United Nations
Commission on Sustainable Development

Background Paper


                    WHY IS FRESHWATER AN ISSUE FOR BUSINESS
                                 J W OATRIDGE
                               SEVERN TRENT PLC


Introduction

      Water has not been seen as significant an issue as global warming. 
However water is the key issue.  Without enough water or with reducing
amounts of water availability economic development is not possible.  We
all need water for life and water is the resource which drives food
production, health, the environment and industry.  Water is an issue for
business but it is also an issue for all sectors of society.  The goal
must be to build a sustainable water future and to do so in an inclusive
way which avoids competition and conflict between sectors.  Business has
to play its part in this inclusive approach to sustain water resources. 
But the overriding need is for all participants in society to recognise
that water is the key issue.  This paper seeks to identify the issues
business perceives as important and to contribute some views on possible
solutions, recognising that acceptable solutions can only flow from an
improved understanding of what is to be tackled.

Background

      The planet seems to be awash with water but the availability of
usable fresh water is small.  Only 2% of water resources is fresh water,
of that 70% is in ice caps and 29% is not accessible for a whole range
of reasons.  Only around 1% is available for human use.  That is broadly
the present perspective.  The demand for fresh water is growing but in
almost all cases the availability of fresh water per person is declining. 
As populations grow there are parts of the world where fresh water per
person is reaching a point of criticality.  Increasing demands for water
are occurring in four key areas which in aggregate are exerting
unsustainable pressure both in developed and developing countries:-

  *   Human needs for safe drinking water and proper sanitation
  *   Agriculture needs for expanding production to meet population growth
  *   Environmental needs to protect endangered species, biodiversity and
      unique areas of special interest
  *   Industrial needs to provide more goods and services for a growing
      population.

Human Needs - World population is growing and will do so over the next
30 years.  Estimates suggest upwards of 8 billion people will be on this
planet by the year 2025.  The World Health Organisation estimates that
more than 20% of the world population - around 1.3 billion people - have
no safe drinking water and that more than 40% of all population lacks
adequate sanitation.  But it is not just the growth in population and the
need to feed people that is causing water stress.  The situation is
compounded by the relentless drift from rural to urban areas.  Shifting
patterns of population suggests that the number of cities with more than
one million inhabitants will more than double over the next 30 years. 
This will place even greater demands on water and sanitation
infrastructures - where they exist that is.  Relentless urbanisation
suggests that during the 50 years from 1970 the proportion of people
living in urban areas will increase from about a third to around
two-thirds.  So the issue of population and urbanisation, the move from
rural to urban areas, the growth in large cities all compound the already
stressed water positions in many parts of the world.  Fresh water and
health are intrinsically linked.  4 million children die each year of
diseases linked to the lack of potable water.  Half the people in
developing countries suffer from water or food associated diseases,
suggesting water supplies is the single most important step to improving
health in the developing world.  This is one reason why water is the key
issue

Agricultural Needs - Agriculture is the largest water using sector at
around 70% of resources.  It can be the largest polluter of water in both
developed and developing countries.  As a result of poor land management
practices and over fertilisation water use in agriculture is frequently
inefficient.  All too often there are no price signals that encourage
more efficient and effective use.  Agriculture is the largest user of
water and has the potential to be the largest "saver" of water that could
be redirected into uses having a higher economic/welfare potential.

Environmental Needs - The allocation of water for environmental needs is
a growing area of investigation and policy development.  The environment
requires water of sufficient quality and quantity to maintain a diverse
array of eco-systems and biodiversity.  Moreover it is becoming
increasingly obvious that the environment is not just a sectoral user of
water but provides a fundamental role in maintaining the quality and
supply of the world's water resources for use by the other sectors. 
There is a need to give full recognition of the environmental use of
water and to establish the appropriate levels to be used in this way.

