Tag Archives: social entrepreneurship

Make way for the future of sanitation

There’s a saying in the north of England: “Where there’s muck, there’s brass.”

If I thought this’d mean anything to anyone outside the UK, I’d love to have made it the title of this new EY study, produced in collaboration with the Toilet Board Coalition (TBC). Roughly translated, it means that dirty work can be lucrative, which seems apt in the context of a piece that starts with the premise that there’s a multibillion-dollar economic bounty to be derived from human poo.

Yes, you heard me right!

As if it wasn’t scandalous enough that 4.2b of our fellow human beings still lack access to safely managed sanitation – and 830,000 people die each year due to poor water, sanitation and hygiene – we’re compounding this by missing out on a massive opportunity.

As the global population continues to rise, human waste is one of the few natural resources that will increase. Right now, trillions of liters of these valuable “toilet resources” (the TBC’s preferred term for poo!) go lost and untreated every year, when their capture, treatment and productive use could create a transformational sanitation economy worth an estimated US$62b a year in India alone.

Looking to shift the debate from why creating said economy is a good idea to how to make it happen faster, the TBC engaged EY to write this report, which shares insights into the practical and replicable steps that impact enterprises in their Sanitation Economy Accelerator program have taken to achieve scale and sustainability (several of those enterprises, incidentally, having benefitted from not-for-profit EY projects to help build their capacity to scale).

I hope you’ll find it as fascinating to read as I did to write. As ever, I found myself marveling at the ingenuity of some of these models – my personal favorite probably being Sanergy in Kenya who, alongside their Fresh Life toilets business, have built a facility housing a colony of black soldier flies that feed on the waste collected and upcycle it into high-quality animal feed and organic fertilizer.

As well as being a great example of circular economy principles in action (turning the waste from one process into food for another), it’s also a brilliant illustration of how social business model innovations can address multiple Sustainable Development Goals – in this case not only SDG6 (clean water and sanitation), but also SDG1 (no poverty) and SDG2 (zero hunger) by virtue of creating markets for affordable, quality agricultural inputs that smallholder farmers can use to increase their yields and incomes.

This and other examples in the report show that better answers to the global sanitation crisis already existthey just need to be scaled. And in sharing how Sanitation Economy Accelerator enterprises are doing it, EY and the TBC aim to encourage others like them to follow suit, and to stimulate the kind of investment that can help make that happen.

As the report concludes:

We sit at a critical inflection point in the pursuit of the Sustainable Development
Goal of access to adequate and equitable sanitation and hygiene for all by 2030.
With the UN suggesting that achieving universal access to even basic sanitation
by 2030 would require doubling the current rate of change, we need to go
further, faster. In particular, we need to go further, faster in scaling the impact
enterprises whose innovative business models are reaching the parts that
conventional sewerage, waste treatment and processing can’t.

The business case has already been made — powerfully. And better answers to the
global sanitation crisis already exist in the shape of past and present participants in
the TBC’s Sanitation Economy Accelerator program. But unless and until the
debate meaningfully shifts from why a transformational sanitation economy is a
good idea toward how to rapidly scale and replicate the success of these enterprises,
the prize is likely to remain elusive.

That prize — estimated to be worth US$62 billion a year by 2021 in India alone — deserves greater attention and commitment to act. It deserves greater attention and commitment from governments and municipal authorities who can reduce the unaffordable public costs of sewered sanitation, while reaping huge cost avoidance advantages in improving community health. And it demands greater attention and
commitment from entrepreneurs and impact investors who can unearth huge
value, not only from serving the 4.2 billion people still lacking access to safely
managed forms of sanitation today, but also helping to tackle adjacent goals for
sustainable development, such as safe water, food security, renewable energy, and good health and well-being.

Building a profitable, sustainable sanitation business serving low-income customers
is hard, but as the examples in this report show, it can be done. From bundling
sanitation with other services to create a better, broader user experience, to
creating demand for transformed toilet resources, to becoming asset light to make
invested capital stretch further, Sanitation Economy Accelerator enterprises are
illuminating multiple pathways to greater efficiency, profitability and scale. And in so doing, they’ve already brought dignity and a better quality of life to millions of people.

With the right support — particularly innovative forms of finance — EY and the
TBC believe that they, and others like them, can bring affordable, sustainable
and safely managed sanitation to hundreds of millions more of the people who so
desperately need it.

