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Creating Wealth from Waste: Business Plan Draft, April 2013 Resource Recovery and Reuse (RRR) is a strategic research portfolio within the CGIAR Research Program on Water, Land and Ecosystems.

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Page 1: Creating Wealth from Waste · Creating Wealth from Waste: Business Plan ... Further funds are required to support, for example, cross-regional testing of the feasibility of business

Creating Wealth from Waste: Business Plan

Draft, April 2013

Resource Recovery and Reuse (RRR) is a strategic research portfolio within the CGIAR Research Program on Water, Land and Ecosystems.

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Current study locations

Creating Wealth from Waste: Business Plan Resource Recovery and Reuse (RRR) is a strategic research portfolio within the CGIAR Research Program on Water, Land and Ecosystems. This document presents the investment opportunity from RRR’s Research for Development. It describes the need for RRR’s research, the research agenda and specifies its value for donors and partners.

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Resource Recovery and Reuse (RRR) is a strategic research portfolio within the CGIAR Research Program on Water, Land & Ecosystems (WLE), led by the International Water Management Institute (IWMI). RRR provides research for development (R4D) solutions in the interface of agriculture and sanitation in low-income countries via its three inter-linked activity clusters: ‘Creating Wealth from Waste’, ‘Safe Wastewater and Excreta Use’, and ‘Peri-urban Solutions’. RRR’s value offer for investors and partners is: - Providing demand-driven development solutions in the waste-based value chain through recovery and reuse

of nutrients, water and energy available in different domestic and agro-industrial waste streams. - Providing expertise on which business models work best in which situations and why, supporting the

decisions farmers, entrepreneurs, policy makers, planners, investors and civil society need to make. - Offering insights into and knowledge-based support for exploiting at scale innovative value chain

opportunities that arise from recovery and reuse of waste, also for social enterprises. - Offering expertise on locally viable food safety interventions where waste resources are used for food

production by applying the multi-barrier approach of WHO to minimize pathogenic exposure of farmers and consumers, e.g. where wastewater is used for irrigation.

IWMI’s RRR program is a trustworthy and lucrative partner for investors because of its unique, multidisciplinary expertise in sciences (agriculture, environment, social sciences, economics, engineering, human health), in business modeling, entrepreneurship and business development, its excellent presence across Asia and Africa, and its embedding within the CGIAR system with an array of strong partners and networks working on poverty alleviation and food security from innovative development solutions. To support the larger WLE development goals RRR will over the course of 10 years deliver a defined set of research for development (R4D) Outputs, Milestones and Research Outcomes via strategic impact pathways, with an annual budget of currently US$ 4.5 m. Further funds are required to support, for example, cross-regional testing of the feasibility of business models and safety guidelines, regional investment marketplaces, and policy dialogues. The intended research impact on the ground will have a real value to society and to investors: Over the course of 10 years it will reach out to about 20 million small farmers using polluted water to feed about 100 million urban consumers. These farmers and consumers would benefit in terms of nutrition, food safety and food security from safer production practices and low-cost fertilizer produced from organic waste. With a high cost-effectiveness of US$20-80 per averted DALY1 our tested safety measures have a Return on Investment (ROI) of US$ 4.9 per dollar invested. The ROI of business models for RRR should be higher considering that there will be gains for farming, urban food supply, environmental safety and public health if returns are fed back into the sanitation service chain. Cost savings through better solid waste and fecal sludge composting in Asia and Africa could reach several billion US$ per year, assuming a market for 25% of the generated urban organic waste, and reduced greenhouse gas

emissions of up to 13 million tons CO2-e per year.

1 The disability-adjusted life year (DALY) is a measure of overall disease burden, expressed as the number of years lost due

to ill-health, disability or early death.

Executive summary

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The solution-oriented research for development that RRR undertakes creates tangible development impacts and shows a history of proven value to investors in the form of significant Return on Investment. Our value offer to investors and partners comprises of:

Value offering

Providing demand-driven development solutions in the waste-based value chain through recovery and reuse of nutrients, water and energy available in different domestic and agro-industrial waste streams. Used as valuable inputs for flourishing private and/or public enterprises, these solutions will make a significant contribution to food -, water-, and energy- security, human health and livelihood, and environmental integrity.

