SBM and the Circular Sanitation Economy
Chief Executive Officer, Toilet Board Coalition
THE ACHIEVEMENTS OF the Swachh Bharat Mission (SBM) provide impressive and inspiring evidence of how transformation can happen with speed and create an immediate positive impact, improving the lives of millions of people. In particular, the positively disruptive approaches of the Government of India (GoI) of targeting the status quo by engaging young people, the media and influencers; embracing new ideas, making sanitation everyone’s business; and setting a sunset clause deadline for scale up in only five years have been instrumental in the Mission’s success.
At the Toilet Board Coalition, a private sector platform focused on business solutions for sanitation, we see a parallel opportunity for the transformation of the economics of sanitation – from unaffordable public costs to sustainable and resilient systems via scale up of the Sanitation Economy. As SBM moves into the next phase, business has a new and important role to play in partnership with the Central and state governments to ensure the success of an Open Defecation Free (ODF) India.
In addition to a revolutionary behaviour change campaign, SBM has also been a monumental market-building campaign, stimulating industries, innovation, and entrepreneurship and paving the way for the growth of new sectors and supply chains in the Sanitation Economy. The investment the GoI has made in ending open defecation and ensuring access to sanitation for all is, in a way, returnable capital.
The Sanitation Economy is estimated to be a $32 billion a year market and set to double at $62 billion annually in India by 2021 (Toilet Board Coalition, 2017), creating many new jobs – even in the most rural areas of the country – reducing health and environmental costs and creating savings for households. Many toilet and related hardware suppliers have reported boosted sales during the SBM period, and they project recurring sales via toilet upgrades, establishing that people are willing to pay for sanitation. The post-ODF environment is creating new demand for faecal sludge management (FSM), solid waste management, organic and plastic waste solutions – all being cost-recoverable and revenue-generating solutions via the Circular Sanitation Economy. The management information system created to track the progress of SBM is another unique and positive outcome. This information is invaluable for businesses as it indicates potential new market development areas. Digitizing sanitation presents new opportunities to create Sanitation Intelligence, by transforming sanitation systems into smart toilets with smart treatment and information that enables smart preventative health.
Inspired by the success factors of the SBM campaign, this essay applies these successful SBM approaches to the opportunity to scale up the Sanitation Economy in India 2019–25.
Disrupting the Status Quo: Creating Demand for Sanitation Economy Solutions for Post-SBM India
The status quo view on sanitation is that ‘providing sanitation is the responsibility of governments and is an inevitable cost to society’.
Just as demonstrated by SBM, the Sanitation Economy presents an alternative view: there is an enormous amount of value in our sanitation systems that has been left virtually untapped; that the private sector is increasingly playing a new and important role in bringing innovative solutions to the sector; and that there is commercial investment interest in profit-making business models in the sector.
Innovative businesses and entrepreneurs are disrupting the status quo of sanitation delivery by focusing on the creation of value, engaging young people and embracing new ideas. Leveraging the expertise of large companies as well as working together with local entrepreneurs is enabling the scale up of economically viable solutions. Business is bringing new thinking to the sector, from circular economy digitization to pay-as-you-go solar.
The Sanitation Economy transforms the economics of sanitation into a net positive value proposition for both businesses and governments, over and above the social benefits it accrues. Sanitation Economy systems are based on cost recovery and revenue generation by identifying new value – social, environmental and economic – in the system that can be monetized for sustainability and resilience.
In this model, the public sector benefits from private sector expertise, and the private sector sustainably engages in the development agenda through relevant, appropriate commercial constructs. This means focusing on scale or scalable projects, establishing streamlined go-to-market models, and creating favourable economics that attract investment.
Quick Wins Reinforce Belief: Supply of Scalable Business Solutions Are Available Today
Since 2015, leading businesses of the Toilet Board Coalition (Unilever, Kimberly-Clark, LIXIL, Firmenich, Tata, Veolia) and a growing sector of innovators have been building the Sanitation Economy. New economic evidence and business models, and product and service providers are now available for scale in India, providing pathways to the sustainability and resilience of SBM’s achievements.
There is now a growing pipeline of businesses globally, with significant growth, creating innovative products for the Sanitation Economy and becoming service providers in rural communities and cities in India. Some of these are public toilet models; household toilet products and services, feminine care products, and waste management models generating water, energy and fertilizer. Sanitation health sensors generate new data and insights about human health and behaviour, including infectious disease monitoring.
These quick wins demonstrated over the past few years can be utilized to reinforce everyone’s belief and further disrupt the status quo.
The work of the Toilet Board Coalition and its members has revealed that, on average, per 1 million people served, countries can gain $70 million in increased productivity through the provision of safe sanitation. In addition, every $1 invested sees a return of investment of $5 in positive externalities – including healthcare services and increased attendance at schools. Decentralized sanitation solutions, which are 5x more affordable than sewers, demonstrate that waste-water management can be done at a much lower cost. Through these we can save 2.6 billion litres of water per year; treat 65,000 tonnes of sanitation waste, or ‘toilet resources’, per year that would have otherwise polluted the environment and caused tremendous public health risk; produce more than 19,000 tonnes of organic fertilizer and help local farmers gain access to increased supply of affordable agricultural inputs, thereby increasing yields and incomes while addressing food security issues.
