# VEI: A hybrid organization in the making

Christelle Pezon

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Christelle Pezon. VEI: A hybrid organization in the making. Journal of Water, Sanitation and Hygiene for Development, 2025, 10.2166/washdev.2025.238. hal-04941611

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Research Paper

VEI: A hybrid organization in the making

Christelle Pezon

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LIRSA, Conservatoire National des Arts et Métiers, Paris, France

E-mail: christelle.pezon@lecnam.net

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CP, 0000-0002-5821-5122

ABSTRACT

This article analyses how VEI, as a hybrid organization in the water supply sector, navigates through challenges and varying financing policies, development cooperation priorities, and the UN Development Goals (Millennium Development Goals and Sustainable Development Goals) in its search for sustainable funding. This quest for adequate and sustainable funding prompted VEI to experiment with different approaches to intervene and collaborate with funders whose expectations may affect/alter the mechanisms to reach its social mission. These experiments gave way to pragmatism, revealing the strategic tension inherent in the organization's duality and a continuous need to reflect upon its identity. The article offers insights into the construction of a hybrid company that is successful in pursuing its social and environmental goals while mobilizing resources to sustain (and enlarge) its business. This pragmatic approach made VEI over the years a renowned and appreciated partner for many utilities thirsting for improved performance.

**Key words:** development aid, hybrid organization, water sector, WOP, VEI

HIGHLIGHTS

* VEI was born 20 years ago from an adventurous initiative.

* VEI is a major instrument of the Dutch development aid policy in the water sector.

* VEI has developed a strong identity marker: risk adversity.

* The predictability of financial resources entails to adjust the scope of the social mission with the donors' requirements.

* VEI is experimenting with new ways of support that are likely to challenge its governance.

1. INTRODUCTION

'It used to be that people who wanted to solve a social problem created a charity,
today many start a company instead' (Alboher 2009)

Vitens International was born 20 years ago from an initiative retrospectively described as adventurous, in a national context marked by the sheltering of Dutch water companies from the movement to deregulate public services in Europe, and an international context where the public-private partnership (PPP) paradigm dominated as a management model to expand access to water in developing countries. Vitens International soon became Vitens-Evides International, a joint venture of two of the largest water companies in the Netherlands, then, in 2014, VEI, and, in 2017, an organization at the interface of the 10 water companies of the country and the major instrument of the government's development aid policy in the water supply sector.

These name changes reflect changes in cooperation modalities, governance and identity. This article aims to trace the construction of this hybrid company and to highlight its stable features as well as the changes that have enabled it to meet the challenges that hybrid companies usually face: reconciling the pursuit of a social mission and the provision of sustainable income necessary for this mission.

This article is, therefore, the historical analysis of a very particular so-called mentor, which is exclusively devoted to international activities in the form of long-term capacity building support for operators in the South (so-called mentees) and

This is an Open Access article distributed under the terms of the Creative Commons Attribution Licence (CC BY 4.0), which permits copying, adaptation and redistribution, provided the original work is properly cited (http://creativecommons.org/licenses/by/4.0/).
presents itself as the first operator of Water Operators' Partnerships (WOPs) in the world. It does not offer a comparison with other mentors but suggests a reading of VEI as a hybrid organization in order to understand how VEI has navigated over time the challenges associated in the literature with being a hybrid organization.

After explaining the methodology and the analytical framework used for this study, we will analyze three historical phases of the development of the organization, based on pivotal moments. The first phase (2003–2009) pioneered the model, but with limits on the forms of intervention. The second phase (2010–2017) dealt with a leadership crisis by transforming the organization into a professional manager of international cooperation projects available to other water companies in the Netherlands. The WaterWorX program (WWX) initiated a third phase in 2017, with VEI becoming the primary instrument of the Dutch government's development aid policy in the international water sector, partnering with all 10 of the country's water companies.

## 2. METHODOLOGY AND ANALYTICAL FRAMEWORK

VEI has evolved considerably since Vitens created Vitens International in 2003. To analyze its different forms, we conducted 19 semi-structured interviews in January and February 2023 with key staff, past and present (CEOs, CFO, project managers, monitoring and learning officer), and with its partners (Dutch ministry of foreign affairs, financial partners, Global Water Operators' Partnerships Alliance - GWOPA - and utilities in the South). The purpose of these interviews was to understand the methods of intervention of the organization at different times, the evaluation and the limits of the support provided by the organization, its financing modalities and the successive structures of its governance. The organization's annual reports and the articles written by or about VEI were also analyzed to complement the interviews with the actors.

On a theoretical level, we have mobilized the literature in management and in organizational theory, which, for the past 20 years, has sought to understand the specificities of so-called hybrid organizations. This type of organization has become increasingly common as corporations engage in social responsibility and attempt to address some of the world's most pressing social concerns and unresolved needs such as poverty (Quelin et al. 2017). Most often applied to the study of PPPs and micro-finance institutions (Ménard 2004; Pache & Thornton 2020), this concept has never been applied to water operator partnerships, presumably because the latter generally take place within the framework of one-off projects led by a northern (or southern) operator, the mentor, vis-à-vis a southern partner, the mentee. However, VEI is an independent legal entity, which, like all hybrid organizations, must address the challenge of the sustainable financing of its social mission.

