Water hogs, data slop and makin’ bacon
Naming and shaming homeowners who hog water is easy, but better data on businesses could unlock bigger opportunities.
Summer is over. It was most likely the hottest, driest summer on record.
Now, a new phenomenon has surfaced in the drought-plagued American West: public shaming of water hogs.
Media in San Antonio, Salt Lake City, Albuquerque, Spokane, Orange County, Sacramento, San Diego and Austin (to name a few) have published lists of individual water users, often rich homeowners or golf courses, who use the most water. The stories often are accompanied with photos of lavish homes with lush gardens and expansive green lawns.
One could learn, for example, that Portland resident Henry Hillman Jr., the glass-blowing son of a Pittsburgh billionaire and former owner of shoe company Avia, used 1.55 million gallons in a year.
And maybe the exposure made a difference — in California at least, where it was announced last week that the state had decreased urban water use by 31.3 percent in July, surpassing the 25 percent goal set by Gov. Jerry Brown four months ago. The state’s residential use this summer was also significantly lower than 2014.
It's also true that in some areas, such as California, state laws make it difficult to identify the actual owners of water-hogging properties.
But the fact is that homeowners still use far less water than businesses in the United States. And unlike the Henry Hillmans of the world, there is even less transparency about how much water American businesses — and businesses globally, for that matter — are actually consuming.
A drought of data
Businesses flying blind on water must change if we are serious about effectively valuing and managing the resource.
There is currently so little transparency that 60 institutional investors managing a total $2.6 trillion in assets last month urged more than a dozen big food and beverage companies to reveal water risks, including brands such as Kraft Heinz, Tyson Foods, Del Monte Produce and Archer Daniels Midland. (Full disclosure: My company, Apana, provides water analytics tools for businesses.)
Some positive steps have been taken to increase transparency of corporate water use and of business exposure to water risk, including the work that CDP is doing to make water reporting part of corporate governance, and that Ceres is doing to help frame the necessary responses.
Piet Klop, who leads $16 billion Dutch pension fund PGGM’s company and market engagement efforts around water scarcity, recently said:
"We need more corporate data. We need to overcome some of the (corporate) objections that you hear, either legal, competitive or capacity. And indeed, some companies are concerned about the loss of control they may suffer when their water performance data starts to be compared to the data of other companies. ... The well-managed companies are going to benefit from such a comparison.”
Added Neil Brown, a sustainable investment fund manager at Alliance Trust Investment: "We are forced to use narrative data, but it's not comparable, and therefore not usable, in financial models."
CDP research showed that even though two-thirds of companies are experiencing exposure to water risk, only just over one-third assess water risk in their direct operations and supply chain.
That is a huge gap between knowledge of a problem (a complex problem that touches on environmental compliance, efficiency loss, asset value and risk exposure) and the action required to fix it. It is a gap that must be bridged.
For that to happen, water must be a boardroom-level issue, not just a facility management issue. Some CEOs and CFOs, especially companies that wouldn’t exist without water such Coca-Cola and General Mills, have acknowledged that water scarcity and quality pose a fundamental risk to their business and are proactively working to address it.
What’s needed even more to shift the current dynamic is a shift in thinking: from seeing water only as a risk, to embracing it as an opportunity.
Reining in water use is an opportunity to improve business operations and to ensure long-term backing from strategic investors. And it's an opportunity (and fiduciary responsibility) to save money by saving water.
Entrepreneurs also need to understand that water is a $450 billion to $500 billion capital expenditure market annually, according to Impax Asset Management — one that is ripe for innovation. It's a massive opportunity for entrepreneurial ventures to do what they do best.
Now is the time to seize that opportunity. Risk only comes from our failure to do so.