ROUND TABLES WATER EFFICIENCY

DECEMBER 2009

What strategies are companies using to reduce water consumption? And should they accept responsibility for its use in the supply chain? Editor Tom Idle listened to the answers at the latest SB Round Table Debate

Participants
Simon Parsons, Cranfield University
Peter Jiggins, head of branch, water availability & quality, DEFRA
Richard Harpin, global business leader for water scarcity, Halcrow
Chris Twells, development director, Veolia Water Outsourcing
Jens Eiken, Molson Coors
Vidyanath Gururajan, products director, Branston
David Ion, head of technical services, Ginsters
Holly Jasper, environmental manager, Jaspers
Mark Lovett, safety and sustainability, Apetito
Paul Martin, head of engineering UK, United Biscuits
Inder Poonaji, head of safety, health and environment sustainability, Nestle
Martyn Seal, European sustainability director, PepsiCo
Alison Fenton, environment co-ordinator, Lafarge Cement UK
Ian Walsh, global head of environment, Cadbury

In the cosy library of County Hall our select group of business leaders were reminded of the theme of this latest Round Table Debate by the view from the window; water seemingly slapping the walls of Parliament on the other side of the River Thames. With such a strong focus on energy and carbon, the danger is that water will continue as the forgotten element of environmental policy; not just in the UK, but worldwide. The likes of Nestlé, Cadbury, PepsiCo and Branston are concerned. But with a lack of directed policy, fiscal incentives or regulation in this area, businesses are struggling to develop effective water efficiency strategies. Timely then to gather a selection of them together to discuss what is happening and what needs to happen next.

Simon Parsons: Water is back on the public agenda, but also corporate agendas. Back in the late 1980s and early 1990s, there was a big drive by industrial companies to reduce water use. But there has not been a substantial change in 10 or 15 years. So, how do you approach this? What strategies have you used that have been successful? And what's the ideal starting point?

Martin Seal: Our starting point was senior commitment; the fact that we have a senior on the Board representing sustainability means that targets have been cascaded through.

All our sites have a specific water reduction target to aim for. We've then taken that to our staff and really driven a lot of that reduction through them. We managed to reduce the amount of water per unit by 42% over a seven-year period. At the moment, we are looking at the amount of water we can physically recycle within the factory. Can we reach a stage where we can take the wastewater from our factory, clean it to an appropriate level to re-use all of it? What are the food safety implications in that?

Richard Harpin: It would be interesting to start off with asking why companies want to reduce their water usage; it is probably not the cost of water. No. It's about risk: physical risk from the lack of water; reputational risk; and regulatory risk. Companies are often multinational so their supply chains are in different countries. Some of those are water scarce - that is where the risk comes. You can be making improvements in areas where it may not be having any impact at all.

There is a need for companies to come together in the catchments. It's difficult because of competition and often companies do not want to disclose exactly what they are doing. But there is a really big advantage, especially in developing countries where there is often poor regulation, for companies to help raise their game, demonstrate best practice and influence governments to bring in water reforms.

Simon Parsons: There were lots of nods around the table when you asked why companies want to reduce their water use - and a lot of you agreed that it was not financial.

Holly Jasper: To say it's not financial is not correct. Everyone's business looks at the bottom line. Environmental impact and reputation is massive; it helps your supply chain relationships and it's how you further your business strategy. We've dramatically decreased our water usage. We are 95% re-use at one of our sites and 45% at the other. We saved £92,000 just by setting up a water treatment plant and not deep injecting. That's a lot for a small business, so you can't rule out finance.

Vi Gururajan: For us, the total consumption of water in cost terms is negligible compared to consumables. We have looked into small things that might make a differences - not in cost terms, but ethically.

We have a balanced score card for the business as well as for the environment, and part of that is m3 of water consumed, per site, per tonne of potatoes. I said to my managers at each site, 'give me a figure of m3 that you take in, as a site, from different sources, and tell me what you are putting out'. And that needs to be a 100% balance. When we started doing it, I had 140% or even 150% water balance sometimes. Because the cost of the water is not that high, it just goes under the carpet. Doing the water balance exercise opens people's eyes in a big way.

Paul Martin: It is something of a mindset change for our business. The commercial part is very important; it is a key driver. But it is about everyone's objectives. It is about thinking about how you do things differently.

