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Millenium Development Goals





The Poverty and Environment Nexus: A Business Opportunity?

Prepared by UNEP/GRID-Arendal and UNEP’s Division of Technology, Industry and Economics (DTIE), this issue of the Environment & Poverty Times was released on 9 September 2009 at the UNIDO International Conference on Green Industry in Asia held in Manila, Philippines. The following article ( on pages 12 and 13) was written by GIM team members: Sahba Sobhani and Austine Gasnier.

There is ample evidence that we are using the planet’s resources faster than they can be renewed, and humanity’s ecological footprint, our impact on the planet, has more than tripled between 1961 and 2003. The biggest contributor to our footprint is the way we generate and use energy: our reliance on fossil fuels to meet our energy needs continues to grow and climate-changing emissions now make up 48% of our global footprint. If continued, the current status of usage of the world’s energy resources paints a destructive path for the future of development. Today, nearly 1 billion households lack access to clean and proper energy supplies, relying instead on resource-depleting, pollution-creating and health-damaging sources such as wood and fuel oils.

This situation urgently demands that all actors take action, including the private sector. But beyond the need for the private sector to address environmental challenges, the very same challenges represent a significant business opportunity. As the International Finance Corporation (IFC) notes: “There is a close correlation between sustainability and business success”. A large-scale study undertaken by IFC and partners to specifically examine the risks and opportunities of sustainability for businesses across emerging economies, found that many businesses were gaining benefits (such as higher sales, reduced costs and lower risks) from better corporate governance, improved environmental practices, and investment in social and economic development.

At the crossroads between business case, poverty alleviation and environmental sustainability

The Growing Inclusive Markets initiative is a multi-stakeholder research and advocacy platform led by the United Nations Development Programme (UNDP) that seeks to promote greater inclusion of poor people in markets of goods and services as consumers, producers and employees. This initiative reflects UNDP’s strong conviction that the private sector is a great untapped resource for achieving investment and innovation to achieve the Millennium Development Goals (MDG), including MDG 7 which focuses on environmental sustainability.

The initiative’s main contribution is to create a climate in which intermediary institutions can make markets more inclusive by gathering relevant information, highlighting good examples, developing tools to support business and market development strategies, and creating space for dialogue at both the global and local level.

Its 2008 flagship report, Creating Value for All – Strategies for Doing Business with the Poor – was based on empirical evidence from 50 specially commissioned case studies of inclusive business models across regions, sectors and types of companies. The report analyses constraints and strategies for companies to expand beyond traditional business practices and bring in the poor as partners in wealth creation. A number of these case studies feature companies that have developed financially sustainable business models with significant environmental benefits, thus contributing to a greener economy.

Inclusive business models include the poor on the demand side as clients and customers, and on the supply side as employees, producers and business owners at various points in the value chain. The benefits go beyond immediate profits and higher incomes. For business they include driving innovation, building markets and strengthening supply chains. And for the poor they include higher productivity, sustainable earnings and greater empowerment

Case studies: a wealth of inspiring examples

Many inclusive business models contribute to both human development and environmental sustainability: water provision, energy generation, agriculture, recycling, or tourism (see examples below). They show that commercial success, environmental sustainability and poverty alleviation can go hand-in-hand, although many constraints specific to the markets of the poor stand in the way. Innovative strategies are therefore needed to overcome these market constraints and develop successful models.

Technology, for instance, can help companies to do business under difficult conditions and more sustainably. For example renewable energy sources can generate electricity for the 1.6 billion people who still lack access to it without exerting further stress on the world’s climate. Clean sanitation technology is a sustainable and cost-effective alternative for low-income population. Biodigesters can transform waste from pig farming into energy, food for fish breeding and biofertilizers. Business models adaptations, such as sourcing from local communities or deploying recycling, are additional ways for businesses to contribute to environmental sustainability.

Providing cleaner energy

In Mali, where only 10% of the population has access to electricity, the rural energy service companies set up by Electricité de France and its partners are providing electricity to underserved rural areas through solar home systems and diesel generators. The elimination of kerosene lamps has improved indoor air quality. In addition solar systems and generators – which might be replaced by biofuels in the future – save respectively around 95% and 85% of CO2 emissions compared to traditional energy sources. The companies are already breaking even and profits are expected to reach 12 to 15%. At the same time the service will generate a significant human development impact for the 40,000 people currently being served, improving their ability to pump water for livestock and electrifying healthcare centres, schools and small businesses, with over 50 new local jobs and economic spin-offs.

In Mozambique VidaGás is supplying Liquefied Petroleum Gas (LPG) to businesses and households. LPG is a reliable source of energy for refrigeration, keeping medical supplies and vaccines cold, and meeting the energy needs of 250 health clinics, which serve 4.5 million people. LPG is cleaner than other fuels, as it emits less carbon dioxide, carbon monoxide, nitrous oxide, hydrocarbons and particulates. It particularly benefits women, the poor, and fishing, farming and artisan cooperatives, while creating value chain effects through gas-related businesses. The company aims to become profitable within three years.

