Why is the water industry unloved? Building bridges over troubled waters

The water industry is under siege from shareholders, regulators, pressure groups, and the public. Yet as well as resolving these conflicts, it is possible to create water companies that are loved rather than disparaged. Discover a new and audacious world of water that satisfies everyone.

Based on a longer paper, Building Bridges Over Troubled Waters, by Matthew Hancocks with Billy Glennon, Charles Spinosa, and Darren Hanniffy.

The reputations of the water companies are tarnished by reports of sewage dumping, leaking pipes and shareholder dividends. The wider public remains wasteful of one of our most valuable resources. And the regulators are under attack from both sides. Here are four of the key problems:

1. Resentment
   There is widespread distrust of the private equity and pension funds that own swathes of our water industry. And there is resentment at what is considered inappropriately large and frequent dividends for short-term investors at the expense of future generations of water users.
2. Disunity
   There is no commitment to sharing resources across the industry in terms of better conservation and water retention. And despite water being one of our most precious shared resources, shareholders, regulators, pressure groups and the public show little sense of being in this together.
3. Complacency
   The wider public complains about water shortages and river pollution, yet many of us continue to use water carelessly. Instead of taking any personal responsibility, we expect a grand industry solution to take care of everything.
4. Fear
   There is much talk of the huge investment in infrastructure that is required – £90-£30bn to replace the Victorian-era pipes that still combine water and wastewater. Everyone appears to endorse this ambition while simultaneously running away from it, fearful of the cost.

The consequence of these problems is an industry that is unloved. Water UK’s 2050 vision is for inspirational water companies that are true partners to customers, stewards of the environment, and conveners of stakeholders across water catchments. That’s an admirable ambition but we have a long way to get there.

A shared mission

It is a tough challenge. Senior managers in the water industry are worried about being able to provide enough water to people to meet the anticipated increasing demand for quantity and quality and to have sufficient capacity to remove waste and flood water swiftly, cleanly and securely. And they are concerned about the growing complaints about water pollution in the UK’s rivers and beaches. However, they are also only just starting to take seriously that they need to enlist their stakeholders and customers in a shared mission to tackle this problem.

But when they do look towards their stakeholders, they see that meeting their goals of having enough water, enough purity, and sufficient waste removal are no longer enough. Customer demands for purity are increasingly exacting and their growing expressions of dissatisfaction are becoming more urgent. People want their river water, drinking water and wastewater pure or totally purified. And they also want a similar kind of purity in the water business: no high leveraging, putting shareholders ahead of future generations when it comes to financial returns; no price increases, open books; no worries that they are being ripped off.

But water companies face both a short-term capacity issue in some areas like the Northwest and Southeast England and a long-term river regeneration and decarbonisation problem that jeopardises their reputation and requires capital investment, major disruption and cultural change. Even if the solution were clear, the industry still has funding worries for the capital programmes required over the next 40 years.

Beyond the capital investment requirements, successfully dealing with the issues facing the sector will require popularising an industry that has, for many years, presented itself as a technical operator with a transactional customer relationship.

At VISION, we look behind the more obvious operational problems to discover the underlying cultural problem that makes the operational problems seem intractable. In this case, we see that different stakeholders are taking their own interest in water as pure and the interests of others as impure. That’s why the companies and stakeholders do not work together. They don’t understand each other. The geoengineering solutions commonly reached for by water executives will be necessary to address the symptomatic issues facing the industry. But engineering and natural science-oriented thinking will not be sufficient for the conflicts lying at the source of the issues that, we believe, demand more culturally wise thinking.

Our relationship with water

We all have habits and moral sentiments regarding water use left over from our past but largely hidden behind our water industry discourse. The Mesopotamians made individuals in the community civically responsible for water. Laws were written; people were compelled; this was felt as ‘civic responsibility’. We can see these values reflected in many civilisations and eras – from the Romans to the Victorians. The pride people still feel in their local water keeps these moral sentiments alive.

Water leaders, including private equity and hedge fund owners, can throw off acrimony and build greater value by developing a leadership practice that collaborates enthusiastically with dissonant voices and accommodates their concerns. The industry should follow the example of the likes of Apple, Lego and McKinsey who, rather than snubbing their most challenging customers, embrace them and seek to learn from them.

The highest standard to which water leaders can be held accountable is to lead in a way that brings back the wonder, grandeur, locality, morality, beneficence, conviviality and even intimacy that we all share in our relationship with water and allow each a time and place to shine.

Tomorrow’s water company should look like this

This is the moment for leaders in the industry to step forward, embrace conflict and create an heroic way forward. The new water company CEO will be the ‘convenor of the catchment’. They will set up and personally lead a civic activist group that re-builds community solidarity by giving practical voice to all these sentiments and organising commitments that expresses them. The CEO’s role will be transformed from an optimiser of the water system utility to a builder of new, wide and deep water value. Accordingly, the most critical skill for the CEO will be that of listening to the people she or he is serving and bridging their differences. Water leaders will engage first-hand in conversations, work and play alongside water users, and accustom themselves to the real and diverse identities of their customers.

To see how this can all work in practice, let’s imagine some of the promises that a water company of the future might make to its customers to build bridges:

1. Local pride
   Establish local community partnerships with water companies through self-monitoring of water system usage – and restore local pride in the source of our water. For example, people in Oxford, Reading and London would welcome drinking water flowing to every tap from the Cotswolds and Chiltern Hills as well as mineral water bottled from springs at the head of the Thames.
2. Water celebrations
   Bring back conviviality by promising public communal bathing sites, like the Roman baths, for each community of 1,000 people along the catchment with guarantees about upstream CSOs, filtration of nasties, changing rooms, toddler pools and diving platforms.
3. Incremental upgrades
   Create civic pride with multiple new major engineering projects including monitoring of wastewater systems, planting of reed beds, and the separation of foul and flood drainage systems. This can be achieved incrementally over time to make it affordable.
4. Clean waterways
   Ensure clean rivers and beaches, and the environmental restoration of marine habitats by, for example, eliminating microplastics in Thames estuary.
5. FOG reduction
   Introduce attractive and easy-to-install grease management circular solutions for small-scale food service companies that collect and recycle fats, oils and greases (FOGs) as biofuels. And introduce ‘FOG-friendly’ customer assurance for major companies like Deliveroo, Just Eat and the multi-national branded food service chains.
6. Auction partnerships
   Launch EnTrade-like auction partnerships with Thames catchment farmers to set up trading auctions that enhance biodiversity and reduce nitrogen, phosphate and metaldehyde leakage into rivers and estuaries on 100% of relevant arable land.
7. Progressive pricing
   Introduce progressive pricing that rewards people for doing their bit with a basic low tariff that preserves the human right to 50 litres of water each day and then has progressively premium-priced tariffs for consumption above those levels.
8. Digital gauges
   Install attractive digital gauges in people’s homes and on their phones or watches to let them know what is going on with water in their neighbourhood. And provide trackers of water industry financial investment performance and progress on capital spend programmes.

Does that sound like a glimpse of a better future for one of our most valuable assets?

•Read the full Building Bridges Over Troubled Waters paper here.