The Solution Revolution: How Business, Government, and Social Enterprises Are Teaming Up to Solve Society's Toughest Problems
William D. Eggers & Paul Macmillan
304 pages, Harvard Business Review Press, 2013
New Currencies in Action: A Solution to Developing-World Waste Management
Selling investors on a radically new approach to waste disposal, one that serves impoverished regions where garbage heaps are common, is no easy feat. It’s a messy business, rife with health and environmental risks. Obtaining the necessary resources to transform waste disposal, then, requires the utmost resourcefulness. The currencies of reputation, social outcomes, and credit trading can become partial substitutes for capital, creating a basis for relationships and transactions that launch the new model.
No one knows this better than social entrepreneur Parag Gupta, who is using every variety of currency at his disposal to turn India’s trash into a social treasure, improving public health and the economy in the process. While working with top social entrepreneurs at the Schwab Foundation and the World Economic Forum, Gupta noticed something conspicuously missing from most social enterprises: scale. The deep-rooted challenges they address affect millions, yet most enterprises served only a handful of communities. Aside from microfinance, few solutions were being replicated across countries. Gupta began seeking to combine a common social issue with a business model designed from the outset to be scalable. Extensive due diligence pointed to one big issue facing the least developed countries: trash. “When one looked at solid waste management as a whole, it was a tremendous issue that had to be dealt with, both in terms of the health and environmental issues locally but also with regards to climate change,” says Gupta.
Gupta chose to test his innovative business model, Waste Ventures, in India, where governments and contractors collect only half of the forty million tons of garbage its cities produce each year. The rest falls to an informal economy of 1.5 million rag pickers, who collect and sift the trash and sell anything remotely reusable, down to reasonably fresh bits of food. A 2010 estimate indicated that 15 million people around the world depended on waste picking for their livelihoods.
Waste picking provides some income to those who desperately need it and subsidizes cities that pay nothing for the service. But it’s a brutal way to make a living. Pickers spend their days sorting through garbage in massive landfills that reek of methane. The workers make about $1.50 a day, barely enough for food and water. Many youths forget their empty stomachs and empty lives by inhaling shoe polish or turpentine. Their parents have life expectancies of forty-five. Often, the pickers’ only direct interaction with government takes the form of brutal police beatings. And despite the cruel efficiency of the system, much of India’s trash still doesn’t get cleaned up.
As Gupta researched waste management organizations, in collaboration with the Wharton and Harvard business schools, he was surprised to see hardly any focus on end-to-end solutions for waste removal. Some organizations had scaled composting, others recycling, and most focused on the human rights of the pickers, but few did more than one thing really well. Organizational nearsightedness was keeping profits low and prospects for scaling even lower. Gupta started Waste Ventures to change that.
Social Outcomes as Start-Up Capital
Waste Ventures used start-up capital from foundations, social-impact investors, and the Swedish International Development Agency to help pickers form waste management corporations that, with the right training, can use technology and best practices to harvest as much value as possible from trash. Rather than scrambling over dangerous garbage heaps, pickers collect refuse daily from households in a practice that improves both safety and the ability to compost and recycle. This model allows Waste Ventures to deliver social improvements in the picker’s livelihoods and health, the environment, and the municipal sanitation system all at once.
The enterprise holds itself accountable to, and measures progress against, specific targets: triple a waste picker’s daily earnings, cut waste accumulation by 80 percent, and reduce greenhouse gases that would otherwise be released. Tracking these social outcomes is essential because, says Gupta, “it’s linked to our financial well-being as a business.” Such measures of success point to a sector-wide shift toward safe, inclusive, and profitable waste management. For many impact investors, that progress is well worth the investment.
Reputational Advantage
By Gupta’s own account, he could not shape this sector-wide shift on his own. Breaking into unfamiliar territory as a brand-new social enterprise would have been significantly more challenging without the extensive network Gupta had established long before founding Waste Ventures. His reputation offered a currency of its own, opening doors to new partnerships, mentors, and experts in the field.
In India, it quickly became apparent that acting in isolation would be the quickest path to failure. Instead, Waste Ventures built corporations based on existing groups of pickers, often formed by local NGOs. These NGOs also proved to be critical allies in engaging communities and keeping a trained eye out for corruption, a rampant problem in India. For Gupta, the time invested in understanding the local environment and building critical relationships is inherently productive. It builds trust and paves the way for future agreements essential to scaling.
Credits for the Environment and the Bottom Line
The Waste Ventures approach offers more-immediate dividends as well. Pooling compost made pickers eligible for carbon credits, opening new income streams. Now, besides selling recyclables, wastepicker corporations can offer composted biofertilizer and carbon credits. When combined with the $1 monthly fees charged to households for daily trash collection, Waste Ventures’ corporations are four times more profitable than alternative methods for waste collection in the region.
The environmental effects are also dramatically better, reducing methane gas—a greenhouse gas twenty-three times more harmful than carbon dioxide—which otherwise festers in towering trash heaps. Worker life expectancy, as forecasted according to sick days and reported disease incidence, continues to improve, as does workers’ pay, which has already doubled and is on target to triple
Beyond Measuring Expenditures
Throughout this chapter, we have shown how the solution economy engenders new ways to measure public value. Public data can be harvested and shaped into products that create real value. The time and talent that citizens bring to public challenges offer tangible benefits that can be measured and even traded. Social entrepreneurs are addressing stubborn problems sustainably and are building enterprises that create tangible value at the bottom of the pyramid. Even the biggest corporations have discovered the advantage of reputation that comes from public acts of goodwill. Benefits once vaguely viewed as valuable now carry increasingly quantifiable, shareable worth. In this multidimensional environment, government is no longer the sole issuer of currency. Dollars, euros, and yen may dominate global capital markets, but a growing number of exchanges, to be discussed in chapter 5, spur wider adoption of these new currencies, encouraging citizens to transact in the resources at their disposal. A greater diversity of contributions means that more needs are met than whatever money—and big funders like government—alone can supply.