Promoting ecologically-friendly tourism

In Egypt, Environmental Quality International (EQI), a Cairo-based consultants, has implemented the Siwa Sustainable Development Initiative, with a portfolio of enterprises and projects that include eco-lodges, women’s artisanship, organic farming and community art, all of which contribute to revitalizing cultural heritage and nourishing ecologically-friendly tourism. EQI is also implementing a renewable energy initiative that uses biogas digesters to produce biofuel for lighting and cooking, as well as organic fertilizers. It also contributes to prevention of water depletion and further deterioration of soil resources, and raises staff awareness of environmental conservation. These initiatives have created 75 direct jobs and income-generating opportunities for over 300 members of the local community, while generating a profit, partly used to support local entrepreneurship and enhance living standards for the poor through the provision of financial services, as well as the construction of a cinema and library.

Improving Sanitation Systems

It is estimated that 2.6 billion people lack adequate sanitation around the world. In India, Sulabh International, a local NGO, has developed a commercially viable business model, training 60,000 extremely poor people, mostly women, previously surviving by removing human excrement from dry latrines. Sulabh employed low-cost sanitation technology using locally available materials to design environmentally-friendly toilets that require little water for flushing. By 2006 Sulabh had installed 1.4 million household toilets and maintained 6,500 public pay-to-use toilets, with an estimated 10 million people using the facilities across the country. Most of the public toilets run by Sulabh break even in eight to nine months, and some are highly profitable. In 2005 Sulabh’s revenues reached $32 million, with a 15% surplus reinvested in social programmes.

Using forest biodiversity sustainably

In 2000 the Huatai Paper Company Ltd, the largest newsprint manufacturer in China, launched a new strategy to substitute wood pulp for straw pulp. Paper production from wood pulp reduces the amount of pollutants six to seven-fold and does not require chlorine for bleaching. The key was mobilizing local farmers to plant fast-growing trees. Farmers get support through technology, education and irrigation from Huatai and the local government, convinced by the company about the potential win-win nature of this initiative. About 6,000 households have taken part, planting 40,000 hectares of fast-growing trees and generating a significant new source of income. The triploid white poplar trees grow on formerly unused salty land. Meanwhile, Huatai has grown its newsprint business and is minimizing the risk from volatile import prices for pulp.

Investing in the recycling industry

Together with water and sanitation systems, or electricity grids, waste collection is often part of the missing infrastructure that characterizes the markets of the poor. With about 85,000 tonnes of waste generated every day, Mexico is the tenth largest garbage producer in the world. At the same time, tens of thousands of people, including children, are making a living by scavenging saleable items from open-air dumps in very tough, informal conditions. The founders of the Petstar company saw an opportunity in this challenging situation. They realised value could be added to the plastic collected, by closing the recycling value chain, linking the scavengers to the bottling industry. They built the first bottle-to-bottle recycling facility with high-tech automated machinery in Latin America. This innovative project will improve the scavengers’ working conditions by creating separation centres and offering formal contracts. It will also reduce child labour through specially created community education centres, and increase social awareness of the importance of recycling through organized visits to the recycling plant. Last but not least it will yield returns for the company through the sale of the recycled material.

In Philippines, CocoTech, thanks to a fruitful collaboration with a government research institute, managed to turn the challenge of waste into a real business opportunity by converting unused coconut husks into a whole range of environmentally-friendly products such as coco pots, pot liners, grow poles, brushes and rope, while producing a strong social impact on the local community which processes them. CocoTech grew from a small community-based project with an initial capitalization of about US$7,000 and five employees in 1993 into a medium-sized enterprise of 25 employees with revenues exceeding US$300,000 in 2006 and more than 6,000 families involved in the manufacture of CocoTech products.

Sadia Program for Sustainable Swine Production (3S Program): Bringing Sustainability to the Supply Chain in Brazil

The Brazilian company Sadia, a major producer of chilled and frozen foods, is assisting more than 3,500 pig producers in reducing greenhouse gas emissions from their farm operations. The emission reductions qualify for the Clean Development Mechanism (CDM) programme, under which Sadia Institute sells the carbon credits. The emission reduction technology – a biodigester – transforms pig breeding waste into additional revenue from the sale of carbon credits, a renewable source of energy, food for fish breeding and biofertilizers used in other cultivations and pork feeding, while improving the farmers’ working conditions and reducing the environmental impact associated with pig production (see illustration below). With the Program, at least three million litres of pig excrement will be processed daily.

Evidence from the field reveals that there is a lot of untapped potential for companies willing to develop business models that have positive impacts on the bottom line, the lives of the poor and the environment simultaneously. However, grasping this opportunity is difficult due to numerous market constraints, such as limited market information, inadequate infrastructure, ineffective regulatory frameworks, missing knowledge and skills, or restricted access to financial services. And yet, as the case studies show, entrepreneurs have found successful strategies to overcome these constraints, from adapting their products (Sulabh), to investing in infrastructure and education (PETSTAR), leveraging the strengths of the poor (EQI), combining resources and capabilities with others (CocoTech), or engaging with governments (Huatai).

However, further research is needed to get a better understanding of how economic, social and environmental value is created and distributed, and what results can inclusive business models generate. This will therefore be one of the focuses of the second phase of the Growing Inclusive Markets Initiative and its next set of case studies currently being commissioned with a view to highlight good practices, share lessons learnt, and thus encourage the private sector to action.

About the authors: Sahba Sobhani is a Programme Manager, and Austine Gasnier is a Research Associate at Growing Inclusive Markets Initiative, UNDP. The views expressed in this paper are the authors’ and do not necessarily represent those of the United Nations Development Programme.