. So you also have compliance markets where you have companies essentially trading carbon certificates because, say you are a company and you can emit 100, but you emit 120, and then there's another company that can emit hundred but it emits only 80. And you can essentially buy this credit from that company, which is what constitutes the compliance market. But now if you have both companies emitting 120 in a very simplistic market, then you need to kind of buy it from somewhere else, which is also where offsets are playing a role.

I get that now. How are the prices set for a ton of carbon? Is it fixed? Does it fluctuate based on demand? How does that work?

So I think from what we're seeing, there's two or three aspects that are determining the price. So the first one is additionality, which is essentially like what is? So for example, if just there's a government that under their program every year they're spending money to plant hundred trees. So if I'm buying a carbon offset from those trees, that is not really additional because the government was planting those trees anyway. So additionality is essentially like what is the carbon finance adding in? Right. So if because of the carbon finance, somebody who was planting 100 trees is now planting 500, then those 400 trees are additional. And that the stronger you're able to prove additionality, the better a price you can command. The second bit is permittance, which is essentially for how long can you store that carbon out of the atmosphere? Whether you're storing it under the ground, whether you're storing it in geological formations, whether you're storing it in trees or the soil. And then the third and final bit is like, what is the benefit that you're able to provide to the community? Right.

So if you have a project that is benefiting like a thousand farmers versus a project that's benefiting maybe like a couple of rich landowners, in a lot of cases, the project that's benefiting more communities is priced higher.

And who manages all this pricing?

I actually don't know. I think it's, so there are a couple of exchanges on which carbon is listed as a commodity, but a lot of these transactions are bilateral. Right. So it's more about like, you know, in a lot of the cases we don't even know what, what prices like, what is the average price or things like that. There's companies that gives like average prices for things. But because its such a new market, the voluntary market, I think the compliance market is fairly large. Everything is out there. But for the voluntary market, its all, I feel like the market is just about starting off.

Theres a lot of new things happening, a lot of new ways to measure things, a lot of new methodologies coming up, a lot of different ways of sequestering carbon that are also coming.

So I want to pause this for a second on the carbon market because that's a big piece of what you do with farmers for forest. But now I want to frame the context in terms of the farmers. So from that perspective, talk to us a little bit about what is the world for farmers, so to speak? What are their challenges? What are their struggles? And ultimately, how, how do you match what you do with carbon markets to what farmers need?

So I think, and I'm going to talk about farmers in India, because those are the farmers I know the most about. But I think what we're seeing is, like, farmers are definitely disproportionately affected by climate change. So we are seeing weather patterns get extremely erratic. We're seeing an increased number of pest attacks on crops. We are also seeing things like declining groundwater, land degradation, all of these things. So farmers are definitely struggling, and we are seeing yields going down. So youll often hear farmers say that, I could get it used to rain in June, and now its July or its August, but we still dont have good rainfall yet. So farmers definitely, they are struggling, which is why I think a lot of what we're doing is not just helping mitigate climate change, but also helping farmers adapt to all of these changing weather and other circumstances.

Okay, so what I'm hearing here is farmers are in a difficult position in India right now. I think both economically speaking, I think farmers across the world dont have a lot of economic advantages, and theyre very susceptible to changes in climate. Now, what im curious about, particularly with the farmers in India, what does their business model look like? Are you talking about big, large scale farming? Are you talking about small farming? What is the scale? What are they doing with their land?

We're talking mostly about small farming. So a lot of the farmers we work with, average land holding size is like a hectare, which is about two and a half acres. So most of these farmers are really small farmers. In a lot of the cases, we have farmers that grow rice, sugarcane, soybeans, corn, maize, onions. So they're all primarily doing monocrops of certain fruits, vegetables, cereals. And then in cases where land is extremely degraded, we also have farmers who do millets and things like that. And then we also have so the really interesting thing that's happening in a lot of rural India right now is that you really have no young farmers. So everybody in the age group of, like 20 to 35 has, like, migrated out.

They want to work in the city, or even if they are in the village, they don't really want to do farming. Right. They'd much rather, like, run a grocery store or work at a petrol pump or gas station or work at a nearby industrial factory, but not really do farming.

And then, so I imagine the difficult. And we find that actually that's true in the US as well. It's an aging population now in terms of. So we're talking about small scale farmers, a variety of crops. Now, are these farmers? Because I know that not all these farmers are actually using their land as well. So what does the land use look like for these farmers?

