Could business hold the key to universal access to safe drinking water?

Imagine a life without safe drinking water. It isn’t easy. Most of us take for granted that we can just turn on a tap and fill a glass. But that’s not an option for roughly one in four of the world’s population — the 2.1 billion people who still lack access to safe drinking water today.

With half of all hospital beds in low-income countries occupied by people with water-borne diseases, it’s hard to overstate the importance of reaching the UN Sustainable Development Goal of equitable access to safe, affordable drinking water for all by 2030.

While the current rate of change isn’t fast enough to hit that target, some fantastic research by EY’s Wayne Simper suggests grounds for optimism, thanks to the growing number of impact entrepreneurs innovating new models for the scalable and sustainable provision of safe water in underserved communities.

That story of optimism is one that Unilever and EY were shouting loud and proud at World Water Week in Stockholm, late last month, drawing on a joint report based on Wayne’s insights, and which I had the pleasure of writing.

Co-signed by Kees Kruythoff (President, Home Care, Unilever) and Alison Kay (Chair of the EY Global Accounts Committee), How can a trickle become a torrent? shines a light on the critical factors influencing impact entrepreneurs’ ability to build truly scalable and self-sustaining Safe Water Enterprises (SWEs) with the capacity to bring safe drinking water within reach of hundreds of millions more people.

The market leading SWEs, analysis of whose businesses forms the basis of the report, are already serving more than 15 million people across Africa and India, and we may only have scratched the surface of what these, and others like them, could achieve with the right focus and support. Wayne’s research and analysis suggests this rests on recognizing three things above all:

1. That the high fixed costs inherent in any SWE operating model mean that only SWEs that operate at scale can achieve true sustainability
2. That there’s no “ultimate” SWE model that works best in all circumstances, which means that the path to scale depends on finding the best fit to a particular blend of market conditions
3. That we need investors who are prepared to take a more balanced view of SWEs’ potential to generate returns — from a social impact as well as financial perspective — so as not to overlook promising and scalable models for safe water provision

Picking out just one of these themes, to give you a flavor of the kind of insight you’ll find in the report, it’s worth taking a closer look at the third point.

We’ve all seen the power of a “magic metric” to galvanize action, a prime example being how a single piece of data such as grams of carbon dioxide emitted per kilometer (gCO₂/km) has transformed perspectives and behaviors across the automotive industry. The report introduces a new one that has the potential to create a similarly seismic ripple effect: Impact Return on Capital, or IROC for short.

In the case of safe drinking water, this metric represents the number of daily water consumers whose needs can be served per thousand dollars of invested capital. It’s an important measure because it opens up an entirely new way of looking at the capital efficiency of SWEs — one that properly takes into account the purposeful trade-offs these life-changing businesses make, often intentionally running close to breakeven in order to keep prices low and make safe drinking water as affordable as possible.

With innovative SWEs clearly so vital to reaching the SDG target of equitable access to safe, affordable drinking water for all by 2030, we can’t afford to overlook any model with the potential to accelerate that access. Combined with more the more traditional measure of Return on Invested Capital (ROIC), IROC paves the way for a more holistic approach to building and evaluating investment cases that can help guard against this eventuality.

For more on this and other insights for accelerating growth of SWEs, I urge you to read and share the full report. The health and wellbeing of more than 2 billion people could depend on following the advice within its pages.

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On democracy: the case for a referendum on the final Brexit deal

Amid the ongoing Brexit shitstorm, I find myself perplexed by the position of some – including HM Government – on the idea of a referendum on the final deal.

The government’s official response to a petition calling for said referendum reads as follows: “The UK Government is clear that it is now its duty to implement the will of the people and so there will be no second referendum.”

Contrary to the belief of some, I don’t dispute the result of the 2016 referendum. Regardless of my feelings as to how ill-conceived it was (in both motivation and execution), I nonetheless accept it was a decision that was democratically reached. However, I’m bound to point out a logical fallacy that lies at the heart of the government’s response, which is this: a referendum on the final Brexit deal would not be a “second referendum” (as in a rehash of the first). Rather, it would be a different referendum answering a different question.

