Laws, policies and regulations

Different regulatory aspects affect the enabling environment of safe water enterprises and HWTS users. Among them are:

1. Laws and policies
2. Standards for quality and performance
3. Certification
4. Subsidies and tax advantages
5. Import regulations and tariffs

These sub-topics of a regulatory framework will subsequently be explained and their impact on safe water enterprises elaborated.

1. Laws and policies

In many countries, no specific legal frameworks for social (safe water) enterprises exist (ARBTER, WELLSTEIN & ATASOY, 2015). In these countries, social enterprises often adopt the legal status of a (non-profit) association or a co-operative. The existence of a specific legal framework is not a sufficient condition for social enterprise development. Whether a social enterprise can operate effectively is for instance highly dependent on the extent to which the legal framework enables the enterprise to attract capital. Also the (lack of) implementation of the laws and regulations influence the businesses environment. (ILO, 2016).

Governments can also implement policies that facilitate sustainability and scale-up of safe water businesses. The presence of policies specifically tailored to household water treatment solutions (HWTS) for instance can help maximise the impact of efforts to promote and implement different HWTS practices. (OJOMO ET AL., 2015). The government can also implement policy measures to support social entrepreneurs or foster a more general culture of social entrepreneurship. (ILO, 2016).

2. Standards for quality and performance

With numerous HWTS products and technologies available, it is important that consistent standards for quality and performance are established. Government standards and regulations, when implemented and enforced, help to market and scale up effective and sustainable HWTS products. Some of the potential benefits include increased trust of consumers and consistent quality of the product. Filter manufacturers in Ghana and Tanzania indicated that standards help ensure that quality products are being produced consistently. (OJOMO ET AL., 2015). On the other hand standards can also increase costs for manufacturers due to increased costs for monitoring and testing (ITC, 2010).

If government standards have not been developed yet, voluntary standards set by manufacturers and implementing organisations can be a useful intermediary solution. At the international level, the WHO has set widely recognised standards for drinking water quality (WHO 2011). These standards are in place to support national water authorities in setting up guidelines, regulations and structures to deliver quality drinking water to its population (WHO, 2011). Since 2014, WHO has been testing HWTS products against WHO health-based performance criteria through the “WHO International ‘Scheme’ to Evaluate Household Water Treatment Technologies” participating in this scheme can gain consumer confidence (see box 1).

For more information about quality control mechanisms and quality management aspects within a company see factsheet on quality control.

3. Certification

Although standards for water treatment technologies contribute to quality of products, certification informs the public which specific products provide safe water and are of good quality. This can help increase confidence in products which maximises the likelihood of adoption and sustained use (ITC, 2010). In many countries national laboratories exist that are testing and certifying water and nutrition products. These national testing institutions help assure quality and demonstrate that the product being sold has been tested and approved by national authorities. Depending on the type of product that the company sells (e.g. filter, purified water, or chlorine solution), it can apply for specific certifications. However, in some cases there is no certification for a specific (range of) product (box 2).

4. Subsidies and tax advantages

Governments may also influence market supply and demand indirectly. Such market interventions include subsidies and tax advantages. Both can be aimed at influencing market demand or market supply. These indirect market interventions may apply to product markets, labour markets and credit markets social enterprises are operating in (see table below).

For instance in Nepal is the Department of Water Supply and Sewerage (DWSS) considering to reduce or even eliminate importation taxes and VAT (value added tax) for HWTS products in order to accelerate access to safe water for its population. For more information see also factsheet on smart subsidies.

5. Import regulations and tariffs

When products or spare parts are imported, import regulations and high tariffs can seriously affect the supply chain. Inhibitory import regulations can, for instance, lead to import delays and high costs. High tariffs increase the price at which products can be sold to retailers which in turn, increases the price at which consumers pay the product. (OJOMO ET AL, 2015). Reducing these import regulations and tariffs can help to make safe water products more affordable for BoP populations.

Laws, policies and regulations do concern different aspects of safe water businesses and HWTS - on one hand do regulations directly affect businesses (establishment, certification, taxes etc.) and on the other hand can also be limiting regulations in place for HWTS or the sales of water as such.

Business level:

Two of the scaling barriers mentioned by KOH ET AL. (2014) in their study on businesses at the bottom of the economic pyramid are inhibitory laws and regulations. Unnecessary or excessively complicated regulations and administrative processes (the so-called ‘red tape’) can lead to high compliance costs for entrepreneurs (ILO, 2016). To improve the enabling environment for safe water businesses, governments can reduce the administrative and regulatory burdens and also develop policies and regulations that encourage safe water businesses.

HWTS level:

Governments can also take a role in evaluating and regulating HWTS technologies to ensure that citizens use safe HWTS options (WHO, 2011). A WHO study (2012) revealed that only 42% of the responding 46 countries regulate HWTS technologies based on performance or ability to remove chemical and microbial contaminants. Still, 65%, of countries certify or recognise internationally certified HWTS technologies. The majority of the responding countries (72%) have national policies in place that address HWTS. However, only 20 of the responding countries have HWTS targets in place and only two countries (Ghana and Tanzania) have a national HWTS strategy. Even when national policies and targets are in place, implementation is limited, especially in terms of monitoring of use and impact. A large majority (76%) of the responding countries identified limited monitoring of HWTS use and impact as a key challenge (WHO, 2012).

Accordingly it is favourable for consumers and social businesses if governments do (re-)consider their regulations align their regulatory schemes towards a broad access to safe water. Subsequently concrete examples and tools are provided that can help governments enable the safe water business environment through regulatory amendments.

• Governments
• Safe water businesses
• Investors and partners of safe water businesses

Red Tape assessment tool

One interesting transversal tool to identify regulatory issues and adapt it more in favour of safe water businesses is the red tape assessment tool from ILO:

Red Tape is a concept often used to describe “a collection or sequence of forms and procedures required to gain public/official approval for something, especially when oppressively complex and time-consuming. In other words, Red Tape is a short-hand term for unnecessary or excessively complicated regulations and administrative processes that have financial as well as opportunity costs for enterprises when complying with national and local laws and regulations and administrative processes. It must be stressed that not all regulation is Red Tape. Regulation is necessary and useful when it enables enterprise formation, growth and job creation.” (ILO, 2016).

Assess regulations and identify opportunities for improvements. Regulations are needed to enable growth and job creation in the private sector, but the question is: “When is regulation too much? When is regulation constraining rather than enabling? In other words, “When is regulation becoming Red Tape”? Through the Red Tape analysis, it is possible to identify areas where regulatory compliance costs are most troublesome for firms and to review these in order to identify opportunities for streamlining these processes, make them more efficient and less costly both in terms of real costs and opportunity costs for firms (ILO, 2016).

Application. Red Tape is assessed using a mix of secondary and primary data. The most important information is obtained through an enterprise survey using a standard questionnaire to identify red tape issues. The survey helps to quantify the compliance costs that enterprises incur per year. The assessment has been piloted in South-Africa in 2015, surveying over 400 small and medium size enterprises and their perception and impression of the South-African regulatory frame.

Applicability. Assessing and quantifying Red Tape in a rigorous and methodologically sound way takes time. Up to 12 months should be planned for designing the methodological framework, adapting the questionnaire, identifying a representative sample, training of interviewers and implementing the survey. Data analysis and quantification and drafting the report usually require another 2-3 months. Including the validation process, the whole process may take up to 2 years.