The authors, Ann-Kristin Achleitner, Andreas Heinecke, Abigail Noble, Mirjam Schöning, and Wolfgang Spiess-Knafl in their prefatory note sound a note of caution while opening the discussion:
"Social investment is neither a silver bullet to close the funding gap in the social entrepreneurship space nor a suitable solution of growth.The social
enterprises that are best served by social enterprise at every stage every social for investment are those that have clear and realistic plans for how they will address their short and medium-term needs and are open to inviting outsiders into their decision-making processes and, in some cases, to ceding decision-making rights on their strategy and operations to outsiders."
One of the keys to effective “Impact Investing” seems to be just that: clear and realistic plans.
Narrating Envirofit’s tale from 2007 till today on how it has identified problems and tapped various markets to sell cookstoves and become scalable and sustainable, Tim Bauer of Envirofit International in his case study “Enabling Market-Driven Technology” says:
“Shell Foundation took the lead investor role with an initial $3.5 million investment designed to enable Envirofit to raise the total $25 million investment required to grow and scale a global cookstove business. Envirofit’s demonstrated commercial track record, its history of including key stakeholders in strategy and planning, and its transparency in sharing results and lessons learned with its partners has been the key to finding this funding.”
“We strongly believe that a market-driven approach is a necessary backbone to helping solve the problems we focus on—at any level of scale. The company’s vision is larger than the number of lives saved or tons of emissions reduced by implementing a particular technology. With innovative products, services, and financial mechanisms, we are creating a new global standard for cookstoves, thereby addressing problems and challenges that affect half of the world’s population. At a very basic level, the efforts and results of Envirofit have always been and will continue to be made possible by impact investment.”
“We strongly believe that a market-driven approach is a necessary backbone to helping solve the problems we focus on—at any level of scale. The company’s vision is larger than the number of lives saved or tons of emissions reduced by implementing a particular technology. With innovative products, services, and financial mechanisms, we are creating a new global standard for cookstoves, thereby addressing problems and challenges that affect half of the world’s population. At a very basic level, the efforts and results of Envirofit have always been and will continue to be made possible by impact investment.”
Commenting on Tim’s case study, Pradeep Pursnani, Business Director of Shell Foundation’s program to tackle Indoor Air Pollution, says the key lesson learnt was that:
“After five years of pilot projects from 2002 to 2007, we realized that a problem as large as IAP can only be solved through market thinking and private sector involvement. Following a number of pilot projects, in 2007 we selected Envirofit as our global strategic partner, and since then we have supported the establishment and growth of their cookstove business in India and Africa.”
Shell Foundation, says Pursnani, learnt a number of lessons from the pilot projects. The key five lessons which have shaped the strategies and innovations to counter IAP were:
1. Biomass should be focused upon as the fuel used in the stoves as it is in sync with the cooking habits of maximum households around the world.
2. Centralized manufacturing of stoves helps in scaling the project and ensures consistency in quality and performance.
3. SF needs commercial partners to grow. It found out through its pilots that NGOs cannot focus on manufacturing a sustainable global solution at scale as they run on donations which are limited and thus have to compromise on number of stoves or its quality.
4. The solution must meet certain performance benchmarks around fuel efficiency, carbon and particulate matter (PM) emissions and must be technology driven, well engineered, durable and affordable as low quality cookstoves are often discarded and face lapse behavior.
5. Monitoring, evaluation and social marketing are vital for a successful program.
These five lessons have helped Envirofit and Shell Foundation become sustainable and scalable. As of today, Envirofit is funded by Shell Foundation, but, given the rate at which it is growing, Pradeep foresees financial sustainability. He identified three game changers for Envirofit being: commercial partnerships, carbon finance, and the start of large-scale local assembly operations.