SBM has built 97 million toilets since 2 October 2014. These household toilets could produce approximately 50 million tonnes of toilet resources per year which can be treated to become: 490 billion MJ of briquettes, 101 billion MJ of biogas or 7 million tonnes of compost. 1
Remaining Fearless: Requiring Companies to Raise the Bar on Safely Managed Sanitation in Operations for Scale
Many businesses believe that sanitation is a development issue and not a mainstream business issue. But sanitation is every business’s business. Poorly managed sanitation has become a business risk that has far-reaching effects – including on the health of workers and customers, their families and communities, their well-being and productivity, the environmental contamination of soil and water, and climate change via methane emissions.
Businesses are responsible for their employees and the communities in which they operate. Every company’s responsibility must include ensuring safely managed sanitation for all, and via Sanitation Economy, these solutions would no longer mean unrecoverable costs for businesses.
Scaling up safely managed sanitation, and lower-cost/cost-recovery solutions will require the transformation of sanitation from a developmental issue alone to a mainstream business issue. That goes beyond corporate social responsibility to ensuring sanitation access for employees; to understanding the risks of poorly managed sanitation for business; and to the new business opportunities of the Sanitation Economy.
Unleashing the Influencers: Financing Sustainable and Resilient Sanitation Systems via the Sanitation Economy
Just as the media was a key influencer in the success of SBM, finance and financial actors can influence the scale up of the Sanitation Economy. Emergent Sanitation Economy sectors remain high risk for investors as business models are new and may lack a sound financial track record. However, many innovative investment initiatives are under development and are coming online to support the sector, and provide incentives for investors and more robust financial data that investors require.
Catalytic capital, additional credit, microfinance, blended finance models and bringing safely managed sanitation into company ratings for investors are all needed. Some promising new financing options can be advocated by governments to better finance Sanitation Economy sectors.
1. Addressing the Pioneering Gap – Catalytic Capital – Development Impact Bonds
The growing interest in outcome-based funding among some of the biggest development funders represents an opportunity for impact-focused investors to participate in new sanitation solutions that have until recently been seen as too complex and high risk.
Development Impact Bonds (DIBs) are performance-based investment instruments intended to finance development outcomes in low-resource countries. This model maximizes the benefits of private enterprise – the focus on reducing costs, delivering quality service on an ongoing basis and generating revenue – while also recognizing that sanitation is not yet a purely commercial market, and that catalytic capital is needed to make the market work for all.
DIBs combine (i) Contingent funding of impact by donors against a pre-agreed set of outcomes metrics; (ii) External commercial investors who provide pre-financing for an intervention and take on the risk of under-performance; and (iii) A contractual framework that incentivizes frontline service providers to track progress and adapt the intervention as it proceeds, to maximize the likelihood of success.
2. Incentives for Investors – Additional Credit into the Market – Risk Guarantee Facilities
Guarantees are an effective instrument to mobilize commercial financing for development outcomes. Guarantee facilities enable financial institutions to finance small- and medium-sized enterprises (SMEs) whose investments ensure sustainable growth and development in low-income economies. In addition, these facilities have the potential to create employment through the SMEs accessing financing.
Guarantees can take on different forms, for example, loan guarantees, equity guarantees, fundraising guarantees, payment guarantees, etc.
3. More Robust Financial Data – Bringing Safely Managed Sanitation into Company Ratings for Investors
Since 1999, the creation of corporate disclosure data, assessing the risks and management of sustainable development issues on companies’ long-term financial value via ratings and disclosure mechanisms has become an expectation of investors.
This information initially focused on carbon and climate risk but has since moved on to water and other sustainable development risks for business. Investors have determined that sustainability factors represent opportunities and risks that competitive companies must address. Sustainability-related mega-trends are changing our world and are having a measurable impact on companies’ top and bottom lines. The quality of a company’s strategy and management and its performance in dealing with opportunities and risks deriving from economic, environmental and social developments can be quantified and used to identify and select leading companies for investment purposes.
Requiring disclosure on access to sanitation and safely managed sanitation services by companies for the communities that operate in would influence more companies to consider their risks, creating more demand and data for business solutions, required by investors.
Sunset Clause (2025): Setting an Ambitious Deadline to Scale Up the Sanitation Economy in India for Sustained Economic Growth
Learning from the success of SBM, setting an ambitious deadline achieves results. The Sanitation Economy, as described in this essay, presents the opportunity to transform the economics of sanitation by engaging the private sector to ensure systems sustainability and resilience. There are many positive steps that the Government can take to enable the Sanitation Economy to thrive, including advocating the benefits of business solutions for sanitation, and working in partnership with the private sector to create conducive policy enabling environments for business solutions to scale.
Some of these include formalizing reinvented toilet products and services that enable resource recovery (such as FSM), and data recovery (such as public health data); regulations to control safety standards related to new products, resources, data and services of the Sanitation Economy; skills development and promotion of innovation and sanitation entrepreneurship, private sector value chains; public procurement policies that encourage Sanitation Economy solutions; and shared responsibility between the Government and the private sector.
The Government of India has emerged as a global leader in the sanitation revolution needed to achieve Sustainable Development Goal 6. It is well positioned to lead the global transition to the Sanitation Economy, which presents significant potential for economic growth, transforming the economics of sanitation from unaffordable public costs to sustainable business opportunities, while improving billions of lives.