In a broad sense, hybridity is a combination of identities or forms, and logics or rationales that would conventionally not go together: 'The term hybridity expands the scope of analysis beyond organizational forms to consider, for example, identities and rationalities in defining an organization's goals and authority structures' (Battilana et al. 2017, p. 138). Hybrid organizations combine social and economic missions and aim at delivering 'value beyond the locus of firms and customers to broader sets of stakeholders' (Quelin Kivleniece & Lazzarini 2017, p. 764). In other words, hybrid organizations pursue a social mission while attracting grants or other financial resources, including from commercial activities (Smith & Besharov 2019).

Hybrid organizations face persistent challenges due to conflicts over identity, with internal and external stakeholders answering differently the question *who are we as an organization?* because they hold distinct values and beliefs. Identity can be defined as '*the central, enduring and distinctive features that define who an organization is and what it does'* (Smith & Besharov 2019, p. 7), but hybrid organizations constantly reinterpret their dual missions and experiment with various operational practises associated with different meanings. These dual missions are reflected in the formal structure, the expertise of individual leaders and the external stakeholders' relationships associated with each mission. All three can act as guardians for each mission, monitoring whether practices emphasize one mission at the expense of the other, to prevent the organizations from deviating too far toward one mission. Hence, the sustainability of hybrid organizations is driven by their ability to develop a common organizational identity combining the two logics, which entails producing new organizational practises or new organizational forms (Pache & Thornton 2020). Thus dealing with paradox is a core competency in managing hybrid organizations with dual missions to be served.

Most researchers have tried to identify the context in which hybridity occurs:

- the crises, processes and consequences of hybridity, in particular on resources mobilization (Thornton et al. 2012);

- the power shifts and dialectical relationships between 'idealists and pragmatists' (Ashforth & Reingen 2014);

- the short-term responses to the challenges of hybridity (Battilana & Dorado 2010);

- how relationships affect collaborative design and performance (Rufin & Rivera-Santos 2010).
Though many articles, notably in the field of strategy management, highlight the conflicting nature of hybrid organizations, more and more authors argue that critical interactions of stability and adaptation are necessary to sustain hybridity. What matters is to focus on what shifts and what remains stable over time, in order to understand *the juxtaposition between ongoing adaptation in meanings and practises and stability in commitments* (Smith & Besharov 2019, p. 7). Hybridity enhances legitimacy and access to resources from external stakeholders, including the State (Kodeih & Greenwood 2014). Though hybrid organizations struggle to sustain hybridity over time due to tensions between internal subgroups and divergent expectations of varied external stakeholders, the juxtaposition of competing demands provokes a search for new opportunities and stimulates creativity and innovation: it institutionalises adaptation over time and *'*adaptation serves to maintain duality''* (Smith & Besharov 2019, p. 32).

The literature considers two types of hybridity: the hybridity in logics (most common) and the hybridity in governance. While the studies on hybridity in logics deals with unitary organizations facing critical dilemmas in reconciling the social and business logics to fund and support their operation, those on hybridity in governance focus on the interaction between individual organizations and seek to understand the alternative organizing traits of a multi-organization collaborative setting (Quelin et al. 2017). A key outcome of these studies is that a combination of high hybridity in logics and governance – collaborative arrangements involving distinct organizations with mixed economic and social demands – cumulates the factors of instability from both types of hybridity (Smith & Besharov 2019).

VEI is a hybrid organization. The search for sufficient and sustainable funding has prompted it to experiment with different methods of intervention, and to join forces with capital providers, whose expectations have changed the objectives of its soli- darity mission. These experiments have brought the strategic tensions intrinsic to the duality of the organization into view, as well as the need for the organization to rephrase its identity. As Smith and Besharov explain, when the organization *bumps* into one of its missions, this is not an end-point in the process: it fuels another cycle (Lewis 2018). Indeed, when addressing strategic tensions, leaders clarify the identity of the organization and experiment with different operational practises. Hence, strategic tensions offer *'*invitations to act'*'' (Beech et al. 2004). They cannot be eliminated and *'*leaders must instead navigate through them, finding approaches to move forward (...) looking for new points of connection and distinction between dual elements'*'' (Smith & Besharov 2019, p. 25).

# 3. PIONEERING PHASE 2003–2009: FROM RISK TAKING TO RISK ADVERSITY

## 3.1. National and international contexts

In the 1990s, Europe experienced a wave of public service deregulation. In the Netherlands, small water companies were concerned about the possibility of being acquired by larger ones, as well as being targeted by energy companies seeking to build an international multi-utility profile. In 1999, Friesland Water was acquired by NUON Energy Ltd for €165 million paid to its public shareholders. The former head of Friesland Water became director of NUON Water, while the HR manager at Friesland Water was appointed to run NUON's Global Water Solutions unit.

