Is rice climate’s next petrol? Sustainability at Loc Troi, Vietnam

• Main Authors: WANG, Heli, BHATTACHARYA, Lipika
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: Growth Strategy; Climate Change; Environmental Sustainability; Creating Shared Value; Business and Society; Asian Studies; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/cases_coll_all/497; https://cmp-shop.smu.edu.sg/products/is-rice-climate-s-next-petrol-sustainability-at-loc-troi-vietnam?variant=41989007441962
• Institution: Singapore Management University

Could rice become as crucial as petrol in the fight against climate change? In 2023, Nguyen Duy Thuan, General Director of Loc Troi Group (Loc Troi) Vietnam, was sceptical. His company, the largest rice producer in the country, faced a pivotal moment in its journey. Following a successful pilot program involving 1,000 farmers, the company had started scaling sustainable rice production (SRP). Sustainable rice had much lower emissions and used fewer resources than traditional rice production, which accounted for 12% of global methane emissions and significantly threatened the climate. The pilot had reduced pesticide use by 12%, water use by 25%, greenhouse gas emissions by a third, and flooding and straw burning by using organic treatments. It had also lowered production costs and increased profit margins by 18%. But despite such demonstrable benefits, Loc Troi continued to struggle to convince farmers to grow sustainable rice, which constituted only 5% of its total export volume, due to the time-consuming and costly new practices. Scaling sustainable rice required large investments and without government grants, could be financially draining for the company. Loc Troi's other businesses, like vegetable seeds and fertilisers, were also profitable, so over-investing in rice could hinder their growth. Thuan pondered on how to scale sustainable rice and tap into future demand with Loc Troi's expertise. This case is accompanied by a set of slides and can be used in undergraduate, postgraduate and executive education classes to understand the key challenges in the agriculture industry and the significance of People, Planet, Profit and Climate Change in the sector. The case delves into “why sustainability should make business sense” and discusses key components of an agricultural business model, including value propositions, revenue streams, and customer segments.