Providing expertise on which business models work best in which situations and why, supporting the decisions farmers, enterprises, policy makers, planners, investors and civil society need to make to achieve more sustainable use of water, land and ecosystems across the rural-urban divide.

Offering insights into and knowledge-based support for exploiting

at scale innovative value chain opportunities that arise from

recovery, valorization and reuse of waste, also for social

enterprises.

Offering expertise on locally viable food safety interventions where waste resources are used for food production by applying the multi-barrier approach of WHO to minimize pathogenic exposure of farmers and consumers, e.g. where wastewater is used for irrigation.

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Increasing urbanization amid persistent poverty increases pressures on the allocation of natural resources in many developing countries. While millions of smallholders in low-income countries struggle with depleted soils, lack of water and limited access to energy, urban centers generate millions of tons of waste every day. This waste is rich in water, nutrients and energy, but it is not being managed in a way that permits us to derive value from it. In fact, uncollected and untreated waste continues to burden our environment and public health. Especially peri-urban areas suffer from the negative urban footprint. The resulting challenges from an agricultural perspective are two:

• Risk reduction where waste is reused and food safety and environmental health are at stake. • Turning the growing waste streams into an asset for demand-driven development solutions.

Although some waste reuse processes, such as composting, are well-known, most initiatives aiming at safe resource recovery and reuse remain small, often not surviving beyond their pilot phase. A major reason is the historical reliance on public‐sector subsidies in the waste sector which prevents until now the adoption of market driven mechanisms, business planning and development in the provision of sanitation services including RRR.

The problem in figures

Globally, an estimated 2.6 billion people lack access to adequate sanitation. An estimated 24% of the global disease burden and 23% of all deaths can be attributed to related environmental factors.

Conventional sanitation systems dump annually around 50 million tons of fertilizer equivalents with a market value of US$ 15 billion into water bodies.

Each day, an additional two million tons of solid waste are discharged into the environment, polluting soils, rivers, lakes and coastal areas.

In developing countries, more than 80% of the wastewater discharged into water bodies is untreated, contributing e.g. in India to 70% of all surface water pollution.

Farmers on about 20 million hectares worldwide are in contact with poorly treated wastewater, growing crops which are consumed by an estimated 10% of the world's population.

In Sub-Saharan Africa, nutrient depletion accounts to more than 7% of the agricultural GDP.

Ecosystem Services worldwide provide a worth of US$ 33 trillion per year. A significant portion of this value (60%) refers to nutrient cycling, pollution control and waste management. Environmental deterioration due to waste dumping affects in particular crucial regions for these services, like coastal areas and wetlands.

Sources: UN

Problem to be solved

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Our vision

Waste is both a resource and a business opportunity. We envision across low-income countries smaller and larger enterprises safely recovering water, nutrients, energy and organic matter from domestic and agro-industrial waste streams, supporting food production and enabling revenue generation in the sanitation service chain.

Our rationale

Hopeful signs of viable approaches to resource recovery and reuse are emerging around the globe, especially in low-income countries. Many of these new commercial pathways are being charted in the informal sector, or are building on public-private partnerships based on innovative approaches, private capital and business models for cost recovery, social benefits or profit. These enterprises target wastewater reuse; co-composting of different organic wastes, including fecal sludge; and waste-based energy systems, shifting the focus from treatment for disposal to treatment for reuse. Our goal is to understand and verify the potential of these enterprises for replication, within the same and in different settings and regions, and at the largest possible scale. We are focusing on existing, emerging and potential RRR business models and their enabling conditions from technical, economic, regulatory, cultural, and institutional perspectives. As the use of waste resources can pose risks for human and environmental health, special attention is given to risk assessment, perceptions and mitigation, in close collaboration with WHO.

Solutions

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Pertinent questions

In order to address the issues on resource recovery and reuse, our research will provide answers to important questions:

What are the characteristics and success factors of viable, scalable business models for the safe recovery and reuse of water, nutrients and energy in a low-income country?

What is the implementation potential and scale in low-income countries of such business models that provide marketable water, fertilizer and energy products?

What are the local cultural, religious, social, and gender barriers to mainstreaming safe resource recovery from waste streams in agriculture, and how can we change perceptions and behavior to minimize the health risks associated with the use of excreta based products?

How can the value of ecosystem services be geared through resource recovery and reuse systems?

