Nonprofit Chronicles

Journalism about foundations, nonprofits and their impact

This special report was made possible by a grant from the Pulitzer Center on Crisis Journalism.

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p1040385Eric Reynolds was despondent. He had poured his heart and soul, his best ideas and a chunk of his life savings into Nau, the radically sustainable, greener-than-green apparel company that he founded in 2003. The global apparel industry had caused all manner of environmental and social problems, he thought. Nau was designed to fix them.

Instead, after Reynolds recruited managers from Patagonia and Nike to help launch Nau, a clique of senior executives, along with an investor, forced him out.

“I was wounded, quite profoundly,” he says.

What now, he wondered.

Some middle-aged CEOs would have sought consulting gigs or board seats, or tried painting or golf. Not Reynolds. A world-class alpinist, he had dropped out of college to co-found Marmot, the outdoor gear company, with Dave Huntley, a climbing buddy. “Dave was the genius,” he says. “I barely knew what an invoice was.” Later, Reynolds ran a startup called Sweetwater that made water purification devices. Business was interesting to him only insofar as it helped to solve problems, the bigger the better.

So it happened that, after some soul-searching, Reynolds put his Boulder, Colorado, home on the market, sold his $80,000 wine collection and moved to a small city in Rwanda, a small east African nation he’d visited a couple of times as a volunteer helping a village of genocide survivors. He started a company to distribute cookstoves and renewable fuel that, if all goes well, will serve the world’s poorest people, curb deforestation in the global south and, most importantly, save many millions of lives–and, not incidentally, do so while earning investors a profit. Only then will his company, known as Inyenyeri, be able to grow to a meaningful scale.

Scale, Reynolds says, means reaching 100 million households before he dies.

Today, Inyenyeri serves between 5,000 and 6,000 homes.

Which tells you that operating a cookstove company in rural Rwanda has, so far, been a tough slog, tougher than Reynolds had imagined. “This is the hardest thing I’ve done in my life so far,” he says. It’s harder than it might otherwise be because Reynolds runs his company with a commitment to excellence and customer service that is unusual for the sector, which for the most part has fallen short of its promise.

The good news is that Inyenyeri has been made headway lately. Its supporters include Sustainable Energy for All, a UN-backed initiative; the IKEA, Mulago and Osprey Foundations; a few impact investors and, importantly, the government of Rwanda, with which it recently signed an agreement calling for the company and the government to support a rollout of stoves across the nation.

“It’s a breakthrough,” Reynolds says.

Lanky and balding, with wispy gray hair and a ready smile that belies his intensity, Reynolds recently turned 66. He has a Rwandan wife and two children and, like most entrepreneurs, an unshakeable belief that he can overcome whatever obstacles lie ahead.

“I came here and burned the boats on the beach,” he told me, when we met last spring in Rwanda. “This is going to work.”

SMOKE: THE KILLER IN THE KITCHEN

Copy+of+3+Stone+Fire+PictureIt’s hard to get your head around the fact that about three billion poor people, most in Africa, south Asia and Latin America, still burn wood, charcoal or dung in smoky, open fires to cook their food and heat their homes. Three billion! Millions die annually from lung and heart ailments caused by the pollutants produced by cookingaccording to World Health Organization (WHO). Dubbed “the killer in the kitchen,” household air pollution is thought to be the world’s leading environmental cause of death and disability.

So-called clean cookstoves have been touted as a solution, notably by the Global Alliance for Clean Cookstoves, a coalition launched by Hillary Clinton in 2010. Clinton declared that cookstoves “could be as transformative as bed nets or even vaccines,” which have saved millions of lives. Clean cookstoves can “save lives, improve livelihoods, empower women and protect the environment, the global alliance says.

But mostly they have not. There are many reasons why. Low-cost cookstoves deteriorate or break. They are commonly used alongside an open fire, instead of replacing it, all but negating their health benefits. It’s almost impossible to design a stove that can adapt to all kinds of wood–wet or dry, twigs, branches, or logs–as well as other fuels, like dung, crop residues and charcoal, that are burned by the poor, and burn all of them cleanly.

