How much does water really cost?
Sofia Figueiredo, Sustainability Manager at Veolia Water Technologies looks at water risk and the costs associated with it.
Water Consumption in the Food and Drink Industry
The UK water regulator has been increasing pressure on the food and drinks sector to be more efficient with water. In 2007, 54 companies across some 245 sites, including many large multi-nationals such as Coca-Cola, HJ Heinz, Mars, Mondelez, Nestle, PepsiCo and Unilever, signed up to the voluntary Federation House Commitment, which set a target for the industry to reduce water consumption by 20% before 2020. The 2014 progress report currently shows a 15.6% reduction against the 2007 baseline, but the total consumption is still of the order of 33 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 you get the water footprint which measures how much "blue water" (that is available fresh water resource) is consumed in manufacturing a product. The often quoted 2,400 litres of water to produce a hamburger shows just how dependent the industry is on water. But what are the risks if water is not available and what more can the industry do to mitigate those risks?
The World Economic Forum recognises water as the third highest global risk area after major systemic financial failure and structurally high unemployment. It has been reported that 68% of companies are already exposed to substantive water-related risks, a 15% increase since 2011. But only with appropriate investment can companies start mitigating this risk and improve the bottom line by reducing operational costs. Recent 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 always that there isn't enough water; it's just in the wrong place at the wrong time.
So what is the real picture? Let's start with the economics. Currently mains water supply in UK can cost on average around £1.30/m3 but that's only the start. Think about the capital investment in your factory water, storage and distribution systems, the chemicals and power needed for the water treatment plant and then add the costs of disposing of the water after it's been used - as much as £3.00/m3 for sewer discharge - and you're getting closer to the direct cost of water at about £4.30/m3.
But the'real' true cost of water also needs to include the financial consequences to your business if there is a shortage or complete loss of water supply. And don't forget the damage to your reputation if you fail to meet regulatory standards for water or effluent quality, or the implications of customer pressure in respect of environmental and sustainability issues. These risks can be difficult to assess and even more difficult to quantify in financial terms.
Developed by Veolia Water Technologies, the True Cost of Water is currently the only model that puts a monetary value on the impact of water risk on your future profitability.When decisions are being made on water strategy and water technology investment, it's important to quantify the water risk and its potential 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 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.
So what can we do to help your company in reducing water related risks? Benchmarking against other factories is a good start and may point the way to reduce your water consumption. For example, a 2006 Dairy UK study found that the most water efficient milk dairies were using 0.5 litre of water per litre of milk, whilst the most profligate were using up to 2.5 l/l. A 2003 United Nations Environment Programme suggested a target water consumption of about 1 l/l.As well as benchmarking, Veolia's RecoSolutions tool can help companies maximise reverse osmosis system recovery and also optimise boiler operations using RecoBLUE and RecoSMART on-line calculators.
On-site treatment of wastewater reduces the cost of sewer discharge. For example, conventional biological treatment converts 80 - 90% of the wastewater COD into carbon dioxide, nitrogen and water and you can easily calculate the effect of this on sewer discharge costs using the Mogden formula. This can be by around £1.50/m3 for many food industry effluents. So, knowing the capital and operating costs of the on-site treatment plant you can calculate the payback. Increasing the investment to install a membrane bioreactor (MBR) can achieve around 98 to 99% COD removal, making the treated effluent suitable for discharge to a river and eliminating sewer discharge costs all together. A little further investment in a reverse osmosis plant allows the treated effluent from an MBR to be improved to a quality rather better than that of mains water. The resulting permeate can be used to replace mains water for non-product-contact applications such as cleaning in place (CIP) and boiler or cooling tower make-up which, as the diagram shows, are the largest water consumption areas. Recycling not only reduces your water footprint, but the cost of this recycled water is usually much lower than that of mains water so there is a significant cost saving to be had.
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 takes account of real risk-based costs. Water conservation is in everyone's interest and sustainable water management is not only good for the company's image, it can make a real difference to the bottom line. So water is no longer just the business of the Utilities Engineer, it is the business of the Finance Director and the CEO - in fact it's the business of the business.