Great progress has been made in understanding water risks, associated business value at risk and engagement by stakeholders and in particular investors. In response, companies have implemented water risk mitigation strategies. In many ways this has been captured in the move from water management to water stewardship. Water stewardship strategy frameworks have been advanced by organizations such as WRI, WWF, TNC, The CEO Water Mandate and The Alliance for Water Stewardship. These frameworks coupled with an increase awareness of water related risks have advanced current thinking on water as a business risk to be managed in a similar manner as other enterprise risks.
“… we are not thinking as broadly as we should when it comes to the value of water …”
However, we are not thinking as broadly as we should when it comes to the value of water – viewing water as a strategic resource and the value from a water strategy. Water strategy, beyond stewardship, drives innovation in technology, business models, financing, partnerships and creates brand value. Let’s start with partnerships. This broader view can create greater value for both the public and private sectors (even brand value is relevant to the public sector).
“I suggest that instead we focus on “business ecosystems” to drive innovation and value.
The next stage in valuing water will be in innovation…”
While “collective action” has been part of water stewardship thinking, it also doesn’t capture the real value of innovation in partnerships. I suggest that instead we focus on “business ecosystems” to drive innovation and value. The next stage in valuing water will be in innovation which will, in turn, be driven by building these ecosystems. I believe, that water innovation as the next phase of water stewardship will create additional value in economic development, business growth and natural capital.
Innovation will take us from 19th and 20th Century public policy and infrastructure to 21st century solutions by leveraging exponential technologies (i.e., material science, internet of things, etc.), crowdsourcing and prize competitions (i.e., XPRIZE, ImagineH2O), innovative business models (i.e., water as a service) and financing (i.e., green bonds and socially responsible investing) and new stakeholder ecosystems (i.e., The Coca Cola Company’s Replenish Africa Initiative).
Let’s dig into an expanded view of how 21st century water innovation can create greater value. “Collective Action” has for the most part been integrated into water stewardship strategies. Collective action is essentially mobilizing stakeholders within a watershed, region or country to address water related issues through investment, action plans, outreach, etc. However, collective action only touches the broader opportunity possible through “business ecosystems.” To best understand the role and power of business ecosystems, I suggest reading the Deloitte University Press publication, “Business Ecosystems Come of Age” (Deloitte University Press, 2015).
The term “ecosystems” was coined by Arthur Tansley in the 1930’s to describe a localized community of living organisms interacting with each other. These organisms compete, collaborate, share and create resources and coevolve – essentially adapting together. In 1993, James Moore wrote in the Harvard Business Review that:
“successful businesses are those that evolve rapidly and effectively. Yet innovative businesses can’t evolve in a vacuum. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks…. I suggest that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies co-evolve capabilities around a new innovation: They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.”
SABMiller has made “strengthening business ecosystems” a priority
Historically, technology companies have created these business ecosystems to build technologies and platforms to connect customers and partners. However, the strategy of building ecosystems to address business issues, such as water, has moved into other sectors. For example, SABMiller made a priority of “strengthening business ecosystems” to benefit local and regional economies in which it operates (“Business Ecosystems Come of Age” (Deloitte University Press, 2015). The transition to business ecosystems results in a “blurring of boundaries between stakeholders, technologies and roles.”
The view is that these business ecosystems create new opportunities for participating stakeholders in the ecosystem. Again, referring to the Deloitte University Press article, value in these ecosystems can be created to address social challenges. Consider the opportunities to address water scarcity, water quality, infrastructure, financing and technology challenges with a robust business ecosystem.
Eamonn Kelly in the Deloitte University Press article defines business ecosystems as:
“Dynamic and co-evolving communities of diverse actors who create and capture new value through increasingly sophisticated models of both collaboration and competition.”
Again, according to Kelly, there are five ways to think about business ecosystems, ecosystems:
- create new ways to address fundamental human needs and desires;
- drive new collaborations to address rising social and environmental challenges;
- create and serve communities, and harness their creativity and intelligence;
- often exist on top of powerful new business platforms; and
- accelerate learning and innovation.
