World Water Week is going on right now in Stockholm, Sweden. This year marks the 25th edition of the annual international event aimed at calling attention to issues surrounding water.
Over the years, businesses have played an increasing role in dealing with the issue, which makes sense considering the size of the impact that business has. What also makes sense is the fact that smart water policy can not only save companies money, but in many cases, water also represents a strategic asset, without which many businesses could not operate. A major aspect of the sustainability journey has been the process of making ecosystem assets that were previously considered externalities visible to the financial side of businesses.
This secure website is a tool available to businesses at no cost. An expanded version, announced today, provides new insights to help businesses factor current and future water risks into decision-making with a localized assessment of water scarcity impacts on current and future revenue.
The expanded version takes into account the fact that:
Two major factors have interfered with effective water management strategies. First, like many other natural capital resources, water is generally not priced to reflect its full value. As a result, many businesses don’t factor potential cost implications associated with water scarcity into business decisions. Second, businesses often take the water they rely on for granted.
It’s like McGee Young said in our conversation about the ROI of sustainability. Referring to those sticking with a strict show-me-the-impact-on-this-year’s-bottom-line approach, he said, “They are working with the outdated assumption that the environment we are operating in is not about to change into one that will be far more expensive and difficult.”
Not only are the world’s water supplies limited, but demand is increasing and quality is declining due to the need for more food and energy, increased economic development, and other factors. The new monetization tool provides businesses with information on the financial implications related to water scarcity risks and the likelihood that these implications will occur.
Specifically, the tool provides:
The original water risk premium model calculates a risk-adjusted water cost by correlating local water scarcity to considerations that contribute to the full value of incoming water, based on scarcity, for a specific facility, including:
The water risk premium, when added to the local price a business pays for water, quantifies the value a business should place on water based on real and future water scarcity risks (current, three-, five- and 10-year projections).
The new Potential Revenue at Risk function estimates the value of the revenue that a facility could potentially lose due to the impact of water scarcity on operations. The tool uses a revenue-at-risk model to estimate the amount of water available to the facility – its “share” of total water available to industry water users in the basin based on the facility’s contribution to the local economy.
Because water is a finite resource that is shared by many users in a water basin, the amount of water that should be available to a facility may be less than what a facility needs.
That amount available could also change over time, as water scarcity increases or as a local economy grows (the tool forecasts revenue at risk over three, five and 10 years). The revenue-at-risk model compares the estimated amount of water a facility requires to generate revenue (cubic meter per U.S. dollar of revenue) to the facility’s share of water in the basin if water were allocated among water users based on economic activity (contribution to basin-level GDP). If more water is required than the basin share of water allocated (as determined by the model), then a proportion of the facility’s revenue is potentially at risk.
Image credit: Flickr/Susan Nilsson
RP Siegel, author and inventor, shines a powerful light on numerous environmental and technological topics. His work has appeared in Triple Pundit, GreenBiz, Justmeans, CSRWire, Sustainable Brands, Grist, Strategy+Business, Mechanical Engineering, Design News, PolicyInnovations, Social Earth, Environmental Science, 3BL Media, ThomasNet, Huffington Post, Eniday, and engineering.com among others . He is the co-author, with Roger Saillant, of Vapor Trails, an adventure novel that shows climate change from a human perspective. RP is a professional engineer - a prolific inventor with 53 patents and President of Rain Mountain LLC a an independent product development group. RP was the winner of the 2015 Abu Dhabi Sustainability Week blogging competition. Contact: email@example.com