So, yeah, so for a lot of. So essentially, that's what happens, is that when you have people that are younger that move out, and now you have older people in the village, older people doing farming, they are not always able to farm all of the land. So they would, in a lot of cases, not farm the land at all because it's really degraded or even if the land is not that bad. There's so much unpredictability in the weather, and there's so much unpredictability in prices of all of these agricultural commodities. So, like, we had one farmer who literally, like, he had a ton of onion that he was going to sell, and then the price dropped, and then he literally just dumped all of it. So we're seeing a lot of farmers be reluctant. Like, even if they have land, even if they have some amount of resources, they are reluctant because it's an extremely risky business. And then because you have, like, you have younger people who have moved out, there's a shortage of labor in the village.

Labor is really expensive. Do you have farmers, like, having land but not really farming actively, or because the land is now so degraded, you just have, like, fairly large swaths of, like, land that is not being used. And this is, I just want to say, I'm talking specifically about certain states in India where we work, which is Maharashtra, so more like central west, south India. This is not the case, I would say, for all of India. Right. So, like, if you look at up Bihar, I think the situation is slightly different there now.

And it's also true that, I mean, you know, I think this plight of farmers is important. I mean, we had another guest on the show who talked a lot about smallholder farmers. We had, we spoke with Pankaj Mahay, co founder and CEO of Graham Heat. And he also talked about also the, the mental challenges that farmers face in terms of they have extremely high rates of suicide as well. So it sounds like, I mean, there's a decent amount of struggle. And I think things such as climate change are just exacerbating this. So I'm curious to hear now, where does farmers for forests come in? How do you then match what these challenging situation that farmers are in with these global needs to reduce carbon in a way that kind of, you know, incentivizes or, you know, kind of is a win win situation, right?

So essentially what we do is, like, we first try to move farmers to things that are like, that have less. That require, like, less inputs, less labor, less water. So essentially, moving from, like, crops to agroforestry, which is some crops and mostly a lot of trees, reduces, like, the amount of labor because you just have to plant the trees once, right? And then you get a harvest for them for the next 30, 40 years. It's not like every four months you are harvesting, and then it's not like every four months you are like, sowing and then harvesting, then doing that cycle again. Secondly, like the agroforestry model that we have, we also provide a drip irrigation system, which means that you're able to reduce water usage by like 70% to 80%. And then we also provide farmers with organic fertilizer. So that kind of reduces their need to kind of constantly buy urea or NPK, which are, you know, your standard inorganic fertilizers. So most farmers want to move to agroforestry because they know that, you know, that it's more climate resilient.

There is lesser inputs. The income that you can get from agroforestry is higher, but the upfront cost of transitioning to agroforestry is really high. And then also farmers are a little bit nervous because they feel like, hey, this is a new model. What if I go wrong? Like what? You know, they feel like they need somebody to support them during that process. So essentially what we're able to do is we're able to subsidize the inputs, provide them with financial incentives for the first four years until the harvest starts, and then finally also able to give them, like, advisory services for what to do in case there's a pest attack or a tree is dying or something like that, where we're also able to provide some support there.

Amazing. So I'm imagining, let's say I'm a farmer in this case, and let's say I have five acres of land that I'm cultivating and five acres that is just sitting fallow. Do you reach out to me to say, hey, we want to do something? What are the first inputs? Or how does that interaction look like in terms of, are you going to. Are you going to kind of change all of my land? And then ultimately, like, how does that turn? Like, where do the carbon credits come in as well?

Right? So all of the stuff that we do costs money, right? So the saplings the drip irrigation, the organic fertilizer, the advisory services, farmer identification, using drones and satellite to measure all of these things. So that's where the carbon money, I think, plays a huge role because the carbon is essentially funding all of these activities because the company essentially pays for all of these things, and then they get paid back through all of the carbon that these trees and the soil absorbs. And then in terms of your first question, we actually only work on about half of a farmer's land, mainly because we want her to sort of really understand the model really well, you know, be really comfortable with it. And then also the other half the farmer has to, you know, can use for other things. Right? So, like, if they want to grow other crops, they want to grow subsistence crops. If they want to, you know, graze cattle on that land, they have an option to do other things, and only if they feel really comfortable in, like, after the third or the fourth year, we can sometimes say, like, okay, we can take all of your land into the program. In terms of how we identify farmers, it's primarily through, so we have, we have field teams that go out, talk to farmers, explain what the program is. We have a call center number that farmers can call and get more information on.

