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Tool Sections: Overview Module 1 Module 2 Module 3 Module 4 Module 5
Module 4 Strategic Direction and Goal Setting

Module Purpose

Based on an evaluation of the potential water-related risks and opportunities, the tool user must decide if there is a sufficient business case for engaging the organization in the development of a water sustainability strategy. This preliminary assessment necessitates some consideration of organizational factors, such as the business mission and policies, current goals and priorities, and organizational receptivity to addressing water sustainability issues and risks. Using information on risks and opportunities identified in Modules 2 and 3, Module 4 assists tool users to establish the business case and a general direction for pursuing a water sustainability strategy. Module 4 helps tool users to answer the following questions:

  • What business case exists for pursuing a water sustainability strategy?
  • What are the company’s goals related to water sustainability?
  • How can the organization be best engaged in pursuing a water sustainability strategy?


Step 1




Module Approach

Assess the Strength of the Business Case for Pursuing a Water Sustainability Strategy

Assessing the business case typically involves comparing the cost of action to address an opportunity or risk with the benefits derived from taking action. If the value of pursuing an action is greater than the costs associated with the action (adjusting future costs and benefits with a time discount rate), then there is likely a business case for doing so—a positive net present value (NPV). This NPV approach applies whether one is determining the business case for upgrading a wastewater treatment facility or assessing the business case for establishing a cross-functional committee to develop a company water strategy.

The challenge often lies, however, in determining the cost and benefits of taking action. While the organizational costs of taking action are often relatively straightforward to estimate, the benefits—or avoided costs of inaction—can be more difficult to quantify due to future uncertainty. Estimating the value of less tangible benefits, such as reduced risk and improved relationships with critical customers, can be particularly difficult.(1) Some companies have developed or adapted “total cost assessment” or probabilistic risk assessment tools to support their efforts to determine costs and benefits. Nonetheless, business managers are accustomed to making decisions that involve weighing difficult-to-quantify costs and benefits.

Yet the common toolbox of valuation and decision-making tools, such as NPV, can lead companies to underestimate the value of decisions and investments that create options for future action. Recent research has highlighted the difficulty of selecting appropriate discount rates for comparing short-term costs and longer-term benefits of environmental investments.(2) New tools, however, are emerging to assist business managers in making investment decisions amidst significant uncertainty about the future. The concept of “real options” adapts financial options tools to the evaluation of a business’ opportunities.(3) Incorporating the value of future “options”—such as secured access to sufficient quantities of clean freshwater at an affordable price—into corporate decision-making can significantly improve the financial attractiveness of strategic investments. Steps that expand, or keep open, future options for a company often create value. For example, a company’s investment in watershed protection could contribute to a valuable future “option” for its facility to expand production capacity in the future by alleviating local water quality pressures.

Even when the benefits of pursuing an action outweigh the costs (e.g., a positive NPV exists), the activity may not compete effectively for limited organizational investment resources and attention. Some water sustainability projects may be too small to easily attract management interest, or they may have a lower return on investment than other projects under consideration. To the extent that investments in water sustainability initiatives can reduce costs, increase competitiveness, safeguard the business’ “license to operate,” and remove potential constraints to future growth, these benefits are likely to resonate with company leadership. The benefits of addressing water-related challenges, such as reduced risk, enhanced competitiveness, and improved relationships, become more salient in making the business case when they relate to important business priorities or critical customers’ expectations.

Step 2




Identify the Organization's Water-Related Goals

Most companies have three explicit or implicit core goals related to water: comply with all applicable regulatory requirements; assure continued access to sufficient supplies of clean freshwater at an affordable price to meet the company’s needs; and maintain “license to operate” through attentiveness to community needs and concerns.

Some companies see value in pursuing additional water goals to mitigate potential long-term risks, to address the expectations of critical customers, or to support certain sustainability commitments. Tool users should seek to understand the organization’s explicit and implicit goals related to water and sustainability. Through their environmental management systems, many companies have developed vision statements, policies, and goals stating their commitment to environmental performance and, sometimes, sustainability. These may include specific goals addressing water security, water use, and water impacts. If not, they may provide insight into implicit water goals. For example, “working with communities in which the company operates to address their environmental concerns” may be a commitment that implies certain goals or focus areas related to water.

For businesses that pursue a coordinated water strategy, there may be value in engaging multiple levels of the business—facility, business unit, corporate—as well as critical customers and interested members of the community, in establishing clear water-related goals and targets.

Step 3



Set Strategic Direction to Engage the Organziation

Determining whether to engage a business in pursuing a water strategy depends on the strength of the business case. The strength of the business case will largely depend on the importance and magnitude of opportunities and risks facing the business (identified in Modules 2 and 3). Determining how to best engage a business in pursuing a water strategy depends on three key factors: the organization’s culture, the organization’s existing strategy and planning infrastructure, and employees’ perceptions of water resources, opportunities, and risks.

Fitting the Strategy Approach to the Organization

Strategies are typically designed to ensure coordinated action to achieve a desired goal. For some companies, particularly those with a weak or narrowly focused business case, a water strategy may concentrate on specific opportunities or risks. Such a strategy might not engage many functions in the organization and not establish many water-focused activities, such as creation of a water task force. For other companies, the business case may be sufficient to engage the organization in a broad-based effort to pursue a coordinated water strategy. Such an approach would ideally involve multiple business functions to ensure that the water strategy and goals are effectively integrated into existing business processes. The approach that fits best will vary from company to company, and it may change over time. Module 5 provides guidance to ensure that whatever approach is selected contains a continual improvement framework for identifying emerging opportunities and risks that may alter the business case in the future.

Identifying Whom to Engage

Tool users should identify key people and business functions within the organization to approach regarding the business case for pursuing a water strategy. Most tool users are probably well aware of their business’ organizational culture and strategy, planning, and decision-making processes. From this understanding, one can identify who within the organization needs to be aware of the business case for pursuing a water strategy. There may be other personnel or functions within the business that may be affected by a key water opportunity or risk. For example, opportunities to develop partnerships with community-based water organizations may be of significant interest to senior business managers and external affairs staff.

Building Organizational Interest

In many organizations, business personnel are accustomed to thinking about water resources as a “limitless frontier,” without constraints or significant direct or indirect costs associated with water use. Other businesses may not be accustomed to thinking about potential risks associated with the final disposition of the company’s products. In such cases, it may take substantial time and effort to change the organization’s perceptions of water from “limitless frontier” to “valued resource and potential business opportunity.” Several tips for raising organizational water awareness include:

  • Measure water use and post results
  • Charge departments or product cost centers for water use and treatment costs instead of including them in facility overhead costs
  • Include water-related costs in project and product investment decisions
  • Solicit employee suggestions for water conservation and recognize successes

Module Outputs

Assuming a sufficient business case has been established, Module 4 assists tool users to identify the organization’s water-related goals, as well as a strategic approach for engaging the organization in developing a water strategy.

Module 5