Oceans apart: Why businesses need to embed water efficiency across departments
With water availability declining as energy demand rises, some of the private sector's leading lights on water management believe now is the time for businesses to embed holistic water stewardship programmes that capture the interests of other departments. edie's Matt Mace investigates.
Megatrends such as population growth, increased urbanisation and climate change are radically changing our planet’s energy and water requirements. The International Energy Association (IEA) estimates that there will be a 30% increase in global energy demand by 2040, while the United Nations (UN) is predicting a 40% shortfall in global water supply by 2030.
Consider that energy is used to heat or treat water, and that water is used to generate electricity or clean the sources that do, and suddenly we are presented with a precarious situation.
The water-energy nexus is an under-explored area for most businesses, with corporates instead choosing to focus on siloed carbon and water reduction goals. What becomes clear to companies looking at both areas as pieces of the same puzzle is that this relationship between the two can deliver wholesale business benefits, both reputational and economic.
Firstly, it is worth noting that perceptions of water use are changing. Analysis from the World Economic Forum lists water crises as the highest global risk in terms of impact, ranking higher than climate change, energy price shocks and weapons of mass destruction. In fact, two-thirds of the world’s largest companies are reporting that exposure to water-related risks could generate a “substantive change” in business operations and revenues.
The latter insight was provided by CDP, which represents 634 investors worth more than $69trn who are calling for more transparent business data on water use to inform their portfolio and investment decisions. For CDP’s global programme manager Orlaith Delargy, businesses are increasingly understanding how water can impact other areas of operations, but that many are citing common barriers as to why they are yet to act.
“The energy-water nexus is increasingly well understood,” Delargy says during a panel discussion at edie Live. “Around 93% of NDCs featured a water commitment and what we’re seeing is that you can’t have climate adaptation without considering water.
“But carbon emissions are still better understood in the market place. Things we hear from companies is that they aren’t ready, they don’t have the data, or that water isn’t a material issue [for them]. These are the pushbacks we commonly hear.”
One issue that companies have when introducing water stewardship programmes is that, unlike carbon emissions, the viability of water reduction methods depends on the location of a facility and its water source.
A company can switch energy supplier and generate a huge reduction in emissions as a result. Yet, any efforts to reduce water use must be specific to the location that a business operates in.
For example, South African mining company Gold Fields attempted to reduce its reliance on fossil fuels by sourcing from hydropower supplies in Ghana. But when a drought hit the region in 2015, the company was forced to diversify its energy mix again, with new investments costing the company $92m, equivalent to 14.5% of its total capital expenditure in 2015.
A similar cost incurrence was felt by technology giants HP. The company reported a $5m increase in electricity costs due to droughts in Brazil, which had diminished the nation’s hydropower capacity. Not only was a depleted access to water impacting these firm’s ability to source nearby water, but it created unintended consequences for the energy and finance departments.
CDP’s Thirsty Business report highlights that 24% of recorded emissions reductions from business were dependant on the stability of water supplies, while a further 53% report emissions reductions as a direct result of improved water management. But CDP is doing more than highlighting the need for water stewardship, it is doing it in a manner that is creating the business case for some companies. CDP’s water programme encourages companies to disclose environmental impacts by leveraging the influence of investors.
Once the data has been submitted, and a score has been generated, companies can then use the score and the collective worth of the investors to attach an economic value to water management, an approach they may hold more influence amongst senior management.
One company that has successfully embedded water management across different management teams is IHG. With more than 5,000 hotels – including brands such as Holiday Inn – across 100 countries, IHG is well aware that solutions to water management are indigenous to the area around them.
In total, 48% of IHG’s water consumption for owned, leased and managed estate is in water-stressed areas. But while the supply risk is clear to the company, external factors are now creating reputational risks for company.
More than 50% of IHG’s corporate clients now request data on water consumption, and the group has launched its Water Stewardship programme in collaboration with the Water Footprint Network to relay these risks on to other departments.
IHG has recorded a 7.9% reduction in water use per occupied room in water-stressed areas between 2013-2016. The Stewardship programme was launched in 2015, and the IHG’s corporate responsibility manager Michael Savage has used the group’s B-grade from CDP to relay the necessity of reaching a targeted 12% reduction to other areas of the business.
“CDP has been a great tool to leverage other parts of the business, its put water on the risk team’s agenda,” Savage says. “We want to embed it into other parts of the business. It allowed us to get things in order and having investor figures associated with CDP to hand when speaking with senior leaders really helps us send the message.”
The message has clearly resonated well. IHG has since completed a water risk assessment for all open and pipeline hotels, and will spend this year launching targeted actions to reduce water use further.
This has been enabled through collaboration with key departments. Water accounts for around 10% of IHG’s utility bills, excluding the energy used to heat the water. Savage outlined the opportunities to increase water stewardship in a way that made “financial sense” to get the finance department on board with the stewardship.
All directors of finance now have water linked as a direct KPI and ability to reduce and manage water will affect their bonuses. This collaborative approach is generating movement at a much faster rate according to Savage.
“I can spend a long time chipping away at the edges trying to get [water stewardship] in through hotel doors and into other functions of the business, but what has really been a fantastic success over the last year has been collaborating with different functions of the business,” Savage adds.
“We have support from our finance team and our chief financial officer and it is maker a huge difference. Where it was previously quite difficult to bang the door down and get water management into some of those hotels, we’re now seeing a lot of movement.”
