Creating Wealth from Waste: Business Plan

Transcription

1 Creating Wealth from Waste: Business Plan Resource Recovery and Reuse (RRR) is a strategic research portfolio within the CGIAR Research Program on Water, Land and Ecosystems. Draft, April 2013

2 Creating Wealth from Waste: Business Plan Resource Recovery and Reuse (RRR) is a strategic research portfolio within the CGIAR Research Program on Water, Land and Ecosystems. This document presents the investment opportunity from RRR s Research for Development. It describes the need for RRR s research, the research agenda and specifies its value for donors and partners. Current study locations 1

3 Executive summary Resource Recovery and Reuse (RRR) is a strategic research portfolio within the CGIAR Research Program on Water, Land & Ecosystems (WLE), led by the International Water Management Institute (IWMI). RRR provides research for development (R4D) solutions in the interface of agriculture and sanitation in low-income countries via its three inter-linked activity clusters: Creating Wealth from Waste, Safe Wastewater and Excreta Use, and Peri-urban Solutions. RRR s value offer for investors and partners is: - Providing demand-driven development solutions in the waste-based value chain through recovery and reuse of nutrients, water and energy available in different domestic and agro-industrial waste streams. - Providing expertise on which business models work best in which situations and why, supporting the decisions farmers, entrepreneurs, policy makers, planners, investors and civil society need to make. - Offering insights into and knowledge-based support for exploiting at scale innovative value chain opportunities that arise from recovery and reuse of waste, also for social enterprises. - Offering expertise on locally viable food safety interventions where waste resources are used for food production by applying the multi-barrier approach of WHO to minimize pathogenic exposure of farmers and consumers, e.g. where wastewater is used for irrigation. IWMI s RRR program is a trustworthy and lucrative partner for investors because of its unique, multidisciplinary expertise in sciences (agriculture, environment, social sciences, economics, engineering, human health), in business modeling, entrepreneurship and business development, its excellent presence across Asia and Africa, and its embedding within the CGIAR system with an array of strong partners and networks working on poverty alleviation and food security from innovative development solutions. To support the larger WLE development goals RRR will over the course of 10 years deliver a defined set of research for development (R4D) Outputs, Milestones and Research Outcomes via strategic impact pathways, with an annual budget of currently US$ 4.5 m. Further funds are required to support, for example, cross-regional testing of the feasibility of business models and safety guidelines, regional investment marketplaces, and policy dialogues. The intended research impact on the ground will have a real value to society and to investors: Over the course of 10 years it will reach out to about 20 million small farmers using polluted water to feed about 100 million urban consumers. These farmers and consumers would benefit in terms of nutrition, food safety and food security from safer production practices and low-cost fertilizer produced from organic waste. With a high costeffectiveness of US$20-80 per averted DALY 1 our tested safety measures have a Return on Investment (ROI) of US$ 4.9 per dollar invested. The ROI of business models for RRR should be higher considering that there will be gains for farming, urban food supply, environmental safety and public health if returns are fed back into the sanitation service chain. Cost savings through better solid waste and fecal sludge composting in Asia and Africa could reach several billion US$ per year, assuming a market for 25% of the generated urban organic waste, and reduced greenhouse gas emissions of up to 13 million tons CO 2 -e per year. 1 The disability-adjusted life year (DALY) is a measure of overall disease burden, expressed as the number of years lost due to ill-health, disability or early death. 2

4 Value offering The solution-oriented research for development that RRR undertakes creates tangible development impacts and shows a history of proven value to investors in the form of significant Return on Investment. Our value offer to investors and partners comprises of: Providing demand-driven development solutions in the wastebased value chain through recovery and reuse of nutrients, water and energy available in different domestic and agro-industrial waste streams. Used as valuable inputs for flourishing private and/or public enterprises, these solutions will make a significant contribution to food -, water-, and energy- security, human health and livelihood, and environmental integrity. Providing expertise on which business models work best in which situations and why, supporting the decisions farmers, enterprises, policy makers, planners, investors and civil society need to make to achieve more sustainable use of water, land and ecosystems across the rural-urban divide. Offering insights into and knowledge-based support for exploiting at scale innovative value chain opportunities that arise from recovery, valorization and reuse of waste, also for social enterprises. Offering expertise on locally viable food safety interventions where waste resources are used for food production by applying the multi-barrier approach of WHO to minimize pathogenic exposure of farmers and consumers, e.g. where wastewater is used for irrigation. 3

