Sofia Figueiredo, Sustainability Manager at Veolia Water Technologies looks at water risk and the costs associated with it
Sofia Figueiredo, Sustainability Manager
The 2013 World Economic Forum recognised water as the second highest global risk area after major systemic financial failure. But appropriate investment can not only reduce this risk but also reduce costs and contribute to your bottom line. The last two or three years have provided an insight into what may be to come: dry years with water restrictions followed by wet years with flooding, both contributing to poor harvests and problems with water resources. It's not that there isn't enough water; it's just in the wrong place at the wrong time. Although WRAP's Federation House Commitment 2014 progress report shows a 15.6% reduction in water consumed in the dairy by comparison with the 2007 baseline, the total consumption is still of the order of 5.6 million cubic metres per year, most of which is taken from municipal potable water supplies. Add to that the "virtual water" used for production of raw materials - vegetables, cereal crops, meat and so on - and it's obvious just how dependent the industry is on water. But how much does that water really cost?
Typically water from the tap costs around 85p/m3 but that's only the start. Think about the amortised capital investment in water treatment, storage and distribution, the chemicals and power needed for the treatment process and then add the costs of disposing of the water after it's been used - around £2.25/m3 for sewer discharge and you're getting closer to the direct cost of water. So far so good, but there are indirect costs too, like administrative, legal and corporate social responsibility fees. But what happens to your business in the event of water shortage or flood? If you fail to meet regulatory standards for water or effluent, how will this affect your reputation? What are the financial implications of customer pressure in respect of environmental and sustainability issues? These risks are difficult to assess and even more difficult to quantify in financial terms. But help is at hand from Veolia Water Technologies: a new model called True Cost of Water, that helps to mitigate water-related risks.
The True Cost of Water model puts a monetary value on the impact of water risk on future profitability.When decisions are being made on water strategy and water technology investment, it's important to quantify water risk and its impact on the bottom line. So the True Cost of Water combines traditional CAPEX and OPEX calculations with an analysis of water risks and their financial implications. The model puts costs against four risk categories: operational, financial, regulatory and reputational. Operational risks are those associated with the loss of water due to external problems like a burst supply pipe or pollution incident or failure of in-house water treatment plant. Increases in the price of water supply, wastewater discharge or the chemicals, energy and consumables used in for in-house treatment are obvious financial risks. Regulatory risks include the results of failing to meet water quality or environmental standards imposed by regulators like the FSA or EA. That kind of non-compliance has repercussions far wider than the cost of any fines imposed, and these are reputational risks.
On the plus side, modern advanced wastewater treatment systems, like anaerobic membrane bioreactors, can recover energy from dairy wastewater in the form of sustainable biogas whilst producing a treated effluent that can be recycled, via reverse osmosis, at a cost lower than that of municipal water. Veolia's Reco Solutions tool can help dairies maximise reverse osmosis system recovery and also optimise boiler operations using RecoBLUE and RecoSMART on-line calculators. Introducing such water reduction and sustainability measures not only saves money but also helps to promote a positive public image. True Cost of Water includes credits for this kind of saving. Recognising that some industrial sectors are more regulated and susceptible to public opinion than others, this model has different pre-set parameters for different industrial sectors including, of course, dairies.
So recognising the True Cost of Water helps business decision-makers to understand the importance of water risk and the benefits of investing in sustainable strategies such as water reuse and wastewater resource recovery. It means that return on investment is no longer simply based on current costs but instead it is corrected for real risk based costs. By showing better management of risk, businesses can also benefit from, for example, lower insurance fees.This has a knock on effect proving that there are big improvement opportunities beyond simply minimising water risks.
For more information about the True Cost of Water click here