How much public funding is needed to stimulate business development? What programs are helpful in reducing the sanitation sector’s reliance on financial aid, and what roles do resource recovery businesses play in financing and managing parts of the sanitation value chain?

How will population growth and climate change affect wastewater generation, management and reuse, and how far could peri-urban areas benefit to increase the resilience of cities or buffer their negative footprint?

To what degree do the answers to these questions vary across countries, cultures and regions or by the type of waste stream and business considered, and how can we guarantee that gender concerns are incorporated as part of doing smart business?

Our implementation strategy

Our research will provide guidance regarding the size of addressable markets for resource recovery and reuse

(RRR), the subsidies that may be needed to spur private‐sector involvement in many settings, and the economic

and social benefits attributable to the provision of those subsidies. We have the expertise to estimate the

market and non‐market benefits of RRR programs, to understand potential equity considerations, and to

describe the potential for successful involvement of private‐sector firms.

We aim to create impact through three lines of action:

1) Developing scalable business models that offer entry and support to enterprises of different sizes and PPP,

and that offer routes to realizing economies of scale and substantial social benefits.

2) Addressing issues of public safety and health risks: we will deliver options for assessing and mitigating risk

and enhancing social awareness of RRR. We will also determine optimal forms of social marketing,

regulations and incentives to encourage desirable changes in perceptions, behavior and practices.

3) Conducting institutional dialogues and developing fruitful partnerships across the agricultural and sanitation

sectors, we will work with public and private entities to promote long‐term capacity building in RRR,

guideline development and policy support.

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To enable promising as well as new business models to succeed at largest possible scale, we are learning from

existing or emerging RRR cases to understand their technical, economic, regulatory, cultural, and institutional

conditions, and in particular their business plan.

In a second step, we are testing the application potential and robustness of promising models across Asia, Africa

and Latin America via local feasibility studies within similar and different settings. In working to reach our aims,

our activities will focus on three key areas:

1) Developing innovative partnerships aiming at private‐ and public‐sector support for the uptake of successful

business models, accompanied by action research and stakeholder dialogues within and across formal and

informal sectors.

2) A four‐step rolling work plan that enables our research to learn from existing successes and failures in the

analysis of business models, the study of their feasibility at scale in different settings, and actual business

model implementation, as shown below.

3) The development of Sanitation Safety Plans, safe reuse guidelines, strategies and policies in close

collaboration with WHO and national authorities.

In our approach to realize development outcomes (see section below on ‘Deliverables’), we combine Impact

Research and Innovative Partnerships, which include:

Analysis of new, emerging and established business models for RRR with a high level of cost recovery, social

benefit, or profit.

Action research in RRR options that include fertilizer pellets and fish food from fecal sludge, field and

greenhouse trials on crop yield responses, and gender-sensitive safer irrigation practices.

Development of investment plans (preceded by feasibility studies) to enable the safe replication of business

models at scale in various locations across Asia, Africa, MENA and Latin America.

Partnerships with business schools, private and public sectors, directed at learning with and for

entrepreneurs.

Assessment of health and environmental risks, risk perceptions and options for behavior change and pro-

poor risk mitigation.

Close partnership with WHO, FAO and other UN bodies feeding research back into the development of

global public goods, in particular reuse guidelines and Sanitation Safety Plans for operators of RRR facilities.

Interlinkage with professional networks, such as the International Water Association and the Sustainable

Sanitation Alliance, to steer the development and distribution of best practices and business models.

Assistance in drafting guidelines, regulations and policies on safe waste management for reuse in

agriculture, aquaculture, forestry and landscaping.

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Our research will lead to freely accessible international public goods, intermediate development outcomes (IDOs) and sustainable development goals (SLO) via distinct levers of change within our Activity Clusters. Impact pathways will vary between regions but can be generalized as shown below.

Deliverables and Impact Pathway

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Timeline

The impact of our activities increases as we progress along specified impact pathways from Outputs to

Outcomes and from Outcomes to Development goals. The pathways are supported by four lines of action:

- Strategic partnerships, i.e. the UN-Water capacity building program or business schools.

- Targeted communication, i.e. policy and private sector dialogues.

- Research into Uptake, studying e.g. risk perceptions and incentives for behavior change.

- Monitoring and Evaluation, including ex-ante and ex-post impact assessments.