Through Global Water Solutions, the company took shares in water companies in six countries including through a con- cession contract in Argentina. Shortly after this strategic move, the NUON chairman retired and his successor was confronted with the new Dutch Water Act: drinking water was and shall remain a public service and can only be done by a public sector entity. Water companies were required to transform into limited liability companies with shares held by public bodies, municipalities and provinces. In 2001, the reshuffle of Friesland Water shares gave birth to Vitens, a new Dutch water company.

In 2003, the first Vitens CEO re-started international twinnings with a budget of €1 million per year (approximately 0.4% of its annual turnover). The Vitens International adventure began.

At the international level, during the 1990s and 2000s, international donors introduced a water service management model, with the World Bank taking the lead. The Millennium Development Goals (MDGs) aimed to halve the number of people without access to drinking water by 2015, and PPP was seen as a promising solution to finance the necessary investments to meet these objectives. The PPP model involved a concessionaire providing financing and operational expertise to improve service management and expand access to more customers. However, privatizing service management posed significant risks to private partners, as their remuneration depended on setting tariffs high enough to cover the operating and investment costs, while existing tariffs in the sector barely balanced operating costs only (Pezon & Breuil 2012). French multinationals were at the forefront of this movement, winning many international bids, but civil society raised concerns that access to water should
not be tied to people's ability to pay: water was not a commodity like any other, and therefore should not be a source of profit. As a result, private companies were seen as illegitimate in this sector, and partnerships between public entities were deemed more appropriate (Hall et al. 2009).

Against this backdrop, the Dutch water companies hold a unique position and continue to do so. As public organizations with a public service mandate, these companies are not profit oriented but they operate on a full-cost recovery principle.

Vitens International, on the other hand, was established as a private company entirely owned by Vitens with the goal of contributing to achieving the MDGs by helping operators in the South enhance their performance. Through this organization, Vitens pursued a mission of solidarity by providing its staff's expertise to support water companies in Southern countries in the technical, commercial, and financial fields, within the limit of a budget of €1 million per year. The aim was similar to that of PPP: to improve Southern operators' performance, enable them to become financially independent, increase coverage rates, and provide better water services. However, the process was distinct: Vitens did not expect any financial return from its peer support, and its mission was solely based on solidarity.

## 3.2. Fortune favors the brave

The first CEO of Vitens International received *carte blanche* from the Vitens chairman to initiate partnership projects. The first one was in Mozambique.

Quickly a pattern was set up that was reproduced in other countries:

- Co-financing by the Dutch Embassy as part of its development aid in the water sector, which partially covered the costs incurred by Vitens International.

- A support system made up of a resident project manager (RPM) who, depending on the needs of the local company, called on experts from the parent company, who went on mission for a few weeks in order to develop the skills of the local staff, particularly in the management of non-revenue water (NRW).

- A multi-year agreement between Vitens International and one or more local companies.

In Mozambique, the agreement signed in 2003 concerned five small local companies servicing 500,000 inhabitants in the southern region. The adventure started and unfolded auspiciously: the partners in Mozambique were satisfied and the partnership with FIPAG (Fundo de investimento e patrimonio do abastecimento de agua) continues today. The *attaché* in charge of water at the Dutch embassy, who expected this support to be the best way to prepare the utilities to manage a large investment by the African Development Bank (Patrón Coppel & Schwartz 2011), was also pleased. After he was transferred from Mozambique to the embassy in the Republic of Yemen, he proposed to the CEO of Vitens International to replicate the same device in the city of Taiz in 2005.

For its third partnership, the organization established a foothold in Asia, by partnering with Da Nang and Ho Chi Minh City in Vietnam in 2008. It was once again a matter of alert individuals seizing a funding opportunity. Unlike Mozambique and Yemen, Vietnam was not a strategic country for the Dutch ministry of foreign affairs. However, the Vietnam project took advantage of a courtesy visit of the Minister to obtain a co-financing arrangement from the Dutch government. In <4 years, the Da Nang company managed to generate an operating margin, thanks to the substantial drop in its NRW and the improvement in its cost recovery rate (Wright-Contreras et al. 2020). As the Regional Project Manager recalled: 'We pushed in areas that they did not think they could improve. They were not under-performing, but they could do a lot better. They had a lot of information but they were not using it: we helped to change the mindset to become a learning organization'.

## 3.3. Developing other financing streams

Management wanted to diversify their financing base and make its resources more sustainable. Joint funding was often acquired from external partners to partially cover the travel and accommodation costs of short-termers. In 2006, the Water for Life foundation was created, largely inspired by the model of WaterAid, funded by voluntary contributions from water consumers in the Netherlands when paying their bill. Water for Life collects funds exclusively for the purpose of connecting low-income communities to reliable water service networks in developing countries. At the same time, Vitens International actively sought other funding opportunities from donors and financing institutions (Patrón Coppel & Schwartz 2011). As the former CEO recalled: 'If the government decided to follow other policies, we would lose our financial basis. We had to develop another business model, we had to explore other contracts such as management contracts for instance. This is how we went to Ghana'.
The company decided to compete for a World Bank financed contract to manage the Ghana Urban Water Company for $11 million (Vitens International 2007). As Vitens relied on groundwater it was necessary to broaden its expertise with the surface water-based Evides water company. Vitens International became Vitens-Evides International in December 2006, owned equally by Vitens and Evides and its budget doubled to €2 million in 2007. The search for an African partner was to strengthen the consortium with additional competencies. Rand Water from South Africa was ready to join in the international tender. Winning was a significant achievement for Vitens-Evides International, as it marked their recognition as a professional organization.

