This month’s Editor’s Choice is a tad unusual. I want to highlight two related reports, one from 2014 and one 2015. The first provides analysis of sanitation models, the second reports progress of a ground-breaking coalition that incorporated that analysis into action.
The pair speak volumes about the need for true innovation that disrupts business and public sector models, the role of partnerships in inclusive business and about what it takes to catalyse market change. They also illustrate the value of gross margin analysis, understanding consumers’ aspirations, and human waste. The last point apart, these issues are relevant to most of us in inclusive business, not just the ‘sanipreneurs’ and ‘toilet champions’ working in sanitation.
The first report is “Designing the Next Generation of Sanitation Business”, published by Hystra in 2014. It dissects the existing rural and urban toilet models, identifies where costs and constraints lie, and where action is most needed. It does not go as far as to argue that profit-maximising models can work at the BoP. But it does contend that social business models, with market based solutions that create sustainability, have strong potential. That said, several technical issues (such as waste management and logistics) and consumer strategies (particularly finance) need to be solved along the way.
The second report, “Creating Alliances to Accelerate Commercially Viable Sanitation”, reviews the first year of the Toilet Board Coalition (TBC). The TBC, in their own words is:
a global alliance of corporations, government agencies, multilateral institutions, sanitation experts and non-profit organisations that aims to bring sanitation to millions of families by catalysing and accelerating scalable market-based initiatives that bring together the resources and skills of corporations, the know-how of the development sector, and the expertise of the non-profit sector.
As the excellent, independent introduction to the TBC report says, TBC partners recognised that ready made models do not exist, so adopt a more difficult and more captivating route: creating a new market.
The approach of Hystra and the Toilet Board Coalition sensibly separate rural sanitation and urban sanitation, given the hugely different contexts and alternatives. For rural areas, the first report highlighted on interventions that facilitate the creation of a local sanitation market. For urban areas, it hones in on enterprises servicing home mobile toilets. The TBC decided to invest in these two types of models, putting into practice the recommendations of the first report.
In rural and urban areas, the priority are models that:
So far 4 initiatives are being supported:
Critical success factors for rural models include:
For urban toilet models, key themes include:
These themes, plus a host of great graphs, margin analysis and examples, are well covered in the 2014 report. It concluded with recommending social business models that could scale and be sustainable at a low profit margin. These would not be profit maximising companies, but also would not be so grant dependent as current donor funded programs of limited duration. Financial estimates suggested that a value chain activation approach that includes revenue from sales could generate a 4% net profit, based on selling 150,000 latrines and shelters per year, with over $30 mn of sales. For urban areas, an improved business was also modelled, with estimates that a business renting 20,000 home mobile toilets per year could generate over $3mn in sales and net profit of 15%.
In its first year, The TBC has explored these models further. Some adaption was necessary. Companies could not be found to invest in rural toilets, based on good margins from the shelter construction, so a social enterprise model has to be created. Some initial lessons are shared:
The evolution of the TBC partnership is fascinating. And it clearly goes beyond just talking. Technical constraints were highlighted in the 2014 report: malodour, portability, chemicals. TBC has used partnership to address this as explained in the second report. As no company had the solution alone, they explain:
‘the TBC brought together the R&D teams of LIXIL Corporation, Firmenich, Kimberly-Clark and Unilever at the end of 2014. This group initially focused on three work streams: (1) improving the current generation of portable toilet solutions, in particular for better malodour control; (2) developing the next generation of portable toilet solutions; and (3) exploring innovative technologies for small-scale waste treatment plants.’
The TBC report concludes with 10 lessons for creating a public-private alliance for social change, and 5 for co-creating collaborative and sustainable initiatives. We will be covering those further in our partnership theme next month and in a Webinar with Hystra on April 28th at 2pm London time.
If you work in sanitation, you have probably read at least one of these reports, but if you haven’t you really should. If you don’t work in sanitation, I contend that you will find huge value in this, for all that it reveals about how social business can tackle a development problem, adaptation to consumer aspiration, the role of technological innovation, the challenge of value chain coordination, the sharing of burdens between public and private sector, and the innovative approach of a multi-stakeholder partnership.
Creating Alliances to Accelerate Commercially Viable Sanitation (2015) is written by Simon Brossard, Jessica Graf and Olivier Kayser and published by Hystra, in November 2015.
Designing the Next Generation of Sanitation Business (2014) is written by Simon Brossard, Jessica Graf and Olivier Kayser and published by Hystra, in September 2014.
For a full list of Editor’s Choice reviews since 2010 click here.
This Editor’s choice is a part of the April 2016 series on Inclusive Businesses and Sanitation. View the whole series for more business examples, research and insights on sustainable sanitation solutions.