The fundamental problem has been summed up by Kevin Starr, managing director of the Mulago Foundation, which has provided low interest loans to Inyenyeri. “The cheap stoves aren’t good enough,” Starr says, “and good stoves are way too expensive.”

Most stovemakers have opted to take the cheap. The vast majority of the tens of millions of stoves that the global alliance says have been sold or given away since 2010 cost $25 or less and don’t burn cleanly enough to protect women and children from respiratory disease; they emit tiny particles that lodge in the lungs. What’s more, the poorest of the poor–a market that Reynolds is hell-bent on serving–can’t afford even a $25 stove. “You can’t sell stoves to people with no money,” he says.

AN UNORTHODOX BUSINESS MODEL

Inyenyeri, by contrast, offers a top-of-the-line stove. The company is able to do that because Reynolds has brought a business model to Rwanda that may sound familiar to anyone who has bought a razor or desktop printer for below cost, while paying full price for blades or ink. Inyenyeri gives the stoves away, and generates a recurring revenues by selling fuel.

Mimi-Moto-Picture-collection-wide-160712-1024x843Here’s how it works: Inyenyeri provides customers with a modern, rugged cookstove called Mimi Moto that is designed by a Dutch company and built in China. The stove is expensive: It costs about $85 by the time it gets to Rwanda. Instead of burning firewood, it burns wood pellets that are supplied by Inyenyeri and turns them into a synthetic gas that, at least in theory, burns as cleanly and efficiently as the gas stoves used by many of us in the west. It relies on a chemical process known as gasification that requires a stove with a battery, fan and circuit board, all of which raise costs.

The marriage of the cookstove with the wood pellets is the key to both protecting human health and sustaining Inyenyeri’s business. Stoves are designed to burn pellets of consistent quality. The pellets are made by Inyenyeri; a supply of pellets sufficient to run two stoves sells for about $12 a month. That’s roughly 30 to 50 percent less than the equivalent amount of charcoal, which is the fuel that most city dwellers in Rwanda use for cooking.

“There are no sign-up fees, no deposits,” Reynolds says. “We’ve designed it so they save money from the first day.”

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Charcoal for sale at a market in Gisenyi, Rwanda

If charcoal were the only competitor, Inyenyeri would be thriving and profitable. Customers need fuel, after all, to cook every day. And the pellets are not only cost less than charcoal, they are cleaner, meaning no blackened pots, clothes that smell of smoke or soot-stained walls. “We have a product that that’s better, faster and cheaper than the competition,” Reynolds says.

Problem solved? Not even close. Most Rwandans–as much as 80 percent, including the poorest households–still rely on firewood for cooking. They chop down trees or gather sticks and branches, denuding hills and valleys. “This country is going bald,” laments Reynolds. People spend hours a day collecting wood and, then, more time collecting water to wash the soot from their kitchens and clothes.

Can Inyenyeri compete with firewood that’s “free”? Again, Reynolds has devised an ingenious solution: Poor people can gather firewood, bring it to Inyenyeri and trade it for pellets. His customers become his raw material suppliers. The model works, according to Reynolds, because pellets in a gasifying stove burn much more efficiently than wood; the sticks and branches supplied by one customer can be made into enough pellets to supply two or three customers, Inyenyeri has found.

It sounds great on paper. Paper isn’t Africa. It’s been about eight years since Reynolds arrived in Rwanda, a nation of nearly 12 million people, but Inyenyeri has only a bit more than 5,000 customers. Some live in and around Gisenyi, a city on Lake Kivu where the company is based. Others are refugees in a UN-operated camp in Kigeme in the south. Still others are VIP customers in Kigali, the nation’s capital.

Distribution is a challenge. So is maintaining a supply of pellets. Customer service costs are high, particularly when stoves break or need to be replaced.

Says Reynolds: “We’ve had a lot of stumbles along the way.”

A FIERCE PURSUIT OF EXCELLENCE

Part of the problem has been Reynolds. His business career has been driven by an unyielding commitment to do the right thing, a value instilled in him by parents who raised him in northern California in the late fifties and sixties. “The family heroes were Albert Schweitzer, Mahatma Gandhi and Martin Luther King,” he recalls. His mother and father told him: “We don’t care what you do. Just leave the world a better place.” Whether at Marmot, Nau or Inyenyeri, Reynolds has been a stickler for quality..