There's also a lot of word of mouth that happens, right? So if you're in a village and, you know, there's three farmers in the program, some other farmers will be like, hey, you know, there are these three people in the program. They had a really good experience, and then they'll kind of reach out to us and we get them into the program. So it's mostly like right now, like some amount of social media, a lot of field interaction, and then some amount of word of mouth.

All right, so that makes a lot of sense. I'm curious now to learn about, you mentioned that the kind of purchasing of these carbon credits is ultimately what funds these investments at the farmer level. So who is like, talk to me a little bit about the financial model here. So do you go after carbon credits and somebody pays you and then you make the investments, and then how do you actually get that initial funding? And then how does that benefit the funder in the long term?

So essentially, how. So there's a bunch of ways to finance these things, right? So I'll talk about a few, or let me just talk about one, which is sort of the primary way in which we're funding all this. So if I'm a company and I want to purchase credits, say I want to purchase a million credits, but there isn't an availability of a million agroforestry credits in the market right now? I would come to farmers for forests, I would tell them that hey, I need a million credits over 20 years. How much would that be? And we'd be like, that might be the equivalent of 4000 agroforestry. So then we'd essentially calculate how much it would cost to transition 4000 ha, or about 5000 farmers through agroforestry. And the company would pay us that money upfront until they are able to essentially make a million credits. Right. So its essentially like theyre pre funding all of this.

And from the companys point of view, theyre taking on a lot of risk because some of these trees might not survive, some of that land might go to other things, there could be a drought, all of these things. But for the risk that they're taking on, they're essentially able to buy the credit cheaper than, say what? They would have to buy it if they were buying it in 2030 or 2035. So from the company's point of view, they're taking on a lot of risk, but they're hedging against a future price increase in carbon. And from our point of view, we're able to transition all this money, get farmers to transition to agroforestry because these farmers otherwise would not have had the money to do this themselves.

And how much in terms of the impact to the farmers, what is the economic impact there?

So we're actually seeing three times to five times increase in the income per hectare that the farmer was earning before agroforestry and after agroforestry. And a lot of that income increase is actually coming because. So for two reasons. So one is we transition them to a more biodiverse model. So under our model there would be like two to three fruit trees, bamboo, probably some smaller shrub trees as well. So now what happens is like because the farmer has more diversity on their farm, even if there's a pest attack, even if it rains later than usual, even if there's a drought, even if prices for one commodity fall, they're able to make money from others, right? So for example, if all of my mango crop is destroyed, I am still making a profit from the lemon that was growing on my land. So that's one way we are seeing their income increase. The second is it's requiring a lot less labor and a lot less input than what they were doing previously.

And then in the third, fruits and bamboo is essentially fetching them a much higher price in the market than stuff like onions or sugarcane, because there's a much higher demand for these commodities than there is for. For some of the things. And even the price fluctuations are actually not as severe as growing, let's say, sugarcane or onions or soybean.

So within all of this, how does farmers for forest make money?

So we essentially make money by selling the carbon credit. Right. So we essentially have the hard job of working with thousands of farmers stitching a project together, which is not something that you have a lot of people doing or able to do well. Then we also have this really cool software through which we're able to give really almost very high quality information on the health of the tree, the height of the tree, the amount of carbon sequestered, what is the species, things like that. So for the fact that we're able to provide a lot of data on our project, there's a lot of additionality, and agroforestry has a good amount of permanence. We're actually able to sell our carbon credits at a premium than what a typical credit in the market would be. And that's essentially how we are making money.

Oh, that makes a lot of sense. So, in essence, when you sell these credits, you're able to take a portion of that, and then obviously a portion of that gets passed on to the farmer as well.

Yes.

Now, one thing that seems obviously really critical here is the monitoring of the growth of trees carbon sequestered, which to me, sounds like a daunting task because I'm like, wow, that's a lot. If you have thousands upon thousands of parcels of land under monitoring, how do you manage, or how do you monitor all that?

So we actually first started out with manual monitoring, which is we had somebody actually count trees manually, which was, of course, not very sustainable or scalable. We even tried stuff like QR coding the tree, which also didn't yield a lot of good results. And I think eventually we landed up on this model where we take very high quality drone images that are also ortho rectified, which is that they're essentially like the size of the image is made proportionate. And so now, through the drone image, for every pixel, we essentially have a latitude, a longitude, an RGB value, and an altitude. And through this, we're essentially able to extract information like what is the height of the tree, how tall the tree is, what is the geolocation of the tree. We're also able to measure things like how many meters of drip irrigation pipe we've deployed, which is one of our major costs. So I think since we've moved to this model, we've had a lot more success in being able to measure and monitor what's happening on the ground.

