Preparing for uncertain challenges

Last year 40 per cent of Fortune 1000 companies said the impact of a water shortage on their business would be “severe” or “catastrophic”- but only 17 per cent said they were prepared for such a crisis (Marsh Centre for Risk Insights)[i].

It appears many businesses – operating in areas with plentiful amounts of relatively cheap water – do not see water as much of an issue yet. But we all know that water is an environmental, a political, an economic and a social issue, and that makes it a business issue too. With rising populations and climate change, it’s an issue that will go up and up the business agenda in the coming months and years. Even areas that may be water rich today could prove to be challenging in the future.

As with many uncertain challenges, the better you understand the issues and prepare for multiple futures, the less disruption you are likely to experience as operating realities change. Only when a business understands its whole water footprint – direct and indirect impacts – will it know where the risk areas are and where the opportunities for process and product innovation are.

At our recent Forum Business Network event (‘Water Falling’), delegates voiced concerns about competition for water and the priority their businesses would be given by authorities if the communities in which they operate were to face a severe lack of clean fresh water. What is clear is that getting access to the right amount of the right type of water will become more difficult. An increase in water prices in many parts of the world is likely, but there may also be instances where water will be simply unavailable for industrial use. Thus security of supply of water will become one of the key drivers for business.

Getting to grips with water footprinting

Water footprinting - a term introduced by Hoekstra over five years ago[ii] - can be done at a variety of levels: individual, product, company or even country level. The most widely accepted definition of a water footprint for a business is “the total volume of freshwater that is used directly and indirectly to run and support a business”[iii].

Understanding where your business’s big water stresses are now – right along the value chain – is important. Preparing for how those water stresses might change in the future is doubly critical.

The value of water footprinting for business

The real value in water footprinting is that it helps a business analyse its water impacts and highlight the hotspots (or its water stressed spots) in its value chain. Companies can then focus their efforts on those areas of greatest impact and where they have greatest influence.

Based on Forum’s experiences with corporate carbon footprinting, the value of water footprinting is likely to be much more in the business response than in the consumer response. This is likely to be focussed on eco efficiency, but also increasingly around product innovation.

An evolving tool

It’s clear that water footprinting can be very helpful as a company starts getting to grips with its water consumption and associated risks. However, it is a relatively young concept and there are still some sticky issues with using it more widely. For companies to be able to benchmark their performance for example, boundaries need to be clearly defined and agreed. Definitions need to be universal, methodologies for measuring need to be standardised – pretty similar issues as with carbon footprinting, carbon labelling and carbon neutrality.

There are, however, some fundamental differences between water and carbon footprinting. Unlike carbon, water is geographically bound, and analysis and solutions must be applied on a watershed level.

The UK might be classified as a region with low or no water stress when analysed on a national level, but look closer and the Thames Valley region stands out as severely water stressed, and likely to remain so for the foreseeable future. Water footprinting is not just about the amount of water – it also takes into account the type of water and, crucially, where it comes from.

Businesses need to be aware of their current footprint, but it is also vital that they think ahead. Companies also need to develop an understanding of how their water needs, and the watersheds in which they operate, might change over time.

Water footprinting isn’t for everyone

For some businesses the cost of detailed water footprinting will be a barrier, but many won’t need a detailed methodology to tell them the water stressed parts of their business. A simple risk mapping exercise, such as the World Business Council for Sustainable Development (WBCSD)’s Global Water tool[iv], might be a more viable alternative for some.

It’s not a panacea, but it can be a useful first step

Water footprinting is only the first step in a corporate water strategy. As with carbon, companies should start by measuring their direct (operational) footprint. They should then map out their supply chain water footprint. Once they understand their dryspots – and/or wetspots for that matter – businesses can then prioritise action. They can introduce water reduction plans at their facilities and also look at their raw materials that come from water-stressed areas.

Businesses need to think about how they can work with their key suppliers and the communities in which they operate to minimise their total water footprint. At our ‘Water Falling’ event in September, participants agreed that collaboration is key to finding the appropriate solutions. This suggests that there is a readiness and willingness to come together to find a way forward in tackling the water challenge.

Where to go for more information?

If you want to know more about how Forum for the Future can help you with future water scenarios, risk mapping or developing corporate water strategies, please contact Lena Staafgard or Dan Crossley.

Other resources

• WBCSD website for access to a free water assessment tool for global understanding of consumption for individual sites[iv]
• Waterwise (www.waterwise.org.uk)
• Water Footprint Network (www.waterfootprint.org)
• Forum for the Future’s ‘Water Falling’ event summary in the Partner Area of this website (available to members of the Forum Business Network)

Dan Crossley and Lena Staafgard

[i] http://global.marsh.com/news/press/PRMCRI092107.php
[ii] http://www.waterfootprint.org/Reports/Report12.pdf
[iii] http://www.waterfootprint.org/index.php?page=files/BusinessWaterFootprints
[iv] http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=MTUxNQ&doOpen=1&ClickMenu=LeftMenu

I long ago swore that I would avoid all big UN Conferences on environment or climate change issues, and have pretty much stuck to that sanity-protecting rule. Indeed, John Prescott got very grumpy with me when I declined the opportunity to be part of the UK delegation at the 2002 World Summit on Sustainable Development in Johannesburg. But he was almost always grumpy with me, so it didn’t matter too much.

The only downside to this self-imposed embargo on all such jamborees is that one undoubtedly misses out on those rare moments of drama that almost (but not quite!) compensate for the hours spent in such soul-crushing misery.

One such moment occurred right at the end of the Bali Conference on Climate Change last year. By general agreement, Bali was even more of a soul-crusher than most of these Conferences, in part because of the deplorable behaviour of the US delegation that played an out-and-out spoiler from Day One right through into extra time.

With delegates in despair, and some in tears, the country representative from Papua New Guinea (a guy called Kevin Conrad) stood up and told the US delegation either to recognise the overwhelming will of the Conference (and agree to the Bali Declaration) or get out of the Conference Chamber and scuttle back to Washington cloaked in contempt and ignominy. Very high drama! And fortunately, the US did sign up.

So it was quite a treat to meet up with Kevin Conrad at the Cheltenham Science Festival last week. He was talking about some of the really exciting new ideas around the incentivisation for rainforest countries to keep their rainforests intact rather than cutting them down. A simple but powerful idea: the world needs to protect its remaining rainforests (deforestation contributes up to 20% of total CO2 emissions every year), but they are not “our” rainforests – they are part of the resource base of a number of countries that desperately need the income from their forest to help them develop. So we need them in place; they need them logged and sold on.

One solution is therefore to compensate them financially for not cutting the forests down, and there is now a huge amount of effort going in to developing financial instruments to help “reduce emissions from deforestation and degradation” – or REDD, as it’s called. A new report published in the Philosophical Transaction of the Royal Society shows just how much could be achieved here for just a few billion dollars every year. Very challenging stuff.

And that is what Kevin Conrad is now out there doing – building up a growing head of steam around REDD financing.

Unfortunately, there was one big black cloud hanging over Kevin’s presentation – namely, the ongoing destruction of Papua New Guinea’s own forest. Using the latest remote sensing techniques, a team of scientists based at Port Moresby University, has calculated that PNG is logging its forests even faster than Brazil is cutting down the Amazon rainforests. In 2007, an astonishing 1.7% of the entire forest base was cut down – if it continues at that rate, a full 50% will have disappeared by 2021.

To which there was only one response from his audience. Let’s get this REDD stuff up and running before it’s too late.