Ian Walsh: I agree. Starting off with the low-cost stuff and the behavioural and cultural issues is the right way to go.
The opportunities to do sizeable capital investment are there. But the lion's share of projects, like a water recycling and recovery plant, have been invested in because of the cost of effluent discharge, not because of the cost of the resource in the first place. In the UK, you are typically looking at a three to one ratio between what you are paying to get rid of the stuff versus what you are paying for it to come in through the front door. The biggest driver in the carbon agenda, despite what everybody likes to think about the morals of climate change, has been the price of energy.

Justifying spending money on projects which reduce water use, unless you can show a very good saving based on your effluent bill, three-, four- or five-year payback periods are not attractive to boards unless they are heavily converted to the ethical position.

Inder Poonaji: Water is a basic human right. And that is the key value that drives a lot of our thinking. The other thing is that water has no boundaries. At Nestlé, there are three key things that we value in our shared sustainability programme: nutrition, water and rural development. Water is a key ingredient - that must be respected and valued.

Jens Eiken: For us, it is about increasing awareness about water as a really precious component. We've created a nationwide employee communications programme to educate our staff about the importance of improving water efficiency and maintaining quality. We're rolling this out across our global business units.

David Ion: When we started looking at our carbon footprint, we were looking for an indicator that we could make available to our workforce and a lot of the energy demands are outside of their control. But water has a very high visibility and we went for a lot of point-of-use metering, which is a really key way of saying to someone, 'Today, you used 2.5 cubic metres, how can you get that down?' They know what they do. They know where their waste is.

Simon Parsons: For those of you who value water highly because it is going into your products, water is obviously a key issue. But what about you, Alison? You come from a very different sector.

Alison Shenton: Yes. We do not want a lot of it in the product, but we use a lot of it to make the product - cement.

Traditionally, we extracted water from the river, but we wanted to reduce the stress on the local river. So we worked-out a shale quarry to create a lake that now provides all the water for the works. Now, we don't abstract from the river at all. It has saved us a huge amount of money, a massive amount of energy and it is a recirculating system, so the water from the lake goes through the works and is used for cooling.

But we still have to understand where we are using water and driving people to use less.

Simon Parsons: What do you think is likely to be the situation five or ten years down the line in terms of how water is going to become more and more important for your business?

Martin Seal: It is the risk element that Richard talked about. If you are really going to ask your business to look at the risk that sits within your operating sites and the supply chain on water, it kicks out some quite interesting things.

Clearly you need to look at where your potatoes are being grown and establish the availability of water within those locations. You can then start to look at the physical supply chain risks and raise that risk into a financial. All of a sudden it becomes quite a big number with which to sit down with senior management.

In 2007, there was a major flood in the UK and we lost a certain amount of our potato crops. At the same time, there was a major drought in southern Europe, so we actually had a crazy situation where we could not get the potatoes out of the ground in the UK because it was too wet and in Europe, we could not get them out because the ground was too hot. That cost PepsiCo about $10M.

So there is an ability to move the debate on from saving money by reducing usage to looking at risk.

Ian Walsh: Comments have been made about carbon dominating the agenda and water being left out. But we are in danger of doing exactly the same thing with water as we have been doing with carbon - looking at water with our blinkers on.

Also, we've talked a lot about water use and water efficiency. But the most important word in the water agenda is impact. In the carbon debate, it is a global phenomenon and we revert all fuels back to carbon equivalent. With gas it is all about CO2e. But we don't have H2Oe. Should we focus all of our efforts on making things absolutely dandy in the UK? Or should we focus our efforts on Africa and India and Asia Pacific? I know what the answer is, but it's about how you get that message across and how you quantify the risks when there are no agreed measures for calculating the impact.

Simon Parsons: Is it about accepting responsibility for water use in your supply chain?

Richard Harpin: I have just come back from a round table meeting of the Alliance for Water Stewardship in Brussels, which is trying to set standards for water stewardship. It is difficult because different places around the world have different regulations and different cultural needs. There are standards at the moment in Australia and in Europe for water stewardship, but it's a voluntary thing.

In Europe, we have the Water Framework Directive as an underlying regulation, which affects where we use water.

But they have now all set themselves the task that in three years' time, they want to produce water stewardship standards that companies and utilities can sign up to and prove they are engaged in good practice. It's a fantastic opportunity, but I am worried that it is a very difficult thing to achieve.

