Intro
Main business solutions
Example: Hygiene & Sanitation

  

In the recent economic slowdown, scarcity of resources and associated concerns related to environmental pollution are beginning to re-emerge as major issues, particularly in emerging markets. These concerns manifest themselves and are intensified in urban areas which are undergoing rapid urbanisation resulting in problems such as over crowdedness, contaminated water, poor sanitation and air pollution. Problems are further heightened by emerging problems of industrial and agricultural pollution. Companies that capitalise with solutions stand to benefit from vast opportunities, especially as these markets will become major resource consumers. Increasing consumption of finite resources (e.g. oil) and overexploitation of potentially renewable resources (e.g. water or land) is increasingly placing pressure on their availability and/or quality.


Population growth leads to rising consumption and increasing pressure on scarce resources
















(source: Goldman Sachs, July 2010)


Key priorities include tackling water scarcity to sustain growth, moderating escalating energy demand with a combination of efficiency and renewable solutions, and securing adequate food supplies to meet existing and growing food demand. Market opportunities will expand as local, national and international authorities have shown a growing interest in the fields of imposing limits on resource extraction (e.g. fishing quotas), encouraging recycling and greening of products, requiring better assessment and mitigation of extractionís environmental impacts, funding green energies, while ensuring the provision of basic services. These business opportunities will concern a wide range of players, from equipment manufacturers to service providers.

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Main business solutions serving resource scarcity and environmental degradation pressures:

• Food Productivity: companies which promote changes in consumer patterns towards lower meat diets; offer efficient agricultural technologies (e.g. irrigation); enable increased agricultural productivity in the long-term. This aspect is tackled in more detail within a previous Dexia AM research paper on Food Scarcity
• Hygiene & Sanitation: companies offering waste and water treatment products and services, but also, personal hygiene products aimed at consumers, primarily in emerging and developing markets
• Management of Resources: companies involved in resource exploration; developing alternative materials and processes to traditional resources (e.g. new fuels, recycling, renewable energies); as well as providing resource efficient technologies.1
  
  
   

Business Solution Example: Hygiene & Sanitation

An estimated 90% of all wastewater in developing countries is discharged untreated directly into the natural environment, resulting in it becoming a key vector of disease. According to the UN/WHO, some 2.2 million people die globally each year from diarrheal/water-linked disease, among which 1.8 million are children. This situation is reinforced by the lack of resources to promote and preserve health, combined with limited infrastructure for managing waste. Apart from obvious social health impacts, it also affects the economy through reduced productivity and further damages natural resources such as marine ecosystems. For example, in China, the direct costs of water scarcity and water pollution are estimated to be 2.3% of GDP.2

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Ratio of Wastewater Treatment


(source: UN Habitat, 2010)
An estimated 90% of all wastewater in developing countries is discharged directly into rivers, lakes or the oceans


China Everbright International is a Chinese conglomerate which disclosed for 2010 strong revenues (+60%) and profits (+34%) compared to 2009. While the construction and operation of  waste-to-energy power plants accounts for its fastest growing segment, its historical environmental water project branch still contributes to about 30% of its 2010 revenues and profits. This segment engages in the construction, upgrade and operation of wastewater treatment plants, reusable water treatment plants and surface water treatment plant. Owing to urbanisation and industrialisation rates, wastewater is expected to reach 79 billion tons by 2015 compared to 57 billion tons in 2008. Current wastewater treatment infrastructure is still inadequate, and this has resulted in a large demand for investment.3 During 2010, Everbright water projects treated more than 460 billions m³ of wastewater, representing an increase of 18% compared with the previous year. This increase in volume has had a direct positive impact on operation service revenues and profit.

Another interesting player in the Hygiene & Sanitation field is Suez Environnement. The company is regarded to be among the two leading water and waste operators in the world with a presence in 25 countries. It offers a fully integrated range of services along the water and waste value chains. Suezís contribution to the right of access to water and waste services is clearly demonstrated; during the past 15 years, it has brought drinking water to over 11 million people and connected 5.3 million people to wastewater service networks. The secular growth for environmental services (water and waste management) is mainly driven by new infrastructure needs in emerging markets (along with upgraded installations in developed markets). Suez should be able to increase capex in 2011-2012, while also gradually reducing its gearing ratio. Suez is well placed to take advantage of the continued growth in international water projects, notably through its continuing presence in China.