Global Institute for Water, Environment, and Health Tapping into Social Entrepreneurship to Alleviate Global Water Scarcity 10.2013 Caleb Smith GIWEH 10,RueChantepoulet 1201Genève E-mail:[email protected] www.giweh.ch Tél:0227337511 ! ! ! ! Table of Contents Abstract 3 Preface 4 Acknowledgements 6 List of Abbreviations 8 Introduction 9 Section I: Social Entrepreneurship 10 Section II: Inclusive Businesses 13 Section III: Corporate Social Responsibility 16 Section IV: Funding/Social Investment 18 Section V: The Global Water Crisis 20 - The Millennium Development Goals 21 - International Involvement 23 Section VI: Case Studies 26 - Programme hydraulique Niger-Suisse 26 - Association of Private Water Operators in Uganda 27 - Grameen Veolia 28 - Manila Water Company 29 - Ecofiltro 30 Section VII: Future Steps 31 Conclusion 32 Works Cited 34 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 2|P a g e ! ! ! Abstract The field of social entrepreneurship is emerging as a viable way to alleviate many global problems, especially access to safe water. Social entrepreneurs use conventional business methods to generate a social or environmental impact. Instead of pursuing strategies to maximize profits, social entrepreneurs search for practical, innovative, and sustainable solutions to problems that marginalized populations are unable to solve independently. Social entrepreneurship is a revolutionary concept that offers a sustainable alternative to conventional development mechanisms such as philanthropy, private charity, and official aid. This paper will explore how social entrepreneurship can facilitate multilateral cooperation between investors, governments, civil society and local communities in order to achieve a social or environmental objective. Social entrepreneurs specifically address global water scarcity by developing technology for affordable safe water access, improving water management systems, and/or finding ways to provide access to areas with extreme water scarcity. This paper will explain how social entrepreneurs utilize inclusive business strategies, CSR methods, and social investing in order to develop these technological innovations. Additionally, this paper will examine five case studies that provide examples of how social entrepreneurship has successfully alleviated water scarcity in various regions. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 3|P a g e ! ! ! Preface I first became aware of social entrepreneurship while traveling through Guatemala in 2012. There I learned about Ecofiltro, a company that manufactures water filters using sustainable practices and provides rural communities with access to clean water. I was astounded by the idea that a business can use the profitability of a commercial market to benefit a marginalized or poor population. I have always been passionate about helping those less fortunate, however I have never considered philanthropy and charity as sustainable practices. I was curious to see if social entrepreneurship could be a viable alternative for these mechanisms. While studying abroad in Geneva with the School for International Training, I decided to use our final independent study project as an opportunity to learn more about the potential capabilities of social entrepreneurship. After researching more I began to see all the practical uses for social entrepreneurship, as it not only has the potential to benefit countless people but also has the ability to generate sustainable economic and social development. Initially my research was focused on the direct impact that social entrepreneurship can have on the water scarcity in developing countries. However after learning more about the dynamics between the public and private sector I realized that a multilateral approach is needed to effectively address water scarcity. Due to time constraints I could not cover every aspects of this issue, for example water scarcity effects agricultural and industrial users however this paper focus solely on drinking water. The major themes of the paper are social entrepreneurship, inclusive business strategies, corporate social responsibility, the international aid system and investment, and the global water crisis. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 4|P a g e ! ! ! During my research I attempted to utilize a variety of sources from differing fields in order to develop a better understanding of the major themes. Besides finding information in peer-reviewed journals and official publications I interviewed individuals from academia, NGOs, international organizations, and the private sector. Due to the complexity of the topic and project limitations this paper is unable to provide a comprehensive analysis; continued research is needed to fully understand the potential of social entrepreneurship and its contribution to solving global water scarcity. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 5|P a g e ! ! ! Acknowledgements Accomplishing this project has been one of the most challenging and rewarding experiences of my life. However being able to even undertake such a task could not have been possible without my friends and family. First and foremost I’d like to thank my mom, Sandy, for literally everything. Without your unconditional love and support I wouldn’t be who I am today. Also thank you Nate, my mentor and best friend who has always been there to inspire, encourage, and support me no matter what. I can’t imagine how I would’ve made it here without you. I’d like to acknowledge all those at the School for International Training who made this program possible. Thank you to our academic directors, Dr. Lambert and Dr. Csergai, your jovial attitudes and expertise made this program fun and intellectually stimulating. Thank you Aline Dunant, our academic coordinator, for your hard work and compassion. I know that without you this program would fall apart. And to our homestay coordinator Christina Cornes, thank you for making Switzerland such a welcoming place, your knack for finding homestays is extraordinary. Additionally I’d like to thank Hilary Parsons, Victorine Cassex, Daniel Fino, and Samantha Caccamo who volunteered their time to help with my research. Also thank you Dr. Salim Nidal for taking a special interest in my topic and helping me revise and edit my paper. I look forward to working with you in the future. Thank you to all my friends that I shared this amazing experience with, your friendships are what made this program so special. Best of luck in your future endeavors and hope to see you all again soon! ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 6|P a g e ! ! ! A special thank you to my host mother Cherry, your warmth and hospitality was more than I could ever imagine. I will genuinely cherish the time we spent together for the rest of my life. Last but certainly not least, thank you to my girlfriend Jenny. I’m so grateful for your continued support throughout this program…despite the fact that I left for four months “to do cool things.” ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 7|P a g e ! ! ! List of Abbreviations APWO: The Association of Private Water Operators in Uganda BoP: Bottom of the pyramid CSR: Corporate Social Responsibility EU: European Union GIWEH: Global Institute for Water and Environmental Health GWS: Global Water Solidarity MDG: Millennium Development Goals MWC: Manila Water Company NGO: Non-governmental organization PHNS: Programme hydraulique Niger-Suisse SDC: Swiss Agency for Development and Cooperation UN: United Nations ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 8|P a g e ! ! ! Introduction The international development agenda needs to find new ways to accomplish its objectives. After establishing the Millennium Development Goals (MDG) in 2000, many experts believed official aid, international organizations, and private charities were going to be the primary benefactors for achieving this pro-development agenda.1 More than a decade later this methodology has failed to make much progress towards most of the MDGs. The purpose of this paper is to explain how social entrepreneurship can offer an effective way to improve access to safe water while also consolidating public and private powers to stimulate economic and social development. Many social entrepreneurs strive to alleviate global water scarcity by developing technologies for affordable drinking water, improving water management systems, and/or finding ways to provide access to areas with extreme water scarcity. These objectives are achieved by employing a variety of mechanisms such as inclusive business strategies, corporate social responsibility (CSR), public awareness, and social investing. The UN Global Compact has published reports about the role of private sector engagement in development and how CSR can contribute to achieving the MDG.2 These publications also examine how businesses and local communities can benefit from social and environmental investments. What is not mentioned in these publications is how investing in social entrepreneurship can augment these benefits. A report published in 2012 by Credit Suisse and the Schwab Foundation for Social Entrepreneurship discusses how investors and entrepreneurs can use their capital to generate a positive social or environmental impact while still allowing the potential for a financial !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 "Innovating for a Brighter Future: The Role of Business in Achieving the MDGs." N/A. United Nations Global Compact, n.d. Web. 08 Nov. 2013. 5. 2 See bibliography for a complete list of UN Global Compact references ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 9|P a g e ! ! return.3 This report examines the features of a successful social enterprise and the importance ! of private sector investments. However the crucial aspect of public sector involvement is not acknowledged. The public sector has the power to raise awareness about the problems social entrepreneurs are attempting to solve, providing entrepreneurs with a necessary tool for acquiring support and funding. Additionally, the public sector acts as a key linkage between social entrepreneurs and the local community. As mentioned earlier, local engagement and community involvement is paramount for the success of both social entrepreneurs and the possibility for economic and social development. The following analysis will first discuss the dynamics of social entrepreneurship and the importance of other related mechanisms to alleviate global water scarcity. I. Social Entrepreneurship Social entrepreneurs strive to find practical, innovative, and sustainable solutions to problems that marginalized populations are unable to solve independently. 4 Instead of pursuing strategies to maximize profits, social entrepreneurs give priority to social wealth creation rather than financial or capital gains. The diversity of social entrepreneurship gives owners and investors the freedom to execute their ideas in many ways, from strict non-profit enterprises to more profit-oriented social businesses. Non-profits enterprises are a way for social entrepreneurs to address a market or government failure, e.g. access to safe water, by engaging private and public actors to create a multiplier effect.5 These ventures depend on continuous philanthropic funding and vested interests by the partners involved. Due to this reliance on subsides and philanthropic support, !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3 "Investing for Impact: How Social Entrepreneurship is Redefining the Meaning of Return." N/A. Credit Suisse and the Schwab Foundation for Social Entrepreneurship, 5 Jan. 2012. Web. 15 Sept. 2013. 4 “What is a social entrepreneur?” Schwab foundation for social entrepreneurship. 5 Ibid. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 10 | P a g e ! ! non-profits are shielded from the pressures of capital and profit markets, allowing more ! resources to be utilized for the social objective.6 Non-profits can have a tremendous social and environmental impact by using philanthropic and state funding in a more effective manor than official aid. However the reliance on these funding sources make non-profits vulnerable during economic downturns and prevents them from becoming self-sustaining. Most social entrepreneurs drift towards hybrid non-profit ventures in order to solve the problem of sustainability. Even though the primary source of funding is usually mobilized from public and/or philanthropic sources, they still generate some degree of cost recovery through the sale of goods and services.7 Ecofiltro is an example of a hybrid non-profit that relied on public funding and grants to get off the ground but then eventually became selfsustaining. A subset of social entrepreneurship is social business. A social business is a for-profit entity focused on creating a positive impact for those who are often poor or marginalized in society. The main goal of a social business is to alleviate a social or environmental problem while at the same time trying to recover its investments by using commercial methods.8 Once revenue is generated, profits will be reinvested in order to grow the business and reach more people in need. Social businesses are designed to maximize their investments and create more cost-effective ways of achieving objectives while not compromising the integrity of their service or product.9 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 6 J. Gregory Dees and Beth Battle Anderson. “For-Profit Social Ventures.” Duke University. Senate Hall Academic Publishing (2003). Web. 10 Oct. 2013. 2-3. 7 “Investing for Impact: How Social Entrepreneurship is Redefining the Meaning of Return." 21. 8 Yunus, Muhammad. “Building Social Business Models: Lessons from the Grameen Experience.” Long Range Planning. Vol. 43, April–June 2010. Web. 09 Nov. 2013. 