Accounting for Water: the Next Frontier of Business Sustainability

Published on by

Accounting for Water: the Next Frontier of Business Sustainability

It is time for the business world to step up its role in managing the water crisis.

Commercial and industrial businesses use between 20-25 percent of publicly supplied water in the United States and Europe. In the US that amounts to 80 billions gallons every day. Yet in water-intensive businesses, billions of gallons of that water are wasted unnecessarily. Amid the drought in California, Washington and other western US states, much of the attention has rightly been placed on agriculture and the use of water to cool fossil fuel power plants, the two biggest consumers of water in the US.

But at a time when water quantity and quality are increasingly seen by institutional investors as business risks, it is time to also focus attention on the critical role corporations must play in a water-constrained world. According to a CDP report, more than two-thirds of the world’s largest companies report exposure to water risk (i.e. business being interrupted by water scarcity), often at the expense of growth. No water, no growth.

Many factors impacting water access remain outside corporate control. At the very least, however, what happens “inside the fence”, or “behind the meter” - i.e. how water is used within the envelope of business operations - is completely manageable. Unfortunately, unlike energy, water is still largely an afterthought when it comes to corporate resource management, even though water use is a strong indicator of overall operational efficiency and performance. Only a bit more than one-third of businesses assess water risk in their direct operation and supply chain, CDP found.

As a result, companies are literally pouring money and water down the drain.

Water, like carbon, has a chance to be integrated into business accounting.

It took years for major corporations to embrace the business case for sustainability. If you can save on electricity, save on materials, save on fuel costs, why wouldn’t you? The same simple logic should apply to water, but the fact that water is priced irrationally low in many regions (even those hit by drought) has meant that companies have been unwilling to make an investment to manage it.

Fortunately that is starting to change. Water prices for the American consumer have gone up 41 percent since 2010 in the United States and are continuing to rise at a rate higher than college tuition and healthcare. At the same time, the number of investors calling for corporate accountability regarding water through CDP (which helps institutional investors with trillions of dollars in assets track portfolio risk associated with carbon, water and deforestation) has increased over 300 percent since 2010.

Water Disclosure is Good, Water Management is Better

But performance tracking and disclosure of water risk is just a first step. Business has a responsibility to do more than disclose, if for no other reason than to manage risk and save money.

Innovations in technology now allow water-intensive industries - retail, manufacturing, hotel/resorts, grocery, for example - to not only understand and report how much water they are using, but more importantly, to build strategies and operational practices that can lead to significant reductions in water use, and to financial savings that come with that increased efficiency.

Water, like carbon, has a chance to be integrated into business accounting.

According to CDP, 75 percent of companies said that investing in water technology opens up operational, strategic or market opportunities, by allowing them to cut costs, increase revenues and shrink the value of their business at risk from water stress.

But only if you can apply the transparency of any other key business metric to water. And that requires the ability to track performance and manage that performance. That which is not reported is ignored.

A Need for Speed

More progressive water utilities in California and Nevada, hit by severe drought, have started to introduce support for business adoption of water management technologies, including installation rebates. But more action is needed.

In particular, water authorities can simplify the rebate process and increase incentives for performance. For example, Southern Nevada Water Authority (SNWA), which serves Las Vegas, has strong business incentives through its Water Efficient Technologies program (which has saved more than 5 billion gallons of water).

For businesses, they need to stop being passive and start to think of water as an important line item in planning and budgeting, as well as to recognize that addressing water efficiency has a ripple effect in reducing other costs, such as sewer and electrical. Hard to believe, but the vast majority of commercial and industrial businesses use their water bill to tell them what was wasted in the previous month. That’s not good business.

Media

Taxonomy