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WBCSD publishes guide to water valuation

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16 Sep 2013

The World Business Council for Sustainable Development (WBCSD) has released a new guide on the valuation of water which is designed to help entities commission, manage and review water valuation studies, as well as make the best use of the findings. The new guide seeks to mount a business case for water valuation as a tool to enhance decision making, maintain and enhance revenues, reduce costs, manage risks and enhance reputation.

The WBCSD is a CEO-led organisation of over 200 companies that seeks to create a sustainable future for business, society and the environment, through thought leadership, effective advocacy, sharing of best practice and the development of innovative tools.

The report, Business Guide to Water Valuation: an introduction to concepts and techniques, builds on an earlier publication, Water valuation: Building the business case, and seeks seeks to ensure entities account for the real value of water they are using to respond to growing water demand and stressed water supplies.

The introduction to the report notes:

Water can have a high value but a low or zero price, as it can be withdrawn for free or is supplied at a subsidized price. The price of water indicates its financial or market value, but rarely reflects the full cost of supplying it or the full amount people would be willing to pay for it.

The guide argues that as water demand continues to rise and outstrips supplies, water costs to business will escalate and supplies may be threatened. In this context, the document argues two cases for businesses to undertake water valuation:

Two sets of drivers are pushing and pulling businesses towards undertaking water valuation. On the one hand is the underlying global and regulatory trend towards natural capital and water valuation and improved water pricing, while on the other is the evolving business case and potential benefits to be gained.

The guide suggests that water valuation should always start with a qualitative valuation (a scale of value, such as high, medium or low) before moving to a quantitative valuation, which is based on quantifying physical units or indicators associated with the values and should reflect actual "value" such as a number of people or yield affected, rather than simply the volume of water consumed. Once these initial steps are determined, a monetary valuation is undertaken which determines a monetary value, e.g. value of water in particular catchments for particular industries. The "total economic value" (TEV) concept may also be utilised to allow monetary value estimates to be incorporated for environmental and social values, to compliment market-based economic values, but even then the guide argues that broader social and ecological aspects may need to be considered when valuing water to ensure all elements of human well-being are considered. The guide outlines the main valuation techniques that can be used to determine water-related values.

The guide also outlines the business applications of water valuation, including operations and management, pricing and sustainable financing, product development and marketing, environmental and social considerations and reporting performance. For example, water valuation processes may assist in investment decisions such as the optimal location for business operations, or long-term pricing decisions for an entity's products and services, or cost-saving initiatives such the identification of water-saving and conservation measures.

On the topic of reporting performance, the guide notes the strong linkage with the concepts in the report with integrated thinking and integrated reporting:

Water-related valuation can help enhance the level and usefulness of information provided externally within company accounts and reports. Putting monetary values on externalities such as GHG and air emissions, and water consumption can help shareholders understand how sustainable a company is and the extent of possible future liabilities. In addition, it can highlight the extent to which a company is providing positive impacts through, for example, pollution prevention, pollution removal activities and habitat enhancements. As the concepts of integrated reporting and accounting and demonstrating net positive impacts take off, the number of companies including valuation of water (and other environmental and social parameters) within their accounts and company reports should escalate significantly.

Click for access to the guide (link to the WBCSD website).

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