Description
development for dharavi, mumbai through Strategy and business model, Technology Integration, Microfinance, advocacy, Funding Requirements, The Market, Industries, Social and environmental impact
Ray of Hope, “Umeed Ki Aasha”: Improve Lives and Reap Benefits
SAN FRANCISCO STATE UNIVERSITY
Table of Contents
Table of Contents....................................................................................................... 2 Background ............................................................................................................... 3 Business overview and definition...............................................................................4 Problem definition...................................................................................................... 5 Our Solution................................................................................................................ 5 Strategy and business model.....................................................................................6 Technology Integration............................................................................................8 Microfinance............................................................................................................ 9 Advocacy................................................................................................................. 9 Our Approach............................................................................................................. 9 Funding Requirements .............................................................................................10 The Market...............................................................................................................12 The Industries..........................................................................................................12 Conclusion................................................................................................................ 14 Appendix A. Informal Recycling Industry..................................................................15 Appendix B. ROH’s approach to recycling................................................................16 Bibliography.............................................................................................................17
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Background Home to the largest slum-dwelling population in the world, Dharavi, India houses over one million individuals across 525 acres of marshy land (Dhillon, 2008). Migrants from all parts of India resettled on this reclaimed land establishing an economy that generates over $500 million annually through informal markets sectors (Baruah, 2004). Roughly 60,000 Dharavi inhabitants participate in illegal waste management activities as their sole source of income generation (Mahadevia, 2008). Commonly referred to as “rag pickers” or “waste pickers,” these individuals are responsible for recycling 80% of Mumbai’s waste thereby reducing the financial and environmental impact on India’s limited landfills (Baruah, 2004). Managing India’s booming economy has strained its government resources. As a result, providing adequate care and training to this country’s poorest citizens has often fallen to the lowest rung of priorities. Hence, rag picking was labeled an illegal activity so India’s government would be devoid of any responsibility to care for individuals or standardize ragpicking practices. Individuals caught engaging in rag picking often have their tools and recyclables confiscated by local authorities. While there are signs of increasing government awareness of the impact rag pickers play in the waste management industry, working conditions and treatment of rag pickers by authorities has not improved much over the last ten years. According to one survey, 90% of rag pickers are women (85%) and children (5%) (Furedy, 1993). Many rag pickers are forced into a life of waste collection due to unemployment, ineffective government policies, rural-urban migration, and overcrowding (Rosario, 2004). The often demeaning role of waste collection is often relegated to women and other ethnic minorities
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due to their second class citizen status in India’s cast driven society. Young women are often harassed by local authorities or sexually abused due to their exposed activity of trash picking in landfills and alleyways (Mahadevia, 2008). Approximately 98% of the rag picking population is illiterate with a majority surviving on less than $1 per day (Mahadevia, 2008). In addition to the long work hours, verbal and physical abuse, many rag pickers are exposed to waste contaminates which lead to infection and disease. Recycling centers often exploit the plight of rag pickers by paying below market wages for their products and diminishing their bargaining power by working with individuals rather than collective groups. In the city of Mumbai, approximately 9,000 tons of waste is generated per day at a cost of $10 million annually. Through rag picking, this waste may be reduced to 1,800 tons with potential savings of up to $8 million annually to the city (Bejoy, 2010).
Business overview and definition By recognizing the earning potential of this growing industry, we want to provide an opportunity for India’s rag pickers to increase their earning potential while legitimizing the rag picking practice as a respectable occupation. We want to instill in them the feeling of hope and have therefore named our organization “Umeed Ki Aasha”(Ray of Hope). Through our organization, we will reach out to the rag pickers working in the slums of Mumbai. Our mission is to establish and operate a business aimed at rag pickers with the goal of halving the number of individuals living on less than $1 per day (aligned with the U.N. Millennium Goals). Our business will operate as a warehouse-recycling center where rag pickers can come to clean, sort, and sell their products directly to Ray of Hope (ROH). ROH will encourage rag pickers to form cooperatives in order to increase their productivity and purchasing power. In return, these co-ops will receive
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fair market rates for their recyclables, which will hopefully allow these individuals to free themselves from the cycle of poverty.
Problem definition Discrimination against rag pickers is the failure of India’s government to recognize waste picking as a necessary and beneficial role in society. Because waste picking activities are illegal in many sectors of Dharavi, an underground recycling economy has flourished generating revenue for thousands of individuals and businesses. However, while rag pickers perform substantial work in the waste management industry, they are harassed, exploited, and abused by local authorities and business vendors on a daily basis. Recycling shops often exploit waste pickers by paying them below market values for their products. As a result, many waste pickers are unable to break the cycle of poverty. In addition, waste pickers are more likely to develop infections from cuts, develop severe back pain and illness from chemical poisoning (Mahadevia, 2008). Children born into waste picking work long hours and are unable to attend school. As these children mature, they are more likely to get involved in theft or drugs as a means for survival (Venkateswaran, 1994). By addressing the issues afflicting rag pickers, the quality of life for these individuals can improve while decreasing governmental expenditures on waste management and disposal.
