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The need for sanitation

The need for sanitation
27/11/18

Sanitation is one of the 17 UN Sustainable Development Goals (SDGs). Inadequate sanitation results in serious public health issues and heavy economic losses. Nearly half of global losses were in India, where poor sanitation wiped over 5% off it’s 2015 GDP.

The consequences of inadequate sanitation, including poor health and unnecessary deaths, are receiving increasing attention around the world. Economic development and technical advances of the last decades have gone hand in hand with tremendous efforts to improve the sanitation environment globally. However, there are still significant differences in sanitation facilities between countries. In this MindScope we discuss the major sanitation challenges, with a special focus on India where the sheer size of this issue justifies special attention. India’s sanitation problems cost the country over USD 100 billion annually, or more than 5% of GDP. We also highlight India’s impressive public and private sector initiatives aimed at battling the challenge.

Proportion of the population using improved sanitation

Source: https://www.unicef.org/publications/index_82419.html

Addressing the world’s clean water and sanitation problems has become a priority and sanitation is the United Nations’ sixth Sustainable Development Goal (SDG). SDG 6 aspires to ensure the availability and sustainable management of water and sanitation for all. The UN wants to provide access to adequate and equitable sani-tation and hygiene. It aims to end open defecation, paying special attention to the needs of women and girls, and those in vulnerable situations – all by 2030. Furthermore, the UN aspires to support and strengthen the participation of local communities in improving water and sanitation management. Last year we published a Mindscope on clean water; this edition focuses only on sanitation. The scope of the global sanitation challenge is daunting: 2.4 billion people lack access to basic sanitation services, such as toilets or latrines More than 80% of wastewater resulting from human activities is discharged into rivers or seas without being treated Each day, nearly 1,000 children die from preventable water and sanitation-related diarrheal diseases. Over 180 million people in crisis-torn countries have no access to drinking water, according to UNICEF’s global chief of water, sanitation and hygiene Sanjay Wijesekera. “Children’s access to safe water and sanitation, especially in conflict areas and emergency circumstances, is a right, not a privilege,” he says.

UN Sustainability Development Goal 6

Source: Cairns-Smith et al., based on data from WHO/UNICEF JMP

What is sanitation?

The World Health Organization defines sanitation as “the provision of facilities and services for the safe disposal of human urine and faeces” and “the maintenance of hygienic conditions, through services such as garbage collection and wastewater disposal.” There are several variations on the definition of sanitation. For example, many organizations consider hygiene promotion as an integral part of sanitation. For this reason, the Water Supply and Sanitation Collaborative Council defines sanitation as “the collection, transport, treatment and disposal or reuse of human excreta, domestic wastewater and solid waste, and associated hygiene promotion” (Evans et al., 2009).

Percentage of population served by various sanitation systems

Inadequate sanitation leads to disease, death and high costs

A lack of sanitation refers to below minimum required hygiene levels of sanitation. In practical terms, it usually means an absence of toilets or hygienic toilets people would want to use voluntarily. This often results in open defecation (and open urination but this is of less concern) and a number of associated serious public health issues (Mara, 2017). It is estimated that 2.4 billion people lack adequate sanitation facilities (WHO, 2015). Poor hygienic conditions cause approximately 2.2 million deaths annually, mostly among children under age five. According to an Oxford Economics report on behalf of LIXIL, global economic losses from poor sanitation were estimated at USD 223 billion in 2015, an increase of more than 20% compared to five years earlier (http://www.lixil.com/en/sustainability/sanitation/)

That same report states: “The absence of safe, clean toilets is a particular threat to women. Not only is it embarrassing for women and girls to defecate outside, having to leave home or school to relieve themselves increases the risk of assault. As a result, the lack of sanitary toilets is one of the primary reasons young girls drop out of school when they reach puberty.” Every year in India, 1.3 million children die before reaching the age of five, many from preventable infections. Handwashing with soap has been cited as one of the most cost-effective solutions to address this challenge. A review of several studies shows that the simple act of handwashing in institutions, such as primary schools and day care centres, reduces the incidence of diarrheal diseases by an average of 30%. In the developing world, 80% of diseases are water-related. The World Health Organization states that the provision of safe water alone will reduce diarrheal diseases by up to 50%.

Proportion of the population using improved sanitation

Source: https://www.unicef.org/publications/index_82419.html

The cost of poor sanitation in India

Sanitation is a major public health issue in India, which is home to one-sixth of the world’s population. According to the 2015 report of the Joint Monitoring Program of the United Nations International Children’s Emergency Fund and the World Health Organization, around 44% of Indians defecate in the open. 1 Poor sanitation has a range of negative impacts on society and the economy. It causes debilitating and deadly diseases through the contamination of drinking water sources and food with pathogen-laden human waste.

