Water and Effluent Treatment Magazine
Issue link: https://fhpublishing.uberflip.com/i/593898
10 WET NEWS NOVEMBER 2015 W ater companies have taken great strides in broadening how they assess the impact of their planned actions. Today, the industry looks at more than just financial costs; companies consider short and long-term consequences on communities, wider society and the natural environment. Thinking holistically about impacts is undoubtedly a sensible and positive approach. But, here is the rub: comparing impacts when they are expressed in so many different units, or perhaps are not readily quantifiable, is a challenge. One option is to use money as a means of measurement. A good example is 'the traded (or non-traded) price of carbon', a now familiar term in the water industry and elsewhere, and which represents the value that should be attached to carbon emissions to ensure we reduce emissions efficiently and in line with the trajectory set out in the Climate Change Act. But broader attempts to value 'ecosystem service' or societal impacts remain limited and have, to date, made little difference to decisions. A quick glance at industry trends shaping decision making shows that our current ad-hoc approach to valuing impacts may soon not be enough. Increased competition First off, water companies are increasingly expected to deliver investment programmes that deliver outcomes (such as reduced flooding) rather than outputs (say, the length of water mains replaced). As a result, companies need to better understand and more consistently assess what is important for customers and communities, rather than just focusing on improving the efficient operation of assets. Furthermore, the changing structure of the industry and increased competition means that new entrants will be allowed to deliver retail services to non-domestic customers. This could soon spread to other service areas. As companies move away from single service provision, they will be more concerned with assessing and adding value from different areas to a greater number of customers with varied interests and demands. Moreover, understanding and assessing value is a pre- requisite for companies being driven to maximise the value of their resources and assets. For example, water and sewerage companies now see sludge as a resource, not waste, as treatment works increasingly become energy generators. Finally, the water industry needs to plan for a growing population and for climate change, whilst assessing the potential consequences of, and preparing for, incidents like • Can better impact assessment deliver improved decision making? MWH Global's sustainability expert, Dr Bruce Horton, believes the answer is 'yes'. Ad-hoc decison- making not enough ONSITE IMpaCt assEssMENt NEED TO KNOW 1 Companies are expected to deliver investment programmes that deliver outcomes rather than outputs 2 New entrants will be allowed to deliver retail services to non-domestic customers 3 attempts to value 'ecosystem service' or societal impacts remain limited 4 Comparing impacts when they are expressed in so many different units is a challenge "this approach would improve our understanding of the links between the decisions we make and the people and environments affected by these decisions. It is surely in the best interests of present and future generations" Dr Bruce Horton Companies need to better understand and assess what is important for customers, rather than just focus on the efficient operation of assets major flooding events and energy price increases. Each new development increases the need for the indus- try to understand the nature and value of potential impacts on everyone and everything a water company touches, from assets and systems, to customers, com- munities and the environment. Economic value The challenge is to find a way to consistently and robustly value these impacts so as to develop a way of making the decision making process for every investment less subjective. A useful way of thinking about impacts is to position them within the five different types of 'capital' that exist – natural capital (like resources), human capital (such as knowledge and skills), social capital (like businesses and schools), manufactured capital (like tools and buildings) and financial capital (such as shares and currency). To take a truly all-encom- passing view, economists use the 'total economic value' frame- work to ensure that the value of all kinds of capital is captured and considered in decision-mak- ing. This takes into account the full gamut of financial, social and environmental impacts of actions, so that the total result of every single intervention is rec- ognised, considered, measured and assessed. In practice, this means the industry needs to assess incidents such as flooding