5 Problem to be solved Increasing urbanization amid persistent poverty increases pressures on the allocation of natural resources in many developing countries. While millions of smallholders in low-income countries struggle with depleted soils, lack of water and limited access to energy, urban centers generate millions of tons of waste every day. This waste is rich in water, nutrients and energy, but it is not being managed in a way that permits us to derive value from it. In fact, uncollected and untreated waste continues to burden our environment and public health. Especially peri-urban areas suffer from the negative urban footprint. The resulting challenges from an agricultural perspective are two: Risk reduction where waste is reused and food safety and environmental health are at stake. Turning the growing waste streams into an asset for demand-driven development solutions. Although some waste reuse processes, such as composting, are well-known, most initiatives aiming at safe resource recovery and reuse remain small, often not surviving beyond their pilot phase. A major reason is the historical reliance on public sector subsidies in the waste sector which prevents until now the adoption of market driven mechanisms, business planning and development in the provision of sanitation services including RRR. The problem in figures Globally, an estimated 2.6 billion people lack access to adequate sanitation. An estimated 24% of the global disease burden and 23% of all deaths can be attributed to related environmental factors. Conventional sanitation systems dump annually around 50 million tons of fertilizer equivalents with a market value of US$ 15 billion into water bodies. Each day, an additional two million tons of solid waste are discharged into the environment, polluting soils, rivers, lakes and coastal areas. In developing countries, more than 80% of the wastewater discharged into water bodies is untreated, contributing e.g. in India to 70% of all surface water pollution. Farmers on about 20 million hectares worldwide are in contact with poorly treated wastewater, growing crops which are consumed by an estimated 10% of the world's population. In Sub-Saharan Africa, nutrient depletion accounts to more than 7% of the agricultural GDP. Ecosystem Services worldwide provide a worth of US$ 33 trillion per year. A significant portion of this value (60%) refers to nutrient cycling, pollution control and waste management. Environmental deterioration due to waste dumping affects in particular crucial regions for these services, like coastal areas and wetlands. Sources: UN 4

6 Solutions Our vision Waste is both a resource and a business opportunity. We envision across low-income countries smaller and larger enterprises safely recovering water, nutrients, energy and organic matter from domestic and agro-industrial waste streams, supporting food production and enabling revenue generation in the sanitation service chain. Our rationale Hopeful signs of viable approaches to resource recovery and reuse are emerging around the globe, especially in low-income countries. Many of these new commercial pathways are being charted in the informal sector, or are building on public-private partnerships based on innovative approaches, private capital and business models for cost recovery, social benefits or profit. These enterprises target wastewater reuse; co-composting of different organic wastes, including fecal sludge; and waste-based energy systems, shifting the focus from treatment for disposal to treatment for reuse. Our goal is to understand and verify the potential of these enterprises for replication, within the same and in different settings and regions, and at the largest possible scale. We are focusing on existing, emerging and potential RRR business models and their enabling conditions from technical, economic, regulatory, cultural, and institutional perspectives. As the use of waste resources can pose risks for human and environmental health, special attention is given to risk assessment, perceptions and mitigation, in close collaboration with WHO. 5