Our Solution Our company plans to replace the role of the middleman in the recycling industry. By working directly with rag pickers and industry buyers, we plan to earn a profit through sales of recyclables while increasing the standard of living of rag pickers by paying higher than average industry wages. Additionally, we plan to partner with local NGOs in order to leverage their
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resources by subsidizing educational services ROH is unable to provide to rag pickers. Services such as workforce development, child education, and financial literacy are just a few of the essential skills that will enhance the lives of rag pickers and their families. By working directly with local NGOs specializing in waste picker advocacy and education, we will legitimize the waste picking industry as a respectable and necessary part of society. Our focus is to determine how best to work within this informal sector in order to improve livelihoods of rag pickers, working conditions, and efficiency in the recycling business. We are aware that the success of our endeavor will depend on the nature of our relationship with industry buyers. To that end, we are committed to establish and nurture preferred contracts with industry buyers and partner with municipal waste management facilities.
Strategy and business model Our organization will operate as a hybrid non-profit venture as defined in The Power of Unreasonable People (Elkington, 2008). By establishing our business with two separate concentrations, we will use the profits generated from the sale of recyclables to fund our nonprofit venture of improving the work environment for rag pickers. As outlined in the flow chart in Appendix A, rag pickers sell their products directly to the recycling shop at a fraction of the price industry will pay. An industry in this market is typically a manufacturing company requiring raw materials such as a bottling or paper company. This discrepancy is partly due to the added value of cleaning and sorting recycling shops perform. Our organization will assume the role of the recycling shop by purchasing clean, sorted recycled materials from rag pickers and selling these raw materials directly to industry.
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According to anecdotal discussions with traders and wholesalers, rag pickers receive approximately 25% of the value industry places on recyclables (Venkateswaran, 2008). By these estimations, we believe there is large potential to profit from this industry. For example, assuming one individual generates $4 worth of recyclables in one day, the annual worth of those products is $1,460. If 300 individuals participate in rag picking the annual earning potential would be: $4/day x 365 days/year x 300 individuals = $438,000/year Under the current business model of recycling in India, the business breakdown of these $4 is: Individual earns Recycling Shop earns Wholesaler earns $1 $1 $2 from Recycling Shop from Wholesaler from Industry
Annual revenue to rag pickers $109,500/year Annual revenue to Junk Shop $109,500/year Annual revenue to Warehouse $219,000/year Under the ROH model of business recycling in India, the business breakdown of the same $4 would be: NGO earns Individual earns ROH earns $0.5 $1.5 $2 from ROH from ROH from Industry
Annual revenue out to NGO $54,750/year Annual revenue out to rag pickers $164,250/year Annual revenue out to ROH $219,000/year
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By assuming the role of the middleman in the recycling industry, ROH can effectively improve the standard of living of rag pickers by increasing their income by up to fifty per cent. Additionally, by partnering with local NGOs, ROH has the ability to leverage its resources by paying NGOs for services ROH is unable to provide such as child education and financial literacy. NGOs such as Stree Mukti Sanghatana and Chintan currently operate non-profit programs in Dharavi. Street Mukti Sanghatana focuses on empowering female rag pickers by helping liberate women from economic, social, political, cultural and psychological oppression. Chintan (2009) focuses on providing rag picker children with access to non-formal and formal education, practical skills and awareness about their rights in order to enable them to transition from child labor to full time students in a position to make informed and independent decisions about their work and lives. By partnering with these local NGOs, ROH will enhance its credibility as a new entrant in the recycling industry. At this time, ROH feels confident that the initially recruitment of three hundred individuals for our program is a reasonable number for NGOs and ROH to manage. In addition, a majority of the funding given to NGOs will be used to create programs that will increase the productivity of rag pickers. Some of the programs ROH proposes to sponsor include: Technology Integration ROH will subsidize the price of mobile phones to make this technology affordable to rag pickers. By equipping rag pickers with mobile phones, ROH can pay workers through mobile banking. This program is intended to give workers access to technology and an introduction to formal banking while providing on-line security. In addition, mobile phones will be used to send daily voice messages to each group detailing work schedules and locations of local drop-off points.
