1. Water Stewardship – a matter of
business value and risk
Matthew Segur
Net Zero Water Session 1 – Drop for
Drop: Net Zero Approaches for Water
Quantity and Quality
October 23, 2013

2. Sustainability

3. What changed and why now?
New paradigm
Old paradigm
•
Abundant raw materials
•
Cheap energy
•
Limitless sink for waste
•
Environmental and
social performance
matters
•
You and your supply
chain

4. Sustainability drivers
Internal
performance
drivers
•
•
•
•
Cost savings
Source of innovation
Business continuity
Talent retention
Value stream
drivers
•
•
•
Customer interests and brand value
Value chain transparency
Industry collaboration
External
performance
drivers
•
•
•
•
Government regulations
Demand for transparency and sustainability reporting
Shareholder resolutions
Social license to operate
Sustainability is no longer an option, but a business imperative

5. Why is sustainability a business opportunity?
Sustainability is value creation and
innovation
•
Revenue: new products/services, brand,
brownfields, carbon
•
Risk management: transparency and reporting,
supply chain, license to operate
•
Reduced operating costs: resource efficiencies;
materials, energy and water

6. The Global Water Condition

7. Water availability has declined significantly since 1975 and is
expected to continue this trend
Water availability: 2000
2025
1975
Extreme Scarcity
<500
Scarcity
500–1,000
Stress
1,000–1,700
Adequate
1,700–4,000
Abundant
4,000–10,000
m3/person/year
Surplus
>10,000
Ocean/
Inland Water
No Data

8. Water withdrawals are predicted to increase
by 50 percent by 2025
in developing countries, and 18 percent in developed
countries.

9. 47% of the population will face water shortages
by 2030

10. As the expansion of the global economy progresses, several forces
put increased pressure on fresh water and other natural resources
Rapid Population Growth
As human life expectancy increases and the birth rate
continues to rise, human demands on the environment
have increased exponentially.
“Freshwater is crucial to human survival and well-being, yet
1.1 billion people have no access to safe water supplies, and
2.4 billion lack access to basic sanitation facilities. It is
estimated that two-thirds of the world's population, including
25 African countries, will live in water-stressed areas by the
year 2025.”1
Expansion of Business Activity
Rising Middle Class in Emerging Markets
The rate of poverty alleviation is increasing especially
within China and India which will increase water
consumption from always needing clean fresh water to
wanting jacuzzis or private swimming pools.
“By one calculation, there are now more than 1.7 billion
members of „the consumer class‟—nearly half of them in the
developing world. China and India alone claim more than
20% of the global consumer class, totaling 362 million, more
than in all of Western Europe.”2
Accelerating Rate of Urbanization
Business activity from industrialization to services
continues to expand at rapid rate. Expansion of
business activity requires significantly more water
supply and sanitation.
Urbanization requires significant investment in water
infrastructure in order to deliver water to individuals and
to process the concentrations of wastewater from both
individuals and business.
“Virtually every industrial activity requires water. The likes of
power-generation, mining, paper and drinks sectors are
particularly water intensive. Non-industrial
services, meanwhile, such as tourism and
entertainment, can depend heavily on water resources as
well.”3
“Over a third of Africa's 1 billion inhabitants currently live in
urban areas, but by 2030 that proportion will have risen to a
half…the population of some cities is set to swell by up to
85% in the next 15 years.”4

11. Water issues could have a material impact on city stakeholders – the
private sector
 Rising demand and limited supply could lead to higher and more volatile energy and water availability
Direct costs
Increasing
regulations and
continuity of
supply
Reporting and
product
footprinting
Reputation and
Brand Value
Source of
innovation
 Communities chain could levy taxes or surcharges on embedded water that increase a company’s
delivered cost
 Tightening local environmental regulations, particularly around water, could increase suppliers’ costs
 Governmental restrictions on water withdrawals threatening water availability
 Investors are increasingly demanding greater transparency – and quantification – of water related
impacts
 Conducting a product footprint (e.g., LCA, carbon footprint, or water footprint) can help companies
understand and communicate drivers of environmental impact
 Rising public concern about water scarcity as consumers become more familiar with the issue could
threaten corporate reputations, even when impacts are several tiers upstream in the supply chain
 There is an opportunity to build a company’s brand as a good environmental steward through
proactively identifying and addressing supplier’s environmental impacts in China
 Natural resource scarcity (whether energy, water, or any other input) serves as an additional constraint
that can spark innovation
 New business models may emerge to creatively address water and other environmental challenges

