The price of water

Rob Gray examines an emerging CSR issue facing multinationals and utilities

Water is a resource that we in the UK take for granted. But, as last week’s United Nation’s report revealed, water supplies for billions are worsening.

The report warns that by 2020 the average water supply per person worldwide is expected to fall by a third with political inaction and lack of awareness to blame.

The looming water crisis is now emerging as a major corporate social responsibility issue for some of the world’s leading firms. A key test for these companies, politicians and NGOs at the forefront of the debate will be the third World Water Forum that gets underway in Kyoto, Japan this weekend.

NGOs, government ministers and corporations from across the globe will gather to discuss a plethora of water-related issues. These cover areas as diverse as integrated water resource management, financing and the role of the private sector in water provision. A more high-profile issue is how to bring about a sustainable supply of fresh water and sanitation in poorer countries.

Critics of current international, national and corporate water policies will watch developments in Kyoto intently, ready to pounce should the Forum generate more hot air than fresh water solutions. If the Forum fails to deliver more action and specific commitments than its predecessor did in The Hague, the Netherlands, in 2000, some of the key organisations at the centre of the water debate may find themselves coming under fire.

Among the most obvious targets are the privately-owned water supply utilities, handfuls of which are today global players. But large multinational manufacturing companies that use a lot of water in their products and production processes also have their policies and activities held up to uncomfortable scrutiny by NGOs and other campaigners. As, of course, is the case with the construction and engineering companies participating in dam-building contracts.

All of these kinds of companies are under growing pressure to behave in a socially responsible manner in relation to their use of water and the way in which they affect, and indeed effect, its supply. Failure to adhere to high standards of corporate social responsibility on these issues could threaten a company’s reputation.

Against this backdrop, PRWeek commissioned online research and insight specialist Infonic to monitor the debate on water issues online between 1-23 February. Analysis of the monitoring generated some clear conclusions that will prove unsettling for the utility companies in particular (see charts, p12).

For a start, it is clear that at present the activists and NGOs are firmly in control of the debate. Infonic found that their criticisms go largely unchallenged, previous projects are described in an overtly slanted fashion and executives of water utilities tend to be quoted selectively and in brief, while space in the media is offered to the ‘anti’ camp.

‘A key benefit of a good reputation – and handicap of a bad – is the ability or lack of ability to secure “license to operate” from local government and general public stakeholders to enter new, sensitive markets,’ says Infonic head of research Chris Thomas.

‘The major multinational water utilities face a key danger here: their image online is uniformly negative, and first blood has already been drawn, both in the developing world, with documented failures of privatised water projects in Argentina and the Philippines, and in the developed, with the “remunicipalisation” [return to public ownership] of the water supply in the City of Atlanta,’ he continues.

‘NGOs and activists, notably Ralph Nader’s Public Citizen group in the US, have shown themselves adept at focusing on these failures, and using them as a tool to campaign against privatisation in other areas. This is a phenomenon that must be addressed by utilities if they are to continue to succeed to win new contracts in areas where there is currently a significant public opposition to their involvement,’ adds Thomas.

Indeed, local US media gave extensive coverage to local campaigning about the privatisation of water services on a town-by-town basis, often quoting US government lobbying group Public Citizen in this context. The most active NGO source was the Center for Public Integrity, which published a series of ten reports on water privatisation through a project with the International Coalition of Investigative Journalists.

The ICIJ conducted a year-long investigation of the water industry and its study paints a very damaging picture. It creates serious credibility issues for all of the water utilities covered in this study, as well as for the World Bank, which is portrayed as doctrinaire and myopic in its advocacy of water privatisation projects.

Specific points of attack include: ‘failed’ water privatisation projects in the US, South Africa, Asia and South America; alleged sharp-practice by water utilities, specifically bidding low to gain contracts, then seeking renegotiation to more favourable terms shortly after they are awarded; government level corruption and excessive lobbying is alleged, most significantly between the French government and major French utilities, but a ‘soft money’ campaign contribution angle is also played in the US; exploitation of a doctrinaire World Bank policy to pursue utility privatisation in an indiscriminate fashion.

It is interesting to note that media coverage, though not heavy, was scattered broadly across the continents. For instance, BBC Online picked up on the ICIJ reports in the context of a news item about the renationalisation of a Vivendi contract in Brazil.

There was extensive coverage in India and elsewhere in Asia of the discovery of high levels of pesticides in bottled water brands including some owned by Coca-Cola, PepsiCo and Nestlé. In the Kerala region of India, there was news coverage of a political crisis related to the approval of high levels of groundwater extraction by a Coca-Cola plant in the region – an issue that has been the subject of NGO activity in the past.

Coca-Cola is sending a delegation drawn from its corporate offices in Atlanta, Georgia and from its Japanese subsidiary to participate in the World Water Forum. It will also be exhibiting its environmental management system, the eKOsystem, and various water conservation and quality programmes from its worldwide activities so as to position itself as a responsible steward of the environment that is striving to consume fewer natural resources.

‘As good corporate citizens, Coca-Cola and its bottlers maintain an ongoing dialogue with local water and health officials, community leaders and non-profit officials, helping in efforts to find solutions to sustainable use of water and provision of safe drinking water in water-stressed communities,’ says Coca-Cola media relations officer Kelly Brooks.

Certainly Coca-Cola and many other corporates attending the event in Japan will have the opportunity to engage in dialogue with numerous key NGOs attending, including WaterAid, Tearfund, WWF, Green Cross International and the International Rivers Network.

