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SANERGY BUSINESS MODEL

SUSTAINABLE SANITATION IN KENYA

It’s 2009 when MIT students Lindsay Stradley, Ani Vallabhaneni and David Auerbach are asked to join forces to tackle poverty challenges. Being part of MIT Development Venture class requires indeed to come up with transformative innovations, potentially able to foster positive social change in developing countries.

Among the different social problems to address, the team decided to focus on sanitation. They immediately went after engineers and designers, and also managed to get their first proof of concept (POC) done. After that, they flew to Kenya to run workshops, interviews and experiments. Their goal? Collecting data/feedback in order to validate (or reject) their initial hypotheses and ideas.

When they came back from their journey, David and his team finally founded “Sanergy“. Since 2011, the company manufactures “Fresh Life Toilets“, low-cost, high-quality toilet units designed for urban slums. In fact, thanks to a network of franchise partners, this solution ensures accessible, affordable and sustainable sanitation in impoverished areas. Today, the firm serves more than 100.000 residents per day and employs roughly 250 people.

Problem in context

As repeatedly reported by media, sanitation is a major concern in Kenyan poorest areas. As a matter of fact, the lack of access to affordable, clean and safe sanitation facilities often causes improper waste disposal and littering. Eventually, this can endanger community health, leading to the outbreaks of diseases such as cholera. Not to mention the fact that more than 2.5 billion people across the globe are experiencing the same problem every single day.

With these numbers in mind, the founding team decided to dig further into the issue. They soon found out that in many Kenyan slums and villages sanitation infrastructures were inadequate. Yes, technically few pay-toilets were available, but with prohibitive costs per use. Because of that, people were using instead either pit latrines (often lacking maintenance and hygiene) or flying toilets. (wastes disposed in plastic bags and thrown in the open air).

Sanergy decided to provide local communities with another alternative: “Fresh Life Toilets” (FLTs). Such single-cubicle, sanitation units make indeed hygienic sanitation available, affordable and accessible to impoverished areas. But how does the company manage to turn this activity into a viable business?

Sanergy Business Model

As said, Sanergy designs and manufactures low-cost, high-quality sanitation facilities. Thanks to its “franchise model“, the toilets are then distributed and serviced through franchise local partners. Each partner pays an installation fee to Sanergy, as well as an annual renewal fee. In return, franchisees receive services like transportation/installation of toilets, technical support and excreta collection.

This last service – waste removal and collection – is particularly relevant for Sanergy. In fact, after transporting excreta to its treatment site, the firm processes and converts them into byproducts, such as animal feed and fertilizers. Products, as you might guess, ready to get sold to farmers and horticultural companies.

To make the magic happen, Sanergy adopts a hybrid for-profit/nonprofit structure. On one hand, the nonprofit branch manages everything that relates to FLTs franchise network (i.e. manufacturing, installation, support, etc.). On the other hand, the for-profit branch takes over for waste transportation, treatment and transformation into byproducts.

If we consider Sanergy as a unique entity, we could associate its business model (BM) to a “multisided business model“. That’s because the organization provides different value propositions to different targets (beneficiaries, franchisees, farmers) to remain financially sustainable.

De-coding Sanergy: Social Business Model Canvas

We now take advantage of a tool called Social Business Model Canvas to explore the details of Sanergy business model. As mentioned in the previous paragraph, in the Canvas (and throughout the rest of the article) we will consider Sanergy suite of company as a whole.

Let’s break down the Canvas section by section!