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Microfinance Rag pickers are often ignored by lending institutions due to lack of collateral and physical address. By providing micro loans to rag pickers, we can increase their productivity through the purchase of pushcarts, storage sheds and hand tools. ROH will not only back these loans, but also sell them raw materials at cost if needed. Advocacy ROH will sponsor NGO marketing campaigns legitimizing the role of rag pickers in society. By educating public officials and private citizens of the importance of recycling, we hope to decrease discrimination and abuse against rag pickers. Much of the advocacy work will take the form of radio public service announcements over and community workshops. To entice corporations and residents to work cooperatively with rag pickers, our advocacy campaign will also seek statewide policy change to allow tax write-offs for those who participate in recycling programs.
Our Approach ROH will partner with two to three local NGOs by providing financial support. In return, NGOs will recruit and train three hundred rag pickers to work in one of thirty ten-person groups. Each group is responsible for collecting, cleaning and sorting a particular type of recyclable such as glass, paper, metal, etc. Groups will deliver bulk drops of recyclables to an ROH warehouse on a daily or weekly basis. Payments from ROH will be given to each group member via mobile bank account. ROH will then sell final products to Industry (see Appendix B). Our strategy needs to take into consideration our core customers who are the industry buyers. The reality is that these players have been in business with the middle man (wholesalers and
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recycling shops) for decades and changes in conducting business on their part is simply hard to do. ROH envisions a couple of strategies. First, recycling has a lot of environmental benefits. These benefits can be enhanced by involving the rag pickers. “The recovery and recycling of inorganic material by waste pickers saves energy, time and improves efficiency. For example, recycling aluminum requires only 3–5 percent of the energy needed to obtain aluminum from bauxite.” (Sector Strategies, 2007). Our organization also displays social responsibility by empowering soon displaced slum dwellers. Thus, we will be primarily approaching industry buyers whose missions are closely related to ours. Companies such as Ramky Enviro Engineers Ltd, Excel Industries Limited and SELCO International Ltd (Solid Waste To Electricity Company) all have operations dedicated to waste management activity with a commitment to the triple bottom line. Working for them, we believe we could benefit from the status of preferred supplier and establish long-term partnership. Secondly, we will also approach other industry buyers with the aim of establishing a conversation about them being more socially responsible in their supply chain practices not only regarding the human capital aspect like hiring process and fair wages but also regarding the environmental aspect. “Big corporations have the marketing tools and assets to reach more people.”(Pralahd, 2008). Thus, collaborating with them on the message that needs to be conveyed to the Indian population would be another way to integrate our advocacy work. Although we are committed to a Public Private Partnership (PPP) strategy for marketing and funding purposes, we would help the industry buyers implement their own branded campaigns by getting the message out there.
Funding Requirements The main stake of ROH service availability and sustainability is to ensure projected funding sources materialize, which is typically a big challenge for non-profits. We feel that we can
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justify funding to our program as studies have shown that “recycling by waste pickers saves municipalities money by reducing the volume of waste that needs to be collected, transported, and disposed of.” Studies further indicate that “waste pickers reduce the volume of overall waste by 30 percent, saving the municipality fuel, equipment, and labor costs and extending the life span of dumps and sanitary landfills” (Wilson, 2010). The same way Hindusan Lever Limited's soap program in India showed that savings in health care costs would cover total program cost after 2 years (Prahalad, 2006), we are confident that we can draw the same conclusion regarding environmental impact and recycling, which has a world market worth of $410 billion according to environmental services company Veolia (Waste Management World, 2007). The fact that our organization will diminish the government's burden of dealing with Dharavi's dwellers and also generate taxes yielded by a more formalized industry, we can get the government to recognize the triple bottom line benefits of informal recycling and therefore get some funding from it. The government could also provide an informal storage place not currently in use. We are aware of the presence of corruption or unwillingness that comes with governments in developing countries and therefore would like to rely on a diversified base of funding. Our research shows that we would be able to count on multiple donors and loaners. We would target World Bank, the Swiss Agency for Development and Co-operation and the UK Department for International Development, who work closely with India. Funding partnerships would also include Bombay Community Public Trust (BCPT), Concern India Foundation and Mahindra Foundation, all of which are focused on sustainable social development and waste management issues in India. As a whole we believe in co-operation between private and public sector service providers. Initiating conversations with public waste management as well as privately held recycling shops
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and plants will provide long-term funding through free trash picking permits, preferential contracts and compensation from advertising for companies. Finally, donations and partnerships with non-profits will help us raise the rest of the money. Putting it together in terms of number, we identified five main costs: The cost of personnel, averaging $20,000/year for a total of three managers, a warehouse lease averaging around $10,000/year, NGOs services calculated earlier as $54,750/year, and miscellaneous costs for permits and equipment averaging $2,000/year. As a result, our profit for the first year amounts to $132,250, which makes Ray of Hope a profitable venture right from the start, notably thanks to its monthly revenue.
