Harvard Case - Sanergy: Tackling Sanitation in Kenyan Slums
"Sanergy: Tackling Sanitation in Kenyan Slums" Harvard business case study is written by Jennifer Walske, Laura D. Tyson. It deals with the challenges in the field of Social Enterprise. The case study is 23 page(s) long and it was first published on : Jul 1, 2016
At Fern Fort University, we recommend Sanergy pursue a hybrid organizational model that combines elements of a social enterprise and a for-profit business. This approach will enable Sanergy to scale its impact while ensuring financial sustainability and attracting investors. By strategically leveraging impact investing and social impact bonds, Sanergy can attract capital for expansion while demonstrating its commitment to social impact measurement and sustainable business models. This will require a robust strategic planning process that considers government policy and regulation, community development, and stakeholder relations to ensure long-term success.
2. Background
Sanergy is a social enterprise operating in Kenya, tackling the sanitation crisis in urban slums. Founded in 2010, the organization provides affordable, hygienic sanitation services through a network of franchisees. Sanergy's innovative approach involves manufacturing and distributing sanitation units, collecting and treating waste, and promoting hygiene education. The case study highlights Sanergy's success in creating a sustainable business model while addressing a critical social issue.
The main protagonists of the case study are:
- David Auerbach: Founder and CEO of Sanergy, a visionary leader focused on scaling the organization's impact.
- Sanergy Franchisees: Local entrepreneurs who operate sanitation units and play a vital role in Sanergy's success.
- Kenyan Government: Key stakeholder influencing the regulatory environment and providing potential opportunities for collaboration.
- Residents of Kenyan Slums: The primary beneficiaries of Sanergy's services, experiencing improved sanitation and health outcomes.
3. Analysis of the Case Study
Sanergy's success can be analyzed through the lens of social entrepreneurship, triple bottom line, and impact investing.
Social Entrepreneurship: Sanergy exemplifies social entrepreneurship by addressing a pressing social issue (sanitation) through a market-based solution. The organization's innovative approach leverages business principles to achieve social impact.
Triple Bottom Line: Sanergy demonstrates a commitment to the triple bottom line by focusing on economic, environmental, and social sustainability. The organization generates revenue through its sanitation services, contributes to environmental sustainability by managing waste responsibly, and improves the lives of slum residents.
Impact Investing: Sanergy's model aligns with impact investing principles, attracting investors who seek both financial returns and positive social impact. The organization's transparent impact measurement framework and strong social performance metrics make it an attractive investment opportunity for impact investors.
4. Recommendations
Hybrid Organizational Model: Sanergy should adopt a hybrid organizational model that combines elements of a for-profit business with a social mission. This will allow the organization to attract investors while maintaining its commitment to social impact.
Impact Investing and Social Impact Bonds: Sanergy should actively pursue impact investing and social impact bonds to secure funding for expansion. This approach will attract investors seeking social returns and provide Sanergy with the capital necessary to scale its operations.
Strategic Planning: Sanergy should develop a comprehensive strategic plan that considers:
- Government Policy and Regulation: Engage with the Kenyan government to understand and navigate regulatory frameworks, potentially securing favorable policies for sanitation services.
- Community Development: Foster strong relationships with local communities, ensuring their needs are met and their voices are heard in the design and implementation of sanitation solutions.
- Stakeholder Relations: Develop a robust stakeholder engagement strategy that includes investors, government officials, franchisees, and residents.
Social Impact Measurement: Sanergy should continue to invest in robust social impact measurement frameworks to demonstrate its effectiveness and attract investors. This includes tracking key metrics like:
- Improved sanitation access: Measuring the increase in access to safe and hygienic sanitation facilities.
- Health outcomes: Monitoring the impact on health indicators such as reduced incidence of diarrheal diseases.
- Economic empowerment: Assessing the economic benefits for franchisees and local communities.
Sustainable Business Models: Sanergy should continuously refine its business model to ensure long-term sustainability. This includes:
- Cost optimization: Exploring ways to reduce operational costs while maintaining quality sanitation services.