Industry accounts for around 20% of global fresh water consumption and
industrial use of water is growing.  Trends suggest by the year 2025
industrial water use will double and industrial pollution may quadruple
if no action is taken.  Industry can play a much larger part in
protecting access to water, bringing technological capability to move,
treat and manage water supplies more effectively.  Industry has the
opportunity to participate in providing sustainable solutions for water
management and there is the opportunity to learn from case studies
showing good water management practice.  There is the need to drive
change to have appropriate "best practice" care for water and waste water
management.

Climate Change - There is no doubt that there is increasing variability
in the climate.  Estimates vary about the speed with which climate change
will take effect and the consequences for water supplies.  Water is at
the forefront of resources having to adapt, although so far water has not
been seen as a significant issue affected by climate change.  Higher
temperatures and decreased precipitation lead to increased water demands
and decreased water supplies.  Deterioration in the quality of fresh
water is also likely.  Together these factors put strain on the already
fragile balance between supply and demand in many countries.  Some
countries will have positive impacts but most will be negatively
effected.

The Management of Water Supplies - Apart from the issues of population
growth, health, agriculture, industrial use of water and climate change,
there are also issues concerned with the management of water supplies. 
It has been estimated that 40% of the world depends on water supplies
from a neighbouring country and about 300 major river basins and many
underground aquifers cross national boundaries.  Many of the management
problems in water supply are of a local and regional nature, but some
require national co-operation.  As Dr Chitale, the 1993 Stockholm Water
Prize winner has said "in the natural order of things we are really
citizens of river basin catchments rather than of politically demarcated
territories".  Nevertheless the issue of water has to do with both the
reality of geography and the reality of politics.

      These then are the issues around which the fresh water debate has
to take place.  Fresh water is the key issue because it is the common
strand that links population growth, health, agriculture, eco systems,
industry, climate change, urbanisation, to say nothing of social
responsibility.  Water is the key issue and it is the life blood in all
respects.  It is against this background that the remainder of the paper
will discuss why fresh water is an issue for business.

Impact of Future Resources on Industry

      As has been said, without enough water or with reducing amounts of
water economic development is not possible.  Demand for water is growing
in all sectors including the industrial sector.  But industry can also
play a large part in protecting water supplies and reducing pollution
loads.  The business view is that all sectors must play a part and
increasingly business will seek to be part of the solution rather than
part of the problem.  Fresh water could become a limiting factor in
future development; sustainable development demands that we use our
finite fresh water resources more intelligently and efficiently.  Best
practice in the use of water is important and there is a need to spread
the message more widely.  There is rarely an issue of inadequate
technology to cope with water issues or to prevent pollution.  R&D is not
the issue.  There is enough scientific knowledge to understand the
problems and sufficient technical skills to solve them.  Not all water
issues are related to quantity, quality is important too.  The most
sensitive water issue for many industrial sectors is water quality. 
While the limitations of the future water supply for industry is a
growing concern, industry is still sometimes perceived by the public as
the worst polluter of water.  Although there are many serious examples
of point source industrial pollution in the world, pollution control
regulations and water charges have generally ensured the trend towards
industrial compliance with increasingly stringent limitations on
discharge to public waters.  The reality is that pollution from
agriculture and urban waste water are by far the larger problems - in
terms of absolute levels of pollution, the geographical extent of the
pollution problem and in the relative difficulty of controlling these
non-industrial sources of pollution.  Increasingly business people have
learned that pollution prevention, especially when building new
facilities, is eminently more cost effective than cleaning up dirty water
after the fact.  The paper will address later some of the ways in which
industry has adjusted to change in its use of water.

