Master Global Business and Stakeholder management

Final report: Water scarcity: a threat or a business opportunity?

Pushpika Vishwanathan 287887

Michael Kroes 306392

Irene Oosting 298057

October 31st, 2007

WATER SCARCITY

1

Executive Summary

This study has researched the attitude of water companies towards fighting the issue

of water scarcity, with the focus on developing countries. The most important causes

of water scarcity are the increasing demand of the civil society and industry and the

lack of effective management of water resources. Consequently, over 1.1 billion

people are living in water stress areas. The only possibility to solve this problem is by

significantly reducing the present consumptive level, requiring the cooperation

between all primary stakeholders. Developing countries will have to attract FDI from

the private sector by creating a level playing field, and hence, limiting the risk of

doing business. Developed countries will have to stimulate innovation, where the

challenge lies in turning legislation into a more flexible and ambitious approach with

a strong concentration on sustainable use of natural resources.

Efficient and professional management of the water utility by the water companies is

essential to achieve improved water services and to enlarge water system

infrastructures. In cooperation with governments, water companies must settle the

prices that will be charged to consumers enabling access to all users without

discriminating for income. Stakeholder engagement should become a part of the

mainstream business practice as a way of gathering important input and ideas,

anticipating and managing conflict, improving decision-making, building consensus

among different groups, strengthening relationships and enhancing corporate

reputation.

An empirical study is conducted of five international water companies, by analysing

their sustainability reports. We conclude that the current approach of water

multinationals towards the water distribution issue can be characterized as active.

Their activities do not directly regard the improvement of water infrastructures in

developing countries and their expansion policies within these regions remain

imprecise. Veolia Water can be distinguished from this general statement in terms of

their clear and extensive disclosure about its activities in developing countries and

their contribution to improving water systems in such regions.

WATER SCARCITY

2

Contents

1. Introduction 4

2. Water distribution 6

2.1 Natural water distribution 6

2.2 Man-made water distribution 7

3. Privitisation 9

3.1 Private water market 11

3.2 Public Private Partnerships 13

3.3 Activities in developing countries 15

4. Problem definition and research question 16

5. Stakeholder analysis; causes 17

5.1 Civil society 17

5.2 Market 19

5.3 State 21

6. Stakeholder analysis; consequences 23

6.1 Civil society 23

6.2 Market 23

6.3 State 24

6.4 Water scarcity and climate change 24

7. Action groups 26

7.1 Business representative organisations 26

7.2 State organisations 27

7.3 NGOs 30

8. Emperical analysis 33

8.1 Veolia Water 33

8.2 Suez 35

8.3 Severn Trent 37

8.4 American Water 38

8.5 Grupo Agbar 39

9. Suggested solutions 42

9.1 Public Private Partnerships 42

9.2 Governments in developed countries 43

WATER SCARCITY

3

9.3 Increase water productivity 44

10. Evaluation 45

10.1 Suez 46

10.2 American Water 46

10.3 Severn Trent 47

10.4 Grupo Agbar 48

10.5 Best practice: Veolia Water 49

11. Conclusion 50

12. Limitations & Recommendations 52

Bibliography 53

Appendix 61

Appendix A: Analysis Veolia Water 62

Appendix B: Analysis Suez 63

Appendix C: Analysis American Water 65

Appendix D: Analysis Grupo Agbar 67

Appendix E: Analysis Severn Trent 69

WATER SCARCITY

4

1. Introduction

Water scarcity is not just an issue of a diminishing natural resource; rather, it is an

issue of sustainable life. Unlike some resources, as for instance oil, human life cannot

survive without water and therefore the search for new ways to reduce water usage is

of major importance. Research have indicated that in the years ahead water will

become increasingly scarce in the world as the per capita supply is expected to

decline. By 2025 1.8 billion people are estimated to live in regions or countries with

absolute water scarcity and an addition 350 million will live in severe circumstances

where potential water resources are barely sufficient to meet reasonable water needs

(Richards, 2002).

Although globally there is sufficient water for domestic, agricultural and for industrial

usage, the access to it is uneven across and within countries. Poor regions in

particular, have restricted access to water resources, not so much because of a lack of

the physical availability of water, but rather due to low purchasing power and

inappropriate government policies (World bank: World Development Indicators

2007). This governance challenge reflects itself in the case of Central Africa where

ample water resources exits, but yet national authorities have not succeeded in

providing their citizens with sufficient supply of water. Properly functioning

institutions and good infrastructure management is therefore central in solving this

issue. Some governments have begun to privatize drinking water and wastewater

services. Nevertheless, considerable discussion still takes place regarding the

privatization of water sources which in many cases have resulted in rising water

prices.

Besides domestic water use, also the agricultural and industrial sectors are large

consumers of the world’s water resources. Hence, the decreasing availability of water

may become a limiting factor for agricultural and industrial development in many

countries. Competition for freshwater between the two sectors is causing tension and

may result in the threatening of regional or national food security. Of even greater

concern than the actual volume of water used by industries, is the negative impact that

it has on the environment by disposing of the used water in streams, canals or rivers.

WATER SCARCITY

5

This report is divided into 12 sections. Firstly, we will shed some light on the water

scarcity problem by assessing the global distribution of water and the privatization of

the sector. Secondly, by incorporating this information we will formulate the problem

definition and the research question. We proceed with providing a more in-dept

analysis of the situation, by identifying the stakeholders involved and their

contribution to the problem. The consequences of water shortages will also be dealt

with as well as the effects of climate change on water scarcity. In the following

section we will make an empirical study of five MNEs operating in the water industry

and assess their efforts towards sustainability. Finally, by incorporating possible

solutions for fighting water scarcity provided by other stakeholders, we will evaluate

the performance of the five international water companies.

