COP26 is on the horizon and climate finance and nature-based solutions are firmly at the centre of the agenda.
We speak to Dr. Lyndal Hugo, co-founder of Orlar, a Vietnam-based company that receives support from the Dutch Fund for Climate and Development (DFCD). Orlar has a mission to make contaminant-free organic produce accessible using low-energy vertical farming. Consequently, creating clean jobs and reducing pressure on vulnerable or degraded landscapes.
The DFCD enables private sector investment at scale in climate adaptation and mitigation in business projects in developing countries. SNV, one of the DFCD consortium partners, provides development support for Orlar’s business investment proposition on advanced high-technology farming in Lam Dong Province in Vietnam.
In this interview, Lyndal explains how Orlar works with the fund and the challenges and milestones they have met along the way.
Can you tell me a little more about your company Orlar?
The company was founded in Australia in 2014 when I left the consulting and corporate world to look at ways to produce something valuable from wastewater. I had worked in the intersection of energy (mining) and food (agriculture), and I always thought there would be less friction and more wins if they could work together.
I left Australia in 2017 after we developed some very promising ideas in the lab and field. Little did we know the journey we were about to embark upon!
Why did you decide to establish an operation in Vietnam?
ave a PhD in Fate and Transport of pesticides in the environment, and I worked in residues in food supply chains. In my work, I realised that, unfortunately, there is a vast need for clean food and our technologies and systems in Vietnam, SE Asia, and other developing countries.
As developing countries increase GDP, they also look for clean food. And that means imports and GHG emissions rise from mostly air freight from countries with temperate climates. With my strong background in GHG accounting and emissions reduction, I understood how to produce contaminant-free, high-quality produce locally on small landholder plots. We needed to develop “sustainably intensive vertical agriculture” and not “energy-intensive vertical agriculture.” The world’s global energy crisis validates the approach we have taken.
We could have been more profitable elsewhere- but we would not have made the same impact and created the long-term goodness we have here.
When did you apply for the Dutch Fund for Climate and Development and what was your rationale?
Initially, we were approached by the DFCD as various SNV people knew us and what we were already achieving in Dasar Valley. The more I spoke to the DFCD team, and they explained the fund’s aim, the more I realised this was a good fit for us.
The idea of a debt facility post-graduation was the selling point for our Board. We knew what we could do at scale and at that early stage, our Board didn’t want to trade equity for growth infrastructure as we have an irrefutable vision. We knew that the company needed to scale to get to debt. Five years of R and D, finance, admin, brand and culture building has been hard work in Vietnam. We needed help to propel us forward.
What support have you received as part of the DFCD programme so far?
We are very grateful to work with SNV through this process. Although we have always had an outstanding performance, systems, customers and claims and validation, the DFCD is helping us solidify and package all of that into a comprehensive Environmental & Social Management System.
I want to highlight the support we receive through SNV’s Vietnamese team, in particular. I think it helps that SNV has a local presence. We have another group of super helpers with local knowledge that we can interact and work directly with!
As we work to attract the next equity investor to accompany the debt facility, SNV is vital in assisting us with the approach and communication.
Has the funding helped you achieve a goal or target you may not have managed to do without it?
An example of a massive achievement in one programme, is the progress made from the infrastructure construction to the sale of products to the supermarkets. SNV and DFCD have walked beside us for this achievement and still do today. That’s a good feeling when everything can be against you in an emerging market. We had already spent four years here, but this was the next level of ambition to consolidate it all and double production in five months amidst the fourth wave of COVID. It took us four years to get everything operating at optimum. Then we doubled production capacity – number of “pods”- or production units. Because we made more optimisations we doubled and, in some cases, tripled yield per “pod.”
Our competitors in the energy-intensive vertical agriculture use 10-150kwh per kg of food. Therefore, the food isn’t sustainable and affordable for the largest total addressable market and emerging markets which we want to impact. We have demonstrated we can counter this, and it is now irrefutable. We use 99% less energy than our competitors. Having that “irrefutable evidence” is a significant achievement when you are claiming something so substantial.
We have now won another major international grant with SNV’s support., Now we are implementing this project with SNV as a partner. You give some, and you get some.