WaterAid deputy director Stephen Turner says: ‘In the main, the NGOs that are attending are those that are prepared to sit down with the governments and the private sector and have a dialogue with them even if they do not always agree with their points of view. But there are other NGOs that are suspicious of the event because of the World Bank involvement.’

Indeed, in parallel to the Forum a small alternative event will be held in Rome at which more radical dissenting voices will be heard. Among them many questioning whether the private sector should be involved in water provision at all.

‘We do know that there are movements who are against privatisation full stop and have different attitudes to water than ours,’ says Thames Water head of environment, quality and sustainability Peter Spillett. But he does expect the dialogue in Kyoto to be constructive.

Thames is one of 14 members of the CEO Panel on Water, a body formed in 1999 ahead of the previous Forum to promote business engagement in helping to meet water needs in the 21st century. Unilever, Heineken, and utilities Vivendi Water, Suez and Nuon are among the key members.

Areas which the CEO Panel addresses include valuing water for better governance; financing for sustainable water supply and sanitation; water resource use in agriculture and forestry; and Integrated Water Resource Management (IWRM) – a term that essentially means taking a holistic view to allow for the equitable allocation of water within and between nations.

The CEO Panel work is a textbook example of positive CSR and is likely to bolster the reputations of those companies involved. In sharing the participating companies’ knowledge, experience and best practice in IWRM with others through case studies and partnerships, the objective is to provide genuine private sector assistance on pressing water resource issues.

‘The CEO Panel is a forum for major companies to seek to understand their impact on water and how it should be valued,’ says Turner. ‘We believe the more people try to understand, the more they expand their horizons. These companies are leading by example and we applaud them.

‘If we are going to have a water crisis with demand far outstripping availability, than it is those companies that have demonstrated their environmental responsibility that the governments are going to turn to when giving out licences,’ he adds.

Yet it is not just those companies participating in the CEO Panel that are adopting sound CSR policies in relation to water. A visit to the websites of major manufacturers such as Nestlé and PepsiCo throws up reasonably extensive policy documents on water use and quality. Pepsi points out that its plants are increasingly designed to avoid burdening municipal wastewater treatment systems and reduce its consumption of water.

Among the specific examples given of its policies in action is a facility in India where PepsiCo ‘designed a tomato processing plant so it could treat and discharge wastewater into a local irrigation system, providing a suitable source of clean water for farmers.’

Many of the issues that will be addressed at the Forum were also covered at the World Summit on Sustainable Development held in Johannesburg last autumn. William Cosgrove, vice-president of the World Water Council, which is organising the Forum, says he is confident that the big ‘difference’ between Kyoto and Johannesburg will be a commitment to action and a ‘translation’ of commitments into specific action plans. He also concedes that a good deal of lobbying will take place from both NGOs and corporates.

‘I suppose there will be lobbying going on in the sense of people trying to sell their points of view and there will be many ministers there, maybe around 150 or so,’ Cosgrove explains.

Turner says that WaterAid will be bringing a group of South Asian NGOs together with potential donors and policy makers during the Forum. An engagement that he characterises as ‘important’ for achieving progress.

WaterAid takes the view that most of the answers to the world’s water problems lie with governments rather than the private sector. ‘There is no market for the private sector to deliver latrines in rural Africa,’ argues Turner. ‘There just aren’t the opportunities for the private sector in sub-Saharan Africa but we spend a lot of time talking about it.’

In fact, only about five per cent of the world’s water provision is carried out by the private sector. However, some experts take the view that the private sector may be the key. ‘It would be ridiculous to address the problem without the private sector because taxpayers would have to foot the bill,’ says head of the water policy and management section of the UK Centre for Ecology & Hydrology Caroline Sullivan.

A team of 31 researchers at CEH has recently developed a Water Poverty Index that grades 147 countries according to five different measures – resources, access, capacity, use and environmental impact – to show where the best and worst water situations exist. According to the WPI, the top three water-rich nations in the world are Finland, Canada and Iceland, while Haiti, Niger and Ethiopia fare worst in the Index. Sullivan says water utility groups have expressed a lot of interest in the WPI as a means of helping them target their commitments to water-related social responsibility, as the WPI can be used on a local as well as a national level.

Last week's UN report Water for People, Water for Life underlines the link between water and hunger, warning that the world's water crisis is so severe that it could take almost 30 years to eradicate hunger.

It contains a stark warning that around 25,000 people die from hunger each day, with countries forced to make difficult choices between their agricultural and urban water supply. Countries may have to decide that they cannot afford the water they need to grow the food to eradicate hunger.

Unesco’s director general Koichiro Matsuura says: ‘Water supplies are falling while the demand is dramatically growing at an unsustainable rate. Over the next 20 years, the average supply of water worldwide per person is expected to drop by a third.’

The big hope of many of the NGOs attending the Forum is that it will galvanise governments and corporations into action that will put the world on course to meet the United Nations’ Millennium Development Goals. These include cutting by half the proportion of people without access to safe drinking water and adequate sanitation by the year 2015. It’s a challenging objective. If it is met, it will improve beyond measure the lives of many disadvantaged people.

The issues related to the fair distribution of water are profoundly serious. Pressure is growing on corporations, whether they are suppliers or heavy users of water, to behave responsibly and communicate that

they are good corporate citizens via effective CSR programmes.

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