The 2016 referendum result represents the view of the British people as to whether, in principle, they would rather leave or remain part of the EU, based on their beliefs as to what the relative benefits and consequences might be. A referendum on the final deal, on the other hand, would represent their view as to whether they feel it will be better in practice to follow through on the decision to leave, based on what the precise terms of departure actually are.

This is not the same thing at all.

Further, if you believe it was right and proper for the people to have a say in the UK’s future relationship with Europe by means of the former referendum then, logically, I struggle to comprehend why you wouldn’t adopt the same position with regard to a further one on the final deal.

The democratic rights and freedoms at play are no different. The only difference, in fact, is that, this time, it would be even more right and proper to exercise them. After all, leaving aside subjective opinions on the political and economic fallout, there were no immediate practical implications to the former referendum, other than to trigger Article 50 and commence negotiations. A vote on the final deal – when we will have much more substantial idea of what the upsides and/or downsides of leaving will actually be – is of infinitely greater consequence and therefore even more worthy of being subjected to a public vote.

Let’s state things even more baldly:

If you agreed with the need for the first referendum, there is no logical reason to oppose a further one on the final Brexit deal. There is only an emotional one – the fear that, this time, the result might be different.

This, too, I find perplexing, since, if the case for leaving is as clear and obvious as many Brexiteers purport it to be, then why should that fear exist?

There are only two viable answers to that question, it seems to me. The first is that people aren’t as confident in the benefits case for Brexit as they outwardly claim – or at least not as confident as they once were that a majority of their fellow citizens still see the world as they do. The second is the utter chaos within HM Government’s ranks and the consequent hash they seem to be making of the negotiations – in this case, the fear stemming from the prospect that the final deal bears little relation to what many Brexiteers wanted, and which therefore waters down or undermines many of the benefits they thought would flow from the “hardest” form of Brexit.

Here again, though, you would think this only adds more grist to the mill, strengthening the case for a referendum on the final deal even further. After all, it matters not what you think the deal on the table ought to be. It matters only what it is. And irrespective of whether you are a Leaver or a Remainer, if you think the country’s being sold a pup, you should have the chance to express that view.

In praise of doughnuts: restoring the environment as a key dimension of inclusive growth

As the great and the good gather in Davos for the World Economic Forum Annual Meeting, you can be sure that there’ll be plenty of name checks for ‘inclusive growth’.

Commonly defined as enabling as many people as possible to contribute to and share in the benefits of economic growth (or words to that effect), it captures the need for governments and business to recast our model of growth to one that works better for everyone – spreading prosperity, opportunity and reward more fairly; treating tackling social inequality and driving up productivity as interconnected; and rethinking our account of economic progress so that we measure not only the rate of growth, but also the quality of that growth and people’s ‘lived experience’ of it.

Not much for me to argue with there, right? Well, no, except for the fact that I can’t help feeling an important part of the equation has been left out.

That nagging feeling was brought into sharp relief recently when a colleague shared a copy of a report by Morgan Stanley, entitled “Inclusive Growth Drivers: The Anatomy of a Corporation”. In laying out the ‘business case’ for inclusive growth, it states:

In the broadest sense, inclusive practices can promote business aims in two key ways:

1. Improved Operating Environment: Inclusive growth creates more prosperous, secure, healthy and safe societies, which ultimately provide better operating environments for business and investment. Countries with higher levels of inclusive growth are more politically stable and typically have lower levels of social resentment and social unrest.
2. Enhanced Consumer Purchasing Power: By folding historically neglected swaths of the population into a growing economy, inclusive growth expands the customer base available to businesses. That benefit is extended by the better health outcomes and longer life expectancies correlated with reduced inequality.

It’s the second point above that sticks most in the craw, given the rest of the document goes on to say the square root of bugger all in recognition of the obvious environmental consequences of lots of people living longer and buying more stuff.