Now consider what we are seeing in the water sector (public and private sectors) mapped against the five ways to think about business ecosystems. A few examples are provided below (this is not meant to be an exhaustive list).
- New ways to address fundamental human needs – access to safe drinking through organizations such as One Drop, Water for People and many others.
- New collaborations – increased collaboration of stakeholders including competitors in a pre-competitive setting – 2030 Water Resources Group.
- Create and serve communities – a focus on addressing the needs of local communities such as RAIN.
- Powerful new business platforms – the work of World Business Council for Sustainable Development and The World Economic Forum.
- Accelerate learning and innovation – innovation platforms such as House of Genius, 101010, ImagineH2O and XPRIZE.
“This is just the beginning of viewing innovation as an essential component of water strategy…”
This is just the beginning of viewing innovation as an essential component of water strategy and how this innovation is driven by the power of business ecosystems.
If we can view water strategy more broadly to include the innovation value created from leveraging exponential technologies (i.e., IoT and nanomaterials), new financing models (i.e., green bonds) and frameworks (i.e., closed loop value chains) we will be in a better position to address 21st Century water risks. More importantly we can collectively create economic, social and environmental value.
- Water Stewardship: The Impact To Date - A new report finds there has been little evolution from business -as-usual in regards to water management. What behaviours need to change? How can this be achieved? We sat down with report authors James Dalton from the International Union for Conservation of Nature (IUCN) & Peter Newborne from the Overseas Development Institute (ODI)
- Integrating Climate & Water Diplomacy For Rivers - Climate change will likely intensify water-related challenges in river basins. Meanwhile, the Mekong River Commission is experiencing funding cuts. adelphi’s Sabine Blumstein shares 3 reasons for stronger integration of climate policy & water instruments
- Thirsty Business: Why Water Is Vital To Climate Action - Water is key to the shift to a low-carbon world. Yet, companies aren’t moving fast enough as CDP’s latest Global Water Report 2016 shows. Their Morgon Gillespy on key findings from the report and the need for still more action
- Scotland: The Hydro Nation - Scotland’s ‘Hydro Nation’ vision is underpinned by a statutory duty. Barry Grieg from the Scottish govt on how it manages water with various stakeholders, the many successes so far & what is still to come
- Securing Water For Hong Kong’s Future - The Jockey Club Water Initiative on Sustainability & Engagement (JC-WISE) aims to secure long-term water sustainability for Hong Kong. CWR sat down with Dr Frederick Lee of the University of Hong Kong
- Water: Can’t Always Buy What You Need – With competition for water intensifying, paying more for water may not get you what you need. Deloitte Consulting’s Will Sarni on strategies that can help corporates secure water for growth
- Bridging Gaps to Water Innovation - Water scarcity & pollution will drive innovation in partnerships and technology but the road to commercialisation remains long. Will Sarni, Partner at Deloittes discusses the barriers to innovation in the water sector
- Managing the World’s Liquid Asset – Water - Savvy investors now recognise water as a business risk yet there is still no agreed global standard & framework for sustainability reporting. Biswas, Tortajada & Chandler on why corporates & governments must do more to change the culture & mindset over the use of water
- Developing A Global Water Stewardship System - Alliance for Water Stewardship’s Zhenzhen Xu, Ma Xi & Michael Spencer introduce the first ever global water stewardship standard and share lessons learnt from Ecolab’s pilot at their Taicang China chemical plant
- Water Risk Valuation – What Investors Say - See what 70+ investors have to say on different valuation approaches we applied to 10 energy stocks listed across 4 exchanges. Is there consensus? What are they most worried about?
- Valuing The True Cost Of Water - Water-related risks can be numerous for any given operational site. Nina Cambadelis & Johann Clere walk us through how Veolia’s tool, “The True Cost of Water” can mitigate risks and show potential economic gains