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    Investigating

    SharedRisk in Water:

    CorporateEngagement withthe Public Policy

    Process

    March 2009

    Guy Pegram, Stuart Orrand Christopher Williams

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    Acknowledgements

    This report was prepared by Pegasys Consulting.The authors would like to thank Andy Wales,Jason Morrison, Will Day, Lauren Iannarone,Richard Mattison and Denise Knight or theirinsight and comments to early drats.

    BSTIRTON/GETTYIMA

    GES/WWF-UK

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    04 EXECUTIVE SUMMARY

    06PART A

    Background and context

    06 Introduction

    07 Purpose o this Paper

    08A Perspective on Our Shared Water Future

    11 Why Water is Dierentrom Other Resources?

    12 Why Functioning Watersheds are Important

    14 PART B

    Understanding water sector public policy

    14 Water Management under Increasing

    Water Stress

    15 Government Risk related to Water

    16 The Key Elements o Public Water Policy

    19 What are the Featureso Good Water Management?

    22 PART C

    Understanding corporate risk around water

    22 Typical Corporate Engagement

    with Water Management

    22 Understanding Corporate Risk

    in the Context o Water

    25 Understanding Water Footprint

    and Supply Chain Risk28 Private Sector Exposure

    to Water-related Risks

    30 Should Corporates Engage

    Beyond Footprint?03

    36 PART D

    Exploring shared risk

    and policy engagement

    36 The Concept o Shared Risk

    37 When can a Shared Risk Paradigm beneft

    Corporate Engagement/Risk?40 How should Corporates Engage with Public

    Policy Processes?

    43 Facilitating Government Engagement

    with Corporates

    44 Broader Implications o Adopting

    a Shared Risk Approach

    46 PART E

    Engaging public policy

    through the CEO Water Mandate46 Summary o the Key Issues

    46 Joint Engagement with Policy Discourse

    47 Policy Engagement and Discourse

    at the Global Level

    CONTENTS

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    04

    Executive summary

    The past ew years has seen a radical increase in

    media and corporate recognition o the importance o

    water or society, economy and ecology, largely due

    to the increased understanding o the pressures and

    risks associated with the worlds reshwater resources.

    Corporate risk related to water is thereore an emerging

    issue and is likely to become more signicant into the 21st

    century, due to increasing water stress internationally,

    investor perceptions and public awareness.

    Multinational corporates have begun to assess the risks

    and uncertainties they ace throughout their supply chains

    in producing and marketing their goods and services.

    The CEO Water Mandate and World Economic Forum

    (WEF) processes (amongst others) are already distilling

    these debates. One o the most complex issues is the

    engagement o corporates with public water policy.

    Following their stated interest in advocating or improved

    management o reshwater systems or people and nature,

    WWF has commissioned this paper in an attempt torame the debate and explore various issues, and thereby

    to oster a dialogue around corporate engagement with

    public water policy.

    The central premise o the paper is that government and

    corporates have a shared risk around water that maniests

    itsel in dierent ways, depending upon the specic risks

    and uncertainties associated with a particular situation.

    The process o identiying government and corporate risk

    around water, and then understanding shared risk may

    enable both parties to nd common ground (possiblywith civil society) in the very real need to manage water

    eectively, equitably, eciently and sustainably.

    Water related corporate risk revolves around physical water

    shortage, quality or fooding, regulation and reputation,

    together with the nancial consequences to the business

    though its entire supply chain. Government water-related

    risk similarly revolves around physical shortage, quality

    or fooding and the implications or the achieving social,

    economic and environmental imperatives, together with the

    political consequences to the political leadership.

    Some o these risks may be shared by corporates and

    government, particularly related to avoiding water stress,

    promoting economic development and ensuring unctioning

    reshwater systems, which provides an opportunity or

    cooperation around common interests.

    There are circumstances under which externally imposed

    uncertainty, vulnerability and possibly water related risks,

    indicate that engaging outside o a companys production

    and supply chain may be required or the long-term viability

    o the company, including engaging in public water policy.

    While engagement in water policy-related processes at

    the local, catchment or national level may reduce waterrelated risks, it introduces various other uncertainties and

    challenges, particularly as water management is not a

    mandate or core business element o most companies.

    The nature o water and eective corporate engagement

    around specic issues implies that there is no one-size-

    ts-all solution and these must be developed or the local,

    catchment or national context in which the corporate risk is

    maniest.

    For those corporates that ace this challenge, it is important

    to oster a positive environment or corporate engagement,through collective engagement in public (media) and policy

    (government) discourse at both the national and global level

    through vehicles such as the CEO Water Mandate and WEF.

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    05

    ZKOCH/WWF-Canon

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    PART A:

    Background and context

    A Perspective on Our Shared Water Future

    One o the consequences o the increasing globalisation

    o trade is a dramatic increase in the interdependence

    o the worlds population on the limited reshwater

    resources that support the production o ood, goods

    and services. It is estimated that 1,000 m3 (1 million

    litres) to 1,300 m3 per person/yr is required to meet

    minimum standards in ood production, giving a more

    realistic picture o each individuals minimum water

    ootprint. WWFs country water ootprint work exposesthe level and nature o this interdependency, much o

    which is in the orm o embedded water in products

    that are bought and sold by multinational and domestic

    private sector rms. A recent report estimates that the

    daily requirement or a UK citizen is over 4,600 litres

    per person per day when embedded amounts are

    considered (WWF, 2008)1.

    1 WWF. 2008. UK Water Footprint: the impact o the UKs ood and bre consumption on global water resources. WWF-UK. Godalming, UK.

    2 Smakhtin, V, Revenga, C and Dll, P. 2004. Taking into account environmental water requirements in global-scale water resources assessments. ComprehensiveAssessment Research Report 2. Comprehensive Assessment Secretariat, Colombo, Sri Lanka.

    As has been dramatically demonstrated through the

    nancial crisis, interdependence can create systemic

    vulnerabilities to shocks and instability across the world.

    At the same time opportunities are created to buer these

    shocks through coherent action and response. What

    this means or water is that companies and consumers

    in one part o the world are dependent upon and

    vulnerable to water availability, management and use in

    another part o the world. Already the worlds reshwaterresources (surace and ground water) are stressed by

    over-abstraction, pollution and environmental degradation

    o the upstream watershed, as illustrated by the ollowing

    map o stressed basins (Figure 1.1).

    Figure 1.1 Water Stress in key water basins

    Source: Smakhtin et al (2004)2

    08

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    Environmental taxes / levies to promote water use

    eciency through economic pricing and/or discharge

    control through polluter pays approaches.

    Emergence and ormalisation o water markets, likely

    in closed systems to promote economically ecient

    allocation o water between economic productive

    users.

    Regulation and enorcement o water use licensing

    Tighter controls on the allocation o water in line

    with water allocation planning and watershed

    management priorities to achieve ecological, social

    and economic objectives.

    Increased monitoring and enorcement to ensure

    only legal use o stressed water resources in line with

    water rights, authorisation and allocation systems.

    Institutional decentralisation and stakeholder participation

    Delegation o responsibility or water management tobasin/watershed and/or local government institutions

    or the management and delivery o water.

    Increasing awareness and expectations or

    involvement and participation o private sector and

    civil society stakeholders in local water-related

    decision making.

    Continued human, inrastructure and nanci

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