Clean Water and Sanitation Management Problems

      There are many parts of the world where the management of water
supplies and sanitation issues create their own specific problems. 
Trans-boundary water resources and their use are of great importance to
many States.  As water scarcities increase there will be the risk of
greater conflicts over water.  As has been mentioned about 300 major
river basins and many underground aquifers cross national boundaries. 
Many of the management problems are of a local and regional nature, but
some do require national co-operation.  There is a huge wastage of water
from inefficient practices.  Decades of under-investment mean that water
supply systems all over the world are in a poor state.  Leakage from
pipes of 50% or more is not unusual.  Sanitation pipework is no better. 
Cracked sewage pipes means pollutants can enter pipes carrying household
water for drinking purposes and pollute that water.  The World Bank
estimates that about 600 billion dollars is needed to be invested
worldwide to repair and improve water delivery systems.  In addition to
pollutants from cracked sewers, the amount of polluted water being
returned to the watercourses has tripled since 1950.  In many places
around the world investment in sanitation is at a standstill.  Even in
those places where investment has taken place, it has lagged behind that
of drinking water.  The issue of sanitation is a vast challenge and
without grim determination to succeed, is a problem that will never be
solved.  Aiming for 100% sanitation by 2025 is a "pipe" dream.  By that
time it is estimated that more than 5 billion people will have to be
served by sanitation systems that are currently not there.  Universal
safe sanitation by 2025 requires 450,000 individuals every day to be
provided with safe sanitation for the next 30 years.  A truly massive
task.

      Another water management problem is to do with water sharing.  This
manifests itself not only in terms of the allocation between the
competing sectors of agriculture, industry, the environment and supplies
to homes, but also of upstream and downstream sharing, where the
"downstreamers" are the victims of the "upstreamers".  In reality water
that moves down a river basin has to be used for several purposes.  The
more water is cleaned up by users before it is returned into river
systems the less is the environmental liability passed on to those
downstream who abstract water for their use.  The upstream-downstream
issue becomes greater where rivers cross national boundaries.  The Danube
basin for example is the second largest river basin in Europe.  It serves
a catchment are of over 800,000 square kilometres in which about 75
million people live.  The River Danube or its attributaries flows through
some 17 countries.  Industry has a need for water including those river
systems crossing national boundaries.  Industry has to find a way to be
involved in processes which affect the future basis upon which water is
shared.

Possible Actions by Industry

      Industry does have an opportunity and the ability to participate in
providing solutions to water management and reduce pollution at source. 
The lack of adequate water resources may be a limiting factor in the
development of some countries.  In turn this may limit the ability of
some businesses to operate in such countries.  The domestic and
particularly the agricultural sectors are significant users of water
resources.  The answer cannot be for business to compete with these two
sectors for that resource which is available.  Business needs to align
its strategies to solve problems and not make them worse.  The following
possible actions by business give some indication as to where business
may be able to play its part in contributing to a sustainable future:-

  *   Sustainable business practice
  *   Exchange good ideas
  *   Reduce water use
  *   Increase conservation
  *   Reduce pollution
  *   R&D improvements for water efficient production
  *   Create wealth (jobs, foreign earnings) to provide resource to
      improve water and sanitation infrastructures
  *   Import best practice
  *   Foster partnerships in communities

      The following two case studies provide some real experiences of some
of these actions taken by business.  In particular they demonstrate ways
in which companies have reduced water consumption, reduced effluents,
prevented pollution, improved water handling and actively played a part
in the community being served.

Case 1 Millar Western - A Zero-Effluent Pulp Mill - CANADA

      The most challenging environmental problem for pulp mills involves
polluted effluent discharged into natural water systems.  When Millar
Western decided to build a new pulp mill at Meadow Lake, Saskatchewan in
western Canada, the company faced an unusually difficult situation.  The
area was blessed with high quality aspen pulpwood, access to power, good
transportation and a quality work force.  But one piece of the puzzle
needed to be found.  The Beaver River, the only water source available,
had an extremely low flow and in winter the entire river froze.  The
river was virtually a pristine water body which it was judged could not
accept effluents from a pulp factory no matter how clean.  So the company
made a strategic decision to try to close the loop and go for zero
effluent discharge.  Water recycling is extensively practised in the pulp
and paper industry.  But the degree to which water systems can be closed
is always limited by the build-up of contaminants in the system.  The
bleached chemi-thermomechanical pulp (BCTMP) used by Millar Western
allowed organic extractives and inorganic salts to enter the wastewater
at the rate of 200 kilograms per ton of pulp.  In order to recycle
wastewater, the residues must be removed.