On the evidence of most viewpoints I’ve read on inclusive growth, this is by no means atypical. Quite the contrary, it appears a very common trap to wax lyrical about reducing social inequality while totally ignoring (or at least neglecting) environmental considerations.

It’s an omission I find totally baffling, given the obvious correlation between poverty and environmental degradation. Wherever they occur around the world, climate shocks hit the poorest in society hardest and, unchecked, the World Bank has estimated that global temperature rises could result in an additional 100 million people living in poverty by 2030. Surely, then, it’s as plain as the nose on my face that action to protect and restore the environment has to feature more prominently in the prevailing narrative around inclusive growth?

The great challenge facing us as a society – so that broader narrative goes –  isn’t only ensuring that everyone has the opportunity to contribute to and benefit from economic growth; it’s also making sure, at the same time, that we don’t irreparably damage our planet’s life-supporting systems. In other words, it’s to generate growth that is both economically inclusive and environmentally sustainable.

This is precisely where Kate Raworth’s doughnut economics model – with its combined emphasis on raising social foundations, while not smashing through the ecological ceiling – runs rings (pun absolutely intended) round just about everything else I’ve seen and read on the topic of inclusive growth.

If this model is new to you, it’s worth taking a moment to absorb the elegance of the metaphor. In the hole in the middle, we are living in a state of deprivation, with an insufficiency of the goods and services we need to lead a good life; beyond the outer ring, we are living beyond what the planet can support; it’s in between the two rings – in the doughnut itself – that we find the “safe and just space for humanity.”

It’s time to restore the environment to its rightful place amid all the talk around inclusive growth and the doughnut shows us how. (I always knew they were good for you!)

Cracking the last-mile distribution challenge

You can’t manage what you don’t know.

While we’d probably all subscribe to that maxim, it’s one that rings especially true for organizations seeking to serve the more than four billion low-income people living at the base of the pyramid (BoP).

BoP markets have long been heralded for their potential to drive economic growth and social impact on a massive scale by providing millions of poor households with affordable access to essential goods and services such as safe water, clean energy and improved sanitation.

The fact that we’ve barely scratched the surface of that potential points to the essential problem: these markets are notoriously hard to reach, with geographic isolation and limited access to information leaving BoP customers disconnected from any business value chain.

This dislocation is the crux of the so-called last-mile distribution challenge and, if we’re going to crack it, then finding ways to reliably connect with end customers, and capture and make use of their insights, is surely a vital part of the equation.

That’s because — in largely informal economies, where word of mouth is king — the end customer is so much more than that. They’re also potentially your sales force, your design team and your corporate strategy department — your best source of market intelligence on what works and what doesn’t out there in the real world.

A collaboration between EY, Acumen (the world’s leading impact investor) and Frontier Markets (one of its investees) stands as proof of the difference that can be achieved when impact entrepreneurs invest time and energy in establishing robust feedback loops with customers, as well as the dealer networks that form an essential part of so many BoP value chains.

Insights and lessons learned from that collaboration (including from the odd failure as well as successes) are the subject of a new report I had the pleasure of writing – Are your customers in the loop? – which aims to accelerate the growth and impact of the social enterprise sector at large by translating the experiences of that single project into practical and generally applicable guidance that any BoP business can follow.

It not only shows that it’s possible to mine a rich seam of valuable customer data, if you are prepared to experiment with technology, and create the kind of incentives and experiences that make customers want to engage with you; it also illustrates how that insight can be used to drive all manner of strategic and operational improvements that can help BoP businesses to increase their resilience, productivity and capacity for sustainable growth.

The importance of such efforts shouldn’t be underestimated.

Impact entrepreneurs and their businesses are crucial to achieving the United Nations Sustainable Development Goals, making sure that many more millions of people are able to share in the benefits of economic growth. Fusing the social mission of a nonprofit with the market-driven approach of business, they are critical engines for powering inclusive growth, human dignity and potential.

