The future of water
Article for the Water Report June 2019
Early in May, we saw the Labour Party present once again its plan to renationalise the water industry. Intriguingly, it did not seem to land as well as previous interventions, possibly because it quite outrageously made the case for buying the industry at below market value. But another reason surely is the sense that the debate has largely moved on. Recognition has grown, in other words, that the discussion we need to have is not about who owns what, but rather how to develop effective stewardship of the planet’s most precious resource.
We should not be entirely surprised by this development. Its roots belong not just to growing public disquiet at what is perceived as irresponsible and self-interested corporate behaviour, but also to an increasing awareness of the need to place the natural environment at the heart of the decision-making process in every sphere of public life. It coincides too with the dramatic events of recent weeks – climate change strikes by schoolchildren and direct action in our cities to raise awareness of the need to take more action to tackle emissions. I make no comment or judgement about the latter, but only the point that they are part of a much broader and deeper concern in society about the future of our planet.
The context, then, for the latest thinking about corporate responsibility in the water sector is profound. It represents a broad consensus that the progressive way forward for our country cannot be founded on principles from the past, but rather must be based on meeting the needs of the future. Our society has come to recognise the scale of the challenges facing the world today and consequently, is increasingly sceptical of traditional economic structures. A quiet revolution is taking place, one which demands that capitalism itself should adapt to the greening of our future.
All this begs a key question. Is the water industry responding sufficiently to the challenge? Is it leading the way, or is it being dragged, kicking and screaming, into the debate?
Who knows? The answer, I suspect, is not straightforward; I get the sense there are water operators out there who not only understand the need for change but embrace it. They are excited at the prospect of innovation in the way they do business; they are keen to explore new models for delivering water services which embed at their heart the enhancement of the natural environment. But is this the case with every water company? Are they all willing to engage with the concept of the ‘social contract’, the key term used to describe the range of changes necessary to make our water industry fit for the future? Do they recognise the underpinning of the ‘social contract’ by a belief that our water services need to deliver for wider society as well as for shareholders and individual customers? We will soon see, I expect, the extent to which the sector has decided to show leadership in delivering this transformative agenda. It is to be hoped this will materialise, for a failiure to engage in the process of developing a social contract approach to the future will represent lost opportunities – cutting emissions and costs through more efficient use of resources, for example, and securing for the long term the availability of cleaner, healthier water sources from which to draw supply.
In many ways, of course, it feels instinctively right to see leadership on social contracts emerge first in the water sector. Water is at the heart of our existence; it is the lifeblood of our natural environment. Those therefore that take ownership of it, extracting it and processing it for human use, should surely understand that this ownership brings with it special responsibilities. Good husbandry, combined with a strong sense of partnership with customers and stakeholders alike, is surely the progressive way forward for the industry.
Much will depend, of course, on the leadership shown by the industry’s trade association, Water UK, and in this regard the latter’s publication of a Public Interest Commitment stands as early evidence that it has recognised the case for progressive change and, moreover, understands the need to pay a key role in shaping the transformation required. Equally, OFWAT’s Chief Executive, Rachel Fletcher, has exhibited a refreshing willingness to adapt the role of the regulator to ensure delivery of the ‘social contract’. If we choose to cast the water companies as stewards of our water supply and to a large extent of the natural environment they spring from, as I think we should, then the primary purpose of OFWAT as the guardian of the public interest surely has to be seen as ever more important. This does not mean that the regulator should revert to its past behaviours; on the contrary, it calls for further development of an outcomes-based culture which recognises that the public interest goes far beyond the customer paying the bill.
Social contracts have significant potential to transform the water industry and it is to be hoped that they will be accepted not grudgingly, but willingly, by the sector. I conclude, however, by pointing out that the responsibility for delivering improved environmental outcomes does not belong to the water industry alone. Yes, it has a large part to play – a leading role. It can work to deliver net zero emissions for its operations and a more robust, healthy natural environment. But it needs help; we live in a world where the pressure on the natural environment is huge and unremitting. New homes, new transport infrastructure, new commercial development – all play a role in putting further stress on our natural resources. I would suggest, therefore, that government needs to think more radically about how best to protect the environment in the context of this unrelenting pressure to build, build, build.
What we need, in fact, is significant reform of the way we regulate development. We need a planning system which puts water first, which puts our most precious resource at the heart of the decision-making process. By so doing, we could maximise opportunities for protecting and enhancing the lifeblood of all our natural resources.
Now, isn’t that a prize worth fighting for?