For Savage, engaging with people is key. Both external and internal initiatives have been established to strengthen the ties between water stewardship and everyday staff activities.
Internally, designated water champions are chosen to identify and implement specific water actions in the hotels that they work at. IHG then works collaboratively to establish the business case for these schemes to be used elsewhere.
Externally, IHG is leaning on resources and assistance from various non-profits to ensure that water stewardship extends beyond the “four walls” of every hotel to directly improve the area where the water is sourced from. For example, four hotels in China have partnered with the Chengdu Urban River Association, to work upstream to protect nearby water sources.
Water’s worth it
Water management is a common practice in the hotel industry. The Hotel Water Measurement Initiative (HWMI) was launched in 2016 to create a common methodology for hotels to measure and report on water. Anyone who’s stepped-foot in a hotel has likely seen signs about washing towels or low-flow shower heads because relating the message to the consumer is part of the battle.
But for cosmetic companies such as L’Oreal, water footprints and consumer interaction can be a full-blown war. L’Oreal is aware that in order to create the most impact, it will have to engage with people outside its factories, but as Unilever has found, it is very difficult to argue the case to consumers to go and have shorter shower times.
Instead, L’Oreal is focusing on reducing the amount of water used onsite and in its products, with a vision of creating “dry” factories that only consumer water for human use.
Staff members are creating a big impact for L’Oreal’s water stewardship programme. The company’s environmental compliance expert for the quality environment, health and safety department Hans-Ulrich Buchholz claims that behaviour change amongst staff accounts for around 20% of its water consumption.
L’Oréal is one of two companies to be awarded an “A” score by CDP on three key topics: climate protection, sustainable water management and the fight against deforestation. Since 2005, the company has reduced water consumption per litre per of finished product by 48%, despite the business growing by almost a third in that time.
Buchholz has turned to closed-loop water systems to hit this target, and he revealed that new systems had “changed the behaviours and responsibilities of staff”.
Wastewater recycling prototypes are onsite at 10 facilities across Europe, India and China. But as technological advancements bring businesses to the cusp of Industry 4.0, Buchholz is hoping to integrate further innovations that complement the staff attitudes and current recycling methods.
“We are going from a linear system to a circular one,” Buchholz says. “It changes everything in a factory. Wastewater stays onsite, we treat it and check it for quality and people have to collaborate and communicate in ways that they didn’t before. We will continue to close the loops, and if possible become dry factories.
“In a couple of years all the factories will be completely automated and people will be very reactive and flexible. All the utilities and wastewater have to respond to this. We need more equipment to control quality so that they are in line with this new flexible product.”
The 48% reduction is still short of L’Oreal’s 60% target for 2020, although Buchholz remains “very confident” that the goal will be reached. Around 35% of total water consumption on production sites is linked to “very strict hygiene standards” of cleaning production equipment and packaging lines.
In 2016, 300 projects were introduced to close the loop in the cleaning process, and 45,000m3 of water was saved in 2016. The equivalent of 18 months’ water consumption has been saved between 2005 and 2016. But with 30% of L’Oreal’s total products produced in water-scarce regions, Buchholz realises that tailored solutions need to be introduced. L’Oreal’s first plant for manufacturing haircare products for Middle Eastern and North African markets is located east of Cairo across 10 hectares of desert.
The site opened in 2013 and had already achieved LEED Silver certification and was designed to reduce water consumption. The focus now is on creating onsite renewables capacity, but L’Oreal will also use systems, such as the ones outlined in the water path video below, to boost water stewardship in areas like this in the future.
“Water is the number one raw material that we deal with,” Buchholz adds. “Water is becoming rare and it is mandatory to increase water efficiency. We’ve seen with water stress that the topic is regional, it’s not like CO2, it depends where and how you use it.
“It makes it complicated, but also easy, because you can work on a corporate level to reduce water needs and then apply different strategies in the regions.”
Circling the drain
The growth of innovation in the water sector can be relayed back into the energy management team to streamline management systems.
The Future Water Association (FWA) acts as a thinktank for businesses in the water sector, and those looking to enhance water stewardship programmes. The association’s chief executive Paul Horton believes that the growth of data management – 80% of the data used in the water sector was generated over the last two years – will allow companies to match real-time water and energy data and embed solutions that promote the circular economy.
“Technology and innovation can bring water and energy closer together,” Horton says. “If you think about the water and energy nexus you really start thinking about water and the circular economy. This is where you change the dynamic of how you view water. It starts to be seen as an untapped resource, it’s a key infrastructure resource. Thinking of water in a circular way is critical.”
Banking group ING has already suggested that the adaptation of circular economy methods in water-stressed regions could save 412 billion cubic metres of water each year, the equivalent to 11% of annual global water demand.
Considering that water shortages have already been cited as reasons for energy supply concerns, closed-loop water applications, coupled with enhanced data, could unlock economic opportunities across the business.
As Horton notes, in the future “every drop of water accounted for should also account for every kwh of energy usage.”
All of the quotes in this feature were taken from the edie Live 2017 exhibition in Birmingham last week. In a session within the Resource Efficiency theatre, the experts from CDP, L’Oreal, the Future Water Association and Intercontinental Hotels Group explained how cross-examining water targets with wider business aspirations can deliver tangible benefits driven by external expectations on water use.