The Business Importance of Water Scarcity and Stewardship

Jason Morrison:

You can't build more resilient communities without addressing water. And in fact, I would say that water is an unlock to a number of other societal challenges we have, whether it be energy security, food security, poverty alleviation, biodiversity, gender equality. They all go through water. They have to be, you can't solve for any of those challenges without solving for water.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer at BMO. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world.

Disclosure:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.

Melissa Fifield:

Welcome back to another episode. I'm Melissa Fifield, and I lead the BMO Climate Institute. Today's episode is focused on the intersections between water and climate, and I'm pleased to be joined for today's episode by Jason Morrison, President of the Pacific Institute and head of the CEO Water Mandate. The CEO Water Mandate is a special initiative established in 2007 by the UN Secretary General and the UN Global Compact, or the UNGC, in partnership with the Pacific Institute to advance corporate water stewardship around the world. Welcome to the show, Jason. Please take a moment to introduce yourself to our audience and share an overview of your work with both the Pacific Institute and the CEO Water Mandate.

Jason Morrison:

Thank you, Melissa, and thank you for the invitation to be here and to talk about a topic that I am deeply passionate about. I have been at the Pacific Institute for over 30 years. I joined as an intern, so that tells you a little bit about how much I like the topic of water. The Pacific Institute itself is a 38-year-old not-for-profit nonpartisan research organization. We think of ourselves as that think-and-do tank. Our mission is to create and advance solutions to the world's pressing water problems. About five years ago, we set a long-term goal to catalyze the transformation to water resilience in the face of a changing climate. We knew that that was going to be the top issue at the time, and it's what we are organizing our work program around. What makes the institute unique is that we work with a wide range of decision-makers on water, whether it be global corporations or urban utilities or state and provincial governments, federal governments, the UN.

It's a really wide range of stakeholders and we like to believe that we have a high level of credibility with all of those stakeholders, which uniquely positions us to convene and talk about the complex issues pertaining to water. We also take a holistic approach to water, looking at the social dimensions, the economic dimensions, the environmental dimensions. If you use the metaphor of a prism, we like to shine the light through it in all different ways because we believe that lasting solutions to water really require this holistic way of understanding the resource. It's not an easy resource to manage. Since our beginnings, the Pacific Institute has had a solutions orientation. I refer to myself as being pathologically pragmatic and when it comes to global water challenges, they are quite complex. And having an organization like the institute that works tirelessly every day to advance solutions to these topics is recognizing this complexity.

About 17 years ago, the Pacific Institute entered into a corporate water stewardship-focused partnership with the Global Compact, and for those that are not familiar with the Global Compact, it is the largest corporate sustainability network in the world with over 22,000 member companies. This water initiative is called the CEO Water Mandate, as you mentioned, and it now has roughly 440 members that are committed to taking action on water. More recently, about five years ago I would say we launched a platform called the Water Resilience Coalition, which is really oriented around companies working together toward a shared long-term goal. And we've got two dimensions to this 2030 goal. One is to have elective positive water impact in 100 water stress basins, and when we mean collective water impact here, we mean not just water quantity issues, but also water quality and also access to water for vulnerable communities.

So all three of those issues are captured and what we're trying to do together in these 100 basins, and in fact these 100 basins are where over three billion people live. They are very important to the global economy. They're where water scarcity is already pronounced, and we also looked at climate modeling to see where water systems are likely to be most impacted to changes in our climate. The other part of our 2030 ambition is around enabling clean drinking water and sanitation for at least 300 million people. So those are the goals of the Water Resilience Coalition and how we're organizing our member companies and our partners

Melissa Fifield:

Pathologically pragmatic. I'm going to hang on to that one, Jason. Maybe if we could click into your business stakeholders in particular, if you could explain a little bit more for the CEO Water Mandate companies for the corporations that you're working with. Why is water stewardship specifically such a critical issue for businesses today?

