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Cleantech at the Bottom of the Pyramid: 10 Impressive Companies Disrupting Low-Income Emerging Markets

In the age of the Internet, it is difficult to imagine that about 1.5 billion people in the world still lack electricity. More than 1 billion people have no access to any type of clean drinking source of water and about 2.6 billion people lack even a simple ‘improved’ latrine. These aren’t just inconveniences; reliable electricity and safe drinking water are not just basic human needs, but a necessary condition for economic and social development. One of the paths towards the reduction of extreme poverty in developing countries is providing more developmental aid, subsidies, government support and NGO-based solutions. Another way to meet the needs of the low-income population is a profit-driven market-based approach.

In 2004 C.K. Prahalad one of the world’s most influential business thinkers published his bestseller ‘’The Fortune at the Bottom of the Pyramid’’. In his book Professor Prahalad argues that the world’s poorest people are a vast, fast-growing market with untapped buying power, and companies that learn to serve them can make money and also help people escape poverty. Prahalad refers to the market of 4-5 billion people at the bottom of the economic pyramid, living on less than $ 2 per day. He advocates for envisioning those people as producers and consumers of products, rather than merely as philanthropic beneficiaries. Prahalad’s book has undoubtedly affected the behavior of many companies in the years since its publication. The large private sector is learning rapidly that there is a significant market at the bottom of the pyramid. In some industries the size and attractiveness of the bottom of the pyramid markets are well established. Retailing, fast-moving consumer goods, micro finance, telecom, and agricultural business, belong to this category. In his book Professor Prahalad gives an example of the mobile phone industry. There is no a single country where the poor have not taken to the cell phone. From urban to rural areas, mobile networks have become the predominant infrastructure in emerging markets and more people are now covered by mobile networks than have access to energy and water.

Today the challenge for developing countries is greatly complicated by the need to expand access to essential energy, water and sanitation services. Providing safe, reliable and affordable energy as well as clean drinking water to those who currently have no access to such is widely viewed as essential in order to progress toward other development objectives. Access to energy and water is the basis for economic development; it helps poor countries to tackle the most pressing problems in agriculture, health care and education. Increasing the use of clean and sustainable technologies is particularly important in emerging economies since these countries will experience the greatest increase in energy demand and carbon dioxide emission in the short term. We all know that our planet is under stress—be it access to water, deforestation, pollution, or greenhouse gas emissions. What if we add additional 3-4 billion people as micro producers and consumers to the current 2 billion? In order to serve additional 3-4 billion and at the same time protect the environment we need to focus our attention on sustainability as never before.

At the same time, responding to the urgent need for sustainable energy, water and sanitation services in emerging markets is an extraordinary economic opportunity. By focusing the application of clean technologies on underserved global communities, companies can develop new innovative products and business models with massive growth potential that will move us toward a more sustainable world. However, providing sustainable solutions for the low-income population is particularly challenging. Many of big cleantech players, including companies working on grid scale solar and wind projects remain skeptical about business opportunities in the low-income markets. The extreme price sensitivity of the consumers at the bottom of the pyramid requires dramatic cost reductions to create products and services that these consumers can afford. The bottom of the pyramid markets cannot be approached with the mindset of traditional markets. There is a need for experimentation and innovation.

As a result, solving critical problems of poor population encourages entrepreneurs to develop new affordable and sustainable solutions and build new markets for them in innovative and social responsible way. Through challenging all elements of the business – capital intensity, work flow, volume, manufacturing and logistics, design of products, its maintenance, pricing, use of people and skill development – companies in developing countries manage to create low cost products and services with significant business and social value. In this article I would like to present 10 impressive companies that have developed new disruptive products, services or business models, which touch the lives of people in the poor communities and at the same time, generate profits and create jobs.

