evaluating water risk information to motivate action...evaluating water risk information to motivate...

Evaluating Water Risk

Information to Motivate

Action

Will Sarni

Director and practice leader, water strategy

Deloitte Consulting LLP

[email protected]

@willsarni

mailto:[email protected]

2 Copyright © 2015 Deloitte Development LLC. All rights reserved.

Water scarcity in 2025 – we arrived early

Source: Center for Environmental Systems Research, University of Kassel, www.usf.uni-kassel.de

people, or almost half of the world's

population, live in areas of physical scarcity

and/or face economic water shortage

$17 trillion

22% of Global GDP is currently

generated in water-scarce areas.

By 2050 it will be 45% 3.3billion

3 Copyright © 2015 Deloitte Consulting LLC. All rights reserved.

Water is

needed to

generate

energy

Energy‏ is

needed to

extract, treat

and transport

water

The water, energy and food nexus

Water for energy

Energy for water

Water and energy for

food


Water scarcity trajectory – an‏opportunity‏to‏“deflect”‏

We need more

It’s‏already‏

having an impact

It’s‏global

All sectors

Power & Utilities‏

Oil & Gas‏

Energy Intensive‏

Industries


The past is not a guide to the future

Scarcity impacts economic and business

growth

Public policy will align with the “new

normal”

Scarcity drives innovation – “business‏

ecosystems”‏and‏technology

Data analytics are essential for a fact

based dialog with stakeholders

October 13, 2015

Abnormally dry (18%)

Moderate Drought (15%)

Severe Drought (15%)

Extreme Drought (19%)

Exceptional Drought (8%)

The public sector and water risk - have we learned?


Public policy and long term strategy

Set a statewide water‏

reduction target of 20% per

capita by December 31, 2020;

passed a $7B water bond and

new groundwater legislation in

2014; Adopted mandatory

conservation requirements for

urban water suppliers in 2015

Launched a $2 billion‏

infrastructure fund that will

focus solely on water projects

California Texas


The private sector and water risk

2015 World Economic Forum

8 Copyright © 2015 Deloitte Development LLC. All rights reserved.1 – “Watching Water,”‏JP‏Morgan‏Chase‏Global‏Equity‏Research,‏April‏.2008‏

How the private sector views water risk

Physical

Regulatory

Reputational

Operations Product UseSupply Chain

Water scarcity

drives up input

prices (~2%-20%)

Increased capital

expenditure on

water treatment,

extraction or

alternative

technologies

raises costs

Non-availability or

scarcity of water

required for using

product or service

limits growth

Suspension or

withdrawal of

supplier's water

license or

discharge permits

disrupts supply

chain

Reallocation to

more urgent

needs during

drought disrupts

operations

Restrictions on

use of particular

products or

services due to

water intensity

raises costs or

checks growth

Responsibility "by

association" for

suppliers' water

pollution damages

brand or

reputation,

hinders growth

Competition with

household

demands, or

pollution

incidents,

damages brand or

reputation,

hinders growth

Public outcry

regarding water

intensity of

product damages

brand, reputation,

hinders growth

Financial Impact

Lost revenue

Higher costs

from:

− Supply chain

− Changes in

production

− Capital

expenditure

− Regulatory

compliance

− Increasing price

of consuming or

discharging

water

Delayed or

suppressed

growth

Potential higher

cost of capital

http://pdf.wri.org/jpmorgan_watching_water.pdf

Copyright © 2014 Deloitte Development LLC. All rights reserved.- 9 -

− Incorporate water risk into‏‘traditional’‏

corporate risk management processes

−Quantify the “real” value of water to the

business

−Understand the energy-water nexus and its

potential business implications, set targets

across the value chain

− Increase focus on engagement and

innovation

−Look for opportunities in the overlaps

−Make a public commitment to water

stewardship

−Practice “radical transparency” about water

and seek opportunities to collaborate – or

clear the (internal) path for collaboration

Getting Ahead of the “Ripple Effect” A Framework for a Water Stewardship Strategy. W. Sarni, Deloitte University Press. 2013

Water stewardship strategy to address water risks


“Fueling‏growth”‏– defining leadership

INCREASING VALUE AND COLLECTIVE ACTION

No strategy

• Water scarcity not

acknowledged as an

issue

• All resources treated

equally

• Cash flows heavily

weighted

• Market price of water

governs decisions

Efficiency strategy

• Water scarcity as a

driver of cost

• Consider cost of

acquisition and use of

water

• Heavily weight

profitability risk

• Focus on water

conservation

• Set internal water

efficiency goals

License-to-grow strategy

• Quantify value of

water

• Proactively drive

business

“ecosystems and

“aligned action”

• Innovation - develop

product/service

offerings that

address water

scarcity

• Internalize

externalities

• Manage water scarcity

as a platform for

growth

• Participate in water-

related policy

development

Risk strategy

• Manage water scarcity

risk at the facility or

business-unit level

• Pursue stakeholder

engagement to

improve water access

• May calculate full cost

of water

• May participate in

public policy

formulation

• Ad hoc investment in

technology innovation

• “Social‏license-to-

operate”‏risks‏heavily‏

weighted

Fueling Growth: You Can’t Always Buy What You Need. W. Sarni. Deloitte University Press. 2014.


