The company is launching a campaign today that could change the plight of water-borne illnesses in Kenya, while making the company a tidy sum of money. Over the next five weeks, 4,000 temporary employees will distribute the company's LifeStraw water filters to 900,000 households in Western Province—nearly 90% of the entire population—providing 4 million people with clean, safe drinking water. The filters will be provided to the end users for free, and company founder and CEO Mikkel Vestergaard Frandsen has invested $30 million of his own money into the project. But he's not worried about losing out—because for each LifeStraw he donates, he's going to be making money.
The campaign is called Carbon for Water. Kenyans boil their water to eliminate waterborne diseases, using wood fires. Those fires generate a large amount of carbon, and eliminating the need to boil water means fewer emissions from Kenya. Because they're providing the means to reduce emissions, Vestergaard Frandsen earns carbon credits for each LifeStraw donated. He will then turn around and sell those credits to companies in countries that have carbon caps and exchanges. "We are using international agreements about climate change to finance the mitigation of CO2 in the least developed countries," he says.
Vestergaard Frandsen estimates that the campaign will offset about two million tons of carbon every year—that means the company will earn two million carbon credits. Carbon trades on the commodities market at between $6 to $12 a unit and, he says: "because the project is based in Kenya and has significant humanitarian and health co-benefits, these credits can be sold for a premium." Vestergaard Frandsen has made a 10-year commitment to Carbon for Water, which means that the project could potentially offset 20 million tons of carbon. Even at the lowest estimates, that means Vestergaard Frandsen will make his $30 million investment back many times over. Which is important, because Vestergaard Frandsen doesn't sell its units retail—at $25, the LifeStraw Family is prohibitively expensive for most end users to purchase. Instead, the company formerly relied on partner nonprofits to fundraise, purchase LifeStraws, and donate them in bulk. It was a succesful plan—in 2010, the company had a profitable bottom line with revenue of about $500 million—but now, he doesn't have to rely on the fickle kindness of philanthropists.
The model isn't the perfect solution the issues plaguing water in the developing world: while not having to collect firewood to boil water helps preserve safety and time of the women and children who typically bear the burden of these tasks, they still have to make trips to the water source. And carbon trade is inherently controversial, and as of now no plans have been announced for what happens to carbon offsets after the Kyoto agreement expires in 2012.
"I agree with you that the carbon market is imperfect," Vestergaard Frandsen says. "Nations need to be developed and companies need to be polluting in order to qualify for carbon credits. But the program that we built here provides a very important correction to that. It's a profitable model that gives water filters away for free, financed by the carbon market."
"We live in a time when there's neither conflict nor controversy in the business of doing good," he says. "We have very little competition in the public health space—90% of our investments in health benefit only 10% of the planet. That leaves just a 10% investment to help 90% of the world. If you're a young entrepreneur with a technology platform, there's so much you can offer to governments, the United Nations, and volunteer organizations."
Vestergaard Frandsen is also working with The Carter Center to eradicate guinea worm—if successful, it will be the only disease besides small pox to ever be wiped off the planet—and claims he has other innovative models for malaria and food security in the works. "It takes 40-50 years to eradicate a disease. We need to be smarter still about tapping into new types of funding."
Photo by Credit to Neil Thomas Vestergaard Frandsen's Flickr stream