This post is part of a blogging series by economics students at the Presidio Graduate School’s MBA program. You can follow along here.
By Kartika Tulusan
Considering that we drink about a gallon of water a day and consume around 520 gallons through our food consumption and production, water consulting is the business opportunity of the century. In contrast to carbon intensive energy sources, water has no substitute. Moreover in 2010, the United Nations General Assembly voted to establish “the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights.”
Around 33 years ago, the Clean Water Act established policies and penalties for water remediation, and created a compliance driven industry, such as remediation of pollution and reduction of environmental liabilities during property transfers. Over the last 5 years, businesses have recognized the risks water scarcity poses, such as increasing water costs volatile price fluctuations, changing customer expectations and the disruptive risk to business operations, and realize the advantage of a proactive water management strategy.
Today, significant investment have been made to proactively identify long-term sustainable water strategies for governments, corporations and NGOs alike, such as stakeholder engagement, water foot-printing, grey- and black-water treatment, water-efficient technologies, water recycling and water infrastructure management.
The Carbon Disclosure Project published the first CDP Water report in 2010, which highlighted that 39% of companies have been affected negatively by water in the last 5 years and acknowledge that water management has to be addressed right now. Similarly, although water savings are small compared to total revenues, 62% of corporations understand water as an opportunity; for instance metals in the mining industry, and chemicals in the industrial & manufacturing industry. Importantly, 72% of corporations are aware of energy and costs savings available through water management tools.
Thus, corporations embracing proactive water management can account for increased profits, stronger balance sheets, attracting and retaining a talented workforce and increasing brand equity. Understanding water as a business opportunity has resulted in the development of several corporate coalitions that are currently steering water stewardships, and have leveraging frameworks and tools such as:
- Global Environmental Initiative GEMI
- World Business Council for Sustainable Development
- Global Water tool
- Global Water Footprint Standard
Despite, positive progress in water management and sustainability reporting, many corporate groups have been accused of blue-washing, exploiting natural resources and securing water ownership through privatization to maximize profits, which has caused violent protests and political instability in several countries.
For instance, the UN CEO Water Mandate, which is a public and private driven water group, promotes its mission to be the following:
“[…] our mission seeks to make a positive impact with respect to the emerging global water crisis by mobilizing a critical mass of business leaders to advance water sustainability solutions – in partnership with the United Nations, civil society organizations, governments, and other stakeholders.”
However, the UN CEO Water Mandate is spearheaded by Coca-Cola, Pepsi, Nestle, Unilever, Levi-Strauss, and Suez, who are the leading water bottlers, heavy water users and the latter is on of the largest private water management companies in the world. Thus the mandate spurred global concern over conflicting objectives and future water policies.
In response, 118 organizations from 33 countries, amongst them the Sierra Club, have co-signed a letter to the United Nations Secretary General Ban Ki-Moon that demands the withdraw of his support of the CEO Water Mandate. Perhaps, partial privatization of water management can improve and ensure water preservation; such as outsourcing of municipal water system infrastructure repairs to private companies. However, there is a thin line that divides good and bad privatization.
Thus, recent water business opportunities have led to a call for not only economically but also socially and environmentally responsible business practices and policies. Business, governments and citizens alike must collaborate and manage water opportunities for the long-term.
Considering these trends in water management in California and the world, an important and necessary question arises: “How can we ensure the development of sustainable water consulting practices that will define ethically, environmentally and economically sound water policies and frameworks, and guarantee water as a social good in an open market?”
Key water market drivers are summarized as follows:
- Water scarcity is at a tipping point to a worldwide crises.
- In 2010, the UN declares access to clean water as a human right.
- Water is understood as a social good.
- Growing population.
- Fast emerging industry and middle class in India and China.
- Local supply-chain: Any usage of water resources affects multiple local stakeholders and communities.
- The world bank is selling water rights to corporations in exchange for monetary support to developing nations.
- All corporations need water and that there is no substitute for it.
- Consumers are becoming more aware and asking for water efficient products and services.
- Water and energy nexus: Water requires large amounts of energy for treatment and transportation.
- Aging infrastructure.
- Food production accounts for 70% of total water consumption.
- Corporations are buying water resources to be in control of future water markets.
- Large economic and human capital investments are necessary.
- Regulation and enforcement processes are developed leading to new policies.
- Pollution and broken water cycles.
- Bottled water increases waste and carbon footprints.
- Demographic change: Water is not evenly distributed on the planet.
- Climate change and increased temperatures have worsened water access and quality.
- Land and forests have not been managed properly and has led to increased run-off of water causing eutrophication in open water systems and reducing aquifer recharge.
- Depletion of aquifers due to overpumping.
- Increased levels of privatization, but remains controversial.
- Industry consolidation, ownership but also power struggle to control greater resources.
- Strong surge for private and public equity investment.
- Greater efficiency – focus on reducing demand to increase supply.
- Increased focus on water recycling and reuse.
- Consumer gain more awareness and demand water efficient products.
Based on these key drivers, several conclusions may be drawn:
- Water prices do not accord to true costs or true value.
- Companies do understand water risk but have difficulties in justifying costs due to missing policies that connect the costs.
- Corporations are strategically obtaining water rights to increase profits
- Water could become an economic good and not a social good in the future due to lacking policies.
Sources for summary market trends.
Every Last Drop – Strategic Sustainable Consulting
Kartika Tulusan is a management consultant in IT and human-centred design, and a MBA Student at Presidio School of Management.
Ms Tulusan aims to leverage her professional experience with her business education towards a career in sustainable water management. Her interests are innovation, systems thinking and scenario planning. She can be reached under firstname.lastname@example.org
Follow her on twitter @kartika