- Revenue diversification: Investigating new revenue streams beyond sanitation services, such as waste management or hygiene education programs.
- Supply chain optimization: Improving efficiency and cost-effectiveness in the manufacturing and distribution of sanitation units.
5. Basis of Recommendations
These recommendations are based on the following considerations:
Core competencies and consistency with mission: Sanergy's core competency lies in its innovative approach to sanitation and its ability to create a sustainable business model. The recommendations align with the organization's mission to provide affordable and hygienic sanitation services while generating social impact.
External customers and internal clients: The recommendations consider the needs of both external customers (slum residents) and internal clients (franchisees). They aim to improve sanitation access for residents while providing franchisees with a sustainable business opportunity.
Competitors: The recommendations consider the competitive landscape and aim to differentiate Sanergy by focusing on social impact, sustainability, and innovative business models.
Attractiveness: The recommendations are attractive to investors due to their potential for both financial returns and social impact. The use of impact investing and social impact bonds will attract investors seeking to align their investments with their values.
Assumptions: The recommendations are based on the assumption that Sanergy can successfully navigate the regulatory environment, build strong community relationships, and continue to innovate in its business model.
6. Conclusion
Sanergy has the potential to become a leading force in the global sanitation sector. By adopting a hybrid organizational model, leveraging impact investing, and prioritizing social impact measurement, Sanergy can scale its operations and achieve significant social impact while ensuring financial sustainability.
7. Discussion
Alternative options not selected include:
- Purely for-profit model: This would potentially limit Sanergy's social impact and could alienate investors seeking social returns.
- Nonprofit model: This would rely heavily on donations and grants, potentially limiting Sanergy's growth and scalability.
The key risks associated with the recommendations include:
- Regulatory challenges: The Kenyan government's policies may change, creating obstacles for Sanergy's operations.
- Community resistance: Local communities may resist Sanergy's services or have concerns about its impact.
- Financial instability: Impact investing and social impact bonds may not provide sufficient funding for Sanergy's ambitious growth plans.
8. Next Steps
Sanergy should implement the following steps:
- Develop a comprehensive strategic plan: This plan should outline the organization's vision, mission, goals, and strategies for achieving its objectives.
- Engage with investors: Sanergy should actively seek impact investors and explore the issuance of social impact bonds.
- Strengthen stakeholder relationships: Sanergy should build strong relationships with the Kenyan government, local communities, and franchisees.
- Invest in social impact measurement: Sanergy should continue to develop and refine its social impact measurement frameworks.
- Refine its business model: Sanergy should continuously explore ways to optimize its operations, diversify its revenue streams, and improve its supply chain.
By taking these steps, Sanergy can position itself for continued success, expand its impact, and become a model for other social enterprises tackling sanitation challenges in developing countries.
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Case Description
This case centers on Sanergy, a five-plus-year-old hybrid organization, that has become a high profile, high growth, social enterprise, known initially for its Fresh Life toilets deployed in the Mukuru and Mathare slums of Nairobi, Kenya. Sanergy's co-founders launched their social startup out of the 2011 MIT 100K business plan challenge and quickly received national attention in the press. By 2013, the firm had raised a "Series A" equity round from Acumen, Eleos Investment Management (Eleos) and Novastar, the team had also begun its operations in Kenya to more rapidly build-out both sides of its business: (1) in its non-profit business, deploying Fresh Life Toilets to improving access to hygienic sanitation in Nairobi's informal settlements sanitation business, largely using a franchisee model; and (2) in its for-profit fertilizer business, with its Evergrow Organic Fertilizer, produced by Farm Star, sold to small- and medium-sized farmers in need of rich soil supplements. This case examines both Sanergy's hybrid business model and "sustainable sanitation value chain" in detail and explores the challenges the social enterprise entity will face as it continues to scale up both businesses and seeks to reach the breakeven point by 2018.
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