The management contract was opposed by the Ghanaian civil society, which perceived it as creeping privatization. Unlike the partnerships in Mozambique, Yemen, or Vietnam, this contract put Vitens-Evides International in charge: the focus was no longer on supporting a company and enhancing their skills, but a matter of being in managerial control and prioritizing the recovery of investment through water sales. Although this management contract was less risky than the affermage contract once envisaged by the World Bank, it nevertheless led to substantial risk-taking that was largely underestimated by the company's management at that time.

In parallel, another experiment was undertaken in Malawi where Vitens-Evides International landed a service contract financed by the European Investment Bank (EIB) to improve the performance of water boards in Lilongwe and Blantyre. These boards were, like many urban services in Africa, under high pressure from the World Bank to enter into PPPs. The EIB offered them an escape route with this 'private sector' service contract, which the Water Boards accepted all the more easily as Vitens-Evides International highlighted its public operator profile. If the boards were happy to escape privatization, they were nonetheless complicated partners.

Vitens-Evides International had to comply with heavy reporting obligations of the donor; this harmed the working relations with the water boards and made Vitens-Evides International look like a typical external consultant, not engaged nor interested in the daily affairs of water boards. As a former top manager explains: 'In a partnership we can be flexible. These utilities they make improvement on their own so their challenges also change. You need to adjust the topics hence the short-termers you call in. You might need less on this and more on that. But you cannot change what is in a contract'.

**3.4. The first identity marker: Not for profit not for loss**

The search for additional financing to the core funding made available by Vitens first and then by Vitens and Evides brought to light a first identity marker of Vitens-Evides International: risk adversity. The shareholders refused to bear the risks associated with potential losses to fund their solidarity mission. Vitens-Evides International is a not for profit and not for loss business.

The retirement of the CEO of Vitens in 2009 brought an end to the pioneering team and the development phase of Vitens-Evides International. The annual report of 2010 was the last where management and service contracts appeared as the first implementing modality of the company, and the management of international financing projects topped the list of the type of support it provided.

From this first phase of development, two major lessons were drawn by the new management team: first, Vitens-Evides International would no longer finance its solidarity missions through PPP; and second, funding from multilateral donors did not fit its interventions, for liability reasons.

The ambition of Vitens-Evides International was not to act as consultant, being more engaged in the day-to-day operational work processes. For the second contract with small companies in northern Malawi, also financed by EIB, the bank chose to associate Vitens-Evides International with a project implementer to provide technical assistance. As the Lead Water Expert at EIB explained: 'The combination of such a partnerships with a project implementer works well'.

# 4. PROFESSIONALIZATION PHASE (2009-2017): VEI, A DUTCH-DUTCH PARTNERSHIP

## 4.1. International and national contexts

In 2006, the concept of WOPs surfaced as a capacity development mechanism for improving service provision in developing countries. The United Nations Secretary-General's Advisory Board on Water and Sanitation formalized this initiative in the Hashimoto Action Plan as a tool that would contribute to the achievement of the MDGs targets on water and sanitation.

WOPs were first envisioned as a follow-up on Public-Public Partnerships (PuPs), though restricting partnerships to operators, while PuPs could also involve local authorities, community-based organizations or unions (Boag & McDonald 2010). WOPs' mechanism emerged as a response to the limitations of PPPs in managing water and sanitation systems in developing
countries. However, WOPs eventually evolved to any kind of partnership between operators, structured or simple, aimed at capacity building on a non-profit basis (IWA GWOPA & Vitens-Evides International 2009).

As authors rightly pointed out, most WOPs endorse corporatization as a favored model for public sector reform, a phenomenon found in PuPs as well, but more central to the objectives of WOPs (Boag & McDonald 2010; Beck 2019).

At the national level, the Dutch Parliament passed a law (Koppejan law in 2009) authorizing water companies to devote up to 1% of their turnover to international solidarity activities, inspired by the 2005 Oudin-Santini law in France. For the Dutch water supply sector, this 1% translates in nearly €15 million that could be mobilized for international solidarity, as part of the companies' corporate social responsibility.

## 4.2. From Vitens-Evides International to VEI

The formalization of WOPs and the creation of GWOPA, in 2009, in the orbit of UN-Habitat, to promote it, shifted the lines for some donors. Thus, the Asian Development Bank launched a financing program for around 10 WOPs in 2006, the African Development Bank in 2009 and, in 2011, the European Union financed WOPs within the framework of the EU Water Facility (32 projects were awarded grants totalling €23 million, among which 23 could be considered as WOPs according to Buhl-Nielsen 2017). In the Netherlands, the Sustainable Water Fund program (2010) treated water companies as private sector partners, and funded 11 Vitens-Evides International projects for an amount of €66 M (ODI, 2015).

