Guest Post by Nick Martin, Associate, Antea Group and as originally published in the NAEM e-news – http://naem.site-ym.com/resource/resmgr/Docs/enews-2012-03-antea-spo.pdf
Generally speaking, water is undervalued. On average, my family pays $28/month for water. I pay twice that much for a landline phone I rarely use and three times that much for cable television I could do without. So why is such a precious resource so undervalued? Does the $28/month really cover the cost of providing high quality, potable water to my family?
The simple answer is no. Although there are many signs suggesting we will all one day pay the “true cost” of water, such calculations are highly dependent upon location, user category, water rights, and many other variables. This is not a mathematical and social journey I am prepared to take in a brief article like this! However, water valuation concepts have been gaining increased interest from many of my clients, and it is in interesting to take a closer look at valuing water from a corporate perspective.
In my mind, there are three perspectives for companies to consider:
What You Think You Pay, What You Actually Pay, and What You Could Pay
What You Think You Pay
– simply baseline water and sewage fees. These are water costs that companies budget for and pay directly, no matter what the situation. Such costs commonly include standing charges, metered rates, permits, and sewage fees.
What You Actually Pay
– many companies do not fully account for their actual costs of sourcing, using, treating, and discharging water in terms of hidden or often overlooked costs. Such costs are wide ranging and can include such elements as infrastructure maintenance (e.g., pipe integrity), electric and energy costs for heating, cooling, and transport, water treatment, permit and regulatory management, assessing source water vulnerabilities and implementing protection plans, securing back-up supplies and other associated variables.
Accounting for the actual cost of water to your facilities can provide significant value in positioning water on a more equalized position with other utilities and calculating the “real” return on investment for water related expenditures. Without such accounting, water related proposals rarely meet investment hurdle rates and much needed investments often go, unfortunately, unrealized.
Logical enough, but what if we extend our thinking a bit more to consider What You Could Pay under very probable current and future scenarios.
What You Could Pay
– let’s imagine for a moment some other water‐ related costs that a company could pay associated with very probable scenarios such as:
- Prolonged droughts and reduced regional water availability?
- Securing alternative or back up water supplies?
- Loss of onsite and/or municipal wastewater discharge capacity for an extended period?
- Population growth and increased competition for water?
- Water related liabilities (spills, contamination, discharge exceedances)?
Just like in my personal finances, businesses don’t like surprises. Getting ahead of the “true value” of water issue can reduce uncertainty in the short-term and potentially identify longer-term opportunities to adapt ahead of the day when the true value of water is fully realized.
This is a guest post written by Nick Martin, Associate | Antea Group. Nick Martin is dedicated to supporting clients with assessing, prioritizing and managing sustainability-related business risks and opportunities. He has over 12 years of extensive experience supporting private and public organizations with translating their sustainability-related aspirations into successful strategies, measurable objectives, and where desired, process management systems (ISO 14001 and OHSAS 18001). He leverages a unique combination of environmental engineering and business administration expertise to partner with multinational clients in developing and implementing fit-for-purpose programs that integrate sustainability into core business practices. Specific areas of expertise include global water resource management, development of fit-for-purpose process improvement systems (ISO 14001/ OHSAS 18001/ SA8000), risk assessment, and stakeholder engagement. Much of his strategic support involves researching leading practices in Corporate Responsibility (CR) and utilizing this knowledge to assist clients with benchmarking against peers and developing viable strategies. Nick holds a Bachelor of Science degree in Environmental Science, a Master’s degree in Environmental and Energy Management and a Masters of Business Administration.
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