7 Pertinent questions In order to address the issues on resource recovery and reuse, our research will provide answers to important questions: What are the characteristics and success factors of viable, scalable business models for the safe recovery and reuse of water, nutrients and energy in a low-income country? What is the implementation potential and scale in low-income countries of such business models that provide marketable water, fertilizer and energy products? What are the local cultural, religious, social, and gender barriers to mainstreaming safe resource recovery from waste streams in agriculture, and how can we change perceptions and behavior to minimize the health risks associated with the use of excreta based products? How can the value of ecosystem services be geared through resource recovery and reuse systems? How much public funding is needed to stimulate business development? What programs are helpful in reducing the sanitation sector s reliance on financial aid, and what roles do resource recovery businesses play in financing and managing parts of the sanitation value chain? How will population growth and climate change affect wastewater generation, management and reuse, and how far could peri-urban areas benefit to increase the resilience of cities or buffer their negative footprint? To what degree do the answers to these questions vary across countries, cultures and regions or by the type of waste stream and business considered, and how can we guarantee that gender concerns are incorporated as part of doing smart business? Our implementation strategy Our research will provide guidance regarding the size of addressable markets for resource recovery and reuse (RRR), the subsidies that may be needed to spur private sector involvement in many settings, and the economic and social benefits attributable to the provision of those subsidies. We have the expertise to estimate the market and non market benefits of RRR programs, to understand potential equity considerations, and to describe the potential for successful involvement of private sector firms. We aim to create impact through three lines of action: 1) Developing scalable business models that offer entry and support to enterprises of different sizes and PPP, and that offer routes to realizing economies of scale and substantial social benefits. 2) Addressing issues of public safety and health risks: we will deliver options for assessing and mitigating risk and enhancing social awareness of RRR. We will also determine optimal forms of social marketing, regulations and incentives to encourage desirable changes in perceptions, behavior and practices. 3) Conducting institutional dialogues and developing fruitful partnerships across the agricultural and sanitation sectors, we will work with public and private entities to promote long term capacity building in RRR, guideline development and policy support. 6

8 To enable promising as well as new business models to succeed at largest possible scale, we are learning from existing or emerging RRR cases to understand their technical, economic, regulatory, cultural, and institutional conditions, and in particular their business plan. In a second step, we are testing the application potential and robustness of promising models across Asia, Africa and Latin America via local feasibility studies within similar and different settings. In working to reach our aims, our activities will focus on three key areas: 1) Developing innovative partnerships aiming at private and public sector support for the uptake of successful business models, accompanied by action research and stakeholder dialogues within and across formal and informal sectors. 2) A four step rolling work plan that enables our research to learn from existing successes and failures in the analysis of business models, the study of their feasibility at scale in different settings, and actual business model implementation, as shown below. 3) The development of Sanitation Safety Plans, safe reuse guidelines, strategies and policies in close collaboration with WHO and national authorities. In our approach to realize development outcomes (see section below on Deliverables ), we combine Impact Research and Innovative Partnerships, which include: Analysis of new, emerging and established business models for RRR with a high level of cost recovery, social benefit, or profit. Action research in RRR options that include fertilizer pellets and fish food from fecal sludge, field and greenhouse trials on crop yield responses, and gender-sensitive safer irrigation practices. Development of investment plans (preceded by feasibility studies) to enable the safe replication of business models at scale in various locations across Asia, Africa, MENA and Latin America. Partnerships with business schools, private and public sectors, directed at learning with and for entrepreneurs. Assessment of health and environmental risks, risk perceptions and options for behavior change and propoor risk mitigation. Close partnership with WHO, FAO and other UN bodies feeding research back into the development of global public goods, in particular reuse guidelines and Sanitation Safety Plans for operators of RRR facilities. Interlinkage with professional networks, such as the International Water Association and the Sustainable Sanitation Alliance, to steer the development and distribution of best practices and business models. Assistance in drafting guidelines, regulations and policies on safe waste management for reuse in agriculture, aquaculture, forestry and landscaping. 7

9 Deliverables and Impact Pathway Our research will lead to freely accessible international public goods, intermediate development outcomes (IDOs) and sustainable development goals (SLO) via distinct levers of change within our Activity Clusters. Impact pathways will vary between regions but can be generalized as shown below years 9-12 years 0-9 years 0-3 years CGIAR SLO: Food Security CGIAR SLO: Sustainable NRM IDO: Increased capacity of low-income communities to adapt to.. variability,.. and long term changes. Target level Increased consumption of safe, nutritious food by the poor, especially nutritionally vulnerable women and children through better wastewater and excreta management to the benefit of up to 20 m farmer and 100 m consumers currently exposed to contaminated food in South Asia and sub-saharan Africa. IDO: Greater resilience of poor communities.through enhanced ecosystem services and mimized impacts of intensification. Target level Waste based business models will benefit up to 20 million marketoriented smallholders in sub-saharan Africa and South Asia, improving food supply for over 100 million consumers, while supporting cost recovery for waste management. Research Outcomes 10 national policies and programs acknowledge recommended safety practices (S.Asia, W. Africa). Global reuse guidelines and initiatives acknowledge WLE input. Multi-regional capacity building covering 100 countries in collaboration with WHO, FAO, and UN-Water. Private and public sector interest in safe excreta use for food production. The Theory of Change is based on strategic partnerships with national authorities and international institutions supporting safe wastewater and excreta use via guidelines, capacity building and investment plans, such as WSP, WHO, FAO, USAID, ADB and UN-Water. The Theory of Change is based on an innovative business approach aiming at scalable business models that attract private capital, support PPPs, and address public safety concerns. Strategic partnerships target global change agents, like BMGF, WSP, and business schools, and peri-urban areas. Research Outcomes More than 10 donor programs and 20 business schools acknowledge reuse-based business models and opportunities for resource recovery. The feasibility of RRR business models has been verified in 10 periurban areas across Asia, Africa and Latin America. Entrepreneurs are investing private capital into documented RRR options. Research Outputs and Activities Compendium of 50 promising Resource Recovery & Reuse business cases and models. Sanitation Safety Plans and national and international guidelines for safe wastewater and excreta management and use. Ten investment plans for the replication of RRR business models at scale within Asia, Africa, and Latin America. National and regional stakeholder training workshops on safe wastewater reuse and policy dialogues Models of future water and nutrient flows and allocations for resource use efficiency in the rural-urban interphase 8