They are at the epicentre of an altogether different narrative about inequality and business’ role in tackling it, by providing affordable access to the essential goods and services — energy, education, health care, housing, water and sanitation, and agricultural inputs — that give people the agency to change their lives.

Often succeeding in spite of massive constraints, few are more significant than the challenge of last-mile distribution. If we can find reliable ways through and around that challenge, then there is no telling what more these innovators might achieve.

On the search for identity in a VUCA* world

As I’ve written before, perhaps the greatest joy of my current role is the exposure I get to the fabulous work of some truly inspirational impact entrepreneurs. These people are at the forefront of accelerating progress toward the Sustainable Development Goals, innovating new business models specifically conceived to extend affordable access to essential goods and services (e.g. off-grid energy, clean water, improved sanitation) to households living at the base of the pyramid.

Many of those that EY works with are investees of Acumen, one of the world’s leading impact investors, who are also seeking to cultivate a wider community of change-makers through their +Acumen platform. Having signed up to +Acumen, I get the occasional thought-provoking email from them, and the one I received this morning really stopped me in my tracks.

Citing the following from Amin Maalouf’s writings on identity, it’s striking how relevant these words – written almost 20 years ago – feel today:

[In] the age of globalization and of the ever-accelerating intermingling of elements in which we are all caught up, a new concept of identity is needed, and needed urgently. We cannot be satisfied with forcing billions of bewildered human beings to choose between excessive assertion of their identity and the loss of their identity altogether, between fundamentalism and disintegration. But that is the logical consequence of the prevailing attitude on the subject.

If our contemporaries are not encouraged to accept their multiple affiliations and allegiances; if they cannot reconcile their needs for identity with an open and unprejudiced tolerance of other cultures; if they feel as if they need to choose between the denial of self and the denial of the other – then we shall be bringing into being legions of the lost and hordes of bloodthirsty madmen.

For it is the way we look at other people that imprisons them within their own narrowest allegiances. And it is also the way we look at them that may set them free.

What do you think?

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* VUCA = Volatile, Uncertain, Complex, Ambiguous

On our desperate need to teach civics

Getting my caveats in first, I don’t mean for the body of this post to imply that people who voted for Brexit are stupid. Although admittedly fewer in number than Remainers in my acquaintance, I know enough very reasonable and well-reasoning Brexiters not to stoop to that level.

And yet…

For every rational and reasonable Brexiter in my circle of friends – with whom it’s possible to have a sensible discussion – there is at least one other who can be relied upon, like clockwork, to breathe life into the “ignorant Brexiter” caricature by regurgitating Daily Fail-fuelled bile at the very whiff of anything that tickles their “Remoaner” gag reflex.

One guy in particular – my antagonist in this particular exchange and a dozen others like it – appears to come straight out of central casting:

CAPS LOCK on for SHOUTY REPLY? Check!

Inability to master basic spelling and grammar? Check!

Complete reliance on straw men as the basis of argument? Check!

Refusal to engage substantively, deliberately not answering direct questions and/or replying to challenges and counterargument with yet more straw men? Check!

In his mind, and the minds of others like him, there’s only one course of action for “whining liberals” (his epithet of choice for people such as I): to shut the hell up! For him, it’s as if democracy existed for one day and one day only – the day of the referendum – then promptly vanished like a fart in the wind.

It’s exactly this that disturbs me more than anything that Brexit may hold in store for us, and the thought that lends me the title of this post – the quite staggering lack of knowledge about what it means to live in a democracy.

His is a world in which a well-functioning democracy is entirely compatible with judges being branded “enemies of the people” for having the temerity to assert the primacy of Parliament (Erm… isn’t UK parliamentary sovereignty what you said you wanted? Have you ever looked up “separation of powers”?).

It’s a world in which a well-functioning democracy is entirely compatible with ownership of the press by a handful of oligarchs (Erm… have you seen who owns that paper you read? Is it possible their reporting might be, I don’t know, ever-so-slightly biased? Have you ever tried sourcing “news” from multiple sources to get a more balanced view?).