This evolution of the international and national contexts opened up growth opportunities for Vitens-Evides International. The organization seized its chance and managed its transformation into a more professional entity, focusing on structured work processes in order to grow (Vitens-Evides International 2011). The responsibilities for project acquisition, project management, and quality control were geographically allocated to three regional managers. A CFO was appointed to ensure that Vitens-Evides International had the ability to fulfill its social mission without endangering its shareholders.

From 2012 onwards, the WOP was presented as the company's principal working model. From 2014, only this mechanism would be mentioned in its annual reports, a mechanism around which the company redefined itself and reoriented its strategy: 'VEI's field of work is to contribute to sustainable water services through engaging in partnerships with peer operators in developing countries: our Water Operator Partnerships (WOPs)' (Vitens-Evides International 2014).

The support modalities provided by RPMs and short-termers evolved to increase effectiveness: RPMs are positioned within the partner Company to better understand what are the next steps, where to add value and how to be more effective, and to call for short-termers accordingly (Sanz et al. 2013; Mvulirwenande et al. 2014; Sanz 2014). As the former CEO recalled: 'What I wanted was to have long-term partnerships with somebody placed within the partner Company. Then we could see what the next steps are, identify weaknesses, where to add value and how to be more effective. Would it be more effective that the same short termer goes four times instead of one because then he knows the context, and delivers more the second time?'

A limit to the growth of Vitens-Evides International lay in the number of staff it could mobilize to support its partners. With its specialization in the development and management of cooperation projects, Vitens-Evides International offered other Dutch water companies its services in return for an annual contribution. Vitens, Evides and their Dutch partners could thus pool their human resources to conduct their projects via Vitens-Evides International.

WLM was the first company to use the Vitens-Evides international vehicle in 2012. In 2016, four other companies had joined to give content to their corporate and social responsibilities. It created a total expert base of 300 staff, comprising around 10% of the total human resources of these seven companies.

In response, Vitens-Evides International changed its name and revised the order of its priorities. Vitens-Evides International became VEI in 2014. This minimalist change maintained identity but reduced its single focus on Vitens or Evides. The change in priorities was reflected in a new corporate monitoring indicator and highlighted in its annual reports: the number of days of short-termers on assignment. This indicator was intended to help equally balance the HR input from Dutch partner companies participating in VEI. This recognized that, in fact, international solidarity was perceived first and foremost by Dutch water companies as an interesting human resources management tool, which also strengthened the appeal of the companies to young professionals tempted by international opportunities.

As of 2015, VEI no longer sought to grow. On the contrary, their annual reports showed a desire to stabilize its project portfolio (35-40) and its annual turnover (€20 M) 'which is in line with the non-profit nature of the company's activities' (Annual report, 2015, Vitens-Evides International 2015).
4.3. The second identity marker: Full-cost recovery solidarity

Like any hybrid organization, Vitens-Evides International faced the challenge of financing its solidarity actions. The establishment of WOPs and its financing, along with the Water Act that permits Dutch companies to allocate up to 1% of their revenue toward global solidarity, have presented opportunities that the company has undoubtedly successfully capitalized on.

Over 10 years, the funding received from donors had increased almost tenfold, the increase being particularly significant with the arrival of European funding and the Dutch Sustainable Water Fund from 2013, the year in which grants increased from €5 m to nearly €9.5 m (Figure 1), representing 75-80% of VEI's turnover in the following three years (Figure 2).

The use of these various funds required VEI to address and internalize donor requirements on specific areas of interest, as well as delivering and applying the working model to each project. VEI showed its hybrid nature by stretching its flexibility and meeting these obligations (Breeveld et al. 2013; Tutusaus & Schwartz 2016; Wehn & Montalvo 2018).

These financial factors no longer only concerned the Vitens and Evides projects led by Vitens-Evides International, but also those of the Dutch partners utilities which decided to deploy their international operations via VEI and pool their human resources with those of the two shareholders. The scope had therefore widened. The mission that VEI gave itself reflected its new hybrid governance, by taking over the logic of its members, which owed more to the capacity of VEI to offer prospects of international missions to their staff than solidarity as such. This appropriation was a way of paying tribute

<figure><img src="image_5.png" /><figcaption>**Figure 1** | Vitens-Evides International and VEI turnover from 2006 to 2016 (M€).</figcaption></figure>

<figure><img src="image_6.png" /><figcaption>**Figure 2** | Vitens-Evides International and VEI turnover from 2006 to 2016. Source: Author, based on Vitens International 2007; Vitens-Evides International 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017.</figcaption></figure>
to the fact that the contribution of these utilities made it possible, despite everything, to increase core funding, and therefore
the co-financing requested.