10 Timeline The impact of our activities increases as we progress along specified impact pathways from Outputs to Outcomes and from Outcomes to Development goals. The pathways are supported by four lines of action: - Strategic partnerships, i.e. the UN-Water capacity building program or business schools. - Targeted communication, i.e. policy and private sector dialogues. - Research into Uptake, studying e.g. risk perceptions and incentives for behavior change. - Monitoring and Evaluation, including ex-ante and ex-post impact assessments. The timeline below indicates estimated and not exact delivery dates. Some milestones will be measurable at a given time (e.g. feasibility studies, donors and business schools feedback), whereas other milestones will be more gradual in character (e.g. improved urban agriculture and waste reuse). Timeline of deliverables from Impact Pathways Regional focus The RRR program has global activities and outputs with a current regional focus of activities in South Asia and West Africa. Country activities are ongoing in Bangladesh, Ghana, India, Nepal, Peru, Sri Lanka, Uganda, and Vietnam. The program will support the identified WLE focus areas, in particular in the Volta/Niger basins and Indus/Ganges basins with a strong focus on rural-urban interactions and the peri-urban interface. 9

11 Benefits and value Benefits and value to society The estimated benefits and value of our R4D to society are as follows: Over the course of 10 years our impact pathway will reach out to about 20 million small farmers currently using polluted water to feed about 100 million urban consumers. These farmers and consumers will benefit in terms of nutrition, food safety and food security from safer production practices and low-cost fertilizer produced from organic waste. With a high cost-effectiveness of US$20-80 per averted DALY 2 our tested low-cost measures for safe wastewater and excreta use have a Return on Investment (ROI) of US$ 4.9 per dollar invested 3. The ROI of business models for RRR should be higher considering that there will be gains for farming, urban food supply, environmental safety and public health if returns are fed back into the sanitation service chain. Cost savings through better solid waste and fecal sludge composting in Asia and Africa could reach several billion US$ per year, assuming a market for 25% of the generated urban organic waste. Greenhouse gas emissions can be reduced to up to 13 million tons CO 2 -e per year. Value to investors Our R4D into resource recovery and reuse is valuable to investors. Every US$ 1 invested in farm- and offfarm based safety options for wastewater and excreta use 1 yields US$ 4.9 in returns which comes close to investments in improved sanitation 4 which yield on average US$ 5.5 in returns. In both assessments, public health benefits are valued, not any reuse value. Thus the ROI of safe RRR interventions will be higher depending on the value proposition (agriculture, aquaculture, forestry, landscaping, energy, etc.). 2 The disability-adjusted life year (DALY) is a measure of overall disease burden, expressed as the number of years lost due to ill-health, disability or early death. It is a metric which is independent of the type of the disease allowing cross-disease comparisons. 3 Drechsel and Seidu, with a DALY value for low-income countries according to John and Ross, Hutton,