It’s a world in which a well-functioning democracy is entirely compatible with the indefinite suspension of freedom of speech (at least as far as Brexit is concerned).

How much longer must this sort of thing go on before the realisation dawns that no democracy can function effectively, so long as a sizeable number of its subjects remain wilfully ignorant of the rights, duties and responsibilities it entails?

A slightly edited version of the particular exchange that sparked this post – what set yer man off, what he wrote, and what I said in reply to try and set the record straight – is laid out below. At the time of writing this, I haven’t received any further reply and, while the idealist in me would like to think I might actually have broken through this time, my inner realist won’t be placing any bets on it.

---

Dan Gray:
Retweeted Stephen Harper (@stephenaharper)

Celebrate Brexit day by cancelling your Netflix subscription and attempting to build a VHS player using instructions on the side of a bus.

Brexit bloke:
OR GET OVER IT   AND LABOUR DIDN’T WIN SHAL WE HAVE ANOTHER  GENERAL   ELECTION   I DIDN’T WIN THE LOTTERY   SHALL I DEMAND A REDRAW [sic.]

Dan Gray:
At what point have I ever even implied that I demand another election or referendum? Time to retire that pathetic straw man argument. For the umpteenth time, this time in really short sentences:

1. Brexit is happening.
2. I accept this democratic decision.
3. But I don’t have to like it.
4. And I’m free to continue to express my dissent.
5. This is called freedom of speech.
6. Which is also part of democracy.
7. Don’t like it? Boo hoo!

If you insist on living in a country without such rights, and where every citizen is forced to agree with the powers-that-be, I hear North Korea’s nice.

 

Discovering new-found respect for philanthropy

I’ve always had a bit of a downer on corporate philanthropy, having tended to equate it with first generation sustainability strategy and practice – a model based on ‘giving something back’ that often pays little or no heed to what the corporation takes in the first place. In so doing, I’ve always felt, it tends to perpetuate the framing of sustainability as a discrete agenda, separate from core business.

Reflecting further on the latest Acumen Debate hosted by EY earlier this month, however, I’m thinking it’s maybe time to revise that view.

The spur for this reflection is a thought-provoking comment made by Sam Parker, director of the Shell Foundation, in speaking against the motion that, “This house believes that impact investors don’t need to compromise between financial and social returns.”

He was following on from – and directly responding to – the argument made in favour of the motion by Diana Noble of CDC, the British government’s development finance institution. Her experience, she said, proved there was no compromise. CDC has achieved an average 6% return on investments in its portfolio of ‘base of the pyramid’ (BoP) enterprises over the last 20 years; and on her regular visits to Africa and South East Asia, she could not go anywhere without seeing the benefit of businesses, “that simply wouldn’t exist without CDC.”

The essential thrust of Parker’s retort was that’s grand, but how did those businesses get to a place where they became an investible proposition for the likes of CDC? “Somebody somewhere had to do the heavy lifting,” he said. “Somebody somewhere paid for that.”

And you know what? I think he’s right.

If you think about it in terms of something like Ichak Adizes’ famous corporate life-cycle model, impact investors like CDC might only really enter the fray once an enterprise has reached ‘adolescence’ and the risk of ‘infant mortality’ has passed.

Work backwards through the ‘go-go’, ‘infancy’ and ‘courtship’ stages – where ultimately the business idea is but the proverbial twinkle in the parent’s eye – and, chances are, you’re going to be looking at investors with a very different profile.

Go back one step, and you might be looking at investors prepared to work at breakeven; go back two and they’re maybe willing to put up with a 50% loss; go right back to the outset, and you’re probably looking at pure philanthropy – the, “early-stage patient grant,” as Parker put it, without which, “there would be nothing to invest in.”

For me, that logic felt hard to refute and, whereas the show of hands at the end of the event appeared to show several of the audience metaphorically crossing the floor from the ‘opposed’ to ‘in favour’ camps, much to my surprise, I found myself moving in the opposite direction.