The timeline below indicates estimated and not exact delivery dates. Some milestones will be measurable at a

given time (e.g. feasibility studies, donors and business schools feedback), whereas other milestones will be

more gradual in character (e.g. improved urban agriculture and waste reuse).

Timeline of deliverables from Impact Pathways

Regional focus

The RRR program has global activities and outputs with a current regional focus of activities in South Asia and

West Africa. Country activities are ongoing in Bangladesh, Ghana, India, Nepal, Peru, Sri Lanka, Uganda, and

Vietnam. The program will support the identified WLE focus areas, in particular in the Volta/Niger basins and

Indus/Ganges basins with a strong focus on rural-urban interactions and the peri-urban interface.

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Benefits and value to society The estimated benefits and value of our R4D to society are as follows:

• Over the course of 10 years our impact pathway will reach out to about 20 million small farmers currently

using polluted water to feed about 100 million urban consumers.

• These farmers and consumers will benefit in terms of nutrition, food safety and food security from safer

production practices and low-cost fertilizer produced from organic waste.

• With a high cost-effectiveness of US$20-80 per averted DALY2 our tested low-cost measures for safe

wastewater and excreta use have a Return on Investment (ROI) of US$ 4.9 per dollar invested3.

• The ROI of business models for RRR should be higher considering that there will be gains for farming, urban

food supply, environmental safety and public health if returns are fed back into the sanitation service chain.

• Cost savings through better solid waste and fecal sludge composting in Asia and Africa could reach several

billion US$ per year, assuming a market for 25% of the generated urban organic waste.

• Greenhouse gas emissions can be reduced to up to 13 million tons CO2-e per year.

Value to investors Our R4D into resource recovery and reuse is valuable

to investors. Every US$ 1 invested in farm- and off-

farm based safety options for wastewater and

excreta use1 yields US$ 4.9 in returns which comes

close to investments in improved sanitation4 which

yield on average US$ 5.5 in returns. In both

assessments, public health benefits are valued, not

any reuse value. Thus the ROI of safe RRR

interventions will be higher depending on the value

proposition (agriculture, aquaculture, forestry,

landscaping, energy, etc.).

2 The disability-adjusted life year (DALY) is a measure of overall disease burden, expressed as the number of years lost due

to ill-health, disability or early death. It is a metric which is independent of the type of the disease allowing cross-disease comparisons. 3 Drechsel and Seidu, 2011 http://www.tandfonline.com/doi/full/10.1080/02508060.2011.594549; with a DALY value for

low-income countries according to John and Ross, 2010. http://media.marketwire.com/attachments/EZIR/627/18192_FinalJournalManuscript.pdf 4 Hutton, 2012. http://www.who.int/water_sanitation_health/publications/2012/globalcosts.pdf

Benefits and value

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Our competitive landscape

Our closest partners, with complementary strength are development-oriented science groups or research

organizations outside the CGIAR which are eligible to receive development funds, and that are working on:

• Resource recovery technologies in low-income countries (e.g. SANDEC-EAWAG in Switzerland)

• Reduction of the waste problem in low-income countries (e.g. WASTE in The Netherlands)

• Reduction of environmental pollution and/or human health risk in low-income countries (e.g. Swiss TPH)

• Sustainable sanitation and closed loop processes (e.g. members of the SuSanA network)

What sets us apart

• Through ten offices in Asia, Africa and Latin America we are working in close collaboration with national

research partners and authorities. We have a profound understanding of local, regional and global

development needs and opportunities which is multiplying the effectiveness and efficiency of any

investment.

• We believe that solutions to RRR need aside technological advances sound business approaches to waste

supply, resource demand and strategic partnerships. The RRR team is thus combining experience in

agriculture, economics, environmental sciences, social science and public health, with business modeling,

entrepreneurship and business development.

• We work closely with various global change agents, like BMGF, WSP, WHO, FAO, UNEP, IWA etc. for

maximum outreach and policy dialogue.

• CGIAR’s reputation of working on Research for Development. IWMI’s reputation on excellence in Research

for Development in the interface of water, agriculture, ecosystems and sanitation.

• RRR builds on a decade of IWMI experience working on safely recovering water, nutrients and organic

matter from liquid and solid waste streams for agriculture and aquaculture in Africa and Asia.