Decades ago, for example, while running Marmot, Reynolds and a colleague slept for a week in a commercial frozen meat locker to test Gore-Tex, which was then a new, synthetic waterproof fabric. Peter Gilson, who was the president of the unit of W.L. Gore that makes Gore-Tex, says: “He insisted first and foremost on quality, and that has never changed.” Outdoor enthusiasts adored Marmot’s best-in-class gear and clothing, but retailers complained about delivery problems. One critic wrote: “The legendary quality of Marmot’s products stood in stark contrast to the miserable state of its business operations.”

Nau was designed to be greener than Patagonia and more generous than Ben & Jerry’s. Built into its bylaws was the principle that the company should not profit at the expense of society or the environment. “Eric was the visionary,” says Mark Galbreath, the first executive recruited by Reynolds. “The business plan was ambitious, to say the least.” Too ambitious, as it turned out, for the company to execute smoothly.

By Reynolds’ own account, operations are not his strong suit. “I’m not good at getting the trains to run on time,” he concedes. That’s why, he says, he has hired a strong, experienced operations team.

Like Marmot and Nau, Inyenyeri has attracted admirers because it won’t compromise on its values. Rachel Kyte, a former World Bank executive who leads a UN initiative called Sustainable Energy for All, says: “We need to be supporting 100 Inyenyeri’s.” But carrying out the company’s plans will require operational excellence, plenty of growth capital and the blessing of Rwanda’s government.

Gilson, the former W.L. Gore executive, is now an Inyenyeri board member. Reynolds, he says, knows his shortcomings, and he has hired great people, including executives with experience running global companies. “Inyenyeri will succeed,” Gilson says. “There is an overwhelming need for a stove that has no harmful emissions.”

Early backers of Inyenyeri also include the Mulago and Osprey Foundations, small foundations that are willing to loan to small, for-profit companies in an effort to spark big changes. Louis Boorstin, a former investment banker who is now the managing director of the Osprey Foundation, says that cookstove companies like Inyenyeri have the potential to “save women’s time, improve their health and safety, reduce deforestation and provide a global environmental benefit, by curbing climate change.” Mulago’s Kevin Starr, who was trained as a medical doctor, admires Reynolds’ determination to protect poor women and children from the ravages of dirty indoor air. “He is utterly committed to delivering the health impacts to the population that needs it most,” Starr says.

So concerned is Reynolds about the health of his customers that he invited researchers from the University of North Carolina to conduct a randomized control trial to measure the impacts of stoves. The ambitious five-year study, which began in 2015 and is funded with a grant of $2.6m from the National Institute of Environmental Health Sciences, will track emissions from the stoves and see whether they do, indeed, reduce disease and save people money or time. The preliminary findings have been discouraging: They found, for example, no observed effects on the emissions of tiny particulates that lodge in people’s lungs. But they include results from a prior generation of stoves, made by Philips, that performed poorly. “They were terrible stoves,” Reynolds now says, and they’ve all been replaced.

In fact, Inyenyeri has been through four stove suppliers since its launch. Mimi Moto makes one of the very few biomass stoves to achieve top ratings for emissions, efficiency and safety. Even so, Reynolds calls it a work in progress. “The stove is nowhere near where it needs to be and will be,” he says. He’d like to provide a stove that, like those in your kitchen and mine, have two or more burners, which should insure that his customers stop cooking over open fires. Inyenyeri tracks its customers’ pellet purchases and if usage lags, checks in to see why they aren’t relying on the stove. This, too, speaks to a commitment to human health that is rarely seen in the cookstove sector.

A NEED FOR CAPITAL

IMG_1756

A retail outlet

Meantime, with just a single small factory that it operates round the clock, Inyenyeri has struggled to make enough fuel pellets to satisfy demand–so much so that it turned away customers for three months last spring. To satisfy existing demand, the company had to import six containers of wood pellets from Indonesia, which arrived in Dar Es Salaam, Tanzania, by ship and were then transported by truck to Gisenyi. “We were completely constrained by pellet production,” Reynolds says. He has sought permission from the Rwandan government to build a second factory; eventually, he’d like to build a six to eight more plants to serve all of Rwanda, at a cost of $25 million to $40 million per plant.

