Effectively embracing the water-energy nexus – the role of collective action
Water has been such a plentiful and “taken for granted” natural resource that it is not surprising that growing demands on current supply are difficult for many to grasp. Yet it is that overarching and incorrect assumption that water supplies are abundant—and virtually free—that makes water-related public policy such a hot topic. The facts are these: water is a finite resource, it is becoming increasingly scarce, and the competition for it is heating up.
Nearly everything we consume, wear, drive and manufacture uses water. As the implications for water availability and pricing rise to higher levels of public consciousness, many businesses are paying more attention to what this will mean for their strategies and value chain (supply chain, operations and in some cases product use). Perhaps chief among these are energy companies. Why? Because energy and water need each other, and energy, like water, is tied to virtually everything governments and businesses highly value—including economic development and the public good. However, while governments and businesses have grown accustomed to competing for energy, few are familiar with what it will be like to compete for water.
We call this the water-energy nexus: the interrelationship between water and energy that is tied together (and also intimately tied to food production). Increased demands on water are impacting the world’s ability to meet its energy needs, while the need for more water for agricultural, industrial, and domestic uses requires more energy. This nexus of supply and demand can pose substantial risks for governments and businesses. So while many companies spend significant time and money developing strategies for talent, marketing, and technology, for example, few so far have an integrated energy-water strategy. It could be a glaring omission—and a potentially dangerous one for the future of businesses.
Bridging the gap between energy supply and demand and the parallel strains on water resources, should be addressed by approaching the water-energy nexus from both sides of the equation. And it is more than a pricing and cost issue. It’s also about business continuity, brand value, and maintaining social license to operate. We believe that what is needed is a water stewardship strategy that both mitigates risks and identifies opportunities beyond cost considerations. It means safeguarding water and its use for stakeholders over the long term. This may mean sharing water resources and taking other non-traditional approaches for collaboration.
In other words, an effective water stewardship strategy requires stakeholder engagement and collaboration – increasingly referred to as collective action. As a resource of far-reaching implications, water simply has to be managed differently, and governments and businesses must come together to understand how to conserve it, use it, and share it. Energy companies need to view energy development and power generation in the context of the local watershed. Then stakeholders within the watershed should work together to track usage, understand the water footprint and associated risks, and create a collective water-energy conservation and management plan.
Unusual? Yes. But it may be a business model for an energy-water nexus win-win.
Deloitte Consulting LLP
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