Jason Morrison:

Water risks such as scarcity or flooding are escalating, which makes water stewardship a really critical topic for businesses. Unfortunately, many companies still today focus predominantly on the water risks that are in their own operations and are underestimating the water-related risks that are in their supply chains or even for that matter in the key markets where they're looking to sell their products and services. We refer to some of the newcomers to these areas as companies with a low water IQ. And a mistake that often happens is companies that think of water as a relatively cheap input, thus underestimating its true value. And when you start thinking about the value of water when it comes to disruptions in water supply, reputational risks about being a large water user in a context where the communities don't have water for drinking and there's a major drought, that is a big issue, particularly for companies that are consumer-facing.

There's also a lot of water related risk around the nexus between water and energy that many companies don't understand. So water stewardship emerged as a risk mitigation strategy for companies that understand that in order to address these risks, they not only have to think proactively, but they need to think outside of their factory fence line, so to speak, because many of these risks that I just spoke of actually manifest in the local context of a particular area. If it has a lot to do with the way the water is managed in that watershed or as the case may be, is mismanaged or the degree to which the local public sector agencies are planning for these rapid changes that we're seeing as it relates to climate.

Melissa Fifield:

How does the mandate support those companies in achieving their water stewardship goals?

Jason Morrison:

Since the beginning of the initiative, the Sea Water Mandate has been a platform for peer learning and best practice sharing. And in fact, what's been most interesting is how that cross-pollination of ideas and practices can happen across industry sectors. A lot of times an apparel company will know everything that's happening in the apparel sector, but if they hear what's happening in the beverage sector or in chemicals, they can potentially apply those learnings and understandings. The Sea Water Mandate has also been a convener, a global network for companies and NGO partners on the ground practitioners to come together to advance the field of water stewardship and to develop the practical tools that are addressing the issues that the companies are facing when it comes to water. So these can be decision support tools or a framework for taking action. An example of this is a recent framework that we have released around water positive and what it means for companies to be water positive.

This is a framework that is at an enterprise level, it's an ambition for an enterprise, but it can be tailored to that local context and can really land in water stressed regions where these issues are most relevant for a company. One more thing about this framework of water positivity. It has three pillars for action that are relevant for almost any industry sector. We've developed it that way. The first pillar is around operational footprint, basically around using water efficiently, reusing water where possible. The second pillar is around investing in restoring or offsetting that footprint. And the third pillar is around working collaboratively with other stakeholders in a particular region to have impact at scale over time. And that last piece is the hardest, but it's really where the impact is going to need to happen in order for these basins to become more resilient.

Melissa Fifield:

That's really interesting, and I think that cross sector focus leads to a lot of innovation. You mentioned the importance of collective action and having various stakeholders working together. Can you provide maybe an example or several examples of successful collaborations between companies, governments and communities?

Jason Morrison:

Yeah, I'd love to give a number of examples if I may, because we know that companies can be igniters of change and investment, but ultimately water resources are understood to be a public resource or a public good resource, and it's going to require governments to really do that investment of scaling. But there's a synergy there and it's really exciting to see how the corporates can be catalytic in getting things started. So one example I would give is the Nature Conservancy's Water Fund in Sao Paulo, and the first $4 million or so that was invested into this fund came from corporates. Over time, the water fund began engaging with the metropolitan areas downstream and through policy change added a user fee for source water protection. And so over time, that policy change now leads to the fund getting about eight to one public private spend. So it's really a great example of how that initial corporate investment can catalyze a much bigger investment.

TNC then is working with upstream farmers to implement best management practices on farms, and they're doing a lot of work to restore the riparian corridor that has nature benefits, but also flood mitigation benefits and water quantity benefits. So great example of NGOs working with corporates and governments. The second example is here in North America and it's called the California Water Resilience Initiative. The governor's office did a long-term climate assessment for the state and has found that by the year 2040, we are expecting up to 10% less available supply, and I can't get into all of the science around aridification, but it's basically a long-term process where regions get drier over time. So what we did within the California Water Resilience Initiative is we said, all right, well, if that number is 10%, what portion of that could like-minded corporates take on to try to address through collective investment in action?