310. 9 “Investing for Impact: How Social Entrepreneurship is Redefining the Meaning of Return." 20. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 11 | P a g e ! ! ! It is important to note that those who run social businesses are considered social entrepreneurs but not all social entrepreneurs are involved in social businesses. Certain social entrepreneurs still aim to generate profits that benefit their shareholders.10 A social business requires those involved to have an unwavering selfless mindset, one that is so passionate about helping others that they relinquish any thought of generating profit for themselves.11 This is the ideal mindset for solving many global problems, however due to the fact that most people think in terms of financial profits, a compromise must be made to ensure some degree of progress. There is a range of different ways social entrepreneurs can balance profits with social and environmental impacts. This diversity makes social entrepreneurship much less daunting for businesses that still want some financial return. Figure!1:!Social!investment!continuum! The continuum above is from a UN Global Compact publication on the foundations of social investment.12 It outlines the range of different business models depending on the degree of social responsibility. On one extreme is the classic Milton Friedman core business, where social responsibility is only considered if it increases profits. 13 The other extreme is philanthropy, where resources are strictly allocated for social benefit and little or no energy is !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 10 Yunus, Muhammad. “Building Social Business Models: Lessons from the Grameen Experience.” 311. 11 Samantha Caccamo, personal interview, November 6, 2013. "Discussion Paper: Foundations of Social Investment." N/A. United Nations Global Compact and Principles For Social Investment Secretariat, n.d. Web. 08 Nov. 2013. 3. 13 Ibid., 4. 12 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 12 | P a g e ! ! put into profitability or financial return.14 Social entrepreneurship encompasses the models in ! between these two extremes. Although social entrepreneurship is designed to have a positive impact on society, sometimes investors are not committed to the social mission and leverage financial gains over social returns, otherwise known as mission drift.15 In order to avoid mission drift, the social and financial mission of the business should be clearly defined before any action is taken on the ground. Putting these mission-related provisions in the business statutes and investment documentation will ensure that the both parties’ expectations will align with their desired outcomes.16 Furthermore the types of co-investors that a social entrepreneur chooses are key to the success of the business. Having partners that are like-minded and passionate about creating a positive impact will help prevent mission drift. II. Inclusive Businesses Inclusive business strategies are an intrinsic part of social entrepreneurship, whereby the strategies take into account the multidimensional framework associated with global problems such as poverty and water scarcity.17 The basis of an inclusive business is to balance short-term profits with long-term social and environmental sustainability. The primary function of an inclusive business is to include Figure!2:!The!Economic!Pyramid! the “base of the pyramid” (BoP), or the !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 14 Ibid., 7-8. “Investing for Impact: How Social Entrepreneurship is Redefining the Meaning of Return." 38. 16 Ibid., 17. 17 Beth Jenkins, et. al. “Accelerating Inclusive Business Opportunities: Business Models that Make a Difference.” Washington, DC: IFC (2011). Web. 10 Nov. 2013. 6. 15 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 13 | P a g e ! ! enormous population that is conventionally ignored because the consumers live below a ! certain income or spending threshold.18 Targeting the BoP allows inclusive businesses to achieve economies of scale by providing affordable products and services to this largely untapped market.19 Figure 2 shows the comparison of the BoP population to emerging and mature markets.20 One advantage of inclusive business strategies is the opportunity to access funding that is generally unavailable to strictly commercial enterprises.21 However inclusive businesses don’t exclusively target the BoP, the idea is to take a whole pyramid approach, whereby companies are then able to “leverage existing infrastructure, achieve economies of scale, and cross-subsidize.” 22 This provides the BoP with goods and services that would otherwise be inaccessible. The whole pyramid approach essentially charges industrial users and higher-income households more in order to crosssubsidize the lower-income market and even expand access to their good or service.23 Once the business becomes involved in the BoP, the increased business activity can have a multiplier effect on local development by creating jobs, building human capital and physical infrastructure, and generating taxes for governments. In the water sector, companies like Manila Water and Ecofiltro have utilized what the International Finance Corporation calls last-mile and off-grid utilities.24 These strategies aim to create a multiplier effect on local development by extending water access to neighborhoods that were previously considered inaccessible or unprofitable. However in order to maximize the multiplier’s potential it is necessary to have proper management and a complete !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 18 Ibid., 6. “About Growing Inclusive Markets.” United Nations Development Programme. N.d. Web. 12 Nov. 2013. 20 “What is Inclusive Business at the BoP?” Inclusive Business Sweden. N.p., n.d. Web. 18 Nov. 2013. 21 Funding sources include government, multilateral and bilateral donors, and private foundations. 22 “Accelerating Inclusive Business Opportunities: Business Models that Make a Difference.” 4. 23 Ibid., 19. 24 Ibid., 18-20. 19 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 14 | P a g e ! ! understanding of local geopolitical factors. ! 