Simpa Networks

Indian startup Simpa Networks provides access to clean energy for customers at the bottom of the economic pyramid. Company has developed a basic, portable solar home system that is simple to install and affordable to even poor villagers through a pay-as-you-go model. Customers make a small initial down payment for a solar system and then pre-pay for the electricity it generates by purchasing energy credits using a mobile phone. After the payment is done, customers enter a code on the keypad, which, if valid, gives them energy for as many days as they have paid for. If an invalid code or no code is entered, the meter turns off and the system stops generating electricity. Once the customers complete the contract, they take ownership of the system, getting clean electricity free and clear.

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                                                                        Photo by Simpa Networks

Today about 400 million people in India and more than 1.5 billion worldwide are living without access to reliable electricity. The energy-poor households often spend 20% or more of their incomes just to meet their essential needs for lighting. Globally, they spend over $50b per year on a very poor solution, such as kerosene fuel for small lanterns, which is dangerous, dirty, and dim. Available decentralized energy solutions have high upfront costs which make them unaffordable to many remote villagers who have limited income and cannot obtain bank financing. That’s why for low-income households, Simpa’s progressive payment model makes all the difference. Since its inception in 2011, Simpa has sold over 770,000 energy days, delivered over 65 MWh, created over 2,800 full and part-time jobs in rural India, and saved over 75 tonnes of CO2 emissions. Company’s pay-as-you-go solar energy system is dramatically improving the quality of life for energy-poor families and promoting economic activity by enabling small businesses to extend their working days.

Sarvajal

Sarvajal is an Indian startup that wants to solve the issue of getting clean water to rural communities and slums through their distributed water delivery and filtration systems. Using a combination of sensors, cellular connectivity, and solar power the company has created a network of “Water ATMs”. The system uses reverse osmosis and ultraviolet rays to clean water on site and enables customers to purchase only the amount of water they need at that moment, down to very small quantities. Powered through a franchise business model, Sarvajal provides the water filtration equipment and the maintenance while a member of the local community runs the business and sells the water. Remote monitoring and water tracking systems give the company real-time information about the current water quality, how much water is being sold, and maintenance and supply details of the machines.

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                                                                                      Photo by Sarvajal

Sarvajal delivers water to rural villages where there is no any water infrastructure, and people are spending a lot of time walking long distances to get water. They didn’t have any other choices because transporting water to a village in bottles costs a lot of money. The company also serves India’s urban slums, where residents often spend hours a day waiting for tanker trucks that deliver clean water. With Water ATMs customers get 24-7 access to clean water and pay using coins or pre-pay cards, which they can recharge just like mobile phone minutes. According to the company, there are more than 200 Water ATMs currently installed in India. Sarvajal has created 400 jobs and served more than 8 billion liters of clean drinking water.

d.light

Founded in 2007 as a for-profit social startup, d.light manufactures and distributes solar lighting and power products designed to serve 1.5 billion people living without access to reliable electricity. D.light was founded by two Stanford graduates Sam Goldman and Ned Tozun in 2006 with an initial prototype solar lantern and an ambitious plan to bring safe, bright and renewable lighting to poor people around the globe. Through over a dozen field offices and four distribution hubs in Africa, China, South Asia and the United States, d.light has sold 6 million solar light and power products in nearly 60 countries, improving the lives of nearly 30 million people. D.light is dedicated to providing the most reliable, affordable and accessible solar lighting and power systems for the developing world and reaching 100 million people by 2020.Today d.light provides a created range of modular products from desk lights and portable lanterns to solar home systems that power radios and mobile phones.

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Photo by d.light

By replacing kerosene lanterns with clean, non-polluting LED lights, d.light is working to significantly contribute to carbon emission reduction in the developing world as well as put an end to energy poverty. According to Goldman and Tozun, d.light lanterns can completely eliminate the need for kerosene lanterns in households. The cost savings for customers can be significant, as families may spend 10 to 25 per cent of their monthly income on kerosene oil. For a typical farmer or shopkeeper, d.light products will pay for themselves in as few as two months, meaning customers will save money every week for years to come. D.light founders strongly believe that the bright and reliable light from the solar lanterns can support income-generating activities, such as farming and retail. D.light lanterns also allow for longer and more effective studying hours for schoolchildren. According to d.light, its customers are pleased that their children, who would previously often study less than one hour a night, are now able to learn for as much as four hours an evening with the solar lantern.