WATER SCARCITY

6

2. Water distribution

In this section we will analyze de distribution of water resources and make a

distinction between natural and man-made allocation problems.

2.1 Natural water distribution

The planet’s water is not distributed equally in time or space and much of is not

accessible for human use. Freshwater, defined as water containing less than 0.5 parts

per thousand of dissolved salts, is available in aquifers, rainfall, natural lakes,

reservoirs and rivers and represents merely three per cent of world’s water (see figure

1). People already use over half the world’s accessible freshwater.

Figure 1

Source: WBCSD (2005), Water Facts and Trends

Water scarcity occurs when a large number of people in an area are water insecure,

i.e. when an individual does not have access to safe and affordable water to satisfy his

or her needs for drinking, washing or their livelihoods, for a significant period of time

(Rijsberman, 2006). Figure 2 illustrates where current human water use (domestic,

industrial and agricultural) exceeds average water supplies annually. The areas in red

represent regions where water is highly overused. This occurs mainly in areas where

there is a high dependence on irrigated agriculture such as in North China and South

Asia. In these regions society depends on infrastructure as pipelines and canals and on

groundwater extraction to meet local needs.

WATER SCARCITY

7

Figure 2

Source: The United Nations World Water Development Report (2006)

According to the World bank in 2000 the amount of freshwater resources available

per capita was the least in African countries as Morocco, Algeria, Libya, Ethiopia,

Somalia, Kenya, Saudi Arabia, Yemen and Iran. But also countries as Spain, Italy,

Germany, England, India and China are facing decreasing freshwater resources.

2. 2 Man-made water distribution

Besides the way in which nature allocates water resources, also the interference of

men may cause distribution problems resulting into water scarcity. Given that

approximately 260 rivers flow through two or more countries and many countries

depend for a substantial portion of their water on rivers flowing into their land from

other nations, in the absence of treaties among all the parties setting out how the

river’s water is to be shared, tensions are very likely to arise as populations grows and

water demands increase (Wolf, 1998; Postel, 2000). The case of the Jordan River

basin, a river located in a region shared by both the Israeli and Palestinians, illustrates

the complexities involved with the issue of water distribution. According to the

Palestinians the division of the shared water resources is fundamentally unfair as

WATER SCARCITY

8

Israel does not act in accordance with international laws. Palestinian municipalities in

the West Bank connected to water pipelines pay more for the same amount of water

than Israeli municipalities do and their allocation is much smaller. However, Israel

claims that the Palestinians leaders are to blame for the water scarcity by failing to

adopt effective methods to preserve water. According to the Israeli, the problem does

not lie in their allocation of water, but rather in the distribution of water by the

Palestinians (Rouyer, 2003).

Another way in which human intervention may lead to an unequal distribution of

freshwater in rivers is by downstream spillover effects. Stations upstream of

international borders may be less aggressive in their pollution prevention policies

while in downstream countries much stricter pollution controls may exist. In such

cases it may occur that companies in upstream countries free ride by moving polluting

activities near their downstream borders resulting in the deterioration of the

environmental condition (Sigman, 2001).

Finally, the World Bank has concluded in its World Development Indicators 2007 that

actually, globally there is sufficient water to satisfy all needs domestic, agricultural

and industrial users, the problem rather reflects itself in the uneven accessibility of

water across and within countries. Poor regions in particular, have restricted access to

water resources, not so much because of a lack of the physical availability of water,

but rather due to low purchasing power and inappropriate government policies. This

governance challenge reflects itself in the case of Central Africa where ample water

resources exits, but yet national authorities have not succeeded in providing their

citizens with sufficient supply of water.

WATER SCARCITY

9

3. Privatization

This chapter will focus on the privatization of the water supply and sanitation sector.

Several case studies will be assessed from different countries and an in-dept analysis

will be performed of the private water market. We will concentrate on the emergence

of Public Private Partnerships as well as their activities in developing countries.

Private sector participation has become popular in Europe since the early nineties. The

first steps were taken in 1992 when the so-called “Stability Pact” was signed by EU

members and prospective members requiring them to reduce their national financial

deficits to three per cent of the GDP (EU Consolidated Treaty, 2003: art. 104).

Subsequently, public enterprises were sold to private investors as a way to resolve

national debt levels. The result was the emergence of public private partnerships

(PPPs) that aimed to introduce flexibility in the interaction between the two

institutions, state and market. In addition, private concession contracts, defined as an

arrangement in which governments retain legal ownership over the entity while the

management and operation of the services are delegated to the private sector (Van

Tulder and Van der Zwart, 2006), were increasingly awarded to investors from the

water sector. Figure 3 illustrates that the geographical spread of private water

corporations is particularly concentrated in developed countries as Europe and East

Asia.

Figure 3: Share of private sector participation in water supply and sanitation by region

Source: The United Nations World Water Development Report (2006) 3.1 Case studies

WATER SCARCITY

10

Much research has been conducted in the field of privatization, yet the findings are

diverse. Many empirical studies have argued that the privatization of goods or

services strongly stimulates the improvement of quality, productivity, and hence, the

profitability in sectors (Megginson et all. 1994; Barberis et al. 1996; Frydman et al.

1999; La Porta and Lopez-de-Silanes 1999). But when assessing the impact of the

privatization of water supply, attention should be paid to the distinct feature of water,

namely, its perfectly price inelastic nature (Galiani et all, 2005). Research that focuses

on the privatization of water