12. Stewardship

13. Physical, regulatory and reputational risks increase with water scarcity
Supply Chain
Product Use
Manufacturing
 Temporary nonavailability of water
disrupts supply chain
 Temporary non-availability of water  Non-availability or
disrupts operations
scarcity of water
required for using
 Increased capital expenditure on
Physical
product or service
water treatment, water extraction,
Risk  Water scarcity drives up
limits growth
input prices (~2%-20%)
or alternative technologies to
circumvent water problems raises
costs
 Intensifying competition
for scarce water
constrains growth
Regulatory  Suspension or
withdrawal of supplier's
Risk
water license or
discharge permits
disrupts supply chain
 Competition with
household water
demand constrains
suppliers' growth
Reputation
 Responsibility "by
Risk
association" for
suppliers' water pollution
damages brand or
reputation, hinders
growth
 Intensifying competition for scarce
water constrains growth

Reallocation to more urgent needs
during drought disrupts operations
 Suspension or withdrawal of
supplier’s water license or
discharge permit disrupts
operations and/or constrains
growth
 Increased capital expenditure on
wastewater treatment to meet or
exceed standards
 Competition with household
demands, or pollution incidents,
damages brand or reputation,
hinders growth

Non-issuance of water
license or restrictions
on use of particular
products or services
due to water intensity
raises costs or checks
growth
Impact on financial
performance
 Lost revenue from
disruption of water
supply
 Higher costs from:
− Supply chain
disruption
− Changes in production
processes
− Capital expenditure to
secure, save, recycle,
or treat water
− Regulatory
compliance
− Increasing price of
consuming or
discharging water
 Public outcry
regarding water
intensity of product
damages brand,
reputation, hinders
growth
 Delayed or suppressed
growth, potentially
impacting share price
 Potential higher cost of
capital for businesses
that rely heavily on fresh
water resources

14. Water management to stewardship
Water Management
Water Stewardship
Focused on immediate, direct
and indirect business costs of
scarcity and efficient use of the
resource
Focused on long-term
availability of clean water for
stakeholders in impacted
watersheds
Internal Operations
Value Chain
Business Partners
• Consistent, high-quality supply can
no longer be assumed given
increasing drought and flooding
• Complex supply chains cross
watersheds and contain hidden
water-related business risks
• Managing water as an input must
extend beyond the unit cost of
water to include business
continuity, brand value, and
regulatory considerations
• Hidden risks in the supply chain
magnify exposure to water risk
• Effectively managing water-related
business risk through the value
chain is paving the way for
innovation and new business
opportunities
Watershed Stakeholders
• Effective long-term water
stewardship occurs on the scale of
the local watershed in partnership
with local communities and NGOs
• Disclosure of water-related efforts
allows companies to gain
trust, build relationships, and
mitigate tensions
• Watershed-level stewardship has
strategic value for global business
Companies are at different levels of maturity with respect to
addressing water scarcity; stewardship is the most inclusive and
long-term approach.

15. Elements of water stewardship
A step forward in one category improves water stewardship performance
DISCLOSE
• Disclose water-related information to
stakeholders
• Publish water-related analysis in
financial reports
• Audit/assure water-related data
• Be transparent in reporting
GOVERN
• Oversee water policy, strategy, or
management plan at board level
• Develop concrete water-related goals
• Innovate and invest in water
technology
• Manage brand and reputation
• Establish water management
accountability through public policy
and lobbying efforts
Water
Stewardship
COLLABORATE
• Identify stakeholder concerns
(employees, suppliers, local
communities, governments and
regulators, NGOs, other water users
(industry or companylevel), customers, investors)
• Engage internal and external
stakeholders on water-related issues
FOOTPRINT
• Direct operations: Measure water
withdrawals, recycling/reuse, waste
water discharges (quantity and
quality)
• Indirect operations: Measure
supplier water use and discharges
(quantity and quality)
• Measure water footprint of products
ASSESS RISKS & OPPORTUNITIES
• Assess physical/operational,
regulatory, and reputational waterrelated risks (direct and indirect
operations)
• Prioritize risks and develop a
mitigation plan
• Evaluate and implement waterrelated opportunities (direct and
indirect operations)