LifeStraw

LifeStraw is a small tube with specialized filters inside that purifies water by simply sucking it up, as through a straw. Developed by the Swiss-based company Vestergaard Frandsen, LifeStraw removes 99.99% of waterborne bacteria and parasites. LifeStraw uses the point-of-use approach to bring affordable drinking water, which is much more cost-effective and disease preventative. The portability makes it possible for people to drink water from river, lake and even from puddle.

Vestergaard Frandsen uses carbon financing to commercialize LifeStraw in developing countries. Company has started its first Carbon for Water campaign in Kenya. Kenyans boil their water to eliminate waterborne diseases, using wood fires. Those fires generate a large amount of carbon, and eliminating the need to boil water means fewer emissions from Kenya. Because Vestergaard Frandsen provides the means to reduce emissions, company earns carbon credits from Kenyan government for each LifeStraw donated. Vestergaard Frandsen estimates that the campaign will offset about two million tons of carbon every year—that means the company will earn two million carbon credits, which trade on the commodities market at between $6 and $12 a unit.

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Photo by Vestergaard Frandsen

Today over 1 billion people in the world live without access to safe drinking water. LifeStraw could provide safe drinking water to many impoverished people who would otherwise suffer from the many diseases unsanitary drinking water causes. The most prevalent illness caused by unsanitary drinking water is diarrhea. According to The SWorld Health Organization, nearly one in five child deaths – about 1.5 million each year – are due to diarrhea.

Husk Power Systems

Husk Power Systems is a decentralized power generation and distribution company serving rural India. It has developed an innovative biomass gasification technology capable to generate power as efficiently as conventional biomass gasifiers, but on a micro scale—enabling the company to serve rural villages at prices they can afford. Most of Husk Power’s target customers earn around $2 a day.

Each Husk Power’s system consists of a 30–50kW power plant that runs entirely on rice husks, generating electricity through biomass gasification, and a simple distribution micro-grid connecting subscribers directly to the plant using insulated wires strung up bamboo poles. The typical plant can serve from 2 to 4 villages—approximately 500 households—within a radius of 1.5 kilometers. Electricity from Husk Power costs less than a half of what many families previously paid for kerosene lamps, and has far fewer environmental and health hazards.

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Photo by Husk Power Systems

Husk Power can offer power to rural Indians at low prices because they have focused their research and development investment on simplifying electricity production and transmission as much as possible. “What we do well is combine many pieces together in a way that works efficiently and lowers overhead and expenses,” says company’s co-founder Manoj Sinha. For example, when wiring a village for electricity, Husk Power uses readily available and inexpensive bamboo poles to hang wires overhead instead of spending money and time to dig holes and run wire underground. The simplification of the electricity model also allows Husk Power to employ local villagers, who do not need training beyond that provided at Husk’s local facility.

Each Husk Power’s plant serves around 500 households, saving approximately 42 000 liters of kerosene and 18 000 liters of diesel per year, significantly reducing indoor air pollution and improving health conditions in rural areas. By extending village life beyond daylight hours, Husk Power promotes economic and social development, enabling businesses to stay open and allowing children to study after sunset.

Netafim

Israeli-based company Netafim has developed a low-tech drip irrigation system for smallholder farmers in primarily developing countries. This innovation increases and secures yields while saving on water and cutting costs. The irrigation system drips precise quantities of water and nutrients right at the root zone of crops. An elevated tank distributes the water using gravity only. The big win for farmers is that the simple and effective system minimizes the need for electricity and investments in infrastructure.