We've set a goal, a quantifiable goal of one million acre feet by the year 2030, and now we're developing a roadmap for interventions for around nature-based solutions or urban efficiency source water protection that helps us get to that goal. And we're measuring our progress over time. Of course, this is of interest to the state government agencies because now we have an opportunity for businesses in the state to align with a call to action that comes out of the governor's office and what the agencies are also trying to achieve. So a lot of synergy around co-investment and the ability to really try to accelerate the change toward a more water-resilient state.

Melissa Fifield:

Those are great examples. Water is often called the canary in the coal mine for climate change. Could you help our audience understand what does that mean and how does that play out in real-world scenarios?

Jason Morrison:

Yeah. One thing that people may not know is that nine out of 10 natural disasters are water-related, and those in the insurance industry will know that these natural disasters that are landing in the US, for example, are increasingly costly, and that's because of this intensification of these storm events. But we're also seeing it on the other side of the extreme. So your listeners may have heard this phrase, the weirdification of the weather, and really what's happening here is we're getting a lot more variability in the patterns, and water is always got natural variability. You never have a normal rainfall year. It's really usually a little bit wet or a little bit drier, but what we're already seeing today is more extremes, whether they be hotter hot periods, longer dry periods, and then wetter wets with storm events that are much bigger and intense that we've ever seen.

So this notion of trying to build resilience is thinking about how do we withstand when those droughts are longer? So for those that are in the Western US, to use another western US example, about three years ago we had the most pronounced three-year stretch of dry on the Colorado River Basin in recorded history. And one more year of that and there's a lot of question marks around what we're going to do, and we're talking about huge economies at stake in the Western US. So this is why there's this expression that if climate change were a shark, then water would be its teeth because that's where this bite is felt and is already being felt today.

Melissa Fifield:

What's the role of water in mitigating climate change? There's often talk about renewable energy, but how does water factor into some of the other solutions?

Jason Morrison:

Water and energy are inextricably linked, and water-related energy use includes a wide range of things that people don't think about. It's the heating of water, treating water so that it's fit for purpose, pumping it and moving it around, whether it's within a city or across long distances. Sticking with the California example, the state water project is the largest consumer of electricity in the state and it uses electricity to pump water throughout the state, mostly from the north where it originates to the south where the people are. And in places like California, one resource, whether it be water or energy, if it faces constraints or challenges, so does the other. With a state like California looking to reach its energy transition goals and to decarbonize its economy through a transition to 100% clean energy, water will have an integral role in that.

The Pacific Institute produced a study that looks at the future of the water energy climate nexus in California, and it found that without water efficiency measures that are implemented quickly, that carbon emissions associated with water usage in California were likely to spike in the coming years, and it also would change based on water supply and population growth and economic growth. So these must be considered together and oftentimes the best way to realize climate goals is through water, and it's going to be really hard to reach water security unless you factor in energy and energy security and the energy transition.

Melissa Fifield:

How's the mandate leveraging new technology to address some of those water challenges?

Jason Morrison:

At the outset of this podcast, I talked about how there's a risk-related imperative for companies to take action on water, but there's also a huge opportunity for businesses around water. And businesses have a really important role to play in advancing technologies that not only improve our understanding of water, and that's through things like AI and space-enabled technologies, and I can talk about what we're doing on that front, but it's also around the technologies for reusing water and to make sure that we understand where it's being wasted. Right now, there's a lot of water in municipal systems that's lost in the piping systems and we're pumping water out of those cracks. So even just some basic AI or machine learning that could help us understand where in the system these leaks are, allows us to target those investments in finding and saving water.

So a lot of opportunity in the business community around technology, and we've had a partnership with the European Space Agency for a few years now where we're working with our members that themselves are working with startup companies that are providing solutions around water, and we're pilot testing how those companies are helping to be a part of the solution with space-enabled technology. And now we're in a phase where a couple of those most promising startups are getting a second round of funding to take their work to scale.

Melissa Fifield:

We know that implementing the changes necessary to manage our water resources sustainably requires political will and often significant financial investment. What do you see from where you sit as some of the biggest barriers to making these innovations more widespread?

