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The Business Case for Pursuing Water
Sustainability: New Opportunities, New Risks |
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As business leaders
plan for the future, they scan for opportunities and risks
created by emerging trends that may impact their company,
industry, customers, and the world. There are now signals,
some faint, some strong, that water is emerging as an issue
of strategic importance to business.
Over the past several decades, many businesses
have improved the efficiency of water use and reduced the
discharge of pollutants to surfacewaters and aquifers. In
fact, in some areas, despite increases in population and economic
activity, freshwater consumption has dropped since 1980 in
response to water conservation, reuse, recycling efforts,
and changing priorities for water use. Following such successes,
many companies are taking a renewedand more coordinatedlook
at their relationship to water and seeing both expanding opportunities
and heightening risks.
New Signals, New
Opportunities, New Risks
The business case for strategically addressing
water challenges is getting stronger. While each organization
must assess the business case arising from its own relationship
to water risks and opportunities, companies are increasingly
encountering four strategic water signals that the business
case to address water issues is building in multiple industry
sectors. Business benchmarking and case studies conducted
as part of this effort are evidence that these signals are
growing in strength and frequency.(1)
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Total water
costs are increasing in unexpected ways.
Businesses are experiencing increases in
water-related costs, not only those reflected in direct prices.
In fact, water prices in many locations fail to accurately
represent shifting supply and demand for water. Other direct
and indirect water-related costs have emerged or risen in
both industrialized and developing countries, including:
- Treatment costs to ensure that water
inputs meet the business quality specifications
- Wastewater treatment and pollution mitigation
costs to meet more stringent pollutant discharge and run-off
standards as regulatory approaches shift from technology-based
requirements to watershed health-based limits and levels
necessary to support endangered species protection and restoration
efforts
- Supply expansion costs associated with
dam construction, water diversion, well drilling, and securing
new water allocations
- Indirect costs from suppliers with water-intensive
processes or significant water impacts
- Worker absenteeism costs stemming from
employee contraction of water-borne illnesses
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Business disruption
risks are growing. Current water allocations are
not assured into the future.
Many companies now realize that even greater
risks lie in the potential for water-related constraints on
business activity. Current allocations of water
rights for use and for discharge of pollutants are not assured
into the future. In many regions of the world, pressures are
growing to give higher priority to ecosystem and basic human
needs for water. Changing local water supply and quality levels,
combined with increasing competition for clean, freshwater
resources, make past allocations vulnerable to disruption
and revision. Businesses lacking contingency plans and failing
to take proactive steps to address facility and local water
challenges may find it difficult to avoid or respond quickly
to surprises. Potential water-related business risks include:
- Water supply disruptions due to temporary
or chronic water shortages, infrastructure deterioration,
surface and groundwater contamination, or terrorist activity
- Pressures to change water allocations
to address other industrial, agricultural, residential,
and ecosystem needs, particularly in times of tight supply
- Supplier disruptions from water shortages
in other regions, particularly those affecting energy and
agricultural inputs
- Opposition to proposed facility siting
or expansion stemming from existing or anticipated company
or community water uses or impacts
- Public opposition to or government prohibitions
against certain wastewater discharge techniques or certain
types of water quality impacts
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Customer expectations
related to water use and impacts are evolving.
GEMI member companies report that they are
increasingly hearing from customersshareholders and
those who buy a companys products and servicesabout
the growing importance of water issues. Failure to understand
evolving customer expectations can affect a companys
bottom-line performance. Increasing water-related costs throughout
the value chain can affect product costs and pricing, reducing
product or service demand. Many publicly traded companies
are experiencing shareholder initiatives aimed at corporate
environmental performance or decision-making. Such initiatives
and associated shareholder expectations can create pressure
for a company to alter its water-related practices or strategic
plans.
At the same time, some companies are finding
ways to enhance revenues by applying core competencies to
address water-related needs experienced by others, such as
products that use less water or services that reduce customers
water dependency.
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Businesses
license to operate and ability to expand are increasingly
tied to water-related performance.
As public expectations
shift to embrace concepts of sustainability, companies are
also discovering that their definitions of critical customers
may need broadening. Critical customers are no longer just
shareholders and those who buy a companys products and
services. They include those individuals and groupsfinancial
markets, suppliers, neighbors, non-governmental organizations,
and regulatorswhose behavior or responsiveness a business
depends on to maintain its license to operate
and to deliver consistently increasing shareholder value.
Addressing the water needs of a companys critical customers
will require new thinking and more strategic approaches. For
example, increased community awareness and recognition of
local water challenges can alter public acceptance of and
support for a companys strategic plans or water-related
practices.
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Creating
Business Value Through Water Sustainability
Business has a strategic
opportunity to get out in front of water sustainability challenges
before they impose constraints on business activity. Localized
environmental issues of water availability and qualitythat
could often be solved through technical, policy,
or behavioral approachesare transforming, in many communities,
into sustainability challenges that demand ongoing balancing
efforts to satisfy competing needs. Balancing such demands
on water resources will increasingly require thoughtful, collaborative
management.
Case studies
in this tool demonstrate how specific companies have recognized
these strategic water signals, evaluated the business case
for action, and taken steps to address the emerging challenges
in ways that reduce risk, create shareholder value, and benefit
the environment and others dependent on shared water resources.
Lessons from company experience, combined
with advice from water experts, suggest several practical
concepts that can guide efforts to manage water resources
sustainably while creating shareholder value. While incorporating
these concepts into company actions may not be practical in
all situations, doing so frequently reduces risk, opens opportunities,
and enhances water security.
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Connecting
the Drops: Building a Company Water Strategy that Fits
Individual companies
face the challenge of understanding what all of these evolving
water signals mean for them and what steps they should take.
Each company has a different relationship to water throughout
its value chainfrom production inputs, raw materials,
and suppliers to ultimate service or product use and disposition.
Each company must assess its own business case for action.
By understanding some of these signals early, companies may
find paths that prevent future crises.
While water challenges persist at the local
level, businesses are finding advantages in taking a more
coordinated and strategic approach to addressing water challenges.
Coordinated corporate attention to water challenges can support,
promote, and transfer successes across facilities and sites,
while engaging multiple business functions in reducing water-related
risks and pursuing value-adding opportunities. Historically,
at many companies, water-related responsibilities have been
divided among separate functions, such as facilities management,
engineering, and environmental affairs, with ownership of
overall strategic water considerations falling through the
cracks. Leadership, however, can come from many placesand
plant managers will undoubtedly have a growing responsibility
to navigate facility operations through local water challenges.
GEMI has developed this tool
to help you connect the drops and build a creative
water strategy that fits your needs and circumstances. The
tool enables organizations to better understand their relationship
to water throughout the value chain, identify opportunities
and risks, assess the business case for action, and develop
and implement continual improvement-based water strategies.
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