VEI's governance structure remained the same, with its two shareholders maintaining control. Vitens and Evides increased their contributions by €500 K in 2010, then by €1 M from 2012 (to €3.8 M€), when VEI started to work for other companies. In 2016, member utilities paid €1.5 million to VEI, an amount corresponding to approximately 40% of the shareholders con- tributions (Vitens-Evides International 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017). The shareholders' decision to create statutory inequality in governance was intended to facilitate decision-making. It offered member companies, who were not shareholders, an opportunity not to contribute to VEI in the same proportion as shareholders.

In fact, VEI – under a different name – could have become a financially sustainable organization thanks to the 1% law. In 2016, this 1% offered a potential equal to the financing provided by donors to VEI (€16.3 million). VEI shareholders and members preferred to rely on external financiers, which shed a different light on the meaning given to international solidarity: co-financing had indeed the advantage to allow a recovery of project costs, while using only the 1% would have resulted in these costs being covered by the company.

## 5. PREDICTABILITY PHASE (2017–2023): THE CONSEQUENCES OF SECURED FINANCIAL RESOURCES ON THE SOCIAL MISSION

Following the MDGs, the international community has set itself new objectives known as the Sustainable Development Goals (SDGs), which include achieving universal access to drinking water by 2030 as part of Target 6. The Dutch government focuses its development aid on three sectors on a long-term basis: health, agriculture and WASH-IWRM. With regard to drinking water, it intends to contribute to the Target 6 by providing access to water to 30 million people.

### 5.1. The WaterWorX programme

Co-created by the Dutch ministry of foreign affairs and VEI, the WWX rolls out from 2017 to 2030 and instructs VEI to expand the access to water to 10 million people.

Since WWX was agreed, VEI has claimed in each of its annual reports (1) to be the world's leading promotor and imple- menter of WOPs and (2) to have all of its activities financed 'with own resources'.

WWX guarantees funding for VEI until 2030, contingent upon all of the country's water companies participating, and VEI serving as the lead contract administrator responsible for budgeting, reporting, and other administrative tasks. For the Dutch ministry of foreign affairs WWX streamlines administrative management and reduces the costs associated with monitoring various water companies' projects.

WWX consists of three phases. In Phase 1 (2017–2021), WOPs were created with 35 partner companies in developing countries, evaluated and enhanced where necessary, within a budget of €54 million. In Phase 2 (2022–2026), those partners are supposed to review their institutional structure and performance, assess the investment needs and identify the policy changes to improve service sustainability (tariff policy, regulation). Phase 3 (2027–2030) involves the development of invest- ment proposals, in collaboration with local and international funding institutions to accelerate SDG6 service expansion.

The predictability of financial resources comes at a price: the governance of VEI has changed and the scope of its social mission has been adjusted to align with the ministry's requirements.

### 5.2. A dual governance

VEI is the sole contract partner for WWX. A specific unit, the WWX consortium, was set up to steer the program, bringing together, under two different regimes, all the water companies in the Netherlands (WWX consortium).

Under the WWX consortium, either the water companies have their projects managed by VEI and pool their experts with those of the two shareholders in return for a financial contribution (VEI members as from 2012), or they carry out their pro- jects independently and use VEI only to channel funding from the Dutch ministry of foreign affairs (non-VEI members). In terms of project management, VEI acts as project manager for seven companies including its two shareholders, and retains 75–80% of WWX financing (Figure 3). The Amsterdam and The Hague water utilities carry out their projects independently with their own staff as well as Oasen, and have VEI solely as an administrator to facilitate funding (20–25% of WWX funding).

VEI has developed a number of operational guidelines to manage the projects that fall under WWX (utility membership, guiding overhead cost principles, internal/external tariffs for their experts, etc.).
<figure><img src="image_7.png" /><figcaption>**Figure 3** | VEI and WWX governances in 2023. Source: Author, based on interviews and VEI (2018, 2019, 2020, 2021).</figcaption></figure>

As a result of its growing portfolio, VEI head office gained the capacity to hire its own employees in 2018: they were previously depended on seconding staff from Vitens and Evides to manage international activities. Own staff steadily grew from seven in 2018 to approximately 20 employees in 2022 to cover for finance & control (six), communication (two), HR (three), management (four), and operations support (four).

Since 2019, over 60% of VEI's turnover has been made up of the WWX projects. Non-WWX projects can be deployed in WWX countries, under the responsibilities of RPMs who are WWX project staff. RPMs fall under the line management of the WWX coordinator but can carry out projects, which fall under the direct responsibility of VEI. This hybrid governance may be challenging in terms of coordination and responsibility.

### 5.3. Alignment to sponsor expectations

The objectives of VEI have been aligned with the Dutch ministry of foreign affairs' and its members'. The annual reports from 2017 to the pandemic in 2020 used two indicators: the number of people accessing water services each year (SDG6 agenda) and the number of short-term expert working days in project countries. Depending on the interlocutors, the order of these criteria may be reversed. A VEI staff states that: 'Our mission is to be of contribution to the Dutch water companies which means that the employees have to go on short-term missions. That's the main goal for them. The second is achieving SDGs 6'.