It also gives rise to associated losses in productivity due to sickness and increased healthcare costs from caring for those who fall ill. India’s economy has clearly suffered under the financial burden of a lack of sanitation . “True Cost of Sanitation”, a report jointly published in 2015 by the LIXIL Group Corporation, Water Aid and Oxford Economics, takes a detailed look at economic development to estimate the costs incurred as a result of poor sanitation. 2 The report points out that India suffers the most on a national level in terms of total costs, with USD 106.7 billion wiped off its GDP in 2015. This represented almost half of total global losses and 5.2% of the nation’s GDP.

Poor sanitation cost the world USD 222.9 billion in 2015

Source: True Cost of Sanitation Report, 2015

The search for solutions in India

With a population of 1.3 billion and accelerated urbanization, India faces immense pressures on its cities. As a result, its slum population has more than doubled in the past decade and is projected to continue growing. This growth poses challenges for communities in gaining access to water, hygiene and sanitation. Indeed, improving access to these basic needs is essential to offering people a better life.

Government initiatives

Equal access to essential health, clean water and sanitation services
continues to be a priority in India. Since the launch of the government’s flagship scheme Swachh Bharat Abhiyan (Clean India Mission), India has made remarkable strides in the eradication of polio and the elimination of neonatal tetanus. Furthermore, the progress on key health indicators such as infant and maternal mortality rates, as well as the reduction in the incidence of HIV, TB and malaria, has helped India make progress in meeting the Millennium Development Goals on health.

The Swachh Bharat Abhiyan initiative is aimed at cleaning the streets, roads and other infrastructure in over 4,000 communities in India. This government cleanliness campaign was initiated by Prime Minister Modi, with a focus on raising knowledge and awareness of cleanliness among children.

Still, despite the headway made in the past decade, several challenges remain. There are significant inequalities in access to good, affordable health services, and a disproportionate burden of communicable and non-communicable disease. Although government spending on healthcare has increased, the funding is not effectively utilized due to fragmented planning. The private sector, which provides care to about 70% of the population, is poorly integrated into the health service delivery system. Access to life-saving drugs remains a challenge despite India’s role as a large global pharmaceutical player.

In 2005, the central government established the National Health Mission and introduced structural reforms to strengthen healthcare and sanitation, especially in rural areas. Then in 2015, the government launched Mission Indradhanush to rapidly increase immunization coverage. It is also investing significant resources to end open defecation by 2019 through the Swachh Bharat Abhiyan (Clean India Mission) program. In addition, the government’s National Health Policy 2017 clearly articulates its commitment to reforming the health sector and achieving universal health coverage, not least by proposing an increase in the health budget to 4.9% of GDP. The policy also sets time-bound targets for disease elimination, reduction of premature and preventable mortality, systems strengthening, as well as improving health services.

Private sector efforts

In the private sector, both multinationals and domestic companies have initiated different types of total sanitation campaigns with a strong emphasis on information, education, and communication. In addition, private sector companies are making great efforts to develop local products and distribute them to consumers in need. What’s more, they are doing this in a profitable way. The companies that are strongly engaged in making accessible health-related products in India are generally achieving good financial returns.

Individual Corporate Initiatives

Hindustan Unilever (HUL) is dedicated to providing solutions to the sanitation challenges in India. With its brands and affordable products, HUL is working with partners to promote life-saving behaviours. Since 2010, its Lifebuoy handwashing programs have reached over 65 million people in India; since 2005 the HUL Pureit clean water initiative has provided 74 billion litres of safe drinking water through its purification devices. In addition, HUL’s Domestos toilet cleaner brand, known as Domex in India, is working with governments and partners to help support access to improved sanitation.

In 2015, HUL joined the government’s Clean India Mission to promote good health and hygiene practices. In 2016, HUL launched the Suvidha (‘convenience’) Centre, the first of hopefully many community hygiene centres in India. The Centre offers toilets, handwashing facilities, showers, washing machines and safe drinking water to the local community. The Suvidha Centre also considers the environmental impact of its water usage. Through innovative design, it uses a closed-loop approach to reusing water. Water recycling is an integral part of the Centre’s design, ranging from harvesting rainwater from the roof to treating and reusing ‘grey’ water from showers and washing machines to flush the toilets.

