Sustainability first - because for emerging market start-ups, there is no other choice
Over the last few years, the world witnessed a significant increase in capital flowing into sustainable investments, with sustainable fund assets reaching $4T in value in 2021, and ESG-related assets accounting for one in three dollars managed globally. Across the world, companies solving for environmental and social challenges are attracting unparalleled levels of funding, mainly in creating solutions that ‘fix’ pressing global challenges.
Sustainability is an expansive concept. In its broadest sense, it is about meeting our needs without compromising future generations’ ability to meet their own. This definition, however, requires a local nuance since the specific challenges, limitations and needs differ across contexts… as does the solution. This begs the question: what does sustainability mean in emerging markets?
If the common consensus is that private companies play an essential part of the solution, then founders are protagonists in the journey toward creating healthy and thriving communities while protecting the planet. When it comes to building businesses that actively contribute to and advance the sustainability agenda, the approach differs across markets. For emerging market companies specifically, sustainability is not something that they become after the fact, it is something they inherently are. Local realities make it that sustainability, in the definition above, is an intrinsic part of the business model and a pre-requisite for a company’s long-term viability and success.
In these markets, founders operate within a challenging environment from the onset. The resources and infrastructure typically available for companies in more mature economies are either scarce, incipient, or non-existent in emerging markets, which pushes entrepreneurs to build localized solutions around these limitations, and ultimately creates businesses that are sustainable by default. For example, whereas companies in many parts of the world have to search for alternative fuels as a choice, most emerging market mobility companies need to build solutions that are non-fuel reliant simply because of the historical cost of fuel compared to household income and even more so, its lack of availability. This also applies to electricity, which is undependable and inconsistent in most markets and by natural extension, internet.
As a result, when asked about sustainability, the position that most emerging market founders find themselves in is to share that this is, by default, a consideration necessary for a viable business model:
- When Helium Health, a Lagos-based electronic medical record system, was first envisioned, it was set to solve data fragmentation in healthcare in Africa, where less than 30% of hospital visits are documented. When exploring the reason for this, it was quickly identified that most Electronic Medical Record systems are internet-based, and rely on electricity and computers. The next step for them was to create ways for hospitals to collect data without depending on electricity and internet and so, they built an off-line first Electronic Medical Records (EMR) system. Today, 550 facilities have integrated with Helium Health’s EMR, across 35 cities in 6 African countries. Over 7000 medical professionals from these facilities now provide care to more than 310,000 patients every month. The company also grew to become a full stack solution for the healthcare value chain in Africa, and beyond.
- Proximie, an augmented reality tool that enables surgeons to virtually scrub into any operation theatre in the globe, expands access to surgery for the 5 billion people who are unable to undergo necessary medical procedures in a safe and affordable manner. The company was created out of the frustration that in most emerging markets, there aren’t enough surgeons and most operating rooms are often located in basements with lack of connectivity. Proximie was built to be available offline, wireless and low bandwidth. The software was designed so it is not limited by infrastructural constraints, making it accessible to more markets worldwide. The company has enabled over 15,000 surgeries worldwide, and is used more often in the US and Europe than emerging markets, reducing the fuel and travel requirements (carbon emissions) surgeons need to assist with specialist surgeries – a company that has truly impacted sustainability on many levels.
- Born in the arid deserts of Saudi Arabia, a country where food insecurity is a harsh reality exacerbated by climate change and the absence of arable land, Red Sea Farms is growing food in the desert using the earth’s most abundant resources and in so doing, cutting water consumption by 90% and energy consumption 10-fold. In most emerging markets, where the cost of energy is prohibitively expensive for more ‘western’ business models, and where the challenges of access to water (and dependable electricity) challenge any fundamental agritech business model, the ability to reduce the consumption of these two resources is at the core of a successful business, not an afterthought.
- On their mission to solve the challenge of mobility across Africa, the founders of Max, a Nigerian logistics start-up offering a range of mobility services, quickly realized that doing that successfully was ultimately a matter of addressing the issue of vehicle access for drivers. They sought to create a solution that grows driver earnings and reduces their operating costs. This naturally led them to electric vehicles, since they are 50% cheaper and 100% eco-friendly (and therefore more affordable to drive, particularly given recent fuel shortages around the world). The positive sustainable impact of the eco-friendly feature was, again, a side-effect of the necessity of a solution that did not require traditional energy consumption, given the expensive and unpredictable availability of oil and gas solutions in these markets. Max currently designs and assembles its own line of electric motorcycles that they provide to drivers through leasing and financing options.
Unlike other industries, the horizontal nature of sustainability as a sector-agnostic necessity means that we are all stakeholders in its agenda. The attractive opportunities of tomorrow will not only be those with attractive returns and high valuations, but those that are sustainability focused, who are creating uninterrupted access to basic human needs in ways that are affordable, sustainable and environmentally conscious. Within this paradigm shift, emerging market founders and their businesses will become a model for the businesses of tomorrow as their business models are indeed, sustainability-first at their core.