In 2021, a uniform framework with definitions for SDG counting was developed, adopted and accepted by the Dutch ministry of foreign affairs. Schematically, people accessing water are counted by tracking the number at the beginning and at the end of the partnership, assessing the contribution of VEI from the total finance injected into the WOP and on the size of the partner utility: a larger % is attributed for smaller utilities but it does not depend on the type of support. From 2017 to 2022, VEI would have precisely enabled 1,614,238 people to access drinking water services (VEI 2018, 2019, 2020, 2021, 2022a, 2022b).

Before 2017, VEI already set itself a target for mobilizing their experts. However, the indicator was unstable, sometimes based on the number of experts, distinguishing or not the number of short-termers and RPMs, other years on the number of missions counted in weeks or days or working days. As of 2017, these were counted in working days abroad. Targets gradually increased each year up to 4,400 in 2020.
## 5.4. Redefining VEI's identity and missions

The first phase of WWX is the only one whose results are clear to VEI. Although in its early stage, Phase 2 raises concerns about the ability of the mentor and the mentees to participate in the development arena. According to a donor: 'Operators are not equipped to address politics of financing, lending, and tariffs'.

The pressure born from a programme that commits VEI to venture into unknown territory brings back strategic questions about its identity. To achieve WWX, VEI partners with relatively large utilities and supports their acquisition strategy to expand services to peri-urban areas. This setting puts VEI in a challenging situation: its expertise may not be necessarily appropriate and capital investment takes priority over improving what already exists. The choice issue for VEI's mission comes into sharp focus: capacity development or SDG6 targets? A RPM explains: 'WWX as many other programs has a focus on SDG6: more connections. But improving the processes (supply hours, NRW, etc) is equally important as expansion. We need to balance service improvement with service expansion. In the country I work where utilities lose 50% of their water from the extraction to the bill recovery, you need to invest in service improvement'.

At the same time, VEI is adapting and experimenting with new ways of sharing knowledge, ways that are likely to pro- foundly challenge the governance of the organization hence its financial resources.

### 5.4.1. Innovative support modalities

To adapt to the pandemic, more local expertise was mobilized to replace the supply of Dutch experts, which was undermined by severe travel restrictions. VEI switched to digital support and local experts (the so-called south-south exchange). The ambi- tion to be carbon neutral in 2026 included in its strategic plan also encourages a considerable reduction in travel. Expert visits of less than 2 weeks are already discouraged.

In addition, VEI is developing knowledge sharing through 10 online Communities of Practice (CoPs), including one on sanitation for which VEI has no expertise. Previously only opened to VEI and its partners, the CoPs have migrated since 2022 from WWX to the GWOPA open platform and offer knowledge exchange, network events, webinars, and masterclasses to anyone affiliated to a non-profit organization, be it a VEI's partner or not.

These changes call into question the short-term model on which VEI has built its partnership with Dutch utilities. The pro- files for short-termers are changing, in line with the size of the partners and the ambitions of WWX. A VEI staff explains: 'In the 2023 requirements for STers, there is a shift from technical knowledge to more strategic, organizational knowledge, and it is good that we adjust to that (...). Before it was: we need to send away as many people as possible but this is no longer the case. We are in this transition. We were exporting Dutch expertise and we are moving away from that but then what are we doing is a question I struggle with because it touches the identity of the organization'.

### 5.4.2. Innovative support objectives

The second phase of WWX is just starting and deals with the enabling environment, which, according to (former) RPMs, has been a clear limitation in WOPs impact. In most countries, it means helping the partners to understand better the institutional setting they evolve in and to try and engage with policy makers (ministries, regulators). As a RPM explains: 'We are moving away from the original WOP: within a WOP you only have influence, you don't have power, you can support change but you cannot force it. We are presenting our influence as power to the donors. But I don't have power! I am not telling my partner what to do, I am telling him, this is the money, what do we do with it?'.

In the third phase of WWX, the Dutch ministry of foreign affairs intends to contribute marginally to capital investments in some of the countries where WWX is deployed. RPMs are in the front line to strengthen the partner utilities' attractiveness for donors. VEI head office has developed a tool based on the World Bank's turnaround framework (titled 'the utility of the future') to benchmark the various work processes within utilities and to rate them on a scale measuring 'maturity level'. This tool links capacity development to the performance of the utility and is intended to help partners define support needs and also demonstrate improved performance to potential donors.

## 6. CONCLUSION AND WAY FORWARD

VEI's mission is to provide long-term support to urban water services providers in developing countries, and VEI must raise funds to sustain this mission. It is a hybrid organization.

Vitens International started in 2003 as a solidarity based organization within Vitens, the largest water company of The Netherlands. In its pioneering phase, the organization pragmatically 'sailed where the wind blows' and sought different
ways of financing its solidarity mission, resulting in a gradual reduction of those resources involving risks of loss for its share-
holders. VEI is not for profit and not for loss.