Mark Lovett: We have saved about 40% of our water usage and we did it to save money and to differentiate ourselves from our competitors. But should we do more? The next step is innovation and investment and is it worth us doing that investment from a financial point of view? Would we be better spending our limited sustainability budget on something else? I could find tonnes and tonnes of carbon savings from minimal investment elsewhere. We are in Wiltshire, which is not short of water. I worry more about what our competitors are doing.

Richard Harpin: The first thing I would be asking, Mark, is: have I got my risks down to a manageable level? Can I accept that level of risk from where you are now? And can I save any more money? Is there a business case for doing more? It may be that you have got where you ought to be.

Martin Seal: I think you have to look at some of this over a lot longer term than five years, asking what the world will look like in 2030? You have a growing population, demand for energy and food. If you start to do longer-term thinking, and ask yourself what your business is going to look like in 30 years' time, say, all of a sudden that will start to inform the decisions you are making. Here and now, we are trying to hit quarterly targets, yearly targets. Unless you show that longer-term risk on the total supply chain, you are probably not going to get the engagement within the senior management team that you want either.

Chris Twells: Although we may have good intentions, let's ask ourselves, 'how many water projects would meet corporate hurdles, for example, return on capital employed'. So, where is water placed in the board, and is it seen as a business critical issue?

Mark Lovett: Does the investment have to hang together as a decent return? Or do you stretch it a bit for reputation?

Alison Shenton: We would still have the return on capital argument to develop but, because sustainability is such an issue for cement, it helps to bring it through.

Jens Eiken: Coming back to Chris's point about water being in the boardroom or not - it depends on which business you are in and how important this ingredient really is.

Water is the main ingredient in our product, not merely a utility; therefore there is significant risk and urgency to address these issues within our business and treat water with utmost respect.

Simon Parsons: David, have you managed to get senior management buy-in for
water?

David Ion: To a limited extent. The thought process behind making a ten- or 15-year project commitment is still some way off. We have a lot of other competing projects, certainly on the environmental side.

Simon Parsons: What's the view from Defra?

Peter Jiggins: We have been working hard in the last five years to push water efficiency up the agenda in the way water companies look at things, certainly in the balance between their supply and demand. They have just finished their resource management plans, looking 25 years ahead. Some of the indications from that show that non-domestic water use is pretty flat and in some cases decreasing, mainly due to changes in water use rather than assumptions about water being used more efficiently.

Vi Gururajan: Looking ahead, I think there is going to be water labelling. It has started happening and it is going to cause more confusion both to businesses and the consumers. I have already started hearing the word 'ecological footprinting' being targeted too.

Martin Seal: Water footprinting is flawed. Water is about how much you are using, where you are using it, what the physical impact is on the watershed, what time of year you are using it. We need to be strong as businesses to say, 'It's not about putting a label on a brand'.

Vi Gururajani: This is where academics should work closely with government agencies to steer the agenda, rather than sit and wait to see what businesses do - and then probably pick at them and say it's no good.
Martin Seal: What we haven't done is find a way of joining together; we are probably wasting a lot of time and energy individually trying to find a solution. Again, if we had a government agency who was able to pull that together - otherwise it is completely reliant upon us as businesses to talk to one another.

Paul Martin: There might be joint ventures we could do with the water supply in other industries to say, 'Let's build a plant that deals with recycling to the required level for the number of people that are using it'. That might be the best commercial way forward. We have one of the world's biggest greenhouses at the back of our Teesside factory which, with collaboration and the right treatment, there could be some work that could be done that someone's waste, as you say, is someone else's treasure.

Simon Parsons: What's likely to be the tipping point for water efficiency

David Ion: It would be like an oil crisis. It would be one really bad year's drought, where you just cannot get the supply of a large number of ingredients.

Chris Twells: The trouble is, the lessons we learn are the ones that hurt us the most. Can we really afford to wait for a disaster to happen before planning a response?

Vi Gururajan: There is plenty of water around. Yes, you can be more efficient, you can reduce consumption and waste. But it only goes to a certain level, beyond which you start thinking about there being water everywhere - and how we can start using it more innovatively.

Population growth, dietary change, urbanisation, climate change and water pollution - all of these factors are creating a growing water scarcity crisis, particularly in the developing world. By 2030, demand projections indicate that overall water demand will increase by 40% on what it was in 2005. As this latest Round Table Debate showed, there are companies focused on reducing water consumption. Clearly, some are thinking only in financial terms; what it costs to abstract it and clean it up after use. But with a lack of clear and consistent advice for business on water strategies, few companies are looking at the physical, regulatory and reputational risks.

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