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.

A more beautiful question

For a while now, I’ve been searching for what author and journalist Warren Berger calls ‘a more beautiful question’ – the kind of question that, with elegant simplicity, can encapsulate a wealth of ideas, concepts and possibilities; that can help to shift the way we perceive or think about something; and that has the capacity to spark breakthrough ideas.

While that kind of preamble almost inevitably sets me up to fail, I think I may finally have fashioned one worth sharing, and it goes like this:

What if business were society’s greatest problem solver?

I use the word “fashioned” advisedly, of course. I don’t claim any originality, save perhaps for the particular combination of words. The ideas and concepts that underpin it are many, varied and long-established – the self-same ones that have preoccupied me (and many others) for years now.

While people may choose different labels to describe the conceptual space here – be it sustainability, creating shared value, purpose-led business, inclusive capitalism or whatever – they are fundamentally united by a common set of assumptions:

  1. That, whatever your views on the role of business, and the capitalist system more generally, in creating many of the problems and inequities we see today, it’s also essential to solving them (as evidenced, for example, by the inclusion of business as a key partner in achieving the UN’s 2030 Sustainable Development Goals);
  2. That business, and again capitalism more generally, is perfectly capable of this kind of ‘reboot’ (indeed, as powerfully argued by some smart folks at McKinsey, creating and scaling solutions to human problems may always have been at the heart of how and why capitalism works);
  3. That the fates of business and society are interdependent and it’s in the best interests of both that business steps up to assume this role as a partner of choice in solving social problems (whisper it quietly, but business-based approaches are frequently more effective than government or charitable aid in reducing inequality).

What this all boils down to – what we arguably lost during the cult of maximizing shareholder value, and what we are now slowly rediscovering – is the understanding that the long-term prosperity of business and society go hand-in-hand. Business cannot, and should not, divorce its success from the health and resilience of the social and ecological systems that give it life.

Moreover – in line with Peter Drucker’s famous dictum that the only purpose of business is to create a customer – the idea of seeing business first and foremost as a problem-solving engine, rather than solely a vehicle for maximizing short-term shareholder gain, would seem a much better and broader reflection of what successful companies actually do.

With specific regard to the third point above – and offering an inkling of what reorienting business as society’s greatest problem solver might look like – probably the greatest joy of my current role is the exposure I get to the work of some outstanding social entrepreneurs.

As a firm believer that the sustainability imperative represents the innovation opportunity of a lifetime, understanding and telling their stories (and EY’s role in helping them build the internal capabilities to extend their reach and impact) is something I find endlessly fascinating. After all, in many ways, social entrepreneurs are the purest incarnation of purpose-led business – a mash-up of the social mission of a non-profit with the market-driven approach of business to innovate new products, services or approaches to tackling society’s most pernicious problems.

Take Jibu, for example, a clean water franchise business in East Africa, conceived by father and son, Randy and Galen Welsch, as a better way to tackle the problem of affordable access to safe, clean drinking water. Its ingenious business model equips local franchisees with advanced, solar-powered filtration equipment that can clean locally sourced water and make it available at a fraction of the price of other bottled water – each franchise effectively becoming a water purification plant for the surrounding community.

More than the question of affordability, the structuring of the business as a franchise also neatly addresses the problem of sustainability in the sense of long-term viability (i.e., sustainability = the ability to sustain!). Whereas donor-funded water schemes often suffer from a lack of local ownership – as a consequence of which, around half of them fail within a couple of years – every Jibu franchise is run by a member of the community it serves.

This puts the very people who benefit from the service in charge of running it, combining their need for clean water with their desire to control their own destinies and build a more prosperous future for their families. It’s a virtuous circle that should see the growth of the business not only provide permanent access to safe water for more than a million people by 2020, but also create 8,000 jobs, in turn providing 8,000 families with a decent and reliable income.

What makes stories like Jibu’s more compelling still is the fact that, more often than not, social entrepreneurs are achieving this kind of success against a backdrop of massive resource constraints. These are master hackers, and you have to wonder what might be achievable if big business took the time to observe, draw inspiration and reverse innovate from their approaches.

Of course, encouraging business-at-large to do so is precisely the purpose behind searching for (and hopefully finding) that more beautiful question in the first place.