Appropriate technology as a business opportunity I

Appropriate technology is appreciated as a business opportunity, in consequence, there would be linkages among the development of appropriate technology, sustainability and business performance.

In 2008, some 1.2 billion people survive on an income of less than one dollar each day. Progress toward reducing this extreme poverty has been uneven and achieving the Millennium Development Goal to halve the proportion of people in extreme poverty by 2015 remains a major global challenge.

The great majority of extremely poor people lives in rural areas and depends, in whole or in part, on agriculture for their income. The rural poor (whether farmers, laborers, or sellers of non-farm commodities) will not prosper without farm income growth.

Yet small farms in the developing world face serious obstacles to improved productivity. Most smallholders do not control the water supply so crucial for enabling the use of productivity-enhancing inputs and they typically have poor access to input supplies, credit, and output markets.

Despite the challenges, there are reasons for hope. A number of global trends create new opportunities for smallholders in developing countries (see Annex 2). For them to take advantage of these opportunities and for their incomes to grow significantly, they must overcome three key constraints: (a) water control, (b) reliable supply of affordable high-productivity inputs, and (c) access to the increasingly concentrated supply chains that now serve the largest and most rapidly growing output markets.

The unique characteristics of poor (low capital availability, small fragmented land holdings, low risk tolerance and low opportunity cost for family labor) require unique solutions:

• Low investment and operating cost
• High rate of return
• Rapid return on investment
• Optimal use of family labor
• Appropriately sized
• Simple maintenance
• Scalability

This exploratory research helps to clarify the nature of the problem showing how the development of appropriate technology could have significant impact on sustainability and, in consequence, in business success.

In our opinion, it is important to highlight that appropriate technology may become a solution for most of problems addressed by the Millennium Development Goals. Moreover, appropriate technology can be a practical example of “how to” reach sustainability in emerging markets. The business perspective helps appropriate technology to be self-sustainable, involve more beneficiaries and create value and job opportunities.

The objective is to conduct an analysis of business cases for low-income markets in emerging economies that would help to generate new ideas on how entrepreneurs, grassroots inventors and business managers successfully develop appropriate technology-based business and to develop constructs that would facilitate future hypothesis testing.

Businesses with appropriate technology can reduce costs by making environmental improvements which deliver an immediate impact on the financial aspect.

Also termed “eco-efficiency”, environmental process improvement involves producing the same level of output with fewer resources, emissions and less waste. Eco-efficiency can be increased by using alternative raw materials, redesigning equipment or techniques, using more efficient technologies, reorganizing the supply chain and/or sitting production processes in a manner that reduces overall environmental impacts.

Reducing the use of energy and raw materials and limiting emissions and waste from production processes are key contributions that appropriate technology can make to tackle the environmental challenges facing the world. Emissions from industrial activity can have serious impacts on human health and the natural environment. They also contribute to climate change, ozone depletion, acid rain and contamination of surface and ground water and soils. Maintaining finite resources is essential for future growth and development.

Most of the cases demonstrated cost savings from environmental improvements. Some savings flow directly from using less energy and materials. Others come from lower pollution costs, in the form of charges for waste handling and disposal, fees, licenses and fines for breaking environmental regulations. The evidence comes from many sectors, all types of company and all regions.

Shivji and Sons, in Dar es Salaam, Tanzania, has just 45 permanent employees, making laundry soap through a process which uses steam from a diesel-powered boiler. The company replaced leaking steam valves and taps, halved the time required for heating the fat storage tank through efficiency improvements and minimized steam consumption during the cooling stage. These measures cut diesel use by more than 50% and have resulted in annual savings of $188,000 a year from an initial investment of $830. This represents a payback period of just 1.6 days.

Grupo Nueva works in the area of sustainable forest products, water systems and light construction materials. Amanco, a Grupo Nueva subsidiary, specializes in water management systems. Agriculture is the main source of income for 87% of Guatemala’s rural population, yet only 3% of farmers receive the technical assistance that would enable them to improve productivity and raise living standards. In 2004, Amanco started looking for innovative ways to make its products available to lower-income farming communities and decided to provide small drip irrigation systems and latrines for local growers. These irrigation systems help reduce farmers’ costs and ensure highly efficient year-round water availability.

