Water Stewardship Initiatives: Risk reduction or risky business?
Water-related risks are growing, and need to be managed
The private sector recognises that the world is changing, as inputs for business are becoming increasingly scarce. In particular, water resources are stressed as demands for water continue to rise. Globally, there are approximately 2.8 billion people without adequate access to water at least one month out of a year.
As awareness of human-induced pressure rises, consumer behaviour has begun to change. Environmental sustainability and social responsibility have become more important to the general public. This has resulted in pressure for companies to change the way in which they operate, by reducing negative impacts on the environment and local communities.
In addition to pressure from consumers, businesses are also facing disclosure requirements from investors. Not only brand reputation, investors have found that water-related risks are increasingly significant for the viability of long-term business.
70% of businesses responding to the CDP Water Disclosure questionnaire identified water as a “substantive business risk.” In responding to these anticipated risks, companies are setting concrete targets and goals for their operations. Although many companies are internally focused on water use efficiency or water reuse or recycling, some have begun to engage in water stewardship initiatives outside of the ‘factory fence’.
Water-related risks are complex
Water-related risks are often complex and cannot be managed internally alone. For example, improving internal water use efficiency alone may not be able to mitigate risks which are dependent on adequate management of municipal water supply. Water stewardship initiatives may help to mitigate a range of water-related risks at different scales.
A number of risk tools and guidelines on how to manage corporate water risk have distinguished between physical, reputational and regulatory risks. Physical water risks are associated with adequate quality and quantity of water. Regulatory water risks are linked to the regulatory environment of the catchment, whether or not legislation is stable and well implemented. Reputational risks are associated with the companies’ social license to operate.
Risks are often shared between stakeholders in a catchment
Water risks are often shared between stakeholders within a basin. Poor water quality or scarcity impacts a number of water users. Mitigation of shared risks often requires collective action with a range of stakeholders within a catchment. Collective action can range from purely sharing information, seeking advice, collaboration or integrating resources and decisions in an effort to mitigate particular water concerns.
The private sector may decide to support government in effective catchment management in an effort to improve water quality and quantity for the basin as a whole. Private sector investment is often a positive impact with improved resources, capacity or information. Water stewardship interventions may ensure stable, coherent planning and regulation of water systems, improve water system operations and performance and reduce the costs of water supply and treatment, for example.
Mitigating water risks often raises new risks
Although collective action is lauded as a potential way in which corporates can mitigate larger scale water-related concerns, there are also risks associated with engaging other users in a catchment. Engagement of corporates in managing the resource needs to be in the best interest of society as a whole. A major concern is the risk of corporate capture, as areas where water is a risk, may be where legislation is not implemented adequately. There is also a risk that stewardship interventions, although meant in a positive light, have perverse outcomes which are not supportive of sustainable water management.
In addition to risks for the private sector, there are risks for government too. Perceptions of corporate capture may reduce the legitimacy of government processes for impacted stakeholders. A dependence on private groups for information, capacity or resources may also be a risk. Another risk may be the long-term financial risks on government through partnership interventions, particularly once private sector exits through planned or unforeseen conditions.
These additional considerations, regarding the associated challenges of water stewardship initiatives need further investigation to ensure water stewardship initiatives promote sustainable water management for all. The risks and opportunities of corporate engagement in water management are being investigated by the Pegasys team in order to formulate a framework which the public sector may consider when investigating the trade-offs of corporate intervention. This is to ensure that strategic water resources are governed by the public sector for the benefit of all.