Jason Morrison:

Yes, it's true that there's a financing gap to address water, and we will need to invest more to address the global water challenge, and the World Bank has a number of numbers that they would use to estimate that globally. With that said, I think there's a lot of misconception around what that investment in water can look like. Many people when they think of water and investment, they think of these highly centralized urban infrastructure projects, the big storage facilities, the dams, the conveyance infrastructure that move water hundreds of miles, but that's not actually going to be necessarily the most cost-effective way to improve water resilience in the coming years. And now you're seeing a lot more decentralized strategies happening. This is where we don't have to have a single place where we're doing wastewater treatment. We might be able to do it on sites at different locations on private land and public land.

The Pacific Institute has a large body of work that shows that water efficiency and reuse and stormwater capture are the most cost-effective ways of augmenting water supply in these regions. And these solutions are highly resilient. The cheapest water, new water is the water you don't use in the first place, and that doesn't necessarily require a new dam. That could be done through reuse on site and circularity, so-called this idea that instead of using water so linearly where we extract it, use it once and then whisk it away, that we start thinking about how we close that loop. And you can close that loop at a macro level, but you can close it at a micro level too. And that's where businesses have a huge role to play potentially in investing in on-site reuse in their own place.

We did a project with Google and their site in Silicon Valley to really look at the potential for doing on-site stormwater capture and reuse, and then most importantly, how to open up a conversation with their counterparts in municipal government to make sure that those investments that are happening are actually nested within an understanding of where the strength of the pipe system is and where its weaknesses are. So it doesn't have to be this grand investment that we think of when we think of water. It can happen in ways that is really exciting, that companies can actually innovate and drive on their own facilities, but also within their supply chain and also through these collective action mechanisms that I spoke of earlier.

Melissa Fifield:

You've given us some great examples of how businesses are thinking about water in their operations and their supply chains and the role that they play in addressing some of the challenges. What's your key piece of advice to businesses as it relates to water stewardship and climate resilience?

Jason Morrison:

There really is a business imperative for acting urgently on water. I can't overstate that. It's an all hands on deck moment. I use the metaphor of the Wile E. Coyote, the coyote that's gone over the cliff and he's running, but it just hasn't dropped yet. We don't have a lot of time, and I think people think we have more time, but these changes to our water systems in these water stress regions are happening much faster than even the scientists thought would happen 10 years ago, 20 years ago. So all segments of society have a role to play here, and the business community is uniquely positioned to move things forward quickly. That said, no single business can attack this by itself because when you think about the shift to resilience, it's a systems challenge, and therefore you need to think about systems change, and therefore you need to think about a collaborative model because no single company can do this. And that's why we've realized the unlock is about these basin collaboratives that can have stakeholders working together.

Melissa Fifield:

Before we wrap up, are there any other key takeaways or anything else that you want to leave our audience with?

Jason Morrison:

Yeah. I'd say that water is to climate adaptation what energy is to climate mitigation, and what I mean by that is the impacts of a changing climate are already manifesting here today, so we're going to have to deal with how we become more resilient to those impacts. And you're seeing that here in North America and around the world. You can't build more resilient communities without addressing water. And in fact, I would say that water is an unlock to a number of other societal challenges we have, whether it be energy security, food security, poverty alleviation, biodiversity, gender equality, they all go through water. They have to be, you can't solve for any of those challenges without solving for water, and that's why it makes it important and also exciting to take action on water because of those other co-benefits that it can unlock if we take a comprehensive and aggressive approach to solving for water.

Melissa Fifield:

Well, thanks again, Jason, for joining us today and sharing your expertise and leaving us with an improved water IQ. And thanks to our listeners for tuning in. Stay tuned for more discussions and how we can all work together to create a sustainable and resilient future. Thanks.

Jason Morrison:

Thank you.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO. You can find our show on Apple Podcasts, Spotify, or your favorite podcast player. Press the follow button if you want to get notified when new episodes are published. We value your input, so please leave a rating review and any feedback that you might have or visit us at bmo.com/sustainabilityleaders. Our show and resources are produced with support from BMO's Marketing Team and Puddle Creative. Until next time, thanks for listening and have a great week.

Disclosure:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.