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Case
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Reference no. 816-0085-1
Prize winner
Published by:
IBS Center for Management Research (2016)
Length:
20 pages
Data source:
Published sources
Abstract:
The global sanitation crisis attracted the attention of several regional, national, and international organizations which tried to address the issue in their own way. However, the statistics reveal that nothing much had been done at ground level. About 2.6 billion people lacked access to decent sanitation facilities across the globe, more than 2 million people including 1.5 million children died every year only from diarrheal disease. The loss caused to individuals, economies, and environment in developing and underdeveloped world was far more than these statistics revealed. Kenya had become a hub of slums with more than 8 million living in the urban slums in the country. Moreover, more than half of the country's urban population was living in slums, relying on unsanitary options. Since there were no affordable toilets in these slums, people in these areas relieved themselves either by using pit latrines or by defecating in plastic bags (called flying toilets). The result was environment pollution. The communal toilets that existed were often the scenes of crime, with many of these crimes targeting women. Also the pit latrines were a source of danger to children, with many falling in and dying. To rescue the urban slums of Kenya from the sanitation crisis, three Massachusetts Institute of Technology (MIT) graduates - David Auerbach, Lindsay Stradley, and Ani Vallabhaneni - developed a business model which had a non-profit wing to address the issue of inadequate sanitation and a for-profit arm to generate revenues. The company, Sanergy, was launched after a feasibility study was conducted and the possibilities were explored in great depth. Sanergy picked two slums of Nairobi, Kibera and Mukuru, to start with and applied its business model, which included a vertically integrated waste management system divided into five parts: build, franchise, collect, convert, and transfer. The company manufactured toilets which were franchised to the local entrepreneurs of the slums. It then collected the waste from all the toilets to convert it into fertilizers and electricity. The company earned profits while selling the pay-per-use toilets to local entrepreneurs, and then while selling the collected waste after converting it into fertilizers and renewable energy. The local micro entrepreneurs collected money from the local people for use of the toilets. These toilets improved hygiene in the slums while providing employment to several local people. People's health improved and so did the quality of life among slum dwellers. For Auerbach and his team a few challenges remained - The model needed to be scaled up and expanded to other countries to address the global sanitation crisis.
Learning objectives:
1. The inception of a social enterprise by social entrepreneurs. 2. The choices made by a social entrepreneur to build the organization to pursue aggressive goals and decide the business model - to go in for a non-profit or a for profit setup or a hybrid model. 3. Details of business model developed by the company to address its dual goal, including manufacturing Fresh Life Toilets (FLTs), franchising them to local micro entrepreneurs, collecting and processing the waste into fertilizers and electricity. 4. Application of sustainability models - the triple bottom line in any business setup. Sanergy covered three spheres of sustainability - economic, social, and environmental. 5. Acquiring funds to run the business and ensure sustainable development in the long run.
Settings:
Prizes won:
2016 - oikos Case Writing Competition - third prize winner
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