Will Sarni On Water Risk, Stewardship, And Innovation
Source: Water Online
By Julie King
A Q&A with Will Sarni, founder and CEO of Water Foundry and founder and general partner of The Future of Water Fund. Part of a series of interviews from the 2022 Stockholm World Water Week with executives from different areas of the water sector.
Thanks for taking the time for the interview, Will. You’ve participated in Stockholm World Water Week for several years and are very active in water issues, particularly in the Southwestern U.S. This interview series includes looking at the current status of global water challenges compared to 2015 when I first covered the event for Water Online. What are your thoughts on this?
Stockholm World Water Week is behind us by a couple of months, which has given me time to reflect on what has changed, what hasn't, and what needs to change. Having attended Stockholm World Water Week (SWWW) for over the past decade-plus, excluding during the pandemic, my bottom line is that there remains much to do in advancing “aligned action,” innovation, and investing in the water sector.
First, what hasn’t changed is the ongoing discussion on the value of water. As practitioners in the world of water, I believe we can all agree that water is undervalued or not valued. This ongoing discussion only gets us so far in addressing “wicked water problems.” We need to build solutions to ensure that innovations in technology, business models, and financing/funding can be deployed in spite of current water pricing and the low perceived value of water. From a corporate water strategy perspective, there are approaches to overcome the low price of water. For example, increasingly companies are using a shadow price for water to overcome high return on investment requirements or using tools such as the WWF Water Risk Filter WAVE [Water And ValuE] Tool to quantify the business value at risk. The driver for using a shadow price or Business Value at Risk (BVAR) tool is that companies need to meet their water stewardship targets and mitigate water-related risks.
Can you elaborate on using “shadow pricing” for water?
The challenge in the world of water is fairly obvious in that water is inexpensive or close to being free. So, when you have inexpensive water, you have a long payback period to make the business case and that doesn’t really address water as a business risk. It just doesn’t work. The adoption of a shadow price or quantifying the business value at risk helps companies get over that hurdle, so they can adopt innovative technologies that help them achieve their goals and their budgets. So shadow pricing is helpful.
Is that working? Are companies using shadow pricing successfully? Are they understanding and integrating their business risks for water like that?
There are companies that don’t use shadow pricing but have license internally to adopt innovative technologies provided they can help to achieve their water goals and reduce water risk. And there are other companies that have the wrong ROI requirements that are using shadow pricing as a way to get over that ROI hurdle for a simple payback. It’s been successful, I would say.
We tend to push more for, not necessarily shadow pricing, but very broadly business value at risk. So the company thinks about “value of wrong,” including brand value. Not that that’s easy to quantify. But at least bringing that into the narrative helps them think through how to make better investment decisions in certainly technology. That’s what we’re seeing right now.
To what degree is water stewardship being used as a mitigation tool?
It ranges from folks that are leaders in terms of having a corporate water strategy/water-stewardship strategy to companies that view it as an ESG exercise, in some ways just checking the box. There is a large multi-national that I’m an advisor to and they are very, very good about quantifying the risk at individual sites and supporting the operational aspect of the business. They understand the risks and mitigating the risks, then have a rigorous process of either increasing the risk if things are not going well or decreasing the risk if there is progress. That’s one end of the spectrum, and it has been quite effective and powerful.
So, you’re finding that these tools are being deployed? It’s not just another shade of greenwashing?
Yes. As I said, there are companies that just take on water as part of an ESG exercise. But others view water as a business risk but also as a business opportunity. Those are the ones that are really doing well.
I’ve done a maturity model that I started working on several years ago and built it out over the years. It looks at how companies manage water across this maturity model. At its most basic is water management, where companies view water as a compliance issue and efficiency issue and there is no consideration of the value of water. It’s very much within their four walls.
Then there’s water stewardship, which is a risk-mitigation strategy, and that’s where you see companies work with NGOs like WWF or TNC [The Nature Conservancy]. You see risk mapping tools, mitigation strategies, and so on. And the water strategy in my mind is to look at the greatest value to the business and to society. And that’s where companies can contribute who they are and what they do to developing solutions. And what that translates into, for example, is AB InBev’s 100+ Accelerator program.
They identify innovative technology companies, entrepreneurs, they support them, they fund them, they mentor them, they innovate and work with them on pilots, in addition to the stewardship work. Not throwing out stewardship; it’s building on top of it.
In terms of SWWW, what has changed and what needs to change is the increasing interest in innovation and, in particular, digital technologies. First, the increasing focus on innovation has finally gained traction at SWWW. This year, several sessions were about innovation and increased interest in engaging with the investor community to support the private sector in achieving their water stewardship goals such as replenishment, net positive, etc. One such session was led by the CEO of Water Mandate titled "Unlocking Financing for Innovations to Scale."
There was also an appetite to proactively bring entrepreneurs into the SWWW community — these individuals have a bias for action that challenges the status quo. This is a very healthy development as we need to engage all stakeholders to solve "wicked water problems."
We are seeing signs that silos between stakeholders who have not traditionally participated in SWWW are finally beginning to erode. More entrepreneurs and investors are coming to SWWW to engage with the public sector, academics, and the private sector. It appears that the traditional narrative of corporate water stewardship programs is being challenged by entrepreneurs from outside the water sector, innovative digital technologies, and increased interest by investors in water technologies.
These trends are a positive development in transforming the water sector. However, additional opportunities remain to better integrate innovation into public policies and in adapting business models and funding approaches to address the impacts of climate change.