Amanco created a system geared to the specific needs of poor farmers, the .4X4 all terrain Irrigation Model: 4 Seasons, 4 Harvests per year. It also designed a new process to bring this product to a new market. Given that at the outset, Amanco’s potential customers had very little disposable income and a highly unstable income stream, finding innovative mechanisms to help them finance the small investment needed to buy pumps was crucial.

Amanco’s system improves water use through saving up to 50% during irrigation. Soil quality also benefits as these drip irrigation techniques help prevent soil erosion. Farmers are now seeing a 22% rise in production, coupled with a major improvement in produce quality. On the back of this, they have been awarded an international certification of environmentally and socially-responsible crop cultivation. Farmers are achieving 33% savings in labor costs and have significantly improved their standard of living, with incomes doubling to around $1,950 a year. This is enabling farmers to integrate into the formal economy and to pay for their children’s schooling. These new technologies and technical assistance boost rural competitiveness; improve produce quality and supply stability and help secure long-term contracts with overseas purchasers in the United States and Europe.

Procter & Gamble markets almost 300 household products to over five billion people in 140 countries. In 2000, P&G launched PUR®. This technology is essentially a water treatment system for households not served by a safe drinking water supply, or for use in disaster relief. Since its introduction, PUR® has provided 260 million liters of clean drinking water. It has been successfully used in many countries including Bangladesh, Zimbabwe, Sudan, Ethiopia, Iraq and in the tsunami ravaged region of South East Asia, where 15 million sachets were delivered (enough to treat 150 million liters).

The product consists of a sachet of ingredients commonly used in conventional municipal water treatment, reverse engineered to effectively act as a mini-water treatment plant. Each sachet is effective in removing bacteria, viruses, parasites and some heavy metals from contaminated water. It works through a process of precipitation, coagulation, flocculation and disinfection. Each small sachet costs around $0.10 and can provide 10 liters of clean drinking water (enough for an average family for two days). Sachets dramatically improve the microbial quality of stored water and reduce diarrheal illness.

The PUR® approach is complementary to the development of piped water infrastructure. Sachets are robust and compact, making them easy to transport and store; a design particularly suited to natural disaster and other emergency relief. In addition, they are simple to use.

When tested in 514 households in 14 villages in Guatemala, where diarrhea is a leading cause of death, families who used the product to treat their drinking water had in addition to cleaner water, 40% less diarrhea than households that used standard handling practices. These households also had 50% fewer prolonged episodes of diarrhea in children under two. The World Health Organization (WHO) says the provision of safe water alone will reduce diarrheal disease and other enteric diseases by 6% to 50% even in absence of improved sanitation and other hygiene measures.

PUR® sachets provided almost 10 million liters of safe drinking water to Haiti, where in 2004, civil unrest, severe flooding and heavy damage from hurricanes meant that clean drinking water was particularly hard to obtain.

Poor distribution networks and inadequate health education are major obstacles to extending the use of PUR®. Distributing low-cost health products to rural areas represents a significant challenge, especially where roads are non-existent or in poor condition. Similarly, health education and an understanding of the importance of clean water are prerequisites for promoting use of a product such as PUR®.

P&G is currently pursuing two separate models to deliver clean water where it is most needed: social marketing and emergency relief. Social marketing aims to provide sustainable access to clean water. P&G sells PUR® to NGO partners in Pakistan, Haiti, Kenya and Uganda who have their own local distribution networks. PUR® is then sold by local distributors, the profits providing a source of revenue for these low-income families. P&G also provides PUR® at cost to international relief agencies for use in natural disasters and humanitarian crises. The company is developing many other partnerships. In Uganda, P&G promotes health education with the ICN and its Ugandan affiliate. P&G has also helped found the International Network to Promote Household Water Treatment and Safe Storage, a WHO-backed network. P&G’s work has been supported by the United States Agency for International Development’s Global Development Alliance (USAID GDA), and the UK Department for International Development (DFID).

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