Drop by drop, businesses fill the well of 'unlimited water'

ShutterstockPiotr Pabijan

The following article is an excerpt from our State of Green Business (SOGB) 2017 report. Published by GreenBiz in partnership with Trucost, it provides a global view of the year's trends in sustainable business. The report is free to download here.

The World Economic Forum’s 2015 global risk report ranks "water crises" as the top societal risk to the global economy, ahead of infectious disease, weapons of mass destruction and cross-border conflict. Megatrends are converging to create this vortex: a growing middle class with greater demand for water; a changing climate altering the availability of water; and global declines in water quality, reducing the supply of clean water, increasing the treatment cost and putting people’s health and communities at risk.

The problems are widespread. For example, a 2016 USA Today investigation reported that tests of nearly 2,000 water suppliers serving over 6 million people in all 50 states found excessive and harmful amounts of lead. The combination of quality issues with quantity challenges — the projected 40 percent shortfall in clean water supplies by 2050 — will require enormous investments in the coming years, whether for innovative water reuse and recycling technologies or the infrastructure upgrades required to safely treat and convey water to customers.  

Big problems such as global water crises require big solutions, which have often focused on creating unlimited supply of fresh water through seawater desalination, especially in coastal cities. But desalination plants’ huge demand for electrical power and high financial costs can put these assets at risk when there are changes in policy or environmental conditions. Circle of Blue reported in 2016 that four large desalination facilities in Australia in the waning days of a 10-year drought sit idle yet cost ratepayers millions for maintenance and contractual charges. New organizations such as the Global Cleanwater Desalination Alliance, formed in 2015 to pursue new technologies and renewable energy, will help the desalination industry continue to innovate.

But it’s clear that we will need a wide range of solutions to have a growing, water-resilient economy, not just solutions that increase supply (such as desalination), but also those that reduce demand for water, whether by reusing, conserving or recycling it. There’s vast potential: less than 3 percent of wastewater is currently recycled. Promising signs are that the industrial water treatment and recycling market is set to grow over 50 percent the next five years, to almost $11 billion in 2020, and municipal wastewater reuse will increase by 61 percent in 2025, according to Bluefield Research.

Water technologies will need to adopted at a scale never seen before. But the goal of "unlimited water," where continuous use and reuse of water eliminates shortfalls, is within reach.

Events such as droughts create crisis-driven awareness for water reuse and recycling, and also can trigger longer-term policy changes. Rebates to encourage customers to use water more efficiently are growing in water-scarce cities in Arizona, California and Texas.

In other regions, governments are re-evaluating subsidies. Saudi Arabia, a desert country with no running surface water, is the third-largest consumer of water in the world, with consumption rates twice the European average. Between interest-free capital and direct subsidies, Saudi Arabia spends about $10 per cubic meter to treat and deliver water to customers, who then pay about 3 cents to use it, for a total subsidy of 99.76 percent, as reported by Global Water Intelligence. The need for a more water-resilient economy led Saudi Arabia in 2016 to cut water subsidies and increase water tariffs 500-fold.

Water prices continue to rise globally, and some regions such as sub-Saharan Africa and Latin America even saw double-digit rate hikes the past year (12.7 percent and 10.3 percent, respectively), according to Global Water Intelligence. Even with annual price hikes, water still will be underpriced, even in regions where it is scarce. As a result, saving water through conservation and reuse may not always add up to significant cost savings but it will help avoid big risks.

The financial impacts of water risks are considerable. In 2016, companies disclosed to CDP that water scarcity — the lack of clean fresh water — resulted in more than $14 billion of costs, including fines, loss of production, new treatment systems and securing water from new sources. Water valuation tools such as the GIZ Corporate Bonds Water Credit Risk Tool or the Water Risk Monetizer produced by Ecolab and Trucost provide businesses with a "shadow" water price they can use to estimate these risks. China Water Risk, a leading NGO in Southeast Asia on water-related issues, will use these tools to apply shadow water prices to understand and value water risk for major power producers in the region.

A steady flow of new activity will be on the horizon for 2017, including businesses using shadow water prices and applying the principles of a circular economy, an emerging framework to transform the take-make-dispose linear system into a make-use-return circular system. Instead of treating water as an inexpensive commodity that is used once and "disposed," water is managed as an infinitely recyclable and reusable asset, a valuable resource on the balance sheet, just like fixed capital assets at a manufacturing plant that require periodic investment to maintain and keep clean.

Signs of this transformation are already under way. For example:

  • As part of a $2.85 million investment, Coca-Cola European Partners will be replacing and upgrading a water treatment plant at a Scottish manufacturing site, where the plant will save 9 million liters of water a year.

  • Aerospace and defense firm United Technologies invested $1.7 million in water-saving infrastructure across its six sites in Southern California, an area on the brink of what NASA warned could become a "decades-long megadrought."

  • Diageo disclosed $2.4 million in conservation measures, where it saw the average cost of production more than double because of Brazil's drought.

A water-risk-resilient, circular economy will be enabled in part by digital and connected technologies. Businesses and cities are turning to data-driven solutions that capitalize on mobile technologies and the Internet of Things to improve water management and gain new insights about water use. Smart meters, once the domain of energy utilities, are making headway with water providers. Bloomberg New Energy Finance predicts water utilities will spend $2 billion on smart metering infrastructure through 2020.

Smart meters provide real-time data on water use and water losses, and can give customers information they need to conserve water, thereby lowering their water bills. Over 90 startups applied for the Water Data Challenge, organized by Imagine H2O, an organization aiming to accelerate the speed at which water solutions are commercialized.

Another example is Microsoft, which announced a partnership with Ecolab last year to use cloud computing and other technology to speed up the way industries tackle water scarcity, by capturing real-time information from processes anywhere around the world, visualizing it and getting predictive analytics to get insights and intelligence on water reduction and reuse.

Can unlimited water be a rallying goal for business in 2017? Given the uncertainty associated with a changing climate, there’s an ever-greater need for systems that are more resilient to water risks and can make the business case to succeed.

Players to watch

Global Water Intelligence — this leading market research firm provides a global project tracker of water reuse projects, along with annual water tariff surveys.

Sourcewater — a new online exchange for conserving freshwater and creating market incentives for recycling water.

China Water Risk — nonprofit initiative designed to help investors, businesses and individuals understand and mitigate risk around some of the toughest water challenges in Southeast Asia.

Imagine H2O — provides water entrepreneurs with the resources to launch and scale successful innovative water businesses through a global network of industry leaders.

Apana — a water technology company whose tagline "treat water like inventory" provides businesses with data-driven insights to reduce and recycle water.