Is the water sector good at communicating?

This #DirectorsThoughtsThursday comes from Kit Elmes. In this edition, Kit discusses the challenges that the water sector faces when it comes to communicating with different stakeholders and the public, as well as the implications of these communication barriers and what can be done to address them. Don't miss out on this insightful conversation!

I recently attended British Water’s ‘Creating a More Sustainable Water Sector’ conference, which showcased innovative ideas to help meet sustainability objectives and united discussion on what a sustainable sector could look like. I’m an ESG professional, but am relatively new to the water sector, so was delighted by the level of enthusiasm and commitment shown by attendees. However, some all too familiar challenges surrounding lack of investment presented front and centre.

Given strong engagement from water company representatives, suppliers and regulators, I wondered how well sustainability initiatives are being relayed to other stakeholders, and whether there were any obvious communication barriers. If investors and innovators are not acquainted with the ensuing, it may forfeit their valuable input.

As such, I looked to see whether environment, social and governance issues within the sector are easy to spot. On the environmental side, the Net Zero Routemap and the Water 2050 White Paper are among publications which show how water companies have come together and identified how to improve their impacts. On the social side, CCW, one of the industry’s consumer watchdogs, seeks to hold companies to account by being a voice to customers and have influenced strategic priorities. Regarding governance, Ofwat identify a set of performance indicators that water companies must report on annually which is viewed on the Discover Water dashboard.

My initial conclusion was the water sector was leaps and bounds ahead of some others when it came to communicating on ESG-related issues. Not that long ago the water sector was considerably more opaque, and the efforts to improve transparency and prioritise social and environmental targets are evident. Yet, unfortunately, levels of public mistrust and apathy persist.

Public opinion carries influence, making it a regular agenda point for many a boardroom. Investors can be easily put off by risks relating to it. 

In fact, while writing this in a coffee shop, an employee enquired as to my job role, and on sharing this information they quickly followed up with ‘so why is it we have raw sewage in our rivers?’.

Addressing public mistrust is clearly not an easy task; it’s been suggested to me that a limiting factor is that the technical attributes of water management make it hard to communicate the complexity of issues to all audiences. While conveying something simply is often much harder than describing its complexities, doing so is infinitely more valuable, and is an artform we are obliged to master. We must find ways to better engage the public; pressure on our water infrastructure and resources is only increasing, and expressing the message so that people are able to make informed decisions and contribute to problem solving is critical.

Another area where communication could be improved is with the private sector, particularly those acting in other parts of water ‘value chains’. The Carbon Disclosure Project’s 2022 Global Water Report sheds light on some of the innovative work being undertaken by private businesses to address water issues. Examples include Ford’s use of reverse osmosis and ultrafiltration to reduce water usage, and Fujifilm’s ion-exchange membranes derived from photographic film production, which have improved levels of treated water recovery. Many businesses are now required to report on ESG as part of their own investment criteria, therefore greater communication with the private sector is likely to increase pathways to innovation as well as potential funding opportunities.

The water sector has been working to communicate its ESG progress, however there is a noticeable lack of comparability on a large number of indicators, meaning that while investors may be able to access the information, they have no benchmark or methodology to refer to when trying to conduct financial analysis. It’s like oranges and apples. This is not new to sustainable investing; analysis by Danske Bank of 100 Nordic companies found more than 20,000 individual sustainable data points, of which just 28% were deemed material to an investment case. Luckily, efforts are being made to better align, quantify and mandate ESG reporting. For the UK water sector, moving towards a more coordinated approach would aid its pressing need to diversify income streams for sustainable initiatives, as it would provide the transposer that investors require.

Perhaps while the sector could be an inspiration to others with regards to its internal communications, expressing ourselves externally is still a challenge that we need to rise to. We must energise investors, private business and the public with clear, comprehensive and comparable information that will influence their decision making and inspire innovation. Effectually designed ESG and communications strategies will strengthen the sector’s chances of achieving the impressive goals that we’ll be held account to over the coming decades.

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