Water-related risks continue to place stress on economies and communities – both on a local and global level. This precious commodity has economic, environmental, social and cultural dimensions. While carbon is a global issue, water is a local matter and should be treated as such. As a result, collective action and long-term solutions are required to address water-related issues such as quality, securing supply and maintaining a “licence to operate”. These were some of the key discussion points at the recent Deloitte energy and resources media roundtable.
During an open discussion about the rising challenge of water sustainability, William Sarni, director and practice leader for water strategy, sustainability and climate change at Deloitte Consulting LLP, Unites States of America (USA), and Nirali Shah, senior manager of infrastructure and power at Deloitte Southern Africa, analysed the increasing challenges of – and possible solutions for – effective and sustainable water usage from a local and international perspective. Key Global 500 CDP Water Disclosure Report results for 2012 were also discussed.
A watershed moment
According to Shah, there is a limited opportunity to increase water resources, as groundwater sources such as underground aquifers are finite. As such, the notion of water scarcity is driving innovation. “Water is the ultimate renewable resource. The key is to find solutions to manage this precious commodity across boundaries,” she noted.
As a water-scarce country, South Africa has limited water resources that need to be managed optimally. Sarni reiterated this by stating that there is a strong need to drive effective water usage. “The full cost should constitute the full value,” he noted. Shah added that water is a precious commodity and yet it is not priced according to its value.
This raises a key question: How does one ensure that water is used sufficiently and priced according to its true value? Infrastructure and management play a major role in ensuring reliable, safe water resources. Yet South Africa faces numerous water-supply and security-related challenges, such as infrastructure and the politics of access to potable water. Furthermore, there is no integrated structure on resource and supply, as well as a shortfall in the maintenance and treatment of wastewater, according to Shah and Sarni. Aspects that come into play here are that water pricing should focus on full cost recovery.
Water as an economic denominator
According to Sarni, water is an economic issue. He says: “You cannot grow an economy without water. It is important to bring economic vigour to something that people take for granted.” As such, water should be regarded as an indispensible commodity and priced according to its economic value.
As the government is well aware of these challenges, the draft National Water Resource Strategy 2 (NWRS 2) focuses on developing a proper water balance and integrated plan. According to Sarni, the NWRS 2 is viewed globally as a benchmark. “It is a policy based on equity and sustainability. It is a huge thing that there is water reserved for the environment,” he notes. “As an outsider, the right foundations are in place,” Sarni added. The key is to translate water policies into actual efficient, working projects that are characterised by smart planning. “Although the United Nations (UN) stipulates that everyone has the right to access to clean water, we need to get clever,” he noted.
According to the national Green Drop rating system, the 50 major treatment plants are better off than the smaller treatment plants. And yet this is impossible to determine when there is no clear indication of water usage. “We don’t know how much water we are using,” Sarni noted.
Statistics highlight that 37% of municipalities that measure water usage do not have water meters in place. In some municipalities, water meters are not maintained. As a result, the municipalities are unable to provide true figures on water treatment and output. According to Shah, this points to the skills gaps, such as business management and financial management. “A lack of resources and skills leads to capacity constraints. As such, there should be a focus on developing the necessary skills base,” she noted. Sarni says the funding will not be made smaller by tariffs, but by better management.
Sarni and Shah highlighted the following local challenges and opportunities:
• Inter-basin water transfer: What is the most effective way to service outtake areas with a deficit? The cost of transporting water needs to be calculated.
• The carbon nexus debate. Traditional desalination could improve water supply, but it uses a lot of energy.
• There are ongoing initiatives to improve wastewater treatment. In Witbank, for example, 50% of recycled water is returned to the municipality.
• There are discussions with global beverage companies to tackle water issues. When non-alcoholic beverage companies shut their plants down, they ensure that communities still receive water. This is a supply-side conversation as much as it is a water management issue.
• There are opportunities to expand water reserves, such as using brackish water.
• There has been interesting developments in low-energy desalination, nanotechnology and using wastewater at desalination plants. However, one should first look at reusing wastewater before considering desalination.
• Fixing infrastructure at wastewater facilities could help adding to the water-supply mix.
A collective effort
A well-designed public/private partnership model presents a viable solution for these management and governance issues. Adopting collective action initiatives demands a strategic paradigm shift to regard water stewardship as a business strategy and to address water-related risks within the public and private sector. The gap between public and private sectors are becoming narrower. As such, funding for infrastructure – pipelines, running of plants and sewage – should rely more on private sector parties.
The block-tariff system
Water usage is divided into domestic, business, industrial and agricultural “sectors”. The residential sector’s water needs is considerably less than industry and agricultural water usage. Locally, agriculture uses 62% of water resources – this water-intensive industry urgently needs to come up with a strategic plan. Internationally, agriculture uses some 70% of available water resources. There should be a stronger focus on heavy industrial and agricultural water usage and how to mitigate demand. “The agricultural industry should look at different crops and determine how much water is really needed,” says Sarni. “Precision or ‘smart’ agriculture can help to reduce water usage in this industry,” he noted. Adding to this, Shah noted that one should also look at how much water specific industrial plants are using.
From an industry perspective, there is a strong need to balance the risk between water quality and allocation. The Eskom 2030 Pathways Water Strategy is a factor report that highlights the direct and indirect (economic, social and environmental) influence of its water usage. Although this is a move in the right direction, a key question to ask is whether the water mix is equitable. In the United States, for example, the Electric Power Research Institute (EPRI) helps power utilities to optimise their operation and service to ensure equitable allocation and tariff structures.
Another question that requires due consideration is: What is the direct impact on the supply chain? According to Sarni, it is important for companies to look at their value- and supply chain from a holistic all-inclusive perspective. For this reason, companies should also look at the product side. Other important questions to ask is: “How much water does my consumer use?” and “How can I optimise my operations?”
A call to action
Shah cautioned against building new infrastructure to help solve the country’s water issues. “Unless we can demonstrate that we can maintain our current infrastructure, we shouldn’t be building new infrastructure,” she stressed. This calls for a strong focus on human and financial capital. “We need to take action regarding skills and proper pricing. By 2030, there will be a 17% gap between demand and supply, assuming it is business as usual,” said Sarni. He added that the current budget has a 30% shortfall on taxes, tariffs and funding. Ultimately, the economic value of water should be a priority for everyone.
Thinking globally, acting locally
The Global 500 CDP Water Disclosure Report offers invaluable insight, according to Sarni and Shah. This year’s report demonstrated increased water-related awareness and activity among the Global 500 companies.
• Companies reporting on water-related issues have remained static (60%).
• More than half of the respondents have had detrimental water-related experiences during the last five years (53%).
• Respondents identify water as a substantial risk to their business (68%).
• 2012 saw minimal change in respondents with broad-level oversight of policies, strategies or plans (58%) and with concrete target- or goal-setting (55%).
• More respondents are able to identify supply-chain risks (71%) and more require supplier reporting (39%).
• Collective action is an emerging and effective means to address water-related challenges (74%).
• The megadrop perspective: If you are driving water-efficiency across all sectors with smart pricing and management systems, there is no need to build new plants.
• Hydro-literacy helps to create public awareness and helps businesses to change employees’ behaviour.