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Taking a fresh look at the sanitation value chain

Factor[e] Ventures and the Stone Family Foundation teamed up to take a fresh look at the sanitation value chain. Here is a guest blog from Natalie Markham summarising the process and next steps. 

As the global population urbanises, demand for sanitation infrastructure and services is rapidly outpacing the investment and construction capacity of local governments.

Like the Stone Family Foundation, we at Factor[e] Ventures believe that the private sector can play a critical role in providing solutions to this global challenge. We teamed up to see if our two organisations, with the help of some great outside experts, could take a fresh look at the sanitation sector.

Willing to lend us their time, and candidly share the sector’s triumphs and failings, were representatives from Aguaconsult, Eawag, The Bill and Melinda Gates Foundation, and Lion’s Head Global Partners, as well as several leading researchers and independent consultants.

We were aware from the start that ‘disruptive innovation’ is an elusive concept and cannot be expected to simply materialise in a workshop. Our goal was not to have a “eureka” moment per se, but more to spot fertile lines of inquiry that are worth a more directed effort.

We tried to up our odds by paying attention to the assumptions in our thinking that might be holding us back from creative approaches. Recognising and, when necessary, removing these assumptions unlocks the potential for creative problem solving.

We also focused on the non-sewered sanitation value chain, and this near-famous graphic in the sector:

Complex issues can never be answered with one, silver-bullet technology or business model: usually market failures are caused by systemic breakdowns across the value chain. So, at Factor[e], we end up thinking a lot about how, for example, do the urban poor in Mumbai buy electricity? Or how does a rural farmer in Kenya sell maize?

Walking through these value chains allows the market to show us what transactions are necessary to create lasting impact.

The workshop demonstrated to us the the complex barriers to universal sanitation. We came away with valuable knowledge, including these three key insights to inform our investment strategy:

  1. Rethink the value chain

Traditionally, the sector has focused on improving the toilet (on-site) or creating a value chain that gets waste from the household to either centralized or distributed processing plants. We became interested in how we might instead bring treatment and disposal technologies to the pit latrine, avoiding the challenging logistics of hauling waste through dense urban settlements.

  1. Create synergies

There are already several innovative start-ups in sanitation, and we identified that a new set of ventures could provide valuable services to this emerging sector, including helping to simplify the jobs of sanitation workers and rendering the businesses more profitable. There are also opportunities for collaboration that could help link solutions across the value chain.

Innovations such as these could encourage existing players to grow their sanitation work, and possibly incentivise new players to enter the sector.

  1. Leveraging existing infrastructure

In the last five years, donor countries and multilateral agencies have committed more than $10bn towards traditional large-scale sewerage systems and treatment plants. However, that infrastructure is often:

  • Suboptimally utilized and operating at a fraction of capacity; or
  • Severely overcharged, leaking and discharging insufficiently-treated, unsafe wastewater; or
  • Falling into disrepair for the lack of funding for ongoing operations.

The group encouraged us to think about how we could leverage this major investment to produce better outcomes.

Workshop participants exchange and debate opinions about most important gaps and opportunities in the sanitation value chain

The sprint left us energised and ready to begin working in this complex field. Going forward, Factor[e] will continue to build our knowledge base, driving towards our pursuit of scalable, technology-enabled ventures with the potential to make a real difference to global sanitation.

We invite those working in the sector who share our interest and would like to contribute to the mission, collaborate, or pitch us an awesome sanitation startup or technology to reach out to us.