12 Competitive advantage Our competitive landscape Our closest partners, with complementary strength are development-oriented science groups or research organizations outside the CGIAR which are eligible to receive development funds, and that are working on: Resource recovery technologies in low-income countries (e.g. SANDEC-EAWAG in Switzerland) Reduction of the waste problem in low-income countries (e.g. WASTE in The Netherlands) Reduction of environmental pollution and/or human health risk in low-income countries (e.g. Swiss TPH) Sustainable sanitation and closed loop processes (e.g. members of the SuSanA network) What sets us apart Through ten offices in Asia, Africa and Latin America we are working in close collaboration with national research partners and authorities. We have a profound understanding of local, regional and global development needs and opportunities which is multiplying the effectiveness and efficiency of any investment. We believe that solutions to RRR need aside technological advances sound business approaches to waste supply, resource demand and strategic partnerships. The RRR team is thus combining experience in agriculture, economics, environmental sciences, social science and public health, with business modeling, entrepreneurship and business development. We work closely with various global change agents, like BMGF, WSP, WHO, FAO, UNEP, IWA etc. for maximum outreach and policy dialogue. CGIAR s reputation of working on Research for Development. IWMI s reputation on excellence in Research for Development in the interface of water, agriculture, ecosystems and sanitation. RRR builds on a decade of IWMI experience working on safely recovering water, nutrients and organic matter from liquid and solid waste streams for agriculture and aquaculture in Africa and Asia. 11

13 Marketing & Communications strategy Resource Recovery and Reuse s target audiences are: development donors, business schools, media, the public, research organizations, field-specific public and private sector, and policy-makers especially in urban and periurban areas. Recognizing the different types of information needs these different audiences have to be able to actively receive and use our information, we will communicate our R4D intentions and results to these audiences using varying approaches, as outlined in the communications matrix below. Three aspects of resource recovery and reuse, and the implementation of solutions, are crucial in communicating with stakeholders, and these will be salient throughout our communication strategy: 1) The novelty of the subject and a strong business approach, also within the CGIAR this requires focus on awareness rising. 2) The sensitivity of the waste reuse subject this requires high sensitivity in communications both directly and indirectly with the public. 3) The sensitivity of business data. To analyze business cases, we are building relationships of trust to balance the needs of our partners with the CGIAR commitment to an open-access policy and the production of freely accessible international public goods. To support the effective management of above aspects, RRR will make strong efforts to pro-actively engage specific audiences, including media to influence public opinion. Concerning the need for sensitive and wellbalanced out communications, RRR envisions careful research into communications strategies for behavior change at individual or institutional level, for which required budgets are allocated. 12

14 Communications matrix Audience Target-objectives Messages Tools & channels M&E Donors Retain donors interest in R4D; attract interest of new donors incl. private sector / foundations. Progress & performance information; R4D intentions & funding needs & investment opportunity statements (ROI); success stories. Progress reports, funding call Funding patterns; reactions and targeted direct calls. dialogue; Via agreements, donor websites, personal communications; social media, investors hubs. Media Ensure media s favorable translation of our R4D; reaching senior policymakers; avoidance of messages resulting in wrong risk perceptions. Success stories; needs stories; potential policy statements; facts on risks and risk mitigation. Pro-active engagement of selected media; Interviews; press releases; linked to WLE and IWMI communications team. Media coverage extent;, media coverage content; Policy activity in relation to subject. The public & public sector Awareness raising; ensure Success stories, needs the public sees the stories. benefits of our R4D results and understands that risks are managed. Social media, own website & websites of civil society & opinion leaders. Through media, business school curricula. Opinion leaders content; Civil society activities & document content; Media content. Perception studies, investment patterns in RRR. R4D organizations Scientific recognition; possible science partnering; learning. Science results; impact analyses; how can we improve our scientific program (learning). Journal articles, reviews, Publishing records, citation notes; Journals, social media, records. Methodology own website. Targeted replications. s. Private sector Get interest in partnering in implementation activities, interest in financing solutions. Investment opportunities, partnering opportunities. Investment briefs; business model catalogues for business school curricula; investors and industry hubs. Implementations, new partnerships. Investment patterns in RRR. Farmers Safe use of waste resources. Verified guidelines and best practices. Radio, FAO farmer field school manuals; NGOs, extension staff, outgrower associations. Compliance monitoring. Policy-makers Gain interest in Policy notes, success implementation activities, stories, investment policy-change. opportunities. Policy advice notes. Policy briefs; through media, donors and UN networks. Policy statements, implementations. 13