Have there been significant milestones along the way?
A new farm was built from start to finish in five months.
We have developed all of our systems and technology in-house (apart from the irrigation system); we designed and built all our electronics, report to a world-leading database, real-time web reporting and automatic controllers.
The DFCD gave us the confidence to dream that we could be the most efficient fresh food producer in the world – with zero residues, zero net GHG emissions – affordable organic food for the world - but from a developing country. Getting that confidence is a serious milestone for us.
How do you measure the impact of your initiatives?
As above!!! Our most important impact is on our people. When people ask, 'what do you grow at Orlar?' I like to respond and say, 'We grow people.'
And that’s the truth. From the mechanical engineer who previously drove tractors and fixed pumps in a former job and is now designing and building incredible equipment to help enable our growing teams - to the young genius from a rice farm in Long An who we are supporting through a Ph.D. in Australia. We came here to build the world’s number one clean, affordable, ethical, sustainable, fresh food company but at the same time create local employment opportunities and invest in people.
We measure our impact by the number of residue tests we have that are completely free of residues. So far, we have 100% clean tests - zero residues in hundreds of tests.
This means that at scale, our business will employ more incredible people including indigenous people into our inclusive business model. And produce more clean food (which will have massive health and social impact), replace imports, and increase export capacity. We want to change the paradigm of inefficient use of land and other resources for food production by reducing the food production land footprint while reducing emissions to feed growing demand. This transformation in agriculture is critical for the world and Vietnam to meet its climate targets.
For us, climate change mitigation and adaptation are our game and need to be happening at scale. Scale means profitability. We are on the way to scaling this business model- and the DFCD’s assistance has been instrumental. With embedded zero pollution, clean jobs and clean food, it means profit doesn’t come at the expense of social or environmental gains.
What are your plans for Orlar’s future?
We want to be the #1 fresh food-producing technology in emerging markets. That is a total addressable market of billions of people. We want to move our technology to the Mekong Delta, where we can control plant growth with less than 1% of the energy of competitors. That means our produce will be even more affordable and that is an achievement.
We will build the world’s most profitable, ethical and sustainable food supply chain growing the highest class of temperate vegetables in the lowlands of SE Asia. It’s an ambitious vision but we have done much more challenging things. We will also be working with FMO and other development banks to build facilities in the Mekong and elsewhere. That can only happen because, through DFCD, we have every requirement for business management, risk management, compliance and reporting systems implemented.
On a personal note, we want to embed ourselves in the country we love and most importantly, look after the people we love.
Do you have any advice or lessons learnt for other businesses working with the DFCD?
The process and paperwork can be overwhelming. It is a big undertaking to work with a bank like FMO and international organisations such as SNV.
We do everything right as we are accountable under the Australian Securities and Investments Commission (ASIC) and Australian Tax Office (ATO) laws. This is what enabled us to manage through the required paperwork. However, if you’re a small company, it will involve sacrifice. There will be opportunity costs; therefore, you have to enter into it with a very long-term vision.
You have to believe that your people will execute and give them the support structures to accomplish. Along the way, as we took time to sign contracts, we had to take on short-term debt at a very expensive rate. We consider it a cost of building the engine to execute the vision. If you have a long-term vision, the pain will be worth it. It’s something that I reflect on often with the DFCD team.
One of the DFCD team members commented as we went through the origination process and that remark still sticks with me today, “We want Orlar to be a 100-year company”. You have to commit to being a 100-year company and no shortcuts.
DFCD is an ESG investor- and the 100-year vision should be standard in that sphere. Execute today for debt coverage but think very long-term about the communities in which you operate.
Is there anything else you would like to add?
We are unbelievably proud that while HCMC was in lockdown, we donated all our production to the communities of Lam Dong Province. And of course, this has involved SNV to help us get into the communities where they operate.
Orlar has a charity fund where we donate rice to people in need here in HCMC. But we couldn’t deliver in HCMC during the lockdown, so we switched to adding rice to the vegetable donations to Café REDD communes. Again, with SNV support.
We never stop giving. And we won’t. Because it always comes back to us.
Conducted by Sinead Crane, SNV