The Case For For-Profit Solutions To The World's Water Problems

Aid has its place, but WaterHealth International argues that creating an economic system to ensure clean water will have longer lasting results.

More than 1.2 billion people around the world lack access to clean water, which creates a situation considered to be the single largest cause of disease in the world. According to the United Nations, a large number of the people in the developing world are suffering from one or more of the main diseases associated with inadequate water and sanitation, such as: diarrhea, guinea worm, trachoma or schistosomiasis. These diseases fill half the hospital beds in developing countries, and illustrate the profound impact water has on human health and our future.

Earlier this summer, Dow Chemical convened a group of 60 experts providing 60 different perspectives during The Future of Water virtual conference, furthering a conversation that is important to continue. The event brought to light the importance of global discussion and collaboration, driving us to think about innovative approaches to global water issues. While charitable programs have made great strides in addressing this issue, and continue to do so today, decentralized for-profit models are a relatively new strategy that leverages business expertise to effectively implement sustainable solutions to the global water crisis.

In our experience, the for-profit model can be successful in helping underserved populations by effectively supplementing other activities. The public sector can do much more on their limited budgets by supporting business models that leverage private sector funding. This enables the public sector to reach a larger number of underserved communities compared to what would be possible if they went it alone. In addition, supporting for profit models allows government and NGOs to focus their scarce resources on problems beyond the reach of for-profit business models.

Collaboration amongst all interested parties is key. Given the nature of water and the issues that surround it, collaboration with local, state, and, federal governments, NGO’s, and public organizations is an important and essential element. The NGO community has been critical in providing credible, reliable information about the importance of clean water access and hygiene as building blocks of quality of life and economic growth. They have also been essential in persuading host country political leaders to support initiatives that work and solve large problems like the rampant illness that results from lack of safe water.

Historically, however, underserved populations have been looked upon as aid recipients and not as customers, making them dependent on philanthropy, government intervention, and, frequently, unsustainable business models. However, as technology and thinking has evolved, decentralized business models are presenting another opportunity for the underserved populations to be regarded as customers and not simply aid recipients. These models, when implemented in a sustainable manner, have the ability to make a significant impact on alleviating the safe water access issue in the developing world.

As Michael Porter and Mark Kramer advocated in the Harvard Business Review earlier this year, addressing societal needs and challenges creates "shared value" for both business and society. The answer lies in unique access to new markets. The majority of the underserved live in countries and areas that are growth markets for many corporations. Supporting a sustainable approach to clean water helps build the economic base of communities, builds demand and creates an environment where business-local partnerships are supported. Industry has invaluable expertise to share in deploying technology, supply chain management and in business execution.

WaterHealth International (WHI) has developed the concept of a "WaterHealth Center," which serves as one example of such a model. These low-cost modular fully managed systems allow safe water to be offered in underserved communities at a cost of less than 10 cents per 20 liters of water. The average WaterHealth Center provides 3,000 individuals with up to 20 liters of clean, affordable drinking water daily. Due to their modular design, WaterHealth Centers can readily be configured to serve communities ranging in size from 1,000 to 10,000 people, or more.

All water is purified to World Health Organization (WHO) standards and though the water is affordable, it is not free. The WHI model is sustainable because it builds a local stake, engages local people and uses the revenues from water purification to support ongoing operations, maintenance and quality monitoring services. As a distributed utility, WaterHealth Centers provide communities in the developing world a reliable, source of clean water, which brings the same peace of mind that municipal water systems offer us in the developed world. 

WaterHealth Centers are made possible through a public-private partnership that utilizes investment money from the private sector to fund the development of financially self-sustaining water centers. Setting up a WaterHealth Center requires a one-time investment and the cost per beneficiary is between $5 to $10, significantly more cost-effective than other types of water access support.

This model is groundbreaking due to its unique combination of preparation, technology, and world-class execution. WHI uses state-of–the–art business tools such as ERP, CRM systems, real time sensing and automation technologies, smart card systems and parametric monitoring while maintaining local implementation. The role of patient investors and adequate capital is essential to the success of these business models that rely on scale and affordable pricing of goods and services. WHI has received the support of several visionary organizations amongst which are the International Finance Corporation, Dow Venture Capital, SAIL Ventures and the Acumen Fund. WHI and its supporting organizations have a goal of installing over 3,000 systems by 2014.

In order to run successful projects that provide a return on investment, WHI manages the centers, provides maintenance, manages training of local residents to operate facilities and provides ongoing education programs on health and hygiene to help ensure proper use and handling of safe water. Management of the WHC passes to the village after 10 to 15 years, making the initiative economically sustainable for the villages reached.

Businesses are increasingly making a commitment to hold themselves to high standards of transparency and commitment to delivering value and health to underserved communities the same way they approach the development and delivery of other products to their developed country clients.

Providing economically sustainable water systems to underserved communities in the developing world is just one way to utilize the for-profit model. There are many other world challenges around affordable and adequate food supply, decent housing, energy and climate change, and improved personal health and safety. Each of these is full of possibilities for collaboration and impact though a for-profit model; the for-profit model may be a critical tool in many instances to more rapid and sustainable solutions to these difficult challenges.

Dennis Merens is a managing director of Dow Venture Capital, the venture capital unit of The Dow Chemical Company. A global innovator and business leader. Sanjay Bhatnagar leads the new generation green enterprise at WaterHealth International. Bhatnagar is also the founder of the THOT Capital Group, a private equity firm based in New York.

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