News source: Greenbiz
In a world of water stress and scarcity, a company’s sustainability can be measured in its use and conservation of water — an analysis of which often yields surprising insights.
When Belgian brewer Anheuser-Busch InBev (AB InBev) examined its own water footprint, for example, it found that barley growers are responsible for 90 percent of the company’s water usage. In response, it launched several pilot projects to test water management practices and knowledge-sharing networks in agriculture production.
By engaging with its agriculture supply chain, AB InBev is already thinking outside its operational walls. Now the company is collaborating with public entities and environmental NGOs to build sustainable management systems in various watersheds.
In Brazil’s drought-stricken Jaguariúna region, which supplies greater Sao Paulo with water, it joined forces with the Nature Conservancy (TNC) and public-sector entities such as the Jaguariuna Bureau of the Environment and the Brazilian National Water Agency and others in a watershed restoration program that aims to use large-scale green infrastructure to ensure a clean and steady supply of water for all stakeholders in the Jaguari and Jundiai watersheds.
This includes elements of reforestation and soil conservation techniques. The collaboration was the beginning of a unique public-private partnership that now includes other national and regional stakeholders.
“By engaging with its agriculture supply chain, AB InBev is already thinking outside its operational walls. Now the company is collaborating with public entities and environmental NGOs to build sustainable management systems in various watersheds.”
AB InBev isn’t the only company engaging in such private-public partnerships. South African energy and chemical company Sasol formed a partnership with a local municipality and GIZ, Germany’s premier development agency, in an effort to reduce shared water risk through improving urban water infrastructure and plugging leaks. SABMiller, another brewery, partnered with South Africa’s government, WWF and GIZ to identify and reduce watershed risk to hops growers.
And in India, a consortium of national institutions, governments and irrigation companies crafted a program that provides thousands of farmers with credit to upgrade their irrigation systems. Governments benefit from the increase in efficiency and farmers benefit from a larger yield and higher revenues. According to Alastair Morrison, a senior operations officer at 2030 Water Resources Group within the International Finance Corporation, the partnership builds trust between the different parties.
“The public-private alliance isn’t traditional. But each party benefits from working together,” Morrison said during a World Water Week event last week.
This collective approach could be the wave of the future in terms of managing shared and limited water resources. The U.N. Global Compact CEO Water Mandate notes sustainable water management is effectively tied to engagement (PDF) among all the parties with a stake in a water source. And working together often means developing or tapping into new sources of funding.
But don’t be fooled by these success stories into thinking crafting and implementing public-private partnerships for water management is easy.
“It’s a complicated and difficult task,” said Morrison. The event focused on the issue of collective action in the water space from a financial perspective looking specifically at aligning finance for watersheds, agriculture and development. Along with Morrison, panelists from the World Resources Institute, AB InBev and Ecosystem Marketplace publisher Forest Trends were present.
Why is this so hard?
“It’s difficult for most private companies to think long-term. Most are focused on profits and next quarter sales,” said Ezgi Barcenas, a global manager in AB InBev’s Better World, its corporate social responsibility group.
That’s one of several challenges, which range from communication issues to political reasons, in mobilizing the private sector to engage in water stewardship on a grand scale. This grand scale means engaging with an entire supply chain as well as all parties in a watershed as AB InBev appears to be doing.
Outside of the short-term mindset of private-sector actors, the space is relatively data-sparse and that forms another challenge. AB InBev’s pilot projects and information platform on barley-growers is a good example of what’s needed.
“It’s early days with this and there are a lot of unknowns, which to companies, means risk,” said Todd Gartner, a senior associate at WRI.
“The public-private alliance isn’t traditional. But each party benefits from working together.”
Morrison noted the lack of knowledge and experience regarding public private partnerships can affect decision-making.
The role of government is also tricky. Governments are a key stakeholder that, ideally, establishes the governance and regulatory measures that allow for a fair playing field for companies to engage, Morrison said. However, Barcenas said that governments can come to the table with their own notions about the role of the private sector which doesn’t necessarily coincide with a business perspective.
Reeling in the investors
But the overarching key problem lies in project design, according to Gena Gammie, a manager in the Water Initiative of Ecosystem Marketplace publisher Forest Trends. Project developers and organizations shape their projects and products to appeal to the traditional philanthropic modes of funding. “They don’t have investors in mind,” Gammie said.
Jan Cassin, director of the Water Initiative, agreed, noting institutional investors want short-term returns. And watershed restoration projects do deliver short-term returns despite the typical belief that they don’t. The hydrological benefits take a long time to develop but there are immediate results in the form of improved operational efficiencies or cost savings from less dredging because of the reduction in sedimentation, Cassin said.
“We need to demonstrate these short-term benefits while we wait for the long-term return on investments,” she said.
Gammie noted an investments in watershed services project (PDF) in Peru’s Jequetepeque watershed was stalled after failing to secure $40 million more. Further analysis, however, showed the project was capable of generating returns outside of a watershed benefit that could attract investors. Agroforestry and silvopastoral interventions, which the project implemented, generate the financial return investors are looking for.
Those involved in the project learned a significant lesson: “In order for these mechanisms to work, we really need to understand the goals and criteria of each actor,” said Gammie.
Smart investments for smart projects
Although most in the water space agree and believe in collective action, it isn’t applicable everywhere, said Gartner. “We need to do a better job of prioritizing where it makes sense,” he said.
Gartner suggests doing this by integrating metrics such as WRI’s Aqueduct tool with its Global Forest Watch instrument to determine shared water risks and stakeholder impacts when assessing potential partnerships and investments.
“The market for conservation impact investing grew to $23 billion between 2009 and 2013 with projections it will increase to nearly $40 billion over the next five years.”
Engaging investors early and often is also good, Gartner said, as is working with major players in the financial sector such as JP Morgan Chase or Goldman Sachs that have divisions dedicated to sustainability matters.
“We need to get better at helping them help us,” Gartner said.
And as much as the challenges are present, so are opportunities, which are evident in the existing public private partnerships noted. The growing urgency of the global water crisis, which the World Economic Forum made clear when it listed water atop its Global Risks 2015 report, is a major motivator for private investors and companies to get involved.
Impact investing, where investors are looking to make a social and environmental impact alongside a financial return, is on the rise. These investors potentially would have interest in watershed restoration projects that restore degraded waterways while building sustainable livelihoods for marginalized people.
The market for conservation impact investing grew to $23 billion between 2009 and 2013 with projections it will increase to nearly $40 billion over the next five years, according to a TNC and Eco-Asset Management report.
There are also quality standards and certifications, familiar to the carbon world, trickling over to water which can reduce the risk for investors. These protocols such as the Gold Standard’s Water Benefit Standard allow investors to easily track and recognize good water projects.
In short, panelists recognized the complexities and difficulties in establishing public private partnerships but also saw great potential.
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