Owner ORB Consulting
In the UK water is not something most of us have had to think about – it’s always been there, cheap and plentiful. But this is changing.
The new chief executive of Ofwat, the Water Services Regulation Authority for England and Wales, spoke of the need to change the philosophy of water companies, so that they “curate the natural capital on which they depend”. This comment was followed by a warning from the chief executive of the Environment Agency, highlighting that water demand in England could outstrip supply within 25 years. Putting the likely impacts of climate change in financial terms, the UK National Infrastructure Commission has calculated the cost of running emergency water supplies in 2050 to be £40 billion a year.
In other parts of Europe, the situation is more immediate. Around 30% of the total European population — primarily those living in densely populated cities and agriculturally dominated economies of southern Europe — experienced water scarcity in the summer of 2015. Coldiretti, the Italian farmers association with a half million members, estimated that the sector lost €2 billion in 2017 due to the summer drought. In Denmark, pesticide pollution accounts for 20% of well closures and nitrate pollution for 10%, although water itself is currently abundant. Whether aggravated by climate change, pesticide pollution, or excessive demand, scarcity is changing our relationship with water.
Demand for water will increase as global population grows to more than 9 billion by 2050. The World Business Council for Sustainable Development (WBSCD) estimates water demand will increase by 40-50% for the global food system, by 50-70% for municipal and industrial sectors, and by 85% for the energy sectors. Since 2013 ‘water crisis’ has been ranked in the top 5 risks in the World Economic Forums Global Risks Report. The World Bank estimates economic growth rates may decline by as much as 6% by 2050 as a result of water-related losses. Without good water management practices, water scarcity will result in some regions not reaching their economic goals.
Risks and Returns
Clearly, we are facing significant problems, which constitute risks and opportunities for businesses – both of which are best managed and explored with the right information.
In relation to risks, security of water supply and its relationship to business continuity is key. That means water in the right quantities — and of the right quality — to meet the needs of the business today and in the future, with standby capacity and headroom for business growth. It is also important to note that supply chain vulnerability is equally important and often overlooked.
Some businesses may experience insufficient volumes of water from the mains supply to enable the factory processing, heating or cooling, or to go in the product itself. In other cases, the mains supply is not cost effective for the processes required. In these cases, the development of alternative sources of sustainable water are required. Sources could derive from prospecting and developing of a new borehole source or through applying circular water management practices through capture, treatment and reuse of water where previously it would have been deemed to be of no value and discharged from the manufacturing process as a waste.
Attributing a value to process water (in the same way as for energy and other raw materials) would adjust attitudes about water efficiency and water reuse within factory processes. This would move businesses away from previously held misconceptions that reuse impairs production quality.
Some manufacturers understand and have strategies to manage their water security and footprint, but many do not. Likewise, many do not have confidence that water risks within the supply chain are known and managed. There is no visibility into whether key partners in the supply chain have understood security of water supply to their business; whether the infrastructure is sufficient to ensure a reliable supply; whether the long term availability of supply is available with headroom to upscale production as required and will, as far as can be predicted, remain free of contamination.
Opportunities for businesses lie in investing in the security of supply and in optimising business operations around the circular economy of water and the footprint of water demand. By going through this evaluation process and developing informed responses, businesses can realise a long-term return on investment in efficiency and security. At Golder, we have seen clients in the manufacturing and extraction industries achieve their business goals by developing and maintaining a secure water supply. Those businesses that proactively manage water use can minimise the risks of business disruption, can find cost savings through water use reduction, reuse or finding alternative water sources, can find associated savings such as the recovery and reuse of chemicals from wastewater. In parts of the world with water scarcity in particular, water management is a key aspect of corporate responsibility.
Coming Full Circle
The circular economy has begun to shake the foundations of the linear economy. The process of taking a resource, using it once and contaminating it in a way that is expensive and technically difficult to reuse or reintroduce into ecosystems is the foundation of a linear economic model, and that model is set to change.
As we have seen with carbon, a sharper focus on finding solutions, changing policies, and the development of new markets, has created new challenges and opened new opportunities for businesses. New technologies, products, processes, and business models deliver increased interest from different sets of investors and expand the availability of funding for innovation.
A similar change is happening with water and the circular economy. A proposed EU regulation to establish targets for water reuse, the agreement of standards to enable fertiliser from sewage to be sold across Europe, discussions on the reduction in micro-contaminants in wastewater may be just the start.
Until now, water was the quiet cousin to climate change, garnering limited attention in headlines and on international political stage. All indications are that this is changing. The era of cheap and plentiful water supplies is coming to an end, and smart forward-thinking businesses that are managing risks, developing continuity plans, and seeking out opportunities have an opening to experience smoother waters ahead.