Institutional environment and sustainable business models: case studies of non-conventional wastewater treatment systems in India

This article attempts to fill the knowledge gap regarding the significance of institutions for sustainable business models. Through in-depth interviews and focus group discussions, a study was conducted on the business models of three entrepreneurs of non-conventional wastewater treatment systems. Information on financial and social costs and benefits was collected, and net returns were calculated for 15 non-conventional wastewater treatment systems. The entrepreneurs proposed frugal technology and customized existing systems through retrofitting to provide value to customers and society at large. The results imply that the systems were financially loss-making but generated substantial social value. Unwillingness to pay for environmental goods resulted in low or no value capture. The profits or financial returns of the entrepreneurs were modest. The high overhead costs and a prolonged sales cycle contributed to low returns. Asymmetry of information between entrepreneurs and customers or beneficiaries increased search and transaction costs. Entrepreneurs faced institutional barriers due to inadequate government support, corruption, lack of accreditation or recognition, and unavailability of guidelines. Low political will and administrative laxity in implementing environmental rules constrained demand and value capture. The study suggests that a long-term maintenance contract is essential for the sustainability of operation and value generation.