Choose Abundance Over Scarcity
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Jibu's journey to affordable clean water
On the heels of the hottest July and August on record, there was renewed focus on reducing carbon and methane emissions to slow global warming at New York Climate Week. Keynotes and panels on energy transition, greenhouse gas (GHG) reduction, market regulation, and ESG accountability (i.e., no greenwashing) took center stage. Nonetheless, carbon finance, a potential game-changer for enabling access to affordable products and services for low-income and marginalized people most affected by climate change, received insufficient attention. For many early-stage enterprises operating in emerging markets, the practical aspects of carbon certification remain a mystery.
To address this knowledge gap, Jibu’s co-founder Galen Welsch provides meaningful insights based on firsthand experience. Jibu, an award-winning enterprise established in 2012, enables access to clean drinking water (SDG 6) and other essential products to hundreds of thousands of people across Africa. After a decade of operations, carbon finance emerged as a worthwhile endeavor for Jibu.
Having leveraged traditional funding sources — grants, loans, debt, equity, philanthropy, friends and family — to expand into eight African countries (Rwanda, Zambia, DRC, Kenya, Tanzania, Uganda, Burundi, and Ghana), market forces and unit economics had put increasing upward pressure on prices. By 2023, Jibu’s rapidly expanding social franchise network, creating thousands of new businesses and jobs, mostly for youth and women (SDG 8), had grown sufficiently to justify undertaking the resource-intensive and time-consuming carbon credit certification process.
By leveraging carbon finance, Jibu aims to keep prices affordable and reach more customers in need of clean drinking water.
While the establishment of 189 franchises and 10,000 retail points for distribution of over 750 million liters of water had proven the model, the drive to have the greatest impact on people living in poverty underpinned Jibu’s decision to pursue carbon credits. Significant U.S. dollar expenses for clean water treatment systems and water bottles, combined with reduced revenues due to local currency depreciation, created a growing financing gap. This underscored the value of carbon finance as an additional funding stream to keep prices affordable for customers.
Driven by a passion for entrepreneurship, Galen Welsch, Jibu’s co-founder established a social franchise model that creates meaningful business ownership opportunities across emerging markets. Jibu finances, equips, and trains entrepreneurs to launch and grow drinking water franchises. It installswater treatment systems in high-visibility, mainly urban retail points, enabling entrepreneurs to treat water onsite from a local source, package it in reusable 20-liter bottles, and distribute within a one to two-kilometer radius. The production franchises serve 50-100 retail points (B2B) or direct customers (B2C) immediately surrounding them.
Unique to Jibu is how they combine financing with a typical franchise model. Jibu identifies entrepreneurs to deliver safe drinking water at affordable prices in their communities. As local ownership and empowerment are central to the vision, Jibu provides the entrepreneur with financing alongside the franchise system — “the tracks to run on,” according to co-founder Galen Welsch.
Jibu’s capital-intensive growth model for expansion into new regions and reliance on low-cost funds, especially to subsidize water processing in areas of deep poverty, spurred the decision to undertake the carbon accreditation process. Despite variability in the price of carbon credits, Welsch foresaw that Jibu had reached sufficient scale for the certification process to be worthwhile. Also, competition from clean water social enterprises that have incorporated carbon credits into their model made certification inevitable.
In spite of the earlier calculation, current significant shifts in the carbon market have led to new regulations, taxes, and evolving policy frameworks. Increased scrutiny and higher compliance standards imposed by many governments have driven up the cost of certification and participation in voluntary and compliance carbon markets, making them less profitable for Jibu, particularly for smaller projects.
As a result, many carbon markets are no longer profitable, leaving only a few countries where Jibu operates, such as Rwanda, feasible and economically viable. Mainly, this is due to Jibu’s well-established operations there and large number of credits.
Meanwhile, competition from clean water social enterprises that have incorporated carbon credits into their models made certification inevitable.
Factors that influenced Jibu’s decision:
Demonstrating Jibu’s potential to reduce carbon emissions can be a powerful way to attract new investment and funding.
South Pole met all of Jibu’s key criteria in choosing a carbon finance partner:
“It was a no-brainer,” said Welsch about choosing South Pole. No other potential partner provided pre-financing, was willing to do the work themselves, or was as cost-effective. Given Jibu’s strategy of treating carbon finance as supplemental, Welsch did not want to invest in financing, hire a team, and expand bandwidth to develop the credits. South Pole brought an inclusive package and was the lowest-cost partner. The aligned partnership enabled Jibu to maintain its core business focus without having to dedicate additional headcount or divert resources.
Of critical importance, Jibu benefited from existing relationships and outside support to negotiate from a position of strength. Having participated in the accelerator at the Miller Center for Social Entrepreneurship at Santa Clara University, Jibu drew on the center’s resources for:
As a mature business with a proven potential for a large volume of credits, Jibu was in a stronger position to push the margins to a reasonable level. Based on advice from experienced climate attorneys, Jibu negotiated a commission of 18-20% of the carbon credit revenue with South Pole, compared to 40% in other instances.
Given projections from South Pole, Jibu estimates that carbon credits will generate $250,000 to $350.000 per year. The credits apply only to new customers in Rwanda, as there must be additionality. Existing volumes are excluded. Despite volatility in carbon credit pricing, the revenue will significantly impact Jibu’s capacity to keep prices affordable and drive-up income for entrepreneur franchises.
Carbon finance is not the only lever Jibu is managing to maintain affordability; it is one additional tool. According to Welsch, “carbon credits are the icing on the cake”, enabling Jibu to reach more customers and have greater impact.
Embarking on carbon certification, Jibu has several lessons to share with social enterprises considering the process:
Despite uncertainties around carbon market regulation, price volatility, and potential reputational issues related to verification and accountability, Jibu applied discernment in its decision to develop carbon credits. By leveraging carbon finance, Jibu aims to reach more low-income customers with affordable clean drinking water. Time will tell the full upside return of carbon credits. The initial outlook is promising.
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