GEMI
Home Business Case Menu Water Trends Case Studies Overcoming Challenges Resources
Tool Sections: Overview Module 1 Module 2 Module 3 Module 4 Module 5
 
 
The Business Case
The Business Case for Pursuing Water Sustainability: New Opportunities, New Risks
 
 
 

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 renewed—and more coordinated—look 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)
 

Signal 1

 

 

 

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

Signal 2

 

 

 

 

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

Signal 3

 

 

 

Customer expectations related to water use and impacts are evolving.

GEMI member companies report that they are increasingly hearing from customers—shareholders and those who buy a company’s products and services—about the growing importance of water issues. Failure to understand evolving customer expectations can affect a company’s 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.
 

Signal 4

 

 

 

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 company’s products and services. They include those individuals and groups—financial markets, suppliers, neighbors, non-governmental organizations, and regulators—whose 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 company’s 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 company’s strategic plans or water-related practices.
 

 

 

 

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 quality—that could often be “solved” through technical, policy, or behavioral approaches—are 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.
 

 

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 chain—from 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 places—and 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.

Moving Forward