Buying new stoves and training customers to use them requires capital, too, an estimated $250 per household before customers begin generating revenues. Says Reynolds: “Our model is very capital intensive. We have to buy two stoves per household, in advance. We have to build pellet factories. We have to hire staff.”

He thinks of Inyenyeri as a utility company that will require capital to scale up, after which it will profit by selling cooking fuel to millions of customers. “Instead of pipes in the ground, it’s stoves on the counter,” Reynolds explains. “That’s our infrastructure.”

Will investors buy his pitch? That’s one big question facing Inyenyeri. A second is, what help will the company get from the government of Rwanda, which keeps a close watch on foreign business operating in the country?

So far, Inyenyeri has raised about $12 million, a figure includes loans and grants. Its biggest funders include the IKEA Foundation and two mission-driven investment firms based in Europe, Althelia Ecosphere and Oikocredit. Meantime, a World Bank unit has agreed to purchase carbon credits from Inyenyeri in a deal that could be worth as much as $10m, if the company can demonstrate that its cookstoves and pellets reduced CO2 emissions. (This is what’s called results-based finance.) About a half-dozen small foundations also have made grants or loans to Inyenyeri.

So far, though, conventional investors have been unwilling to commit. “I was naive,” Reynolds says. “I didn’t know that the cookstove sector had become so tarnished that donors and funders had given up.” He probably should have known: No one has become rich by investing in cookstoves.

Government support could make the difference. Over the years, the governments of China, Peru and Ecuador have provided substantial, ongoing subsidies to cookstoves that burn liquified petroleum gas (LPG), which consists of propane or butane gas or a mix of the two. India is also trying to promote LPG for cooking. The rationale is that truly clean cookstoves protect public health.

LPG cannot work in Rwanda, according to Reynolds, because neither the government nor the people can afford it. LPG would have to be imported, and its production would accelerate climate change.

“We have a world now that is spending billions of dollars to subsidize a dead end cooking fuel and we can’t even get a few million to develop a next-generation stove,” he says. “It’s just outrageous.”’

SIGNS OF SUPPORT

Indications are that the Rwanda government is getting behind Inyenyeri. Several years ago, Reynolds persuaded the government to exempt pellet fuel and gasification technology items from Rwanda’s 18% VAT tax and to reduce some tariffs on imported cookstoves. A memorandum of understanding signed in October between Inyenyeri and Rwanda Energy Group, a state-backed utility, calls for the company and government agencies to work together to serve 1 million homes by 2024. It’s non-binding, but it could help the company build more pellet factories and develop a robust supply chain of wood. Plans call for Inyenyeri to eventually make pellets out of eucalyptus trees, a fast-growing energy crop.

The bottom line, according to Reynolds: If Inyenyeri can raise capital, the company will be off and running. It can then focus on improving the efficiency of pellet production and providing its customers with better and better stoves. This, he argues, will create a virtuous cycle, driving down costs and speeding adoption.

Inyenyeri also wants to bring on local investors. Reynolds won’t go into detail but the new investors could include Rwandan companies, wealthy individuals or even the government. “The company should be locally owned,” he says. He sees Rwanda as the test case to prove the business model, which can then be franchised to the rest of Africa, again, in partnership with local owners.

“The market opportunity is huge,” Reynolds says. “We have tremendously high confidence that this business model works, and that it will be profitable.”

“That’s important. Without profit, you don’t get impact. You don’t get scale.”

But profits, while essential, are not really the point, he says: “We’re on the verge of solving one of the last great problems of development. If we don’t, it will be tragic.”

One thought on “Smoke alarm: Eric Reynolds, a founder of Marmot, wants to build the world’s first truly clean cookstove company. Millions of lives are at stake.

  1. Thank you!

    Here’s a Mary Oliver poem for your soul.

    [image: 0.jpg] Timothy

    Like

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