25 Cross-sector involvement, like active cooperation with local institutions and governments, will provide the business with the means to be successful. Inclusive business strategies can be used as a tool for creating an environment where the private sector takes accountability for the social and environmental affects of its business activity. Although inclusive businesses aim to benefit a lower-income or marginalized population, some have been criticized for having false motives and taking advantage of the model. Inclusive strategies can be perceived as an opportunity for companies to profit from marketing themselves as ”socially-aware” or “green” while not being held accountable for actually delivering a social or environmental impact.26 In fact, some businesses target a particular developing region but completely exclude marginalized groups in the area because they aren’t considered profitable.27 This is a loophole in the inclusive business model that is further compounded by the accountability of these businesses to their shareholders instead of their beneficiaries.28 Involvement by governments, non-governmental organizations (NGOs), and other civil-society actors is important for the legitimacy of social enterprises, as they reinforce accountability and represent the voice of the consumer population that is often missing from inclusive businesses. It is important to note that inclusive business strategies alone are unable to generate a social or environmental impact on the scale of social entrepreneurship. These strategies are rather an essential aspect of social entrepreneurship, providing mechanisms that effectively address the profitability problem in low-income markets. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 25 Beth Jenkins, "Expanding economic opportunity: the role of large firms” pg 4. Dellas, Eleni. “CSD water partnerships: Privatization, participation and legitimacy.” Ecological Economics. Vol. 70 (2011). Print. 1916. 27 Ibid., 1917. 28 Ibid., 1917. 26 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 15 | P a g e ! ! ! III. Corporate Social Responsibility Corporate Social Responsibility (CSR) emerged from the recognition that business is an integral part of society and businesses have a responsibility to use their resources to support environmental and societal goals.29 The UN Global Compact, established by former Secretary General Koffi Annan, is the original promoter of CSR. The Compact requires companies to voluntarily integrate responsibilities such as protection of human rights, labor, and the environment into their business model while also actively fighting against corruption.30 Many large transnational companies have discovered that CSR can be a lucrative way to access global markets and ensure long-term sustainability and success.31 32 In order to ensure businesses follow the CSR framework it is paramount that the public sector is proactively involved. One transnational company that takes a long-term approach to CSR is Nestlé.33 Nestlé has teamed up with various international actors, including the Swiss Agency for Development and Cooperation (SDC), in order to ensure its water supply chain uses sustainable practices.34 Nestlé and the SDC have developed a program in Vietnam to reduce the consumption of water while simultaneously increasing coffee yields. This program not only promotes sustainable practices by reducing water consumption but also increases farmer incomes through increased yields and reduced energy and labor usage.35 Official aid agencies like the !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 29 “Investing for Impact: How Social Entrepreneurship is Redefining the Meaning of Return." 5. “Overview of the UN Global Compact.” United Nations Global Compact. N.p., n.d. Web. 09 Nov. 2013. 31 There are over 10,000 corporate participants and stakeholders from all over the world that voluntarily adopt the 10 universally accepted principles. 32 "The Role of Governments in Promoting Corporate Responsibility and Private Sector Engagement in Development." Bertelsmann Stiftung. United Nations Global Compact, 2010. Web. 23 Oct. 2013. 8. 33 Hilary Parsons, personal interview, October 29, 2013. 34 “More Coffee with Less Water, Vietnam.” Nestlé. N.p., n.d. Web. 18 Nov. 2013. 35 Ibid. 30 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 16 | P a g e ! ! SDC and other government actors are encouraging CSR because of its ability to stimulate ! sustainable development, national competitiveness and increase foreign investment.36 The problem associated with CSR is that many companies have streamlined their responsibility campaign only after being confronted for discrepancies in their operations and supply chain. This can pollute the legitimacy of CSR because companies are adopting responsible practices solely to correct their tainted image. Social responsibility should be motivated by selflessness, not by the need to adopt certain practices in order to ensure the stability of your own company. Of course CSR had to start somewhere, and correcting the current problems is an essential step towards a more socially conscious world. For now the concept of CSR should only be considered a foundation; real social change requires a bottomup approach and multilateral involvement, elements of social entrepreneurship. IV. Funding/Social Investment Social entrepreneurs often have trouble acquiring funding or investments from likeminded sources. Impact investing is a way for investors from all sectors to use their capital for a social or environmental gain.37 Social investors, or those who partake in impact investing, see the benefit of investing in social enterprises rather than philanthropic organizations because of the potential to recover their initial investment.38 This gives social entrepreneurs a tremendous comparative advantage over philanthropic and charity organizations because they appeal to more types of investors. In the long run, investments in social enterprises are able to go further because the initial investment has the potential either be reinvested or invested in another social enterprise. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 36 "The Role of Governments in Promoting Corporate Responsibility and Private Sector Engagement in Development." 8. 37 “Investing for Impact: How Social Entrepreneurship is Redefining the Meaning of Return." 3. 38 Ibid., 5. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 17 | P a g e ! ! ! Impact investing has emerged as a result of evolving CSR methods, where companies are going beyond their basic social responsibilities and investing directly in social businesses.39 The continuum mentioned earlier illustrates the diversity of impact investing. The Schwab Foundation for Social Entrepreneurship and Credit Suisse are major promoters of this concept. They encourage businesses and clients to balance capital investments with philanthropy to create a positive social and environmental impact while still allowing the potential for a financial return. Large transnational companies like Danone and Veolia have invested directly in social businesses in order to improve health and safe water conditions in developing communities around the world.40 Many times impact investors look to see how their investments can support a specific project with a specific development objective. Although putting all your eggs in one basket can generally have the biggest impact on a singular project, however spreading that investment or leveraging capital can potentially have just as big of an impact. An alternative to social investing is to use capital as a leveraged financial guarantee for smaller entrepreneurs in developing regions. A lot of the time developing communities want to develop but don’t have the resources to obtain financing. Other times the local currency is so unstable that it would be too risky to invest in a long-term project.41 Financial guarantees allow entrepreneurs to receive international funding and develop on their own. FIG is an example of an organization that facilitates financing for micro and small enterprise development by acting as a safety net for entrepreneurs.42 In order for entrepreneurs to obtain a loan in developing regions they need to show international financial institutions that they !