15 Budget and investment needs Budget Gap to be closed Secured Funding as of April 2013 The current annual budget (2013) is US$ 4.5 m. It supports the analysis of RRR businesses across Asia, Africa and Latin America, and RRR feasibility studies in 8 urban areas in the same three regions, the production of safety guidelines and first Sanitation Safety Plans for selected waste to resource investment options. Funding is also available for several activities on the safe use of wastewater and fecal sludge in agriculture in West Africa and parts of South Asia based on a variety of value propositions. As a significant portion of funding is restricted (Windows 3) and usually limited to 3 year periods, funding is sought to close the gap via Window 2 support. The current funding gap for full performance is US$ 1 to 1.5m. Unfunded or underfunded milestones per RRR Activity Cluster are as follows: Activity Cluster Creating wealth from waste Promoting safe wastewater & excreta use 5-year budget (million US$) Unfunded and Underfunded Milestones 11 Creating a RRR business incubator Regional investment marketplace conferences North-South learning on applied RRR solutions Feasibility studies for private-public partnerships for selected RRR business models Cost recovery for wastewater treatment and reuse (MENA) 6 Safety measures for commercial wastewater/fecal sludge use applied to South Asia Policy dialogues and capacity development for safe fecal sludge and wastewater management for agricultural use Peri-Urban Solutions 10 Informal and formal rural-urban water markets and propoor water allocations Ecosystem services und urbanization: Options for a Green Economy. 14

16 Capabilities & assets Our tightly knit RRR team is comprised of people with a multitude of skills and a broad scientific knowledge. Capabilities available within our team are: Scientific expertise Soil fertility and plant nutrition Natural resources management Agricultural economics Waste management Civil engineering Environmental sciences Social science and behavior change Business expertise Research for development Business modeling Business development Business planning/enterprise development Business financial management Value chain development Entrepreneurship building Key Assets of our team Over 10 years of experience in working on wastewater and organic waste management and reuse in low-income countries. A multi-disciplinary team of entrepreneurs, business developers, economists, environmental scientists and engineers specialized in reuse project analysis and development. Ten offices in Asia and Africa and a strong partner network. A continuously growing compendium of reuse cases and related business models for RRR at scale. Recognition by WHO, FAO and USEPA/USAID for the development of safety guidelines and successful capacity building through strategic partnerships and business schools. Selected current partners Organization type Donors Global R4D and developmental organizations Government National research partners, CBOs and NGOs Business Schools and Start-Up facilitators Public Health & Wellbeing entities Private Sector Partners IFAD; SDC; Bill and Melinda Gates Foundation; EU; African Water Facility; BMZ/GIZ FAO; WHO, UNU-INWEH; UNW-AIS; IWA; SuSanA; RUAF; SANDEC/EAWAG, WSP Ministries and authorities at national, urban and peri-urban level in all countries with activities National universities, farmer associations, RRR enterprises, national agricultural research and extension services (NARS), Septic truck operator associations, Cambridge Business School, International Centre for Water Management Services (CEWAS); Small Scale Sustainable Infrastructure Development Fund (S3IDF) WHO, Swiss TPH, Emory, University of Leeds, University of California; Biome Environmental Solutions, India So far about 50+ enterprises working on resource recovery and reuse across Asia, Africa and Latin America 15

17 Contact information For scientific information Name position Telephone Dr. Pay Drechsel Theme and Program Leader RRR ext Jasper Buijs Senior Researcher Enterprise Development ext Krishna C. Rao Researcher Business Model Analysis ext Dr. Miriam Otoo Project leader Feasibility studies ext For business development Name position Telephone Jasper Buijs Senior Researcher Enterprise Development ext Mireille Perrin Head, Donor Relations ext Dr. Pay Drechsel Theme and program Leader RRR ext For linkage to CGIAR Research Program on Water, Land and Ecosystems (WLE): Name position Telephone Dr. Andrew Noble Director, WLE-CGIAR ext Websites Pages on Resource Recovery and IWMI Resource Recovery and WLE Safe wastewater and excreta IWMI Safe wastewater and excreta use with UN-Water Resource Recovery & Reuse CGIAR Research Program on Water, Land & Ecosystems c/o International Water Management Institute (IWMI) 127, Sunil Mawatha, Pelawatte, Battaramulla, Sri Lanka General Tel:

18 wle.cgiar.org/rrr 17