The Sunrise of Water Era: Innovating governance towards sustainable water management
By Marijana Krstić
Water shapes every facet of our world: it is essential part of life we use daily – life giving, and sometimes a brutal force of nature – contested and destructive. As a shared resource, it could both unite and divide us. Management of this precious Earth resource can be multifaced, as this element itself.
In the face of pressing global challenges, the issue of water scarcity and its impact on communities and economies cannot be overstated. The alarming statistics of billions of people lacking access to safe water supplies, coupled with the dire consequences of climatic disasters, rapid urbanization, and aging infrastructures, underscore the urgency for effective water governance mechanisms. The year 2021 witnessed[1] 2.2 billion people without access to safely managed water supplies, emphasizing the critical need for comprehensive strategies to ensure the availability and sustainable management of water and sanitation for all. Additionally, the detrimental effects of water scarcity are not limited to humanitarian concerns, they extend to economic dimensions, with significant anticipation of $5.6 trillion reduction in global GDP. Water demand is projected to increase by 55% by 2050. Alarmingly, over 80% of wastewater is released back into the environment without being recycled or treated and about 40% of the world’s population lacks access to sufficient water to meet their needs.
There is undoubtedly the urgent need for effective implementation of the UN Sustainable Development Goal 6 (SDG 6): “Clean Water and Sanitation”[2] of the established UN 2030 Agenda, which covers eight targets pertaining to the social (equitable access), economic (integrated water resources management), and environmental (protect and restore water-related ecosystems) elements of sustainable development, with their 10 indicators.
Amidst these challenges, there is a growing recognition that diverse governance models of water utilities are instrumental in achieving sustainable water management. The dynamic interplay between operational activities within water utilities and the broader water governance framework presents an intricate web of interactions, including structures, processes, and traditions. These interactions not only shape the way authority is exercised and decisions are made but also determine how citizens and stakeholders are engaged in the decision-making process.
Therefore, by investigating the role of water utilities as those who provide water services worldwide, and by identifying novel and sustainable governance models, based on unique corporate governance dynamics, this article underscores the evolution of sustainable governance in water utilities sector, emphasizing the existing transition from a State-centric-hierarchical approach to Problem-solving model of “good” governance characterized by transparency, accountability, broad participation, decentralization, and deliberation.
This shift is guided by the evolution of EU Laws, including Corporate Social Responsibility (CSR)[1], the emergence of ESG[2] within the United Nations and directives such as: the Non-Financial Report Directive, The Corporate Sustainability Reporting Directive, proposed Directive on Corporate Sustainability Due Diligence, and EU Taxonomy.
Moreover, this article highlights that not only the long-standing debate on public versus private management of water resources is enough, and proposes the new and more sustainable governance debate, hence sustainable water management within the ESG framework (“E of ESG”). This innovative approach to so called sustainable governance would consider not only the Governance materiality issue (“G” of ESG), as it derives from mainstream literature, but would reevaluate it, firstly, by redesigning corporate governance practices of water utilities, defined by its : ownership structures, shareholder/stakeholder rights, transparency, accountability, board structure, voting procedures, anti-takeover measures, executive compensation schemes, profitability aims, and then secondly, by bringing it together with redesigned Social materiality issue (“S” of ESG) in the context of community-consumer-based relations within water utilities.
Therefore, drawing from theories such as “the corporation as a commons” and urban commons studies, the article proposes Co-governance model for water utilities, asking a question if there is a room for reconceptualising water utilities` corporate structures as commons, and for rethinking property rights, towards more efficiency in securing a sustainable management of water. Would these novel and improved forms of governance of water utilities may be possible if the idea of corporate ownership would have been redesigned as a common and could those help execute and accomplish sustainable use of water and contribute to preventing water scarcity and water pollution.
Moreover, could consumer-owned water utilities help closing the existing gap of water service providers and supplement publicly-owned or/and privately-owned water utilities, towards accounting for SDG 6 implementation and reaching the emerging ESG performance objectives. The water utility’s ownership proved to be crucial factor, since it determines how much is consumer`s participation in governance and management acceptable and this participation makes direct contributions to achieving long termism. The idea of viewing customers as partners in private utilities helps developing a feeling of ownership and dedication.
Clearly, the water debate leaves a lot of space for innovating water governance, which means applying our knowledge to assure the correct priorities at the right time and support wise decision-making by contextualizing solutions which encourage transparency and accountability, and by demonstrating forward-thinking and long-term planning capacity-building initiatives to all water stakeholders through collaborative partnerships.
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[1] Contributing to the UN Sustainable Development Goals with ISO standards (2023). doi: https://www.iso.org/home.html.
[2] Goal 6 Targets and Indicators | Department of Economic and Social Affairs (2023) United Nations. Available at: https://sdgs.un.org/goals/goal6
[3] Intersection between S and G. “Policymakers must decide whether companies must meet their obligations to prevent, identify, manage, and mitigate any potential negative impact on society (and thus human rights, health, the environment, and so on), including impacts produced along their global supply chain. This is referred to as ‘corporate social responsibility’ (CSR), which we use as a synonym for ‘responsible business behaviour’ (RBC).” – Noti, K., Mucciarelli, F. M., Angelici, C., Dalla Pozza, V., & Pillinini, M. (2020). Corporate social responsibility (CSR) and its implementation into EU Company law. European Parliament.
[4] The “E” in ESG stands for environmental factors. This includes evaluating a company’s environmental impact, such as its carbon footprint, energy usage, waste management, pollution, resource conservation, and attempts to mitigate climate change. Environmental concerns also include biodiversity, deforestation, water management, and the use of renewable energy.
The “G” in ESG stands for governance factors. The systems, processes, and structures that influence how a firm is managed, directed, and controlled are referred to as governance. It entails assessing the company’s leadership, board structure, executive compensation, transparency, ethics, risk management, legal and regulatory compliance, shareholder rights, and overall accountability. Good governance guarantees that a business is handled in a responsible, ethical, and transparent manner.
The “S” in ESG stands for social factors. This focuses on assessing a company’s societal and stakeholder impact. Labor practices, human rights, employee welfare and diversity, community participation, consumer protection, supply chain ethics, product safety, and customer pleasure are examples of social elements. It also entails assessing a company’s contributions to societal concerns and long-term development.
Bibliography:
- Krstić M. MSc Thesis on “Sustainable governance in the water utilities sector. Shades of Blue S.r.l. as a way to improve the ESG “. Graduated from Luiss Guido Carli University, Department of Law, MSc in Law, Digital Innovation and Sustainability Rome, Italy, October 17th, 2023.
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