Informed decisions based upon transparent data sets

Water Infrastructure and

Customer Analytics

State-wide Economic

Value of WaterReputational Risks –

Social Media Sentiment Analysis

Business Value at Risk and

Supply Chain Analytics

Private sector reputational risk – social media

Social Conversations: Volume Trend

A

B

Top Sources Top Terms

B

A

Rank Brand Posts Net Sentiment Positive Negative

1 XXXXX 40,900 -41.2% 29.4 70.6

Copyright © 2015 Deloitte Development LLC. All rights reserved.13

R&D

Supply Chain Risk Framework

Macro environment risksHave potential effects across the entire supply chain

Extended value chain risksOriginate in upstream and downstream supply chain partners

Economic

$ € ₤ ¥

Geopolitical Quality & Safety

!

Regulatory

Functional risksExist among enabling functions that support supply chain processes

Human Resources Information TechnologyFinance

$$$

Legal

Operational risksRelate to internal process risks

SourceDevelop Plan Make Deliver/Return

SupplyTier 2

DemandEnd Users

Environmental/Social

Responsibility

Tier 1 11

Distributors3rd Party Services

SecurityInfrastructure /

Resources

Marketing

Supply chain risk‏thinking‏and‏“sustainability”‏

In our experience, companies place focus on identifying risk with the biggest immediate impacts on cost and

performance. Environmental and Social Responsibility related topics receive the least focus. .

People Process Technology


Copyright © 2015 Deloitte Consulting LLC. All rights reserved.

Business value at risk – supply chain



Public sector water management dashboard

16 Footer Copyright © 2014 Deloitte Development LLC. All rights reserved.

Collected data from a variety primary sources across Florida to develop a

compelling set analytical dashboards

FDACs - overview of approach

Develop integrated database Create visualizations Collect data

Our approach

• Florida Statewide Agricultural Irrigation

Demand Report and Geodatabases

(2015) and supporting technical memos

• Water Management District (WMD)

Regional Water Supply Plans

• Water Withdrawals, Use, and Trends in

Florida

• NOAA National Climatic Data Center

precipitation data

• USGS Statewide Evapotranspiration

Data

• Combined data from a variety of datasets

into a single, integrated database

• Required reformatting and moving data

from a pdf, excel, and text files into a

single, readable format

• Allows data to be queried at a variety of

levels (state, WMD, and county), sectors,

and timeframes (2015 – 2035)

• View projected water demand metrics at

the state, water management district, and

county level by year and usage category

• Create alternative scenarios specific to

agricultural water demand based on

changes in crop type acreage, irrigation

efficiency

• View and prioritize water conservation

and supply projects based on estimated

costs, benefits and other criteria

17 Footer Copyright © 2014 Deloitte Development LLC. All rights reserved.

Enables users to build out an optimum water supply and demand scenario

using external factors and observe their effects across a 20 year time

horizon

Water Scenario Analysis

Allows users to visualize cross-sector tactics to reach water saving goals

based on multiple metrics such as Feasibility, Urgency, Capex

Tactic Prioritization

Allows slicing and dicing of WMD, FSAID and Regional Water Supply data

to analyse current and future water supply vs demand metrics by county

and WMD

Water Demand and Supply

Helps users to further understand Water Saving Tactics needed in the

Agricultural sector by County in order to achieve Water Saving goals

Agricultural Tactic Prioritization

Developed four dashboards that allow FDACS to understand current and

projected scenarios, run scenario analysis, and prioritize efficiency tactics

FDACs dashboards examples



Water Withdrawals: Surface and Ground water

California dashboard


Water analytics: predictive asset maintenance

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Risk Analysis Tree Spatial Mining

Optimized investment program

GIS visualization

Operations

Expertise

Efficiency

Benefits

Financials

• OPEX reduction: Millions

• CAPEX reduction: Millions

• Reduced leakage

• Reduced interruption of service

• Reduced hindrance due to works

• Deep and data driven insights in

the life cycle of the assets

• Improved data quality

• Supply chain optimization (procurement

strategy, material management)

• Optimal allocation of scarce resources



Automated notification, real-time asset condition monitoring

Predictive asset maintenance



Asset Management Planning (AMP), Scenario simulation, Budgeting

Predictive asset maintenance


The solution provider market forecast

8.9 %

14.7 %

Global growth of the desalination market

from 2013 to 2018

Global growth in smart meters market

from 2014 to 2019

25 % Monitoring forecast and control

24 % Organic nutrient and solids

treatment and 16 % Metals or organics

remediation or reclamation

5 % Desalination and 5 % Leak repair

and pipe replacement

Start ups

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