      The company chose the evaporation process.  Every drop of wastewater
is collected and solids removed by sedimentation and floatation.  The
clarified liquid is then evaporated to produce clean distillate which can
be recycled back into mill processes.  The solid residue is then
concentrated and burned in a recovery boiler.  The inorganic fraction,
84% sodium carbonate, is solidified into ingots and stored at a secure
land fill.  The company is currently working with research organisations
to find ways to convert the salt into caustic soda or peroxide which
could then be recycled back into the mill.

      Millar Western and its consultant, NLK Consultants Inc, chose the
evaporative process in 1992.  Just 24 months later the plant came on line
and within budget.  Four months later the plant was producing high
quality pulp at an average rate of 710 tons per day, in excess of design
capacity of 680 tons per day.  Now five years later, production and
quality have never been affected by the zero effluent treatment system. 
Company officials say that reliability of their treatment system exceeds
that of biological control systems and that operating costs are
competitive with conventional treatment.

      The Company takes pride in never having to worry about upgrading
their effluent control systems to meet new legislative requirements.  As
Peter Knorr, Executive Vice President and Chief Operating Officer, says
"It's kind of hard to beat a zero effluent discharge rate!"  Now  NLK and
Millar Western are exploring modifications to the process to permit its
use in kraft pulping and other non-pulp industrial applications.


Lessons Learned:

i     Dedicated management, supported by competent consultants and
      outstanding staff enabled one company to make a breakthrough and
      reduce effluents to zero.

ii    Such innovation may give the company a competitive advantage or even
      create new market opportunities.

iii   The low flow Beaver River remains pristine despite the siting of a
      major industrial facility.

Case 2 Danfoss A/S - Managing an Underground Aquifer - DENMARK

      Danfoss, a manufacturer of hermetic compressors, pumps, valves,
motors and other electrical control units has a major manufacturing
facility located on a small island, Als, in the Baltic Sea.  In 1983 the
company was routinely withdrawing 2 million cubic metres of fresh water
from the sole aquifer supplying the entire island which is home to 50,000
residents.  This was well within the limit of 3 million cubic metres
authorised by local officials.

      In 1983, Danfoss discovered a crack in a settling tank in its
wastewater treatment system.  The company was concerned that polluted
water might permeate down into the fresh water supply.  The company
repaired the leak immediately but began an extensive investigation of the
groundwater and the aquifer.  The good news was that the leak had not
polluted the aquifer; the bad news was that the level of the aquifer had
dropped dangerously low.  So low in fact that the danger of salt water
intrusion had become a real possibility.  Danfoss management recognised
that they were the major fresh water user on the entire island and as
such they had a responsibility to the 50,000 private citizens who used
this common resource.

      The company initiated a series of water savings programs and
completely revised their wastewater treatment system.  All pipes were
placed above ground so even the smallest leak could be detected
immediately.  In 1989 the local authorities reduced the permissible water
extraction rate from Danfoss down to 2 million cubic metres.  Danfoss,
however, had already reduced their use rate to below 1 million cubic
metres.  Despite increasing production levels, Danfoss continued to find
ways to reduce water consumption even further.  By 1994, Danfoss had
reduced its water consumption to 0.4 million cubic metres, a reduction
of over 80% compared with 1983 levels.  During this same period the level
of the aquifer rose by 1.7 metres and the threat of salt water intrusion
virtually disappeared.  The substantial improved fresh water reserves
indicates a consumption level that can be sustained indefinitely.  Fresh
water supply was assured both for the company, its 7,000 employees and
their 50,000 neighbours on the island of Als.
      The actions taken by Danfoss to reduce fresh water consumption were:

  *   The company's top management gave priority attention to the water
      situation - including supply, quality, consumption and reuse
  *   Top management developed a sustainable water policy
  *   Management sought to motivate and involve all employees in good
      household practices for water
  *   Reviewed all technical installations and processes using fresh water
  *   Modernised the control systems making it possible to save water and
      reduce effluents
  *   Assured quality of recirculation cooling water to enhance
      co-operation between technical personnel using water and company
      environmental specialists

Lessons Learned:

i     Companies can continue to expand production and remain profitable
      while reducing fresh water consumption.

ii    Reducing fresh water consumption involves basic housekeeping,
      management attention, technology innovation and commitment from all
      employees.

iii   This company reduced water consumption by 80%.

      There is one other issue that perhaps should be mentioned and that
is in connection with food production.  One of the more contentious and
politically sensitive options for regions with major water stress is to
import more food.  Where water resources are limited it is suggested that
it may be more profitable to invest in producing goods that can be
exported to buy food rather than to try to grow food at home.  Frequent
opportunities exist where the economics of this philosophy might point
this way but it is understandable that the natural political reluctance
for countries who are well off is to increase their dependency on food
imports.  However attracting inward investment can produce wealth in
terms of creating jobs and foreign earnings from exports and the wealth
creation can be used to improve basic water and sanitation facilities at
home.

Possible Actions from Water Suppliers

      Many actions can be taken in the management of water suppliers and
sanitation services that can contribute towards improving the overall
availability or quality of water and sanitation services.  These
include:

  *   Facilitating sharing arrangements
  *   Institutional/regulatory advice
  *   Promoting best management practice
  *   Demand management
  *   Leakage remediation
  *   Awareness raising
  *   Schools programmes
  *   New investment/proven technologies
  *   Tariffs and metering

      Water suppliers are able to act in two fundamental ways to increase
the availability of water.  These two ways are:-

i)    Action on the supply side of water management by creating more
      capacity.

ii)   Action on the demand side of water management in order to lower
      overall demands for water.

      The following case study demonstrates a number of the actions that
can be taken to enhance water supplies.

Case Study 3 - Trinidad and Tobago

      Severn Trent Plc, UK, was invited to help in the management of
Trinidad and Tobago's Water and Sewerage Authority from April 1996.  A
three year interim operating agreement was initially established.  The
parties involved in the process include:-

  *   The Islands' Water and Sewerage Authority
  *   The Government of Trinidad and Tobago
  *   Trinidad and Tobago Water Services (a JV Company between Severn
      Trent Water International and Tarmac Plc)
  *   Funding arrangements by Citycorp Merchant Bank
  *   World Bank funding

      The Water and Sewerage Authority is a statutory body under the
Ministry of Public Utilities.  It was recognised that the regulatory
structure on the island could be strengthened.  The charging structures
were regulated by the Public Utilities Commission and quality by the
Trinidad and Tobago Bureau of Standards (adopting WHO parameters). 
Historical funding shortfalls had led to a lack of motivation and
incentive and World Bank investment was dependent upon a degree of
private sector involvement and some initial achievements being realised. 
The interim operating agreement has achieved a number of objectives:-

  *   TTWS (the JV Company) has provided a team of managers seconded to
      the authority plus some short term specialists.
  *   The Company arranged a loan of 75 million US dollars with Citicorp
      to fund operating shortfalls and to improve the operations of the
      Authority.
  *   Areas of the Islands had faced limited or very poor water supply
      services; a number of actions had been taken providing an immediate
      improvement to customers.
  *   Leakage was high.  Under the operating agreement the number of leaks
      repaired was increased more than 50%.
  *   When the Company arrived, 20% of electrical and mechanical equipment
      was missing.  Downtime was 59 days on average.  Equipment has been
      purchased and new working practices introduced.  Average downtime
      has been reduced to 3 days.
  *   This has had a big impact on the continuity of supplies (although
      investment has still to be made to improve treatment plants).
  *   Supplies to nearly a quarter of the population have been improved
      before any significant capital investment has been undertaken.
  *   Supplies are now getting to areas that have not received them for
      maybe 20 years.
  *   There is a general increase in continuity of supplies.
  *   Around 60% of the population said they thought the water supply was
      "definitely getting better".