Competitive advantage

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Resource Recovery and Reuse’s target audiences are: development donors, business schools, media, the public,

research organizations, field-specific public and private sector, and policy-makers especially in urban and peri-

urban areas. Recognizing the different types of information needs these different audiences have to be able to

actively receive and use our information, we will communicate our R4D intentions and results to these

audiences using varying approaches, as outlined in the communications matrix below.

Three aspects of resource recovery and reuse, and the implementation of solutions, are crucial in

communicating with stakeholders, and these will be salient throughout our communication strategy:

1) The novelty of the subject and a strong business approach, also within the CGIAR – this requires focus on

awareness rising.

2) The sensitivity of the waste reuse subject– this requires high sensitivity in communications both directly and

indirectly with the public.

3) The sensitivity of business data. To analyze business cases, we are building relationships of trust to balance

the needs of our partners with the CGIAR commitment to an open-access policy and the production of freely

accessible international public goods.

To support the effective management of

above aspects, RRR will make strong efforts

to pro-actively engage specific audiences,

including media to influence public opinion.

Concerning the need for sensitive and well-

balanced out communications, RRR

envisions careful research into

communications strategies for behavior

change at individual or institutional level, for

which required budgets are allocated.

Marketing & Communications strategy

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Communications matrix

Audience Target-objectives Messages Tools & channels M&E

Donors Retain donors’ interest in

R4D; attract interest of

new donors incl. private

sector / foundations.

Progress & performance

information; R4D

intentions & funding

needs & investment

opportunity statements

(ROI); success stories.

Progress reports, funding call

reactions and targeted

dialogue; Via agreements,

donor websites, personal

communications; social

media, investors’ hubs.

Funding patterns;

direct calls .

Media Ensure media’s favorable translation of our R4D; reaching senior policy-makers; avoidance of messages resulting in wrong risk perceptions.

Success stories; needs stories; potential policy statements; facts on risks and risk mitigation.

Pro-active engagement of selected media; Interviews; press releases; linked to WLE and IWMI communications team.

Media coverage extent;, media coverage content; Policy activity in relation to subject.

The public &

public sector

Awareness raising; ensure the public sees the benefits of our R4D results and understands that risks are managed.

Success stories, needs stories.

Social media, own website & websites of civil society & opinion leaders. Through media, business school curricula.

Opinion leaders’ content; Civil society activities & document content; Media content. Perception studies, investment patterns in RRR.

R4D

organizations

Scientific recognition; possible science partnering; learning.

Science results; impact analyses; how can we improve our scientific program (learning).

Journal articles, reviews, notes; Journals, social media, own website. Targeted emails.

Publishing records, citation records. Methodology replications.

Private sector Get interest in partnering in implementation activities, interest in financing solutions.

Investment opportunities, partnering opportunities.

Investment briefs; business model catalogues for business school curricula; investors’ and industry hubs.

Implementations, new partnerships. Investment patterns in RRR.

Farmers Safe use of waste resources.

Verified guidelines and best practices.

Radio, FAO farmer field school manuals; NGOs, extension staff, outgrower associations.

Compliance monitoring.

Policy-makers Gain interest in implementation activities, policy-change.

Policy notes, success stories, investment opportunities.

Policy advice notes. Policy briefs; through media, donors and UN networks.

Policy statements, implementations.

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The current annual budget (2013) is US$ 4.5 m. It supports the analysis of RRR businesses across Asia, Africa and

Latin America, and RRR feasibility studies in 8 urban areas in the same three regions, the production of safety

guidelines and first Sanitation Safety Plans for selected waste to resource investment options. Funding is also

available for several activities on the safe use of wastewater and fecal sludge in agriculture in West Africa and

parts of South Asia based on a variety of value propositions.

As a significant portion of funding is restricted (Windows 3) and usually limited to 3 year periods, funding is

sought to close the gap via Window 2 support. The current funding gap for full performance is US$ 1 to 1.5m.