These programs have two key thrusts: an ongoing behavioural change model and a mass media campaign to drive engagement and awareness. HUL has set an exemplary role in promoting health and sanitation across the country. The programs are also in line with the Sustainable Living Plan of HUL’s parent Unilever, which has the global ambition of helping more than 1 billion people take action to improve their health and well-being. And the programs make business sense, as they help Unilever’s brands grow faster, strengthen its reputation and reach people in what were once inaccessible areas. Unilever aims to make sustainable living commonplace and have its products reach 2 billion people per day

Colgate India is another multinational that is having a positive impact on hygiene. Oral health education in India was almost non-existent prior to Colgate’s entrance into India over 50 years ago. Over the decades, Colgate has launched numerous programs to promote oral health awareness, provide oral care behaviour training and dispense product samples via rural distribution. One of the most impactful oral health initiatives is Colgate’s Bright Smiles, Bright Futures (BSBF), a program committed to educating children (and their parents) about oral healthcare. Globally, Colgate targets 1.3 billion children through its BSBF program. Since 1976, Colgate’s community outreach efforts have touched the lives of 142 million school children between the ages of six and 14 across urban and rural India. Simple changes can make a big difference, like washing hands with soap, providing safe drinking water and building and maintaining clean toilets.

Number of children reached through the BSBF program

Source: Colgate, Palmolive, BSBF program 2018

Among local Indian companies, Godrej Consumers is a household name. The company thrives making quality green products for consumers. Its paper-based insecticide product “Good Knight Fast Card” specifically targets rural India which has low penetration of household insecticides. The product is offered at a much lower price than existing options and requires no electricity to function. It soon became the market leader in the category, creating value for both the company and its consumers.

Lixil Group is a Japanese housing materials company that specializes in sanitation solutions. Its SaTo, short for “Safe Toilet”, was developed as an inexpensive solution to the hygiene needs of people in the many regions where water is scarce and plumbing infrastructure is absent or underdeveloped. The profits on individual SaTo toilets may be small, but the market potential is enormous. Lixil aims to sell 1 million units in India, which does not even sound particularly ambitious given the estimate of 600 million people lacking access to toilets. The SaTo’s design is adapted to local plumbing infrastructure and water resources. The Indian SaTo model is shaped so it can be attached to piping. The blue plastic SaTo toilets were introduced in Bangladesh in 2013, where they sell for USD 1.50 to USD 1.70 apiece. These plastic toilets are designed to keep odours and flies at bay. And the toilets need just half a litre of water to flush, compared with the average of four litres for a typical flush toilet in Japan. The SaTo toilets have been introduced in about 10 countries and the company aims to develop more than 100 related products, such as washbasins, under the SaTo brand by 2021.

Conclusion

Sanitation is about promoting the health of communities by providing a clean environment and breaking the cycle of disease. The goal of improved sanitation is to significantly reduce health issues and child mortality, while improving well-being. This will also reduce the costs associated with poor sanitation conditions. India is clearly making progress in this area, thanks to both public and private sector initiatives. Companies are creating new business models that help reach the hundreds of millions of people that are still without proper sanitation. The NN impact investment strategy invests in listed equities of companies that offer material, intentional and transformational solutions for key global challenges alongside a financial return. The companies we invest in typically have strong innovative business models, a healthy growth outlook and show a real potential to positively transform their environments.

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About the author

Willem Schramade

Willem Schramade

Senior Portfolio Manager

Experience since 2000

Business Experience

2016-to date Senior Portfolio Manager Impact Investing  at NN IP

2014-2016 Sustainability & Valuation Specialist at Robeco. Responsible for Robeco’s ESG integration efforts and recognition: development of modelling standards, benchmarking best practices, reviewing investment cases, client presentations, writing white papers and development of new ESG integrated funds.

2009-2015 Materials Equity Analyst, Robeco

2007-2009 Industrials Equity Analyst, Robeco

2006-2007 Advisor Valuation & Strategy, PWC

2002-2006 Researcher, RSM Erasmus University

2001-2002 Trainee, Financial Management Program (FMP), General Electric

2000-2001 Analyst value based management, Corporate Performance Systems

Qualifications

Ph.D. in Corporate Finance, RSM Erasmus University
MSc in Business Economics, Tilburg University

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About the author

Huub van der Riet

Huub van der Riet

Lead Portfolio Manager

Experience since 1995

Business Experience

2013-to date Head of Thematic Equity

Huub is Head of the Thematic Equity portfolio management team and Lead Portfolio Manager of the Thematic Equity strategies.

2011-2013 Senior Portfolio Manager at NN IP

Huub is a Senior Portfolio Manager of the Thematic Equity strategy

2010-2011 Head of Sector Funds at NN IP

2007-2010 Head of Global Consumer Equity at NN IP

2001-2007 Portfolio Manager at NN IP

1998-2001 Portfolio Manager European Equities at AEGON Asset Management

1995-1998 Portfolio Measurement & Attribution Analysis of Investment Policies at ABN AMRO Asset Management, Amsterdam

1994-1995 Empirical Investigation at Invest Financial Services

Qualifications

VBA (Dutch equivalent of CFA)

MA in Finance, Investments & Treasury Management from the Vrije Universiteit in Amsterdam in 1995

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