      In the longer term major investment projects are needed; there is
an agreement in principle to a $60 million refurbishment programmes from
the World Bank.  The investment programme will include:-

  *   The design and replacement of over 100 kilometres of pipes in the
      water distribution system.
  *   Rehabilitation of 11 services reservoirs.
  *   Drilling new water wells.
  *   Installation of 60,000 water meters throughout the country.

      The Company's performance will be judged during the three year life
of the agreement.  Performance indicators include aspects of service
improvements, income generation and a need to match income and
expenditure within a three year period.  Part of the contract has a
performance related payment built in, where payments are only released
when targets are achieved.

Lessons Learned:-

i)    There is a need for a willingness on all parties to work together.

ii)   A regulatory/standards framework has to be in place or strengthened
      as part of the initial agreement.

iii)  Progress can be achieved at least initially without necessarily
      recourse to major capital investment.

iv)   There is always scope for improving current operational
      arrangements.

v)    The income issue is important; metering/tariffs have to be
      addressed.

vi)   Financing arrangements can be put in place, particularly where the
      funder has confidence in:-

  *   The operator.
  *   The framework conditions under which the operator will operate.
  *   If the income issue is addressed.

vii)  Government's can produce contracts with performance criteria built
      in that are acceptable to an operator.

      Successful outcome can be achieved with each of the parties, the
government, the company, the World Bank, the customers, gaining from the
process thus creating a potential win-win-win-win-situation.  The
contract demonstrates many aspects of managing water supplies and
sewerage facilities as well as linking together a whole range of parties
and interested participants.  Essentially it displays the range of
possible actions identified at the beginning of this section of the
report.  Clearly success depends on a desire and will on all parties to
achieve a programme of activity they are all committed to.  It also
demonstrates that a mixture of good operational experience together with
sound investment can deliver real customer improvements.  In the case of
operational improvements, the customer improvements can be delivered very
fast - well ahead of the normal timescale envisaged for major capital
investment.

Blockers to Progress

      The case studies that have been included in this paper do
demonstrate many of the actions that are possible either by business or
water suppliers working to improve business use of fresh water or basic
services.  The case studies demonstrate that actions are possible and
delivery can be achieved.  But there are a number of conditions that have
to be satisfied in order for achievements to be made.  These are:-

  *   There needs to be a willingness on all parties involved to make
      progress and to share  a common view of what objectives should be
      achieved.
  *   There needs to exist a government framework capable of introducing,
      maintaining and enforcing a strong regulatory framework within which
      water resources are provided.
  *   The quantity and quality of fresh water use and sanitation have to
      be regulated and not open to manipulation.
  *   An appropriate legal system has to in place for a variety of issues
      including trans-boundary water rights, water abstraction rights and
      land access.
  *   The charge/tariff/income issue must be addressed in order to attract
      investment.  Investment will not take place unless this issue is
      addressed either through government (tax) or through direct customer
      payments (eg metering) or a mixture of both.  This may include
      transferring responsibility from government to customers on a taper
      basis over a period of years.

Water is the key issue - solutions have to be found.

Footnote

I am grateful to Millar Western of Canada, Danfoss in Denmark,  Severn
Trent Plc of the UK and WBCSD for helping make information available for
use in the case studies.  The way in which the report is pulled together
and the words that are used are entirely my responsibility.

Jim W Oatridge
Director of Environmental and Corporate Controls
Severn Trent Plc, UK
Tel: +44 121 722 4903
Fax: +44 121 722 4892
e:mail: ecc@severntrent.co.uk

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Date last posted: 8 December 1999 15:15:30
Comments and suggestions: DESA/DSD