ADB Ventures is supporting Cambodian manufacturer Otago as it scales an eco-friendly fuel source into Southeast Asian markets. Otago creates char-briquettes from clean, sustainable biomass such as coconut shells and other organic materials.
This is a substitute for traditional charcoal, which is produced from trees from Cambodia’s vulnerable forests and contributes to respiratory issues when burned. The company currently employs 45 people, many of them women who were previously in the informal economy.
Cambodia currently faces a range of environmental and social issues, from deforestation and climate change to poverty and lack of access to education. It has one of the highest rates of forest loss in the world, with forested area falling by 4.6% per year from 2010 to 2014, according to government data.
While the poverty rate has fallen from 47.8% in 2007 to 13.5% in 2014, roughly 4.5 million of Cambodia’s 16.3 million people are near-poor, leaving them vulnerable to financial insecurity. Education levels beyond primary school remain below-average compared to the country’s economic peers as well, with just a 57% lower secondary completion rate in 2017.
With the help of an ADB Ventures Seed grant, Otago is addressing several of these challenges simultaneously by scaling up the production of charcoal briquettes from coconut shells and other forms of biomass. ADB Ventures funding will enable the company to expand distribution to provinces outside Phnom Penh and explore expansion into other Southeast Asia markets, particularly Indonesia and Myanmar. Seed grants are reimbursable and give ADB Ventures the option to make future equity investments in Otago.
Otago’s Phnom Penh factory currently produces 120 tons of charcoal per month, which meets 1.5% of Phnom Penh’s charcoal demand. Otago plans to build a new facility that can produce another 630 tons of briquettes every month and employ 120 people. Otago’s growth will drive down demand for traditional charcoal, thus reducing the need to drive more deforestation in Cambodia or neighbouring countries.
Otago creates its char-briquettes from coconut shells and other materials from local markets in Phnom Penh. Then, “the coconut shells are crushed into smaller pieces and then carbonized in kilns which we designed ourselves,” said Carlos Figa Talamanca, Otago’s CEO. “This high-quality charcoal is then bound with cassava and compressed together in extruder machines to become compact briquettes.”
Otago’s briquettes are becoming more popular among Phnom Penh restaurant owners and street food vendors.
“These new briquettes are good to use because there’s no smoke and no sparks,” said Lin Hay, a restaurant owner in the capital.
Using coconut-based charcoal is cleaner than burning wood-based charcoal, which contributes to millions of pollution-related deaths each year. “It’s also good for the environment as it means there’s no need to cut all the trees,” Lin added.
The business owner also shared that her food tastes better than when she cooked using traditional charcoal, and her employees no longer need to spend time breaking down wooden briquettes into smaller pieces that can be burned in the kitchen. This saves time and eliminates their exposure to smoke inhalation.
In addition to creating sustainable goods that can be produced without cutting down trees, Otago also provides benefits to its employees and their families.
“Being in the suburbs of Phnom Penh, we’re in an area with a lot of poverty, and we hire our employees through a local NGO that tries to help children from disadvantaged areas with vocational training,” Talamanca said. “We hire their parents, providing a stable job, good salary, annual leave and all of those benefits, with the condition that they are obliged to send their children to school.”
“Before I started working here, I used to go around collecting recycled waste,” says Srey Mao, a machine operator at the Otago factory. “Since I got the job here my life and work is much better. I could only really work in the morning picking up rubbish, and then by the evening I had spent all my small income.
Now I earn a good income and I also got health insurance so it’s much better for me.”
She was able to send her children to school thanks to her steady income, and now they have jobs of their own and help to support the family.
“We are at the stage where we have shown the success of our business model, technology and product,” Talamanca said. “We are pursuing affordable and clean energy for all, while also providing jobs, protecting biodiversity by preventing deforestation, and reducing poverty.”