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Photo by Netafim

The U.N. estimates that 500 million smallholder farmers provide over 80 percent of the food consumed in the developing world. With rising drought issues, irrigation systems are vital to sustain agriculture as they address water scarcity and soil erosion. The Netafim’s solution is commercially viable with a payback time of about a year, making it fit for microfinance projects. Today, Netafim is deployed in 11 countries including Mexico, Kenya and China.

Eco-Fuel Africa

Eco-Fuel Africa (EFA) is a social startup that is trying to eliminate energy poverty, create local jobs, and save forests in Africa by converting waste into clean fuel. EFA works by training local farmers to turn biomass waste into a product called char using simple, locally made kilns. The farmers are trained for five days and after the training, they take home a kiln on a lease-to-own basis, and begin to make char out of waste sourced locally from their communities. The char is then directly sold to EFA or its micro-franchisees and each farmer earns at least $30/month, which increases his income by over 50%.

EFA presses the char bought from farmers into green charcoal, a carbon neutral cooking fuel which functions the same way as traditional fuel-wood but costs 20% less, is not smoky and burns longer than fuel-wood. EFA’s equipment has been designed to be easy to use and maintain, even by people who are not accustomed to operating machinery. ‘’Technically, the most challenging aspect has been the design of the briquetting machines. Some of the early models were solar-powered, and couldn’t be used during rainy seasons. Others ran on electricity, which is not only expensive, but unreliable in many parts of Africa. So, we have developed a manual briquetting machine, which compresses charcoal using a hydraulic jack. It’s a very simple design, low-cost and produces better quality briquettes,” explains Sanga Moses – company’s founder and CEO.

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Photo by Eco-Fuel Africa

Eco-Fuel Africa sells its green charcoal back to communities through a network of women retailers who are hired through partnerships with local NGOs. The future retailers are trained for 3 days and at the end of the training, EFA builds a kiosk for each woman, which she uses as a retail shop to sell green charcoal in her local community. EFA has already created a network of 460 women retailers in Uganda. Each of them earns at least $150/month, which is augmenting here income by over 100%. Along with the social impact, Eco-Fuel Africa addresses unsustainable levels of deforestation and CO2 emissions in Uganda. Deforestation is a huge problem in the country, which has already lost 75 percent of its forests. As a continent, Africa is losing its forest at a rate that is twice the world average.

SimGas

SimGas is a Dutch startup that has developed two improved biogas systems for the East and Southern African countries, targeting both the urban and the rural market. These small-scale systems convert manure and organic household waste into methane gas, which can be used for cooking and lighting. SimGas was founded in 2009 by the brothers Sanne and Mirik Castro. Inspiration for the company emerged from Sanne’s Master thesis research.  It addressed the feasibility of large-scale biogas systems in Tanzania and Ghana. While biogas was a proven clean energy technology, the existing in these African countries large-scale systems were expensive and inefficient. That’s why SimGas has decided to develop small-scale affordable sysytems. The companys has now sold 1,000 systems and sales are increasing rapidly by targeting schools and hospitals. Local production creates jobs: currently the company has 42 employees, 7 in the Netherlands and 35 in East Africa (Tanzania and Kenya). SimGas aims to sell 20,000 systems from their own factory in 2015.

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Photo by SimGas

The biogas systems contribute to reduction of deforestation and carbon emissions. As each household is replacing its current fuel, the energy savings are calculated based on the average yearly use and price of wood-fuel and kerosene. Depending on the current fuel use, the biogas system reduces 5-10 tonnes of CO2 per year. Households depending on wood-fuel spend many hours a day collecting wood. Additional time is saved by faster cooking: biogas can immediately be used, compared to wood stoves that need to heat up first. Therefore, households benefit from workload reduction and increased productivity. Another social impact is the improvement of the women position in the household. In the majority of East African societies, women are still primarily responsible for cooking and household management. Biogas provides cooking energy that is less labor-intensive, more convenient, and safer.