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 39 Brooks, Graham Pansing, "Investing with an Impact: Moving Business Beyond Profits" (2012). Independent Study Project (ISP) Collection. Paper 1445. 11. 40 Yunus, Muhammad. “Building Social Business Models: Lessons from the Grameen Experience.” 321. 41 Daniel Fino, personal interview, October 31, 2013. 42 Ibid. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 18 | P a g e ! ! have the responsibility and capacity to pay it back. Due to unreliable local administrative ! services, that often only have partial or incomplete records, providing evidence of responsibility or capacity can be a challenge. FIG makes this process easier by backing up to 50% of the loan and only asking for 10% of the guarantee amount as collateral.43 This model can significantly contribute to bottom-up development in regions where official aid or other international development mechanisms have failed. The current international aid system is often considered to have a contrary effect development. 44 Official aid provides assistance directly to governments in hopes of stimulating economic development that will have a spillover effect on local development. However official aid has not had much of an impact in developing countries because the aid is used ineffectively. Corruption is partly to blame, however many developing countries lack the institutional capacity to ensure that aid is used responsibly.45 What’s missing is the link between economic and social development. Official aid, private charities and international organizations alone do not have the current capacity to connect this link. The international aid system needs to shift its methodology to include the involvement of the private sector as well as encourage more active involvement from donor countries, NGOs, and local communities. This multilateral relationship will facilitate the engagement needed to make aid more effective and stimulate both economic and social development. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 43 “How FIG’s Loan Guarantees Work.” FIG: Finance for Human Development. N.p., n.d. Web. 10 Nov. 2013. Daniel Fino, personal interview, October 31, 2013. 45 Ibid. 44 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 19 | P a g e ! ! ! V. The Global Water Crisis At the moment it is estimated that over a quarter of the world population lacks access to clean drinking water. Demand for freshwater has increased by over 700% in the last 100 years mostly due to agricultural and industrial use, however with a steadily increasing global population the demand for freshwater is only going to increase further.46 In order to combat water scarcity it is important to determine what type of scarcity a region is experiencing. Economic water scarcity occurs when a region has water but lacks the capacity or infrastructure to purify or properly manage it.47 Physical water scarcity takes place when a region is unable to meet the demand for water because of a physical water shortage.48 Figure 3 illustrates the regions around the world experiencing some degree of water scarcity.49 Despite the obvious difference between physical and economic scarcity, finding solutions for each requires a holistic geopolitical understanding of the region 50 and the following fundamental components: improved technology, infrastructure building, capacity building, and multilateral engagement. Based on evidence provided earlier, social entrepreneurship is able to address the majority of these components, however multilateral engagement and a holistic understanding require the involvement of the public sector and civil society. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 46 Csurgai, Gyula. “Geopolitics: Schools of Thought, Method of Analysis, Case Studies.” Pregny: Ed. De Penthes, 2009. Print. 20. 47 Dr. Salim Nidal, personal interview, October 31, 2013. 48 Ibid. 49 Water Scarcity.” United Nations. N.p., n.d. Web. 11 Nov. 2013. 50 Bates, B.C. “Technical Paper of the Intergovernmental Panel on Climate Change.” 7. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 20 | P a g e ! ! ! Figure!3:!Global!physical!and!economic!water!scarcity! The Millennium Development Goals At the Millennium Summit in 2000, 189 world leaders met at the UN General Assembly to develop a agenda for addressing global depravations and establish a framework for their solutions by the year 2015.51 The Millennium Development Goals were created as a result of this Summit, identifying eight major challenges for global development.52 The only MDG that explicitly mentions water is target 7-C, “Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation.”53 However the role of water in achieving the MDG’s is incredibly understated, solving the global water crisis is a foundational component for the success of any MGD.54 A more realistic agenda needs to be developed in order to make further progress towards these goals. Acknowledging !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 51 “Background.” Millennium Development Goals and Beyond 2015. The United Nations, n.d. Web. 19 Nov. 2013. 52 "Millennium Development Goals | UNDP." United Nations Development Programme. United Nations, n.d. Web. 10 Nov. 2013. 53 "Innovating for a Brighter Future: The Role of Business in Achieving the MDGs." 6. 54 Water Scarcity.” United Nations. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 21 | P a g e ! ! the importance of water, promoting private sector involvement, and decentralizing the role of ! international actors are key components for this future agenda. When the MDGs were established many experts considered official aid, international organizations, and private charities to be the main driving forces behind this pro-development agenda.55 After more than 10 years it was clear that these mechanisms failed to generate progress due to a missing linkage between economic and social development. Fortunately the international aid system started to realize that the private sector could actually enhance the capabilities of these mechanisms. Private sector involvement has proven to be a revolutionary international aid approach for aligning social and economic objectives. International Involvement International actors from numerous developed and developing countries recognized the importance of the private sector in the development agenda by constructing the 2005 Paris Declaration. 