The Market Our market is spread across the country, as there are several industries that will be interested in purchasing our recycled products. As a hybrid organization type we are catering to the needs of the rag pickers, which is the non-profit side of our business, and to the Industry that are looking for recyclable waste for the production of their components and parts.
The Industries The primary industry buyers of ROH products are the industries that receive our cleaned and sorted materials from the recycling warehouse. Since ROH saves the industry the cost of cleaning and sorting, the recyclable materials are sold to at a market premium. There are about 800 different industrial plants in Maharashtra (Census, 2004), which require recycled products in their manufacturing units. Catering and receiving orders from these clients will generate revenue for ROH and make it sustainable in the long run. The industries identified in the nearby areas of
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the slums are the ones that manufacture furniture, flooring, jewelries, roads, shoes, bags and accessories and computer parts. Social and environmental impact Rag pickers are exposed to health and safety risks while collecting materials for recycling. Our services will provide rag pickers necessary equipment and training to deal with the waste materials appropriately. ROH will provide them with work uniforms and masks to protect them from decomposing wastes and toxic substances. The indicators of the impact made by ROH will be based on the amount of waste collected and recycled, then sold to the industries. The more garbage collected and recycling done will indicate that people are aware of the benefits of recycling and how it can be used to generate income. It will lead to a cleaner and healthier environment. The rag pickers will be educated about the benefits that recycling creates. Since our primary target is the female population, educating them about recycling and how it can create benefits for the environment will automatically lead to the education of the entire family. They will in turn spread the word to their friends, colleagues and employees, which will create community awareness. The industries that receive these recycled products will be able to continue manufacturing their products and sell them at a profit. The more revenues the industries make, the more money municipal corporations and the government can earn in the form of taxes. Recycling papers and newspapers will help save the trees that are cut for manufacturing fresh paper. Recycling will reduce pollution by decreasing the amount of toxic substances that come from plastics and empty can into the environment. These wastes can cause significant damage to the environment. The manufacturing industry can make good use of the used materials to make their products from the plastic wastes.
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Recycling also reduces greenhouse gas emissions. This in turn will have a positive impact on the global warming scenario. Manufacturing plastics and paper from recycled materials requires less energy when compared to non-renewable resources.
Conclusion We found that in the largest slum population in India, rag pickers are the most in need of workforce development training and poverty alleviation. By establishing a business strategy that address the needs of these individuals, ROH has created a business model that will decrease the number of rag pickers earning less than $1/day while generating profits from its sale of recyclables. In addition to the benefits ROH will provide to its workers such as workforce training, mobile phones, and field supplies, ROH will partner with various NGOs by financing their activities of rag picker recruitment and retention. Once NGOs have organized rag picking teams, it will be easier for NGOs to provide additional services such as financial literacy and schooling for children of rag pickers. Through our process, we will achieve a triple bottom line of economic profit for ROH, improving the livelihood of rag pickers living in poverty, and reduction of landfill waste. Our process is not only effective, but also replicable for other cities and countries to adopt. The earning potential from recycling in the slums of Mumbai is tremendous and with the solutions provided in this report, Ray of Hope sees a better future for the inhabitants in Dharavi.
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Appendix A. Informal Recycling Industry
Figure 1. Example flow chart of an informal recycling system, showing four types of informal recycling (reproduced from Wilson et al.,2001).
Item
Rag Picker To Recycling/J unk Shop 0.065 – 0.075 0.04 – 0.065 0.28 – 0.30 0.10 – 0.13 0.41 – 0.43 0.26 – 0.30 0.03 – 0.04 0.13 – 0.15
Paper (mixed) Cardboard Plastic LDPE (Milk packets) HM (Thin Polybags) Hard Plastic Mixed Glass Iron
Recycling/J unk Shop to Wholesale r 0.10 – 0.11 0.075 – 0.09 0.37 0.15 0.43 – 0.48 0.43 – 0.48 0.05 0.19
Wholesal er to Recycling Industry 0.13 – 0.15 0.09 – 0.10 0.41 – 0.43 0.19 0.52
0.23 – .26
Figure 2. Estimated comparative prices in dollars (Venkateswaran).
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Appendix B. ROH’s approach to recycling
NGO
T1
Industry
Ray Of Hope T2 NGO Industry Rag Pickers T3
Figure 3. ROH will partner with two to three local NGOs by providing financial support. In return, NGOs will recruit and train three hundred rag pickers to work in one of thirty ten-person groups. Each group is responsible for collecting, cleaning and sorting a particular type of recyclable such as glass, paper, metal, etc. Groups will deliver bulk drops of recyclables to an ROH warehouse on a daily or weekly basis. Payments from ROH will be given to each group member via mobile bank account. ROH will then sell final products to Industry
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doc_668469237.doc
development for dharavi, mumbai through Strategy and business model, Technology Integration, Microfinance, advocacy, Funding Requirements, The Market, Industries, Social and environmental impact
Ray of Hope, “Umeed Ki Aasha”: Improve Lives and Reap Benefits
SAN FRANCISCO STATE UNIVERSITY
Table of Contents
Table of Contents....................................................................................................... 2 Background ............................................................................................................... 3 Business overview and definition...............................................................................4 Problem definition...................................................................................................... 5 Our Solution................................................................................................................ 5 Strategy and business model.....................................................................................6 Technology Integration............................................................................................8 Microfinance............................................................................................................ 9 Advocacy................................................................................................................. 9 Our Approach............................................................................................................. 9 Funding Requirements .............................................................................................10 The Market...............................................................................................................12 The Industries..........................................................................................................12 Conclusion................................................................................................................ 14 Appendix A. Informal Recycling Industry..................................................................15 Appendix B. ROH’s approach to recycling................................................................16 Bibliography.............................................................................................................17
2 |Page
Background Home to the largest slum-dwelling population in the world, Dharavi, India houses over one million individuals across 525 acres of marshy land (Dhillon, 2008). Migrants from all parts of India resettled on this reclaimed land establishing an economy that generates over $500 million annually through informal markets sectors (Baruah, 2004). Roughly 60,000 Dharavi inhabitants participate in illegal waste management activities as their sole source of income generation (Mahadevia, 2008). Commonly referred to as “rag pickers” or “waste pickers,” these individuals are responsible for recycling 80% of Mumbai’s waste thereby reducing the financial and environmental impact on India’s limited landfills (Baruah, 2004). Managing India’s booming economy has strained its government resources. As a result, providing adequate care and training to this country’s poorest citizens has often fallen to the lowest rung of priorities. Hence, rag picking was labeled an illegal activity so India’s government would be devoid of any responsibility to care for individuals or standardize ragpicking practices. Individuals caught engaging in rag picking often have their tools and recyclables confiscated by local authorities. While there are signs of increasing government awareness of the impact rag pickers play in the waste management industry, working conditions and treatment of rag pickers by authorities has not improved much over the last ten years. According to one survey, 90% of rag pickers are women (85%) and children (5%) (Furedy, 1993). Many rag pickers are forced into a life of waste collection due to unemployment, ineffective government policies, rural-urban migration, and overcrowding (Rosario, 2004). The often demeaning role of waste collection is often relegated to women and other ethnic minorities
3 |Page
due to their second class citizen status in India’s cast driven society. Young women are often harassed by local authorities or sexually abused due to their exposed activity of trash picking in landfills and alleyways (Mahadevia, 2008). Approximately 98% of the rag picking population is illiterate with a majority surviving on less than $1 per day (Mahadevia, 2008). In addition to the long work hours, verbal and physical abuse, many rag pickers are exposed to waste contaminates which lead to infection and disease. Recycling centers often exploit the plight of rag pickers by paying below market wages for their products and diminishing their bargaining power by working with individuals rather than collective groups. In the city of Mumbai, approximately 9,000 tons of waste is generated per day at a cost of $10 million annually. Through rag picking, this waste may be reduced to 1,800 tons with potential savings of up to $8 million annually to the city (Bejoy, 2010).
Business overview and definition By recognizing the earning potential of this growing industry, we want to provide an opportunity for India’s rag pickers to increase their earning potential while legitimizing the rag picking practice as a respectable occupation. We want to instill in them the feeling of hope and have therefore named our organization “Umeed Ki Aasha”(Ray of Hope). Through our organization, we will reach out to the rag pickers working in the slums of Mumbai. Our mission is to establish and operate a business aimed at rag pickers with the goal of halving the number of individuals living on less than $1 per day (aligned with the U.N. Millennium Goals). Our business will operate as a warehouse-recycling center where rag pickers can come to clean, sort, and sell their products directly to Ray of Hope (ROH). ROH will encourage rag pickers to form cooperatives in order to increase their productivity and purchasing power. In return, these co-ops will receive
4 |Page
fair market rates for their recyclables, which will hopefully allow these individuals to free themselves from the cycle of poverty.
Problem definition Discrimination against rag pickers is the failure of India’s government to recognize waste picking as a necessary and beneficial role in society. Because waste picking activities are illegal in many sectors of Dharavi, an underground recycling economy has flourished generating revenue for thousands of individuals and businesses. However, while rag pickers perform substantial work in the waste management industry, they are harassed, exploited, and abused by local authorities and business vendors on a daily basis. Recycling shops often exploit waste pickers by paying them below market values for their products. As a result, many waste pickers are unable to break the cycle of poverty. In addition, waste pickers are more likely to develop infections from cuts, develop severe back pain and illness from chemical poisoning (Mahadevia, 2008). Children born into waste picking work long hours and are unable to attend school. As these children mature, they are more likely to get involved in theft or drugs as a means for survival (Venkateswaran, 1994). By addressing the issues afflicting rag pickers, the quality of life for these individuals can improve while decreasing governmental expenditures on waste management and disposal.
Our Solution Our company plans to replace the role of the middleman in the recycling industry. By working directly with rag pickers and industry buyers, we plan to earn a profit through sales of recyclables while increasing the standard of living of rag pickers by paying higher than average industry wages. Additionally, we plan to partner with local NGOs in order to leverage their
5 |Page
resources by subsidizing educational services ROH is unable to provide to rag pickers. Services such as workforce development, child education, and financial literacy are just a few of the essential skills that will enhance the lives of rag pickers and their families. By working directly with local NGOs specializing in waste picker advocacy and education, we will legitimize the waste picking industry as a respectable and necessary part of society. Our focus is to determine how best to work within this informal sector in order to improve livelihoods of rag pickers, working conditions, and efficiency in the recycling business. We are aware that the success of our endeavor will depend on the nature of our relationship with industry buyers. To that end, we are committed to establish and nurture preferred contracts with industry buyers and partner with municipal waste management facilities.
Strategy and business model Our organization will operate as a hybrid non-profit venture as defined in The Power of Unreasonable People (Elkington, 2008). By establishing our business with two separate concentrations, we will use the profits generated from the sale of recyclables to fund our nonprofit venture of improving the work environment for rag pickers. As outlined in the flow chart in Appendix A, rag pickers sell their products directly to the recycling shop at a fraction of the price industry will pay. An industry in this market is typically a manufacturing company requiring raw materials such as a bottling or paper company. This discrepancy is partly due to the added value of cleaning and sorting recycling shops perform. Our organization will assume the role of the recycling shop by purchasing clean, sorted recycled materials from rag pickers and selling these raw materials directly to industry.
6 |Page
According to anecdotal discussions with traders and wholesalers, rag pickers receive approximately 25% of the value industry places on recyclables (Venkateswaran, 2008). By these estimations, we believe there is large potential to profit from this industry. For example, assuming one individual generates $4 worth of recyclables in one day, the annual worth of those products is $1,460. If 300 individuals participate in rag picking the annual earning potential would be: $4/day x 365 days/year x 300 individuals = $438,000/year Under the current business model of recycling in India, the business breakdown of these $4 is: Individual earns Recycling Shop earns Wholesaler earns $1 $1 $2 from Recycling Shop from Wholesaler from Industry
Annual revenue to rag pickers $109,500/year Annual revenue to Junk Shop $109,500/year Annual revenue to Warehouse $219,000/year Under the ROH model of business recycling in India, the business breakdown of the same $4 would be: NGO earns Individual earns ROH earns $0.5 $1.5 $2 from ROH from ROH from Industry
Annual revenue out to NGO $54,750/year Annual revenue out to rag pickers $164,250/year Annual revenue out to ROH $219,000/year
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By assuming the role of the middleman in the recycling industry, ROH can effectively improve the standard of living of rag pickers by increasing their income by up to fifty per cent. Additionally, by partnering with local NGOs, ROH has the ability to leverage its resources by paying NGOs for services ROH is unable to provide such as child education and financial literacy. NGOs such as Stree Mukti Sanghatana and Chintan currently operate non-profit programs in Dharavi. Street Mukti Sanghatana focuses on empowering female rag pickers by helping liberate women from economic, social, political, cultural and psychological oppression. Chintan (2009) focuses on providing rag picker children with access to non-formal and formal education, practical skills and awareness about their rights in order to enable them to transition from child labor to full time students in a position to make informed and independent decisions about their work and lives. By partnering with these local NGOs, ROH will enhance its credibility as a new entrant in the recycling industry. At this time, ROH feels confident that the initially recruitment of three hundred individuals for our program is a reasonable number for NGOs and ROH to manage. In addition, a majority of the funding given to NGOs will be used to create programs that will increase the productivity of rag pickers. Some of the programs ROH proposes to sponsor include: Technology Integration ROH will subsidize the price of mobile phones to make this technology affordable to rag pickers. By equipping rag pickers with mobile phones, ROH can pay workers through mobile banking. This program is intended to give workers access to technology and an introduction to formal banking while providing on-line security. In addition, mobile phones will be used to send daily voice messages to each group detailing work schedules and locations of local drop-off points.
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Microfinance Rag pickers are often ignored by lending institutions due to lack of collateral and physical address. By providing micro loans to rag pickers, we can increase their productivity through the purchase of pushcarts, storage sheds and hand tools. ROH will not only back these loans, but also sell them raw materials at cost if needed. Advocacy ROH will sponsor NGO marketing campaigns legitimizing the role of rag pickers in society. By educating public officials and private citizens of the importance of recycling, we hope to decrease discrimination and abuse against rag pickers. Much of the advocacy work will take the form of radio public service announcements over and community workshops. To entice corporations and residents to work cooperatively with rag pickers, our advocacy campaign will also seek statewide policy change to allow tax write-offs for those who participate in recycling programs.
Our Approach ROH will partner with two to three local NGOs by providing financial support. In return, NGOs will recruit and train three hundred rag pickers to work in one of thirty ten-person groups. Each group is responsible for collecting, cleaning and sorting a particular type of recyclable such as glass, paper, metal, etc. Groups will deliver bulk drops of recyclables to an ROH warehouse on a daily or weekly basis. Payments from ROH will be given to each group member via mobile bank account. ROH will then sell final products to Industry (see Appendix B). Our strategy needs to take into consideration our core customers who are the industry buyers. The reality is that these players have been in business with the middle man (wholesalers and
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recycling shops) for decades and changes in conducting business on their part is simply hard to do. ROH envisions a couple of strategies. First, recycling has a lot of environmental benefits. These benefits can be enhanced by involving the rag pickers. “The recovery and recycling of inorganic material by waste pickers saves energy, time and improves efficiency. For example, recycling aluminum requires only 3–5 percent of the energy needed to obtain aluminum from bauxite.” (Sector Strategies, 2007). Our organization also displays social responsibility by empowering soon displaced slum dwellers. Thus, we will be primarily approaching industry buyers whose missions are closely related to ours. Companies such as Ramky Enviro Engineers Ltd, Excel Industries Limited and SELCO International Ltd (Solid Waste To Electricity Company) all have operations dedicated to waste management activity with a commitment to the triple bottom line. Working for them, we believe we could benefit from the status of preferred supplier and establish long-term partnership. Secondly, we will also approach other industry buyers with the aim of establishing a conversation about them being more socially responsible in their supply chain practices not only regarding the human capital aspect like hiring process and fair wages but also regarding the environmental aspect. “Big corporations have the marketing tools and assets to reach more people.”(Pralahd, 2008). Thus, collaborating with them on the message that needs to be conveyed to the Indian population would be another way to integrate our advocacy work. Although we are committed to a Public Private Partnership (PPP) strategy for marketing and funding purposes, we would help the industry buyers implement their own branded campaigns by getting the message out there.
Funding Requirements The main stake of ROH service availability and sustainability is to ensure projected funding sources materialize, which is typically a big challenge for non-profits. We feel that we can
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justify funding to our program as studies have shown that “recycling by waste pickers saves municipalities money by reducing the volume of waste that needs to be collected, transported, and disposed of.” Studies further indicate that “waste pickers reduce the volume of overall waste by 30 percent, saving the municipality fuel, equipment, and labor costs and extending the life span of dumps and sanitary landfills” (Wilson, 2010). The same way Hindusan Lever Limited's soap program in India showed that savings in health care costs would cover total program cost after 2 years (Prahalad, 2006), we are confident that we can draw the same conclusion regarding environmental impact and recycling, which has a world market worth of $410 billion according to environmental services company Veolia (Waste Management World, 2007). The fact that our organization will diminish the government's burden of dealing with Dharavi's dwellers and also generate taxes yielded by a more formalized industry, we can get the government to recognize the triple bottom line benefits of informal recycling and therefore get some funding from it. The government could also provide an informal storage place not currently in use. We are aware of the presence of corruption or unwillingness that comes with governments in developing countries and therefore would like to rely on a diversified base of funding. Our research shows that we would be able to count on multiple donors and loaners. We would target World Bank, the Swiss Agency for Development and Co-operation and the UK Department for International Development, who work closely with India. Funding partnerships would also include Bombay Community Public Trust (BCPT), Concern India Foundation and Mahindra Foundation, all of which are focused on sustainable social development and waste management issues in India. As a whole we believe in co-operation between private and public sector service providers. Initiating conversations with public waste management as well as privately held recycling shops
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and plants will provide long-term funding through free trash picking permits, preferential contracts and compensation from advertising for companies. Finally, donations and partnerships with non-profits will help us raise the rest of the money. Putting it together in terms of number, we identified five main costs: The cost of personnel, averaging $20,000/year for a total of three managers, a warehouse lease averaging around $10,000/year, NGOs services calculated earlier as $54,750/year, and miscellaneous costs for permits and equipment averaging $2,000/year. As a result, our profit for the first year amounts to $132,250, which makes Ray of Hope a profitable venture right from the start, notably thanks to its monthly revenue.
The Market Our market is spread across the country, as there are several industries that will be interested in purchasing our recycled products. As a hybrid organization type we are catering to the needs of the rag pickers, which is the non-profit side of our business, and to the Industry that are looking for recyclable waste for the production of their components and parts.
The Industries The primary industry buyers of ROH products are the industries that receive our cleaned and sorted materials from the recycling warehouse. Since ROH saves the industry the cost of cleaning and sorting, the recyclable materials are sold to at a market premium. There are about 800 different industrial plants in Maharashtra (Census, 2004), which require recycled products in their manufacturing units. Catering and receiving orders from these clients will generate revenue for ROH and make it sustainable in the long run. The industries identified in the nearby areas of
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the slums are the ones that manufacture furniture, flooring, jewelries, roads, shoes, bags and accessories and computer parts. Social and environmental impact Rag pickers are exposed to health and safety risks while collecting materials for recycling. Our services will provide rag pickers necessary equipment and training to deal with the waste materials appropriately. ROH will provide them with work uniforms and masks to protect them from decomposing wastes and toxic substances. The indicators of the impact made by ROH will be based on the amount of waste collected and recycled, then sold to the industries. The more garbage collected and recycling done will indicate that people are aware of the benefits of recycling and how it can be used to generate income. It will lead to a cleaner and healthier environment. The rag pickers will be educated about the benefits that recycling creates. Since our primary target is the female population, educating them about recycling and how it can create benefits for the environment will automatically lead to the education of the entire family. They will in turn spread the word to their friends, colleagues and employees, which will create community awareness. The industries that receive these recycled products will be able to continue manufacturing their products and sell them at a profit. The more revenues the industries make, the more money municipal corporations and the government can earn in the form of taxes. Recycling papers and newspapers will help save the trees that are cut for manufacturing fresh paper. Recycling will reduce pollution by decreasing the amount of toxic substances that come from plastics and empty can into the environment. These wastes can cause significant damage to the environment. The manufacturing industry can make good use of the used materials to make their products from the plastic wastes.
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Recycling also reduces greenhouse gas emissions. This in turn will have a positive impact on the global warming scenario. Manufacturing plastics and paper from recycled materials requires less energy when compared to non-renewable resources.
Conclusion We found that in the largest slum population in India, rag pickers are the most in need of workforce development training and poverty alleviation. By establishing a business strategy that address the needs of these individuals, ROH has created a business model that will decrease the number of rag pickers earning less than $1/day while generating profits from its sale of recyclables. In addition to the benefits ROH will provide to its workers such as workforce training, mobile phones, and field supplies, ROH will partner with various NGOs by financing their activities of rag picker recruitment and retention. Once NGOs have organized rag picking teams, it will be easier for NGOs to provide additional services such as financial literacy and schooling for children of rag pickers. Through our process, we will achieve a triple bottom line of economic profit for ROH, improving the livelihood of rag pickers living in poverty, and reduction of landfill waste. Our process is not only effective, but also replicable for other cities and countries to adopt. The earning potential from recycling in the slums of Mumbai is tremendous and with the solutions provided in this report, Ray of Hope sees a better future for the inhabitants in Dharavi.
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Appendix A. Informal Recycling Industry
Figure 1. Example flow chart of an informal recycling system, showing four types of informal recycling (reproduced from Wilson et al.,2001).
Item
Rag Picker To Recycling/J unk Shop 0.065 – 0.075 0.04 – 0.065 0.28 – 0.30 0.10 – 0.13 0.41 – 0.43 0.26 – 0.30 0.03 – 0.04 0.13 – 0.15
Paper (mixed) Cardboard Plastic LDPE (Milk packets) HM (Thin Polybags) Hard Plastic Mixed Glass Iron
Recycling/J unk Shop to Wholesale r 0.10 – 0.11 0.075 – 0.09 0.37 0.15 0.43 – 0.48 0.43 – 0.48 0.05 0.19
Wholesal er to Recycling Industry 0.13 – 0.15 0.09 – 0.10 0.41 – 0.43 0.19 0.52
0.23 – .26
Figure 2. Estimated comparative prices in dollars (Venkateswaran).
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Appendix B. ROH’s approach to recycling
NGO
T1
Industry
Ray Of Hope T2 NGO Industry Rag Pickers T3
Figure 3. ROH will partner with two to three local NGOs by providing financial support. In return, NGOs will recruit and train three hundred rag pickers to work in one of thirty ten-person groups. Each group is responsible for collecting, cleaning and sorting a particular type of recyclable such as glass, paper, metal, etc. Groups will deliver bulk drops of recyclables to an ROH warehouse on a daily or weekly basis. Payments from ROH will be given to each group member via mobile bank account. ROH will then sell final products to Industry
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