Wow. It's amazing what technology can do for us nowadays. I'm just imagining monitoring these tens of thousands, hundreds of thousands, millions of trees. Really fascinating stuff. I want to shift this a little bit as we start coming close. I'm curious to hear from you a little bit on you as an impact leader. What's been some of the biggest challenges you faced personally in terms of building a business? What have you had to grow through? What challenges have you had to overcome?

I think a lot. So I think one, so we're a team of, we started off as a team of four co founders with three co founders. Now one of our co founders moved back to Bihar. So I think, like, all three of us were very new to running our own organization and I think we had really underestimated just how hard it is. So I think we had to do, I think our biggest learning was to keep going in the face of rejection because I think we never, you know, when you work in a job and you're not really used to asking for things, so I think the biggest thing we learned to do was ask and, and then also like, to accept, like that a lot of people would say no. Right. You ask for help, you ask for funding, you ask for access, you ask for permissions. So I think that is one thing that we've gotten pretty good at.

Now we're all like, I am definitely far more thick skinned than I was four years ago when I started.

Yeah. So it sounds like. Yeah. And obviously, as so many entrepreneurs know, just starting out, there are so many, there are a lot of no's and it's about being able to keep the vision and that mission in mind and just continue on. So appreciating and glad that you stuck through it because you are making a significant impact right now.

Yeah. And I think also, like, pivoting a lot. Right. Like, you have so many things to figure out. Like, you start off with, like, some perfect idea of something in your head and then you have to iterate and improve. And, you know, it's just a constant process of, like, learning and making mistakes and then being better and then making more mistakes and. And that just continues.

Yeah, absolutely. I mean, that's such a big piece of the entrepreneur journey, is your initial idea may not be the idea that comes to fruition.

Exactly.

And I see a lot of people struggle when they try to get their initial idea perfect. As opposed to start with something, get information, get data, iterate the model, test it with customers and let it evolve. I think that's why there's that common phrase of fail fast. Get the failure information fast so you can move beyond that. As opposed to building something, putting a lot of resources upfront into something that ultimately isn't market tested.

Exactly. Yeah. Yeah. Because I think in our head, like, everything fits very perfectly. But like, when you actually are in the field, when you're actually working with customers, farmers or investors, it's a completely different, everybody has. Yeah. It like nothing that you imagined actually works out that way. But I think that's also fun.

Right. Like, because you get to like think on your feet and experiment and invent and try out new things.

Yeah. I mean, that's where all the learning happens. Yeah. It's super exciting. Yeah. I mean, that, that's where our paradigms are challenged. That's where we're pushed to grow. That's where we're pushed to see things from new perspectives, I think.

Yeah, that's one of the funnest parts of the journey. So as we, as we really appreciate this conversation and, you know, I feel like I've, you know, even though I, we work together and support each other through the Miller Center, I feel like ive got an even better idea of your business model and the carbon market. So just really appreciating you walking us through that as we move to the end. Im curious, the last question for you, which is around ask and offers, when we think about our participants and those who might be interested in pursuing a career or profession or building a business in the social impact space, what are the either asks or offers advice, ideas, resources that you might have for our listeners.

So I think in terms of asks, we are actually trying to hire somebody to head our technology team and then somebody to start and head a sales team. We haven't put out these job postings yet, but, yeah, I mean, if there's somebody listening to this who wants to apply or if they know somebody who might be a good fit for the job, I think that would be amazing. And we're also always hiring. If there's a role that somebody thinks that they might be good for, but that's not listed on the website, it would be great if they reached out. So I think that's an ask in terms of offer. Very happy to share whatever knowledge we have on the carbon market because the market is so new and nascent. We put in a lot of effort and teams in figuring out a lot of this stuff, especially like how do you remotely measure carbon with drones, with satellite? We're still doing a lot of learning and researching and experimentation there. So yeah, very happy to talk about or provide more information on any of that stuff.

Well, thank you so much. Some amazing offers Nas there, Krutika. This was a really fun conversation. Appreciated the clarity in which you speak and everything you're doing out there in the world, and we look forward to following along your journey and seeing where farmer forest is at as in the coming years. So thank you so much.

Thank you so much, Morgan. It was, yeah, it was really fun chatting with you outside of the Miller center, so thank you so much for having me. I had a really good time.

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