56 This declaration established a framework for improving aid through five action-oriented principles outlining specific measures for donors and beneficiaries to follow. These principles include ownership, alignment, harmonization, results, and mutual accountability. 57 This mandate encourages governments to work alongside international organizations and the private sector to find more effective ways to use aid for generating development. Paris Declaration also established the Accra Agenda for Action and the Busan Partnership, which provide mechanisms for gauging the progress of this mandate and the framework to ensure accountability on the political level. 58 Integration of social entrepreneurship, inclusive business strategies, and CSR into the international aid system is a !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 55 "Innovating for a Brighter Future: The Role of Business in Achieving the MDGs." 5. “Paris Declaration and Accra Agenda of Action.” OECD. N.p. n.d. Web. 09 Nov. 2013. 57 Ibid. 58 “Paris Declaration and Accra Agenda of Action.” 56 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 22 | P a g e ! ! key part of this multilateral involvement, however there needs to be an intermediary actor that ! provides expertise and facilitate exchanges between the private and public sector. Third party actors like NGO’s and institutions are key components for any interaction between the public and private sector. They facilitate technology transfers, dialogue between all types of stakeholders, training and capacity building, and public awareness. The Global Institute for Water and Environmental Health (GIWEH) is a prime example of an institution in the water sector that facilitates linkages between various organizations, companies, academia, and research institutes with similar objectives. Another institution is Global Water Solidarity (GWS), an international platform that facilitates the development of solidarity funding mechanisms for access to drinking water and sanitation.59 GWS works with local actors in a participative process and acts as a linkage between the need in water management and sanitation projects in developing countries and international experts. Both these platforms provide technical expertise, logistical knowledge, and financial resources for social entrepreneurs. Without institutions like the GIWEH and GWS both the entrepreneurs and investors would be unable to effectively and sustainably achieve their objectives. Institutions like these provide exceptional examples of how civil society can play a key role in developing appropriate strategies for economic and social development. In 2010 the UN General Assembly published resolution 64/292, part of which acknowledges access to safe drinking water as a basic human right. The resolution also calls for governments and international organizations to provide financial resources, build capacity, and transfer technology to developing countries in order to fulfill this right.60 This resolution not only recognizes the importance of access to safe drinking water but also encourages !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 59 60 Victorine Castex, personal interview, October 31, 2013. “Water for Life Decade: Human right to water.” United Nations. N.p., n.d. Web. 11 Nov. 2013. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 23 | P a g e ! ! governments and international organizations to invest in mechanisms, such as social ! entrepreneurship, that are working towards alleviating water scarcity. In 2011 the European Union (EU) responded to this resolution by launching the Social Entrepreneurship Initiative as a part of its Europe 2020 strategy to fight poverty and social exclusion. The program focuses on promoting the creation and development of social enterprises through new laws and regulatory frameworks designed to simplify the European microcredit process. The EU has made social enterprises an investment priority of the European Regional Development Fund and European Social Fund by designating 90 million euros specifically for social enterprise investment.61 Although this initiative is exclusively provided to members of the EU, developing countries experiencing water scarcity will likely benefit the as a result of technology transfers from the EU. Recently the American Chemical Society launched an initiative to address the global water scarcity crisis. The concern is that developing countries don’t currently have the capacity or the technology to develop solutions on their own. The ACS is asking its members to develop new technologies that more efficiently recycle municipal and industrial wastewater while also adopting “more stringent standards for waterborne pollutants.” 62 This is a tremendous step towards finding more sustainable innovations for both developing and developed countries. Once new sustainable water systems are created, developing countries will be able to address their physical water scarcity problem via technology transfers and the global demand for water will subsequently decrease. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 61 “Citizens’ summary: EU initiative to promote social entrepreneurship.” N/A. N.p., n.d. Web. 10 Nov. 2013. 12. 62 Shakhashiri, Bassam Z., et al. “ACS Global Water Initiative: The Grand Challenge of Water,” American Chemical Society, May 20, 2013. Web. 09 Nov 2013. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 24 | P a g e ! ! ! Solving the global water crisis and providing the poor with access to safe water has the potential to catalyze other global development. Although the connection is not explicit, social entrepreneurship plays an intrinsic role in achieving the MDGs. The fundamental principles of social entrepreneurship, vis-à-vis impact investing and inclusive business strategies, provide the framework to effectively address global depravations like access to safe drinking water. It’s important to note that social enterprises are not the solution, rather a tool that can be used to effectively consolidate public and private powers to have a positive social impact. VI. Case Studies Modern social entrepreneurship can range from small local business like Guatemala’s Ecofiltro, to large transnational companies like Veolia Water. Regardless of their size, these entities are having a significant impact in the communities where they are involved. However the size of the business does correlate with the impact that they can have. Larger entities play a more important role in solving global water scarcity because they have the capacity to reach more people in need. On the other hand, smaller entities are incredibly effective at local capacity building and developing models that can be adopted elsewhere. In order to alleviate global water scarcity, development must start from the ground-up. This is why encouraging social entrepreneurship is important for development in local communities because it can then potentially manifest to the regional and national level. Of course support from public and private actors is key to facilitate this development. What follows are handful of case studies that represent the varying degrees of social entrepreneurship. Each case study has either excelled in CSR, inclusive business strategies, or social entrepreneurship. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 25 | P a g e ! ! ! Programme hydraulique Niger-Suisse: Programme hydraulique Niger-Suisse (PHNS) is a water management project that has successfully incorporated synergies from international development partners, national government, local councils, and private water operators to effectively alleviate economic water scarcity in rural Niger communities. PHNS was a bilateral water program between Swiss Official Development Assistance and the Niger government to build wells in rural communities. 63 Daniel Fino, former Director and founder of the “Executive Master in Development Policies and Practices,” was a coordinating partner for the program and explaines how they were able to improve water supply while concurrently reinforcing local institutions to eventually manage the project. Community involvement played a major role for the success of the PHNS. Utilizing local labor for the initial construction and continued maintenance created an ownership mindset, while active involvement from international actors and the Niger government provided the tools and training needed for the sustainability of the program. Subsidies provided only enough funding to support 50 of the 200 villages in need per year. Due to this shortfall, aid distribution was based on weighted criteria that were established by all involved parties in order to determine the qualifications for funding. Transparency of these criteria was key for preventing corruption. By knowing why a certain village did not qualify, that village was forced to make improvements in order to be a more eligible candidate the following year. This incentivized local initiative and had an indirect impact on local development. Although the PHNS ended in 2000, the model it used provided a revolutionary new way of combining international actors, subsidies, and local participation to improve access to water. In fact a variation of this model was established three years later in Uganda. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 63 Daniel Fino, personal interview, October 31, 2013. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 26 | P a g e ! ! ! Association of Private Water Operators in Uganda: With support from the German Technical Corporation and the Ugandan government, the Association of Private Water Operators in Uganda (APWO) followed the blueprint laid out by PHNS and was able to improve access to water through a sustainable system while also stimulating local economies.64 The APWO works as follows: the government finds sites, facilitates community land purchases, and subsidizes installments. The cost of connecting a singles household to the water source costs $321, however the household only pays $35.65 This is a significant subsidy that makes water access much more realistic for the poor. Private operators distribute the water, assure safety regulations are met, and have the option of retailing the water themselves or subcontracting out the function in the form of retail outlets or kiosks. A five-member Water Board comprised of local residents has ownership of the assets, sets tariffs and policies for their community, and mediates possible disputes between the operators and the community. Both PHNS and APWO provide excellent examples of how the public sector and civil society can effectively work together to improve water access for the poor. Additionally each of them also managed to incentivize innovation and local economic development through community involvement. Grameen Veolia The French company Veolia Water has partnered with Grameen bank to provide !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 64 “Association of Private Water Operators in Uganda: Affordable and Safe Water for the Urban Poor.” United Nations Development Programme. Sept. 2007. Web. 29 Oct. 2013. 3. 65 Ibid., 8. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 27 | P a g e ! ! affordable access to safe drinking water for rural Bangladeshi populations. This partnership ! represents the future of CSR, demonstrating how a large transnational company can integrate a social business branch into its core business strategies. This social business model recycles and purifies surface water tainted with arsenic, then distributes it either directly to households, public drinking fountains, or in the form of water cans transported by rickshaw to more isolated areas.66 Grameen Veolia also uses a prepaid card system to make paying for clean water simple and effective. This partnership is able to distribute water at a very affordable price by simplifying the Goalmari water plant in Bangladesh and maintaining World Health Organization standards, thus reducing the cost of the water treatment as much as possible.67 Samantha Caccamo notes that after this social business was established and operational the challenge was to educate the public about water contamination.68 The local citizens need to be aware of the dangers from drinking contaminated water and that paying for purified water is more important than the potential risks from arsenic poisoning. Manila Water Company Due to an incredibly inefficient government-owned water system, the Pilipino government turned over control of Manila’s water distribution network to the Manila Water Company (MWC) in the late 1990’s.69 With an inclusive business approach and support from the government, the MWC has been able to increase 24-hour access to water from 26 percent to 99 percent; all !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 66 Yunus, Muhammad. “Building Social Business Models: Lessons from the Grameen Experience.” 321. Ibid., 321. 68 Samantha Caccamo, personal interview, November 6, 2013. 69 “Manila Water Company, Inc.” G20 Challenge on Inclusive Business Innovation. N.p., n.d. Web. 08 Nov. 2013. 