Water is essential to a healthy life and a healthy business. So as the world’s water resources are becoming more scarce, the private sector is paying attention.
Raj Rajan, global sustainability technical leader and research, development and engineering vice president at Ecolab, Inc., discussed how commercial enterprises must shift the way they think about water in their business models in last week’s Frontiers in the Environment lecture. His talk, “Water Stewardship and the Private Sector” took place Wednesday, Feb. 26 on the University of Minnesota’s St. Paul campus.
“Part of what is happening in the private sector space is that most for-profit companies are recognizing that water is such a critical component to their growth that they have to think beyond just the traditional return on investment and efficiency within their own operations and actually engage with other stakeholders that we share the resources with,” Rajan said.While water only comprises about 20 to 25 percent of Ecolab’s business, it is the primary focus of the company’s corporate sustainability initiative. Part of what makes water such a complex issue is that it is unevenly distributed both geographically and temporally. Rajan used the example of Cherrapunji, India — one of the wettest places in the world, currently in the midst of a drought. This makes water conservation among businesses in developing countries even more important.”Water happens to be the common thread and we recognize that if our customers don’t grow, we don’t grow and our customers cannot grow without efficient use of water,” Rajan said. “Particularly, most of the geographies where they are growing significantly are heavily impacted in terms of water stress, which is primarily in the emerging markets.”
But getting businesses to factor water into economic decision-making isn’t easy, especially with the current pricing structure.
“The United Nations Global Compact recognized that water is a basic human right,” Rajan said. “So there is this compelling political pressure to provide water and not charge for it because it is a basic human right. But what happens is that the private sector and commercial enterprises get to piggyback on that and that really distorts the situation if all this water is being used for commercial activities instead of basic human needs.”
Making water an essentially free resource presents its fair share of challenges, but Rajan is optimistic about Ecolab’s work to get corporations to consider the value of water in both the short term and long term.
“One of the issues we have focused on working with sectors and customers is shadow pricing of water — essentially phantom pricing internally where you are actually looking at the value of water to your business as opposed to what you’re paying for it today,” he said. “what is it worth to your business growth now, 10 years from now, 50 years from now, and putting that value at least in your decision-making structure — even if you don’t show it in your balance sheet — so that you can drive long-term strategic decisions that are not held hostage to this artificial construct of water being subsidized by government because it is a basic human necessity.”
Watch Rajan’s full presentation online.
John Sisser is a communications assistant with the Institute on the Environment.