16. Another view of stewardship
Watershed protection Water infrastructure
repair
Preservation
Community
outreach
programs to
provide safe
drinking water
Water
technology
funds
Collective Action
Innovation
Technology to
record water
consumption
metrics

17. Benefits of water stewardship
Business
Continuity
Innovation
Brand Value
• A comprehensive view • Historically, water
• Sound water
of corporate water use
management practices
stewardship can align
can have significant
have focused on
corporate and
financial impact
securing water
environmental goals
(e.g., reduced potential
supplies, and
• Avoiding negative
for supply
managing waste
consumer perceptions
disruptions, capital
discharges
can lead to increased
costs to
• Identifying reuse and
revenues
secure, process, and
recycling opportunities
discharge water, and
can reduce costs and
compliance issues)
diversify supply,
• These benefits can be
mitigating risk in direct
leveraged in the supply
operations
chain and in direct
operations
License to
Operate
• Water is a local issue
and misuse of water
resources can lead to
regulatory or consumer
conflict
• Considering
operational and local
community needs can
maintain this license in
the supply chain and
direct operations, and
support business
continuity and brand
value
Risk Mitigated
Operational


Regulatory
Reputational







Responding to water-related risks can mitigate risk and identify opportunities across a
company’s value chain

18. Corporate Action

19. Collective action

20. Companies have engaged in innovative partnerships around water
to protect and enhance their reputations
Coca-Cola WWF alliance goals and progress
Conserve 7 key
watersheds
Improve
operational water
efficiency
Reduce supply
chain water use
Reduce energy
and carbon
emissions
Working with
governments
to change
water
management
practices
Halfway to
achieving 20%
water
efficiency
improvement
by 2012
Working with
growers to
define and
implement
sustainable
farming
Energy and
emissions
growth
slowing but
absolute
reductions will
be difficult
Brand
value, operational
resiliency and license
to operate
Inspire a global
movement
Participation
in the CEO
Water
Mandate
Funding, heightened
awareness, expanded
influence

21. PepsiCo – human right to water and value chain
PepsiCo Agrees to Policy Respecting Human
Right to Water May 2009
PepsiCo is the first publicly traded,
multinational corporation to create a policy
in support of the human right to water.
In 2003, PepsiCo’s water-use license was
revoked in Pudussery, India, because of
claims that its bottling plants there were
over-consuming and depleting community
groundwater, which is in conflict with the
Human Right to Water.
Supply Chain Collaboration
In India, PepsiCo educated farmers on
“direct seeding”, which reduces water use
by as much as 30 percent and saved more
than 5 billion liters of water in 2009

22. Other companies have found that partnering with local suppliers and
communities can generate “shared value” between business and
society
CORPORATE SHARED
VALUE (CSV)
Policies and operating practices that enhance the competitiveness of a company
while simultaneously advancing the economic and social conditions in the
communities in which it operates
Diageo’s Water of Life program
Nestlé's supplier partnerships


The goal: Obtain a reliable supply of premium coffee
for Nespresso by helping farmers break the cycle of
low productivity, poor quality, and environmental
degradation that limits production volumes

Working with growers: Provides advice on farming
practices, guarantees bank loans, and helps secure
inputs

Establishing local facilities: Measures coffee quality at
point of purchase and pays premium directly to
growers, cutting out the middle man
The goal: Aspires to extend access to clean water to 1
million new people in Africa every year through 2015

Community involvement: Positive contributor to the
stewardship of water resources through watershed
protection and sustainable water management

Direct operations: Improving water efficiency and
decreasing water pollution across bottling facilities
and engaging directly with suppliers in water-stressed
countries to encourage sustainable agriculture
practices

Collective action: Working with others to accelerate
progress on the water/sanitation Millennium
Development Goals

23. Conclusions

24. Point of view
• Water risks and opportunities should be viewed differently than other resources
(e.g., carbon)
– Water is a shared resource
– Water is local; it is not fungible
– Water has economic, environmental and social dimensions, all of which must be
considered
• Water can have value well beyond its price, and that value varies by industry sector
– For some companies it has reputational risk and corresponding brand value
– For others it has regulatory risk and as such it is managed as a compliance issue
– For many, it may be a combination of both
• Water stewardship requires collaboration with internal and external parties; building a
water strategy is beyond risk management and includes engagement with multiple
stakeholder groups
Developing a comprehensive water stewardship strategy
can position companies to effectively manage water-related
risks while also identifying key opportunities.