The Solution Revolution

September 27, 2013 Editor 0

By William D. Eggers & Paul Macmillan

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.

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Categories: Social Innovation

Tags: improving public health, Municipal solid waste, schwab foundation, social entrepreneurs, solid waste management