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The 5 Financial Reasons To Take Water Action In 2022

Many businesses continue to overlook the financial and commercial importance of sustainable water management, thanks to its relative low cost when compared to gas and energy.

Mismanaging water can hamstring a company, whether through a broken supply chain, bad press or exaggerated bills and wastage. While an effective, sustainable water program can slash operating costs, drive operational efficiencies and build organisational resilience. Because of this, water has quickly become the low-hanging fruit and provides an irrefutable commercial opportunity.

It’s time for businesses to sit up and take notice. The opportunity of water is now and plentiful.

We explore the top five financial reasons to take water action in 2022.

Gain visibility and control

How certain are you that your bills are true, accurate and correct?

Many businesses are unable to obtain site-level water consumption data and consequently, have found themselves unable to verify the accuracy of bills. Without the visibility of this data, businesses could be paying for water that goes straight down the drain due to leakage. Additionally, if your water meters haven’t been read recently (and frequently), the chances are, you’ll be paying an inflated estimated price for your water usage.

Achieving complete visibility of your water usage and consumption through effective water management means you can take complete control. You can be sure that your profit isn’t simply ‘running down the drain’ through leakage and inaccurate bills.

With accurate consumption data, you’ll be able to make informed decisions when tendering for or choosing new suppliers. And on top of this, you have access to the data you need to implement effective reduction and efficiency strategies. Providing significant financial advantages.

For the 2020-21 period, eight water Self-Suppliers reported efficiency savings of 336Ml, equating to around 4% of annual water consumption.

Think you know water? Take the water quiz to test your knowledge and learn more about the UK’s position.
Take the water quiz to test your knowledge

Administrative savings

Just 9% of non-household water customers were active in the market from 2020-2021, largely due to low awareness of the opportunity to act.

If you’ve yet to explore the opportunity to take water action, you may be investing extensive administrative and operational time in the management and settlement of countless bills from multiple water retailers – an administrative headache!

And, if you have consolidated suppliers, you may be sacrificing vital human resource to validate bills and challenge inaccurate bills. Time which could be better spent developing and delivering water efficiency and reduction measures – providing both substantial commercial (financial) and environmental benefits.

For companies such as Whitbread, Sainsbury’s and Marston’s who have prioritised action on water, the accuracy of the data that they enjoy has continued to repay their investment, year after year.

Sustainable water management, sustainable business operations

Many businesses do not consider the risks to their business if the quality and/or availability of water is affected. Knowing how much water you use, when and where, and taking into account the likelihood of drought and flood-induced outages and/or price spikes offers certainty when making long-term strategic decisions, which helps to mitigate risk and improve operational resilience.

Failing to understand the physical, regulatory, reputational and financial risks that poor water management present may come at an excessive cost and yet, the cost of mitigating these risks is typically much lower than their potential fiscal impact.

In 2020, businesses reported the financial impact of water risks to be £227 billion. That’s five times more than the cost of addressing these risks at £42 billion.

Download the business case for water action

Ensuring long-term positive financial performance

Forward-thinking companies and commercial investors will benefit most greatly if action is taken now. By identifying solutions and funding sustainable water projects that improve water resource management, businesses experience superior financial performance and sustainable growth.

Unsurprisingly, research by Boston Consulting Group found that robust ESG practices correlate with better financial performance including higher total shareholder returns. Companies that invest more in water resource management outperform their peers. A quantitative analysis by industry sector showed that better water resource management was one of three key ESG metrics driving better financial performance.

Companies that were top performers in water management, responsible environmental footprint, and investment in food safety management were awarded 11% higher valuation premiums by investors. Enhanced conservation of water use, alone, correlated to higher earnings of 3.1 percentage points, as measured by EBITDA, and gross margins that were 5.5 percentage points greater. [Boston Consulting Group]

Unexpected water retailer price increases

Change is coming. In order to offset market bad debt which has arisen from Covid, Ofwat have consulted with the market and decided to increase the retailer price cap from April 2022 for 2 years. This small and temporary change will:

  • Protect customers longer term interests by minimizing risk of water retailer failure
  • Avoids those customers who haven’t engaged with the market bearing a disproportionate burden of costs
  • Allow water retailers to recoup 75% of excess bad debt costs

Though this cap only applies to water customers using less than 50 million litres per annum. Larger water users such as those in manufacturing, leisure, hospitality, industrial and retail, who typically use more than 50 million litres per annum, are not subject to this regulated price cap. Meaning retailers are free to apply price increases as they deem appropriate to recoup excess bad debt costs.

The net effect of this is an uncapped increase in your water costs by your retailer. Given the year we’ve had, with finances and cashflow tight, this could prove a major hindrance in your recovery, and your profitability going forward. Financially, it’s clear that making water a strategic priority can have a significant, positive, long-term impact.

By self-supplying, you engage directly with the wholesaler to procure your water. Cutting out the retailer and their margin which provides a valuable boost to your bottom line.

What does ‘water action’ look like?

In three simple steps, you can get proactive on water, take action, and make significant commercial and environmental progress:

Step 1: Visibility
The first step is understanding your water usage. How much you use. Where. And when.

Step 2: Efficiency
Time to take action. Solving problems, achieving efficiency and saving costs. Set targets and develop plans for hitting them.

Step 3: Resilience
Create your own unique water management strategy. So, whatever happens, your business is water secure.

To learn more about how you can make water work for you, driving financial efficiencies, operational resilience and safeguarding our most precious resource, schedule a call with one of our experts here.