Sanergy: Sustainable Sanitation
| Case Code: LDEN106 Case Length: 19 Pages Period: 2010-2015 Pub Date: 2016 Teaching Note: Available |
Price: Rs.600 Organization : Sanergy Industry: Sanitation Countries : Kenya Themes: Social Entrepreneurship |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Sanergy - The Inception
In the fall of 2009, three students – Auerbach, Lindsay Stradley, and Ani Vallabhaneni of MIT Sloan School of Management, met while taking a course, Development Ventures. The course dealt with solving a challenge affecting the lives of a billion people and focused on building entrepreneurial ventures in developing countries. After coming to know that more than 8 million people in the slums in Kenya lacked access to proper sanitation, the three classmates teamed up. They conceived of the idea of providing hygienic sanitation through a franchise model in the slums of Nairobi....
A Sustainable Business Model
According to the founders of the Sanergy, the startup demonstrated value chains which provided potential solutions to the sanitation crisis spread across the globe. Sanergy had a multi-purpose business plan which started with sanitation and ended with fertilizer and energy; it offered an affordable, accessible, and hygienic sanitation solution by creating a dense network of low-cost sanitation centers for the underprivileged sections of society living in places without sewage or electricity...
A Win-Win Venture
Though Sanergy was working for the downtrodden section of Kenya's urban slums, it was driven by the profit motive also. The company discovered a way to maximize its own revenues while solving global problems of improper sanitation and improving lives. It adopted a systematic approach to the entire urban slum sanitation value chain and offered an innovative, profitable way to address this acute need in densely populated slum communities like those in Nairobi. According to Sanergy, being an untapped market, Kenya's 10 million slums had the potential of developing into a multi-million market. Industry experts also viewed the urban slums as a profitable market. The estimated revenue from each toilet for Sanergy was US $1,250 per year. Further, the company hoped to break even by the end of 2017....
The Impact
By September 2012, Sanergy was employing 42 full-time staff and 10 part-time staff. Half of its total number of employees came from the local community including masons, sales agents, and waste collectors. Commenting on the benefits extended its employees, cofounder Vallabhaneni said, “All the jobs we are creating are all in the formal sector. Pension and health coverage; it's important to be able to provide these social safety nets."...
Scaling Up
By 2013, Sanergy had scaled up its model in Kenya through public and private partnerships such as Government of Kenya, Unilever, Kiva, and Oxfam. 59 Joshua Boger, former CEO of Vertex Pharmaceuticals, believed that the biggest challenge for Sanergy would be to speed up its expansion work. Industry experts opined that for achieving a real scale comparable to the market need, Sanergy still had a long distance to cover. Given the fact that there were still millions of people who lacked access to clean and safe toilets, there was vast scope for Sanergy to scale up. Auerbach himself opined that in order to guarantee consistent supply to its customers, the company was required to grow at least three or four times of its existing capacity and network of toilets....
The Challenges
Despite being successful in many areas, Sanergy's growing popularity came with its share of challenges. While experts appreciated Sanergy's efforts to provide affordable sanitation facilities to underprivileged communities in developing countries and also its business model, they felt that to move forward, the company would have to address various challenges. Industry experts were concerned that investors might question whether the Sanergy model was sustainable....
A Tough Road Ahead?
Given the challenges facing Sanergy, analysts opined that though it had made a good start and the progress of the initiative was commendable, it still had a very tough road ahead. Sanergy team over time had realized that there was a lack of sites to scale company’s operation as desired. Though the entrepreneurs started to contact landlords and schools, many domain experts were of the view that it could be very difficult to scale up its operations in coming years. Arranging finance to expand its operations in other parts of Kenya and world would be challenging for the company, according to a few of the experts....
Exhibits
Exhibit I: About Kenya
Exhibit II: Map of Kenya
Exhibit III: Sanitation Facilities in Kenya
Exhibit IV: Integrated Sanitation Value Chain (A)
Exhibit V: Sanergy: Awards and Fellowships
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