In the corporate ‘Innovation Challenges’ I’ve seen working with startups, with both companies and utilities, they were very prescriptive in how the challenges were formed, almost to the point where there was little opportunity for innovation. Innovation, for me, is ‘not knowing what you don’t know’. And there was no scope for even the potential for disruption. It was so narrowly prescribed that it predisposed what they really wanted. But they could still bring that in under the ‘innovation’ category. It wasn’t necessarily new. It was just an area where they wanted to develop. This goes to the transition to digital technology from a position that the company, its operators, and engineers were still committed to using spreadsheets. This was the case for all of the companies I saw.
You know, this is a really important point. The prevailing wisdom point of view is that utilities are slow to adopt innovation and slow to adopt digital tech and that the private sector is much better at it. I agree that the private sector is much better at it. But they have their own challenges, in my opinion, not unlike any other organization where ‘good enough is good enough’ sometimes or maybe even most of the time. And while corporate sustainability and corporate water programs might view a technology as value added, you still have to convince the zone engineer — the engineer responsible for a region — and then also the engineer at the facility.
So, it’s just like any organizational beast. You have to deal with humanity in terms of trying to advance innovative technologies. The book ‘The Technology Fallacy’ was really meaningful and impactful because it talks about the human side and the culture of digital transformation. We talk about the people side of it a lot. But on another side, we don’t really honor it in a lot of ways.
There are a lot of genuine human concerns surrounding this transformation, too. It’s kind of like going from horse and buggy to cars. It’s that dramatic. There’s this gap, and a lot of it comes down to psychology and behavioral change.
Yes, that’s absolutely true. Definitely true. With me, it’s also leadership aligned with strategy and not a one-off in terms of ‘yeah, this looks like a cool technology, let’s give it a go’. But with absolutely no support whatsoever. So yes, all of these factors are the critical ones in the scheme of things.
Where are we with regard to adoption of digital technologies and innovation? What has changed? What hasn’t changed? And where do we need to go?
Digital technology adoption was underway pre-pandemic. The World Economic Forum wrote a white paper that I contributed to on the Fourth Industrial Revolution and Water. The International Water Association with Xylem wrote a paper on digital water transformation. This was happening around 2018, 2019. Then the pandemic hit and suddenly the digital, in my view, was no longer optional. And we saw digital technologies play an important role in terms of helping the remote workforce do their job, monitoring asset performance, resource use, and sensing technologies for leak detection.
So the digital transformation was underway pre-pandemic, and the pandemic accelerated adoption. You saw companies like Kando not pivot, but deliver something of great value around COVID detection in wastewater, and they really got a lot of traction with the utilities sector. I would also say what I’m seeing now on the private sector side with multi-nationals is that they’ve gotten much more interested, much more in tune with digital technologies because they’re trying to quantify impact within watersheds. And, certainly, part of that ties to the ESG reporting. But I would say it’s mostly about the recognition that they need to know if their investment in a healthy watershed is having an impact and what that looks like.
So, it's underway. Like any innovation, it’s lumpy — there are some sectors doing more, some sectors doing less; companies and utilities that are leading, some that are fast followers, and others that could care less.
The same need for investment in private-sector solutions and goals such as water stewardship were topics for discussion at SWWW in 2015. This year, the same topics were being discussed by Las Vegas and the Southern California water districts. Will the shift towards a corporate-centric discussion catalyze investment in the water sector in developed countries — at the expense of developing countries? What is that relationship?
I’d say at a high level, intellectually or rationally we can look at developing countries and emerging markets as having the opportunity to leap-frog technology, which I believe is true. The challenge remains of who pays? Where does the funding come from? I think there is an important role for development banks to play in all of this. A shout-out to the Inter-American Development Bank that has a very thoughtful and deep innovation focus and strategy. They push on that effectively in Latin America and the Caribbean. I think other development banks need to catch up, get up to speed to understand the role of innovation, to iterate new technologies and business models.
There is a lot more we can do in emerging markets to build better, build smart, build 21st Century. But it will take other actors beyond the national governments to write those opportunities, including the funding.
I’m looking forward to SWWW 2023, when the theme will be innovation, and I remain optimistic that the trends observed this year will scale. I will do my best to ensure that SWWW includes more entrepreneurs, investors, and corporations working with the public sector, NGOs, and utilities to solve wicked water problems.
Will Sarni is the founder and CEO of Water Foundry,awater strategy consultancy. He is also the CEO of The Future of Water Fund, a water technology venture fund focused on addressing water scarcity, quality, and equitable access to water. He has been a sustainability and water strategy advisor to multinationals, water technology companies, investors, and non-governmental organizations for his entire career.
Prior to Water Foundry, he was a managing director at Deloitte Consulting, where he established and led the water strategy practice. He was the founder and CEO of DOMANI, a sustainability strategy firm, prior to Deloitte.
Sarni is a co-founder of WetDATA and a host of the podcast The Stream with Will and Tom. He is a board member of Silver Bullet, Project WET, and the Rocky Mountain Rowing Club. He was the Chairman of the Scientific Advisory Board for the WAITRO Global Water Innovation Summit 2020 and was on the Scientific Program Committee for Stockholm World Water Week from 2013 through 2019. His advisory work includes working with the 2020 X-PRIZE (Infinity Water Prize) as a Bold Visioneer for the 2016 X-PRIZE Safe Drinking Water Team and a Technical Advisor for the Climate Bonds Initiative: Nature- Based Solutions for Climate and Water Resilience. He is also on the Editorial Board of the Journal of Water Security.
Julie King is a senior consultant in digital water technologies and is an experienced organizer, developer, and coordinator of international commercial projects with business, academic, NGOs, new tech, and international organization partners. She is a long-time contributor to Water Onlinein the water, environmental, tech, and international development and finance space.