Envirofit

Envirofit was formed in 2003 as a spinoff company out of Colorado State University’s Engines and Energy Conversion Laboratory to develop well-engineered technology solutions to solve global energy and health challenges. Envirofit has developed a line of high quality clean energy biomass cook stoves that offer economic, health and environmental benefits. The stoves retail for only $15-$30; they reduce fuel requirements, smoke and toxic emissions by up to 80%, and costs and cooking time by up to 60%. In addition, the stoves reduce CO2 by 60% and black carbon by 40%.

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Photo by Envirofit

Envirofit has grown from a small pilot project in India with one stove model, to an industry leading company with multiple models and soon approaching 1M sold in more than 45 countries. The company has established manufacturing operations in China, Eastern Africa, and soon in Western Africa and Latin America, with extensive distribution networks in place. Successfully proving the concept for a mass-produced consumer-centered clean cook stove design, Envirofit helped to incubate a clean cook stoves sector that now hosts many producers and distributors. Throughout their 5-year lifespan these stove have impacted more than 3.5 million livelihoods, created more than 1,000 jobs and saved more than 11 million tons of CO2. At the household level the stoves have reduced more than $96 million in fuel costs and saved consumers 6.3 million working weeks of firewood collection.

Sanergy

Sanergy builds a network of high-quality “Fresh Life” branded toilets and franchises them to local micro-entrepreneurs. Sanergy employees collect waste from the toilets daily and deliver it to a central processing facility where the waste is converted into organic fertilizer for farmers. Sanergy’s model ensures increased access to improved sanitation facilities in slums while also providing a safe way to treat human waste and capitalize on its inherent value. Since their pilot phase in 2011, Sanergy has scaled to over 170 franchised toilets in three of Nairobi’s slum areas, with over 8,000 uses per day. The toilets have been used more than 1,000,000 times, and Sanergy has safely removed more than 500 tons of waste from the community.

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Photo by Sanergy

An estimated 2.5 billion people around the world lack adequate sanitation – more than a third of the global population – and 2 million die each year of diarrheal disease. The problem is particularly acute in slums, where over 1 billion people live. By 2030, this population will double to over 2 billion people worldwide. The high population density in slums, combined with the lack of physical space, infrastructure, and resources exacerbates the sanitation crisis. For instance, Kenya’s 8 million slum residents are forced to rely on unsanitary options such as “flying toilets” (defecating into plastic bags that are then tossed onto the streets) and pit latrines that release untreated human waste into the environment.

Ten years after the publication of ‘’The Fortune at the Bottom of the Pyramid’’ there is evidence that the private sector can create profitable business providing market-based solutions for the world’s poorest consumers. For instance, by focusing the application of clean technologies on underserved global communities, companies can create innovative products and business models with massive growth potential. As we have seen above, companies can benefit from providing to low-income customers such sustainable solutions, as pay-per-use off-grid energy, low cost water purification, waste-to-energy systems and others. Ultimately, these innovations can trickle up to the top of the pyramid, presenting new business opportunities through reverse innovation. It means that on the reverse side, some innovations implemented in emerging-markets may prove useful in developed countries.

The concept of ‘’Reverse Innovation’’ was introduced by another influential business thinker Vijay Govindarajan. In his book ‘’Reverse Innovation: Create Far from Home, Win Everywhere’’ Professor Govindarajan provides strategy insights, case studies and worksheets for companies to learn how to innovate in emerging economies – and to take these innovations to other emerging economies and back to mature economies as well. He gives an example of GE’s radically cheap portable ultrasound scanner developed for rural India that is now being widely used in ambulances in the US and Europe. In the same way, why couldn’t some cleantech solutions and business models developed for emerging markets find an application in developed countries? For example, why couldn’t small-scale, low-capital, modular renewable energy products be used in households in reach countries? What about portable water purification, micro-franchisees networks or mobile banking applications? The ability to innovate in line with market requirements and to solve tough problems with fewer resources will be an indispensable advantage in modern world. So, today the bottom of the pyramid is becoming not only the purchasing and manufacturing power, but also a source of new design and innovation.

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