The true value of water

This article is taken from World Energy (WE) number 46 – Water stories

Too little, too much and too polluted water: most countries suffer with one of these problems, and some have all three. For the tenth year in a row, the WEF Global Risks Report highlighted the water crisis as a top five risk in terms of impact. Yet over this time, the global water crisis has worsened— punctuated by apocalyptic stories of “Day Zero” (Cape Town, South Africa), pollution (Flint, Michigan, U.S.) and floods (Southeastern Africa). The 2018 UN Progress report on SDG6 concluded that the world is not on track to meet its water targets: hundreds of millions will still be without access to safe and reliable water supply and sanitation, demand for freshwater will outstrip supply and wastewaters will continue to pollute the environment in 2030. 
What compounds this risk are the dependencies and impacts of water for big systems: food, energy and climate, for example. More food to feed a growing population requires more water, transitioning to a low-carbon economy has water use implications and the main means by which climate change impacts manifest is through floods and droughts. Yet despite this bleak outlook, there are opportunities, solutions and synergies to fix our water problems. If we can galvanize political will, create “water-coherency” across environmental, economic and social policies and establish fit-for-purpose water governance, we can unleash the finance, technology and institutions to fix our wicked water problems. 

The negative impact of water on business and the economy is increasingly apparent in developing and developed economies. For example, in 2018, low water levels in the Rhine due to the warm summer and low rainfall disrupted shipping channels and contributed to reducing German GDP by 0.7 percent. In India, it’s estimated that a business as usual response to the water crisis will lead to an eventual 6 percent loss in the country’s GDP by 2030.

Business face physical and non-physical risks driven by competition for water, pollution, regulation, and climate change. Water scarcity or flooding, as well as regulatory, financial and reputational risk can lead to business disruption. At the same time, investing in sustainable water management offers opportunities to gain a competitive advantage. In its most recent water report, CDP reported that the cumulative water-related financial losses of 2,114 companies in 2018 was USD $38.5 billion. Such figures are also resonating with the investor community, who are demanding more detailed and specific information about climate-related risks such as water. Furthermore, investors are requesting more context specific information about companies’ water risks and opportunities, since water risks and their impacts are manifestly different depending on the location and prevailing socio-economic and environmental conditions.

Three areas where business, as part of a collective effort with other business, government and civil society, has a significant role to play are wastewater, agriculture and household water efficiency.

Most of the data related to the global status of water and sanitation is shocking: billions lack access to safe drinking water and adequate sanitation (WASH), demand for freshwater is projected to outstrip supply and 80 percent of all wastewater is discharged directly into the environment without treatment. While universal access to WASH and securing freshwater supplies are intrinsically complex challenges requiring systemic change and huge investment within a generally weak governance setting, the wastewater challenge is more shocking when one considers the opportunity it presents.

A recently published paper highlighted that, theoretically, full recovery of major nutrients—nitrogen, phosphorus, potassium—from global wastewaters could offset 13.4 percent of global demand for them in agriculture. Furthermore, the energy potential and water included in wastewater make it a rich resource to tap if the right regulatory and market conditions can be created.

An example that illustrates the potential scale and benefits that can be realized if the regulatory and market conditions are right is Aquapolo in Brazil. At its inauguration in 2012, Aquapolo was the largest water reuse project in Brazil. The plant was developed and financed through a public-private partnership including Braskem, the largest petrochemical company in Latin America; Sabesp, the public water operator for Sao Paulo and Foz do Brasil, a waste management company. The facility has the capacity to produce 1,000 liters per second of reused water, supplying a petrochemical complex located in São Paulo. Braskem, which uses approximately 65 percent of Aquapolo's capacity, has signed a 41-year contract for this supply, guaranteeing revenue to cover operating costs. While serving the growing demands of industry, the project also enabled an increase in the supply of drinking water for human consumption, which during the water crisis of 2014-2015 is estimated to have saved over USD 50 million. Business working with the public sector to deliver economic, environmental and social benefits at scale is the opportunity that we need to unlock.

