Ideas for using the true cost of water in sustainability strategy
As many of us know, water traditionally has been undervalued for quite some time and does not accurately represent the actual true cost of water to a company. Because of this, the financial incentives and the return on investment (ROI) for water conservation projects just aren’t there.
And because this real cost of water has not been adequately detailed, investments in water efficiency and conservation have not historically scaled with GDP. As a result, instead of becoming more productive with an important and less abundant resource, many economies are becoming less productive and efficient (PDF) with water resources because there is little incentive to discourage waste.
When businesses can understand the true cost of the water they are using, they will see a better ROI on potential water efficiency and water reuse projects and will be more likely to invest in such projects. The true cost of water would include all costs associated with purchasing the water, the energy to pump the water, the energy to heat water, the energy to treat the water (if treating pre- or post-use) and the costs of disposing of the water.
Tools to calculate the true cost of water
A few tools have been developed to help companies more accurately price their water use including the Beverage Industry Environmental Roundtable’s True Cost of Water Toolkit, Veolia True Cost of Water and a true cost of water tool developed by Rutgers University. Here’s a brief description of these examples:
Beverage Industry Environmental Roundtable (BIER) True Cost of Water Toolkit: This interactive tool can help facilities within the beverage industry and beyond to better determine direct costs associated with their most water-intensive processes.
The toolkit defines a set of pinch points or processes within a typical beverage facility with high water cost variability. For each pinch point, a true cost of water tip sheet and easy-to-use calculation worksheet has been developed. After using the True Cost of Water Toolkit, many facilities find that their true cost of water is at least 2-4 times higher than they had originally thought based on simply using their water bill as a gauge.
Veolia True Cost of Water: Veolia Water Technologies is a French water company with 130 locations around the world. Veolia developed a metric tool called the "True Cost of Water" to help monetize both direct costs and externalities of water use in order to optimize decision-making in terms not only of risk management but also of the creation of new opportunities.
The tool combines traditional calculations of capital and operating expenditures with analysis of water risks and their financial implications for businesses and organizations. The four levels of cost accounting for the Veolia tool include direct costs, indirect costs, risk impacts and missed opportunities.
Rutgers University True Cost of Water: With this tool, Colgate Palmolive (PDF) found that its average true cost of water is 2.5 times more than the purchase cost. Elsewhere, Yara Valley Water in Melbourne, Australia, underwent a process to understand the total costs of its water use and found that each cubic meter of water conserved delivers $6 through avoided damage to the environment. With this information, the utility can understand the true payback of investments in water efficiency and conservation improvements.
How Jackson Family Wines uses the true cost of water
I was fortunate to have the opportunity to lead sustainability initiatives in the wine industry as director of regenerative development at Fetzer Vineyards from 2014 to 2017. During my time working in the wine industry, I’ve been part of a number of cutting-edge water initiatives — from innovative wastewater treatment systems to smart water management technology.
Another company doing great sustainability work in the wine industry, and one I’ve become very familiar with while providing them GHG emission consulting services for the past year, is Jackson Family Wines. The company has used various true cost of water frameworks to help it understand the true cost of water for various operations, in various facilities from various water sources.
I caught up with Jackson Family Wine’s sustainability manager, Aaron Stainthorp, to get his perspective on the importance of understanding your organization’s true cost of water and the specific benefits he is seeing at Jackson Family Wines. Stainthorp told me that Jackson Family Wines has worked with a number of tools to calculate the company’s true cost of water including the BIER True Cost of Water Toolkit and the CSWA Water Budgeting Tool, as well as some other water calculators that his team has modified to suit its needs. Here is where Jackson Family Wines has found using true cost of water data to be particularly useful:
For prioritizing investments: "They all pretty much do the same thing — you're assigning a value to water. In doing this, it's been really eye-opening because now when we start looking at water conservation projects, we can pretty quickly understand the dollar value to the company," Stainthorp explained.
He mentioned that the tools have been very useful for prioritizing investments because "each one of our sites has a different cost of water. Using these tools helps us determine where we want to prioritize projects more than others," he added.
For understanding impacts of water source and quality: Stainthorp gave an example of how using the true cost of water helped the company save money by sending a different water source to one of its facility cooling towers.
“A certain cooling tower was using well water, and we were able to determine that switching to the municipal water source in that area would help us save a substantial amount of water because the water quality was higher," he said. "However, that actually had a higher initial cost because we would be paying the city for water rather using well water. But we were able to determine that the amount of water savings we could achieve by running the cooling tower at higher efficiency was going to have a payback of six months because we have this internal cost of water calculated.”
Don't underestimate the importance of real-time monitoring
Stainthorp explained the benefits of taking this true cost of water approach even further by combining it with detailed water balances of a facility, which can then help you determine the water costs for every single operation in the facility.
"It starts to be easy to make justifications for upgrading various equipment and why you are doing certain procedures in your facility,” he said. To accomplish this, real-time water meters will be valuable because as you go deeper and deeper into this exercise, “the better data you have the better decisions you can make," he added.
Stainthorp’s point about using smart water management technology to help your organization make these decisions around water is important. Once you understand your true cost of water, these technologies are useful to inventory that water use, identify opportunities for improvement and prioritize water conservation projects.
Understanding an organization’s true cost of water, while also researching and learning about new water technology solutions, can help sustainability leaders understand and communicate the true ROI of potential water conservation projects and more successfully sell these projects to the company’s CFO and leadership team.
WaterStart is a Las Vegas-based organization I have become very familiar with after providing consulting services to them for the past year. This non-profit organization brings together large water-using organizations with water technology solution providers from around the world and is a great place to learn about and stay informed on some of the most cutting-edge water tech companies on the market.
Identifying water technology solutions and using them as part of a true cost of water strategy can go a long way in getting more water conservation projects approved and implemented for your corporate sustainability program.