The quest of non-risky financial resources prompted Vitens-Evides International to become a professional project manage-
ment organization in capacity building, offering a paid service to other Dutch water utilities for seconding staff to overseas
work. This created a hybridity of governance due to the pooling of the staff of the two shareholders and of other members.
Vitens-Evides International became VEI as VEI's shareholders discovered that their core funding acted as leverage for VEI to
obtain external financing, while covering the costs of providing expert support, applying a principle of cost recovery for its
solidarity missions. It also offers an HR resourcing tool for its shareholders and member companies to attract staff in the
job market. VEI has increased its expert resource base, which now represents roughly 10% of all employees working for
Dutch water companies.

With the launching of the WWX, VEI has turned into a major instrument of the Dutch Ministry of foreign affairs. The pro-
gram is creative but complicates VEI's role: it secures 60% of the company's annual turnover until 2030 but implies a change
in the mission delivered by VEI and brings back into view strategic questions about the organization's identity. Diversifying its
financial basis will be increasingly important to reduce VEI's vulnerability to donors and not become 'just an executive gov-
ernment body'.

These tensions on the identity of VEI emerge from the different visions that the interviewees have of their organization in
the short and medium term. The only common point is that VEI must grow and increase a turnover that has been stable since
2015 (Figure 4).

A rather minority vision is to refocus VEI on its original mission: technical support to water operators in the South 'what we know how to do well'.

A second vision is to convert VEI into a knowledge broker in areas extended to sanitation, water resources management
and adaptation to climate change to meet the expectations of operators in the South.

A third vision is a follow-up of WWX, a 10-year European WWX where European operators would receive funding from
the EU and their ministries to support the water operators in the South.

Each vision may diversely affect VEI's identity and sustainability (Table 1).

Under the first option, VEI will return to its prior WWX identity and face the issue of financing its projects, unless VEI
shareholders and members fully utilize the financing potential offered by the 1% law, which would result in a turnover com-
parable to 2022 (€20 M).

Under the second scenario, VEI's identity would radically change and most certainly VEI governance. Connecting knowledge
and skills with donors' money in order to address water operators' demand requires attracting experts from different sub-sectors,
while VEI shareholders and members are exclusively water service providers. VEI could certainly participate in this knowledge
exchange platform notably through the CoPs that it has developed and positioned under the umbrella of GWOPA, but it lacks
the legitimacy to extend the scope beyond the provision of water services. Thus, this second vision entails to accept the weak-
ening of the corporate interest and optimise the delivery of capacity building wanted by global south operators.

The third vision offers more growth opportunities: it capitalises on VEI experience and offers predictable funding. The
recently launched EU-WOP Program, the first dedicated European fund for WOPs – whom GWOPA has been tasked to

<figure><img src="image_8.png" /><figcaption>**Figure 4** | VEI turnover from 2015 to 2021 (M€). Source: Author, based on Vitens-Evides International (2016, 2017) and VEI (2018, 2019, 2020, 2021, 2022a).</figcaption></figure>
<table><caption>**Table 1** | The possible futures of VEI after 2030</caption><thead><tr><td>Visions</td><td>Identity</td><td>Governance</td><td>Social mission</td><td>Implementing modalities</td><td>Financial resources</td></tr></thead><tbody><tr><td>'VEI will grow by providing technical support'</td><td>'old' VEI</td><td>VEI shareholders &amp; VEI members</td><td>Technical support to 'mentees'</td><td>Highly specialized FIFO (fly-in - fly-out)</td><td>1%</td></tr><tr><td>'The future of VEI is to be a knowledge broker rather than a broker of Dutch expertise'</td><td>Knowledge broker in the field of water</td><td>GWOPA</td><td>Connecting knowledge and skills with donors' money</td><td>CoPs exchange visits</td><td>?</td></tr><tr><td>'A WWX type of program that runs from 2030 to 2040 funded by the EU'</td><td>VEI</td><td>VEI shareholders or meta-organization</td><td>Technical, organizational and strategic supports</td><td>RPM FIFO CoPs</td><td>EU and domestic ministries</td></tr></tbody></table>

Source: Author.

manage – can possibly lead to another facility, the urban catalyst fund, and ultimately prefigure a more permanent funding stream to support WOPs, and compensate European utilities for their international solidarity mission (Buhl-Nielsen 2017; Lestrat 2021). Depending on the conditions for accessing this funding stream (and the contribution of each utility), the question of the governance of VEI may resurface (members pushing to become shareholders), transforming VEI into a meta-organization (Berkowitz et al. 2022).

The direction of VEI will depend, as for each of the historical sequences analyzed, on the national and international contexts.

## ACKNOWLEDGEMENTS

This research could not have been completed without the access to VEI's database and a cross-section of their (former) employees, partners, and financers.

## DATA AVAILABILITY STATEMENT

All relevant data are included in the paper or its Supplementary Information.

## CONFLICT OF INTEREST

The authors declare there is no conflict.

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First received 3 October 2023; accepted in revised form 31 December 2024. Available online 15 January 2025