Will Sarni and Hugh Share on the future of corporate water stewardship.
To date, corporate water stewardship programmes have almost always been framed as an investment to mitigate water-related risks and/or framed as Corporate Social Responsibility. When investments are only seen in this narrow manner, it leaves business value ‘on the table’, making stewardship an incomplete value proposition for businesses.
This results in the adoption of effective water stewardship strategies stalling. Existing efforts focus on risk management as opposed to creating business and societal value. Water stewardship is stuck because actions are mostly transactional in nature rather than being transformative.
Barriers to transformative actions
We maintain that a water strategy can be an opportunity to contribute to business growth at the same time as mitigating business risks and improving the wellbeing of communities and the environment.
Such an approach would better align with the reality that corporations spend more money and allocate greater resources on growth strategies v risk mitigation strategies.
For example, marketing and sales – according to ‘CMO Survey: Highlights and Insights 2018’ – accounts for 7.3% of company revenue, with some spending close to 50%.
Likewise, technology can account for 3.28% of company revenue (‘Technology Budgets: From Value Preservation to Value Creation’, 2017).
In contrast, the 2018 RIMS Benchmark Survey found the total cost of risk is $9.75 per $1,000 of revenue (so representing 0.975%), defining the total cost of risk as the cost of insurance plus the costs of the losses retained and the administrative costs of the risk management department.
A transformative corporate water strategy would identify and invest in activities that create brand value (e.g., the trend for brands with purpose), drive innovation in technology (e.g., digital transformation), strengthen water governance, advance funding and financing mechanisms (e.g., blended finance), and establish higher impact partnerships and business models. This approach would generate greater societal value and would position a company as part of the solution to our 21st century water challenges.
Business value through a water strategy
There have been signs of a few practitioners beginning to add value creation into the discussion of water stewardship. Most notably, WWF published Water Stewardship Revisited, which built upon WWF’s framework of water stewardship as a risk mitigation strategy to highlight the business value of water stewardship. For us, this was an important step. WWF continues to build on this 2018 paper and its Water Risk Filter (WRF) tool with increased functionality that allows companies to link portfolio water risk assessments to financial impacts. The WaVE WRF module will help companies understand how water risk can affect financial value (a joint project of WWF and Water Foundry and powered by CDP).
We believe that only by framing water investments as contributing to business growth will the private sector be more actively engaged in solving water challenges. This does not imply that all companies will become water solution providers (e.g., technology and services). Instead, we propose that companies, regardless of the industry sector, have skills, talent and capital to leverage in the water sector and ultimately help solve our water challenges. Moreover, there are opportunities for companies to partner with NGOs (e.g., Absolut Elyx and Water for People, AB InBev and water.org) and engage their employees and even consumers in programmes to support education and awareness of water issues (Project WET).
Can a company have a water strategy that includes water stewardship without it being the primary framework and end point? We believe so and that this approach is essential for solving water challenges. Consider an information communication technology company (ICT) that is focused on artificial intelligence or internet of things (IoT) solutions that use the technology for water efficiency, improved asset management and water reuse. These are not necessarily in the realm of water stewardship but have the potential to transform how water is managed. The work of the World Economic Forum on the Fourth Industrial Revolution maps out the opportunities for the ICT sector in water. Imagine the impact if companies worked with governments to bring these technologies forward to help solve some of the pressing water challenges in large urban areas.
An excellent example of a company with a water strategy building upon their stewardship strategy is ABInBev. According to ABInBev, its ZX Ventures global growth and innovation team launched in 2015 has a goal of developing new products and businesses that address emerging consumer needs. In October 2018, ABInBev also launched its 100+ Accelerator which, it said, issued 10 challenges to scientists, technologists, and promising entrepreneurs around the world.
The key point is that ABInBev is a leader in water stewardship but has now created additional business (and societal) value by focusing on innovation and expanding business ecosystems to solve sustainability (including water) challenges. Carlos Brito, ABInBev CEO, put it well in terms of business value when he said:“Through the 100+ programme, we will leverage our global reach and resources to accelerate progress toward the SDGs and our 2025 Sustainability Goals. And we are excited to work with all these innovating partners.”
We maintain that nothing is as important as reframing water as a business issue and opportunity to engage the private sector in solving water challenges more fully. A broader view of the value of the private sector’s business opportunities in solving water is needed to accelerate solutions and compel the public sector to move beyond slowly evolving water policies.
Transactional Water Stewardship
- Five to 10-year horizon
- Project and task thinking
- Policy and governance improvements absent
- Fewer stakeholders involved
- Project based goals
- Value based on company projects and savings
Transformational Water Stewardship
- 25 to 50-year horizon
- System thinking
- Addresses policy and governance improvements
- Diverse set of stakeholders involved
- Science + context-based metrics/goals at basin level
- Value based on system-wide, basin benefits for all users