This is the time of year to look back and to look ahead.
This essay focuses on looking back at my predictions for 2022, published in the Jan. 7 Liquid Assets column, "The year ahead for water: The Roaring '20s and creative destruction." I believe I was mostly right. (Feel free to challenge this when I post to GreenBiz and LinkedIn!)
The theme for that article was that we are in the Roaring '20s for innovation and witnessing the "creative destruction" of how we extract water, transport it and treat it. I proposed that technology innovation would be a primary driver for creative destruction of existing business models, as the global economy emerged from the COVID-19 pandemic.
First a recap about the concept of creative destruction. As I mentioned last year, in the early 20th century, economist Joseph Schumpeter described the dynamic pattern in which innovative entrepreneurs unseat established firms through a process he called "creative destruction." According to Schumpeter, and discussed in detail in "The Prophet of Innovation: Joseph Schumpeter and Creative Destruction," the entrepreneur not only creates invention but also creates competition from a new commodity, new technology, new source of supply and a new type of organization. This innovation propels the economy with "gales of creative destruction," which "incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."
My overarching view of 2022: Cracks are beginning to show, primarily the result of chronic problems that have long plagued the water sector — aging infrastructure, underfunding and grossly outdated public policies. These systemic failures in the water sector in many cases were amplified by the impacts of climate.
These systemic failures in the water sector and climate change led to the "bite" —creative destruction in play — that water challenges posed to economic development, business growth, ecosystems and civil society in 2022.
That bite manifested itself in climate-induced events such as the aridification of the American West, which is resulting in the demise of the Colorado River Basin and the potential threat to hydropower production; the disruption of river commerce in the major rivers such as the Mississippi in the U.S., and the Danube, the Rhine and the Po in Europe; along with the catastrophic flooding in Pakistan. All of these events had and continue to have quantifiable economic impacts on local and national economies as covered in these news stories.
Other significant factors contributed to the disruption, including:
- The rise of digital technologies: Digital tech is playing a crucial role in bringing the water sector into the 21st century. The past year represented a significant step forward in adoption, although the public and private sector approach remained ad hoc. Public and private sector enterprises need to commit to strategic digital transformation strategies that fully incorporate investments in risk-taking, learning, culture and workforce.
- Innovation in partnerships: Historically, partnerships in the private sector consisted primarily of relationships with NGOs such as WWF or The Nature Conservancy to address water scarcity, quality and access. This past year, that changed dramatically. We witnessed the private sector working directly with entrepreneurs, investors and other multinationals on identifying and supporting innovative technology solutions to more proactively address "wicked water problems." The best example is the work of Anheuser-Busch InBev with its 100+ Accelerator program, which now includes The Coca-Cola Company, Unilever and Colgate-Palmolive.
- The failure of public policies: The rules and regulations guiding water access (in particular) have failed to keep pace with the realities of the impacts of climate change on an underfunded, aging and last-century infrastructure. One of the best examples is the American West and the Colorado River Basin. The states in the Colorado River Basin are slow-walking solutions to drastically reduced surface water and the over-extraction of groundwater in the region. The best quote on the topic was from Southern Nevada Water Authority General Manager John Entsminger, calling on other Colorado River basin states to "do the math and face reality" as they work toward finding a way to stabilize the dwindling river that supplies water to 40 million people in the Southwest.
- Climate change and water: Professionals in the water sector were (to varying degrees) pleased and excited that water is slowly being acknowledged by the climate change community. A bit of traction at COP26 and COP27 has led to a view that perhaps the value of water will be taken seriously. As a result, solutions are being developed to solve water scarcity, poor water quality and the lack of access to safe drinking water. My take is that the acknowledgment of water in the COP community is not the path forward to solving the water challenges we face. The harsh reality is that the public sector has made little progress in addressing climate change. Why would anyone expect the public sector to succeed by "adding water" to the COP process? I believe the water sector will realize that pinning hopes on linking water issues to the climate process by the public sector is not a productive path forward.
What do these trends mean for 2023? My January prediction: Water technology innovation scales and becomes the catalyst to drastically change public policy.
More to follow.