At a global level, a significant proportion of water—up to 90 percent in some parts of Asia—is allocated to agriculture, and this is where big gains can be made for water efficiency. Staple crops such as rice, wheat and sugar are water intensive and are often grown in places where water is scarce. This is the consequence of a global food system that provides unhealthy diets and agricultural policies that incentivize over-abstraction of freshwater for irrigation. For example, in some states in India, water abstraction is free, the energy to pump it is subsidized and farmers are given a guaranteed price for selling rice when other crops might be more suitable. The 2019 EAT-Lancet report, which pointed the way towards a food system that provides healthy diets for all within planetary boundaries, highlighted a combination of halving food waste and loss and improving farming practices to improve water efficiency by 30 percent. Improved farming practice for water efficiency often translates to irrigation but ignores the great potential offered by maintaining the soil health that is important for water retention and broader watershed management approaches that establish allocation thresholds and mechanisms to share water across users. An irrigation system that operates without established thresholds and usage data is nearly useless.  

Farmers are the most important stakeholders for water management. Yet all over the world  small-holder farmers, which the World Bank estimates at 2 billion, find their livelihoods threatened. Access to finance is low, yields can be erratic, sometimes due to climate induced changes to weather patterns that disproportionally affect those that rely on rain-fed agriculture (95 percent of farmed land in Sub-Saharan Africa is rain-fed) and advisory services are not readily available. Technology, particularly mobile phone-based, can be a great enabler to unlock these challenges. Simply providing weather data to farmers can help them to better prepare their seeding schedule. Remunerating and incentivizing farmers to use less water, potentially coupled with carbon mitigation and sequestration incentives, can be a win-win for government and farmers. Critical to this is valuing water by ensuring that the environmental, social and economic values of water are included in decision making. 

Where water is free, it is not valued. When we put a true value on water, it can drive decision making that protects and conserves freshwater.

Approximately 15 percent of greenhouse gas (GHG) emissions related to buildings can be attributed to water use, for appliances and fittings in the laundry, bathroom and kitchen. Water efficiency in the household translates to energy efficiency and GHG mitigation. Average per capita water consumption in the home ranges from over 500 liters (L) per day in some cities in the US to 100 L per day in some European cities. During the recent Day Zero emergency in Cape Town, residents were restricted to 50 L per person per household per day, creating a burden for everyday life activities such as cleaning, cooking and hygiene. But what if 50 L a day wasn’t a burden and felt like 500 L? Is it possible? Yes. First, homes are plumbed in a linear way: water comes in, used water goes out, and in the middle, large amounts of energy are used to heat and transport. What if we closed the loop at a household or neighborhood level? Grey water is reused for toilet flushing, heat exchangers are fitted to shower units and rainwater harvesting tanks collect and store water for various uses. It’s all possible. And there are great innovations from several companies that offer brands to wash clothing at lower temperatures with less water, widgets to decrease water flow from taps and products to wash hair without water. While domestic water only accounts for approximately 10 percent of our total water use, behavior in the home that is more water efficient can resonate beyond the four walls of our abode. Changing societies’ relationship with water through improving our understanding of water required for consumer goods, including food, will be the great lever to solving our water crisis. 

The world is facing a future of unprecedented water challenges, including floods and droughts. At the same time, a growing population, economic development and climate change increases the demand for water. Water scarcity will negatively affect human health and wellbeing, environmental sustainability, regional stability and economic performance. A world in which society and business value water is one where big system transformations are accelerated through actions on water. We can meet our climate targets if we act on water, we can fix our broken food system if we act on water and we can meet our low-carbon energy needs if we act on water. Water is the great connector, but history tells us it is also the greatest victim of political apathy, incoherent policies and weak governance. In this critical year, with new global biodiversity targets to be established and climate ambitions to be urgently raised, we must make sure that water is central to the mix of solutions.

He leads WBCSD’s work on water, facilitating the engagement of large, multi-national member companies on a range of issues related to water. For the last 15 years, Tom has worked on global issues related to water security, with a range of private and public sector stakeholders.