Unfunded or underfunded milestones per RRR Activity Cluster are as follows:

Activity Cluster 5-year budget

(million US$)

Unfunded and Underfunded Milestones

Creating wealth from

waste

11 Creating a RRR business incubator

Regional investment marketplace conferences

North-South learning on applied RRR solutions

Feasibility studies for private-public partnerships for selected RRR business models

Cost recovery for wastewater treatment and reuse (MENA)

Promoting safe

wastewater & excreta use

6 Safety measures for commercial wastewater/fecal sludge use applied to South Asia

Policy dialogues and capacity development for safe fecal sludge and wastewater management for agricultural use

Peri-Urban Solutions 10 Informal and formal rural-urban water markets and pro-poor water allocations

Ecosystem services und urbanization: Options for a Green Economy

.

0

1

2

3

4

5

6

7

8

9

2012 2013 2014 2015 2016

Budget Gap to beclosed

Secured Funding asof April 2013

Budget and investment needs

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Our tightly knit RRR team is comprised of people with a multitude of skills and a broad scientific knowledge.

Capabilities available within our team are:

Scientific expertise Business expertise

Soil fertility and plant nutrition Research for development

Natural resources management Business modeling

Agricultural economics Business development

Waste management Business planning/Enterprise development

Civil engineering Business financial management

Environmental sciences Value chain development

Social science and behavior change Entrepreneurship building

Key Assets of our team • Over 10 years of experience in working on wastewater and organic waste management and reuse in

low-income countries.

• A multi-disciplinary team of entrepreneurs, business developers, economists, environmental scientists

and engineers specialized in reuse project analysis and development.

• Ten offices in Asia and Africa and a strong partner network.

• A continuously growing compendium of reuse cases and related business models for RRR at scale.

• Recognition by WHO, FAO and USEPA/USAID for the development of safety guidelines and successful

capacity building through strategic partnerships and business schools.

Selected current partners

Organization type Partners

Donors IFAD; SDC; Bill and Melinda Gates Foundation; EU; African Water Facility; BMZ/GIZ

Global R4D and developmental organizations FAO; WHO, UNU-INWEH; UNW-AIS; IWA; SuSanA; RUAF; SANDEC/EAWAG, WSP

Government Ministries and authorities at national, urban and peri-urban level in all countries with activities

National research partners, CBOs and NGOs National universities, farmer associations, RRR enterprises, national agricultural research and extension services (NARS), Septic truck operator associations, …

Business Schools and Start-Up facilitators Cambridge Business School, International Centre for Water Management Services (CEWAS); Small Scale Sustainable Infrastructure Development Fund (S3IDF)

Public Health & Wellbeing entities WHO, Swiss TPH, Emory, University of Leeds, University of California;

Biome Environmental Solutions, India

Private Sector So far about 50+ enterprises working on resource recovery and reuse

across Asia, Africa and Latin America

Capabilities & assets

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For scientific information

Name – position Email Telephone

Dr. Pay Drechsel – Theme and Program Leader RRR [email protected] +94 11 2880000 ext. 1316

Jasper Buijs – Senior Researcher Enterprise Development [email protected] +94 11 2880000 ext. 1308

Krishna C. Rao – Researcher Business Model Analysis [email protected] +94 11 2880000 ext. 1322

Dr. Miriam Otoo – Project leader Feasibility studies [email protected] +94 11 2880000 ext. 1320

For business development

Name – position Email Telephone

Jasper Buijs – Senior Researcher Enterprise Development [email protected] +94 11 2880000 ext. 1308

Mireille Perrin – Head, Donor Relations [email protected] +94 11 2880000 ext. 2210

Dr. Pay Drechsel – Theme and program Leader RRR [email protected] +94 11 2880000 ext. 1316

For linkage to CGIAR Research Program on Water, Land and Ecosystems (WLE):

Name – position Email Telephone

Dr. Andrew Noble – Director, WLE-CGIAR [email protected] +94 11 2880000 ext. 1318

Websites

Pages on

Resource Recovery and Reuse @ IWMI www.iwmi.org/Topics/RRR

Resource Recovery and Reuse @ WLE http://wle.cgiar.org/rrr

Safe wastewater and excreta use @ IWMI www.iwmi.org/Topics/wastewater

Safe wastewater and excreta use with UN-Water www.ais.unwater.org/wastewater

Resource Recovery & Reuse CGIAR Research Program on Water, Land & Ecosystems

c/o International Water Management Institute (IWMI)

127, Sunil Mawatha, Pelawatte, Battaramulla, Sri Lanka

General Tel: +94 11 2880000

Contact information

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wle.cgiar.org/rrr

www.iwmi.org/Topics/RRR