67 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 28 | P a g e ! ! while maintaining 100 percent water standard compliance.70 MWC relies on a micro-business ! model that allows low-income communities to take part in the management system. This model provides the communities with not only an additional source of income but also reduces the incentive for illegal tapping.71 MWC practices social responsibility and inclusive business strategies by being actively involved in the community, installing washing facilities and drinking fountains in public establishments, and is expanding their social impact to nearby regions.72 Ecofiltro Ecofiltro manufactures water purifiers made from locally sourced materials such as clay and sawdust, then coated with colloidal silver, a natural antibacterial.73 The business is classified as a hybrid non-profit74 because it sells more-expensive ceramic filters to the urban market and uses that revenue to subsidize more basic filters for rural customers; i.e. cross-subsidizing. Ecofiltro’s basic filter comes in a generic five-gallon bucket and has the ability to filter 22 gallons of clean water a week.75 By employing local labor and sourcing materials locally, Ecofiltro is able to provide the poor with inexpensive access to clean water while creating economic opportunity in the community. Rural communities also indirectly benefit from Ecofiltro because they save money by using less firewood (needed to boil water for purification) and decreased their risk of waterborne illness from contaminated water (not having to purchase !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 70 Ibid. “Investing for Impact: How Social Entrepreneurship is Redefining the Meaning of Return." 14-15. 72 “Manila Water Company, Inc.” G20 Challenge on Inclusive Business Innovation. 73 Ecofiltro: One. N.p., n.d. Web. 08 Nov. 2013. 74 "Philip Wilson." Schwab Foundation for Social Entrepreneurship. N.p., n.d. Web. 20 Oct. 2013. 75 Ibid. 71 ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 29 | P a g e ! ! medicines). The exciting thing about Ecofiltro is that it is a model that could easily be ! implemented and successful in other regions experiencing economic water scarcity. VII. Future Steps The cases presented in this report were chosen to reflect the diversity of social entrepreneurship; they represent only a minute portion of successful social enterprises operating today. Further research needs to be conducted on numerous aspects of social entrepreneurship and the global water crisis. Aspects such as: the viability of social entrepreneurship in different contexts, the protection of intellectual property rights to ensure proper facilitation of technology transfers, and how to increase the level of CSR in transnational companies. Additionally, this paper does not discuss the possible negative side effects of social entrepreneurship and does not examine failed social enterprises. A holistic analysis of the relationship between social entrepreneurship and sustainable development is needed in order to fully understand the impact that social entrepreneurship can have on global disparities. This analysis should include more evidence for increasing multi-sector cooperation and involvement as well as more case studies from different regions. An important step for solving many global disparities, including global water scarcity, is to enable developing communities to become self-sustaining. This can be accomplished through public awareness and education campaigns that stress the importance of sustainability and empower these communities to eventually develop without assistance. There are three pillars of sustainable development: social/economical, environmental, and the people. Dr. Nidal argues that the most important pillar is the people.76 Teaching individuals how to be sustainable is fundamental for generating development, and sustainable development is !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 76 The other two pillars are social/economical and environmental. ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 30 | P a g e ! ! essential for finding a solution for many global disparities. 77 The private sector has a ! responsibility to streamline this sustainability campaign because of their influence in developing communities. Also in the long run the private sector can actually benefit from implementing sustainable practices. Holding the private sector accountable requires additional public awareness and education. Governments need to enforce CSR, while at the same time the private sector needs to hold the government accountable for supporting an environment where transnational companies, small and medium enterprises, and investors can become involved in social endeavors. The question now is how can civil society encourage businesses to be truly socially and environmentally responsible instead of just projecting a responsible image, while simultaneously increasing government accountability? Informing the public about the responsibility of each sector is the first step towards mutual governance, the next step is coordination between international and local actors in order to secure universal trust and reliance.78 Conclusion The modern development system is currently entering an era where multilateral cooperation is being recognized as an effective way to accomplish development objectives. Social entrepreneurship fosters an environment of multilateral participation by engaging international actors, governments, local communities, and private investors. Multilateral engagement is key for alleviating social and environmental disparities. In the case of the global water scarcity, social entrepreneurs are developing technology for affordable drinking !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 77 78 Dr. Nidal Salim, personal interview, October 31, 2013. Margareta Wahlstrom, “Meeting the Sustainability Challenge in the post-2015 Era.” UNOG Library Talk. 15 November 2013.!! ! 10 Rue de Chantepoulet, 1201 Geneva, Switzerland :: Tel : +41 22 733 75 11 :: :: Website : www.giweh.ch :: Email : [email protected] 31 | P a g e ! ! water access, improving water management systems, and/or finding ways to provide access to ! areas with extreme water scarcity. We see water innovation taking place around the globe, mostly due to this multilateral engagement. Social entrepreneurs utilize a variety of funding sources to get their ideas or projects of the ground and then work with governments and local communities to ensure that their involvement has a positive impact on society while also being sustainable. Solving the global water crisis should be a priority on the international development agenda. Many global problems, most notably those outlined in the MDGs, can benefit from simply improving access to safe drinking water. Social entrepreneurship is a tool that can effectively consolidate public and private powers to alleviate global problems. Increasing the leveling of multilateral involvement as well as public awareness and education is essential for the progress of the international development agenda. Civil society should act as an intermediary between the public and private sectors, providing technical and logistical assistance as well as promoting public awareness and education campaigns. 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