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Go Where The Money Is: Sanitation And Water

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By John Richardson on 04-May-2016


By John Richardson

HOW do you define global progress? Is it the number of extra people each year who are able to afford to buy a smartphone, or is it the number of additional people who are given access to modern sanitation?

The thing is that ownership of smartphones will soon reach  ceiling until or unless basic needs – such as better access to modern sanitation – are better satisfied. If you are so sick from all the diseases linked to poor sanitation, then, of course, you are never going to be able to attend school and get the education necessary to earn enough money to buy a smartphone in the first place.

So it seems a dreadful waste from an economic growth standpoint – never mind the moral issue – that, as our new Study points out, 2.3bn still lacked access to modern sanitation in 2015 compared with 2.7bn people in 1990. This is obviously not just about my example of affording smartphones, but is also about being able to buy all the modern-day consumer goods and services that are made from chemicals and polymers.

Let’s take water as another example, where our new Study also details that:

  • Globally, 20-30% of drinking water is lost because of leakages in urban distribution systems. Huge opportunity for plastic pipes.
  • Almost 60% of the world’s fresh water goes to crop irrigation, with many countries charging nothing for its use.

The opportunity for the chemicals and polymers industry is two-fold here.

First of all, there are the many hundreds of thousands of tonnes of, for example, extra polyvinyl chloride (PVC) resin demand that would be generated through a global programme aimed at providing much better access to modern-day sanitation. One of the major end-use applications for PVC is in sewerage pipes.

Equally, just think of all the polyethylene demand that would be generated through much wider use of drip irrigation systems – i.e. plastic pipes or “veins” – that would save drinking water by directing water directly to the roots of each plant.

Then you get the second order effect I described above – of millions more people in the emerging world being able to afford modern-day consumer goods for the first time.

And think about a second order effect bonus that can be specific to your chemicals company. You have already helped provide, say a government in Africa with low cost PE to make drip-feed irrigation pipes. This in itself has delivered many thousands of tonnes of what is, in effect, “captive demand” to your company to make all of this irrigation pipes.

But then a basic plastic processing industry starts to grow in this country because basic needs have been met for the first time. Thanks to the goodwill you have created, you become a preferred supplier of PE to these plastic processors.

Sure, CEOs will argue that this has nothing to do with their daily grind of delivering constant quarter-on-quarter improvements in financial results.

But the CEOS that want to still be around in three years, very likely  less, need to recognise that the economic Supercycle is over – for good. What I describe above should not, therefore, be seen as idealistic, but instead extremely pragmatic. Helping to meet basic needs in emerging markets is, in fact, one of the only ways to guarantee the future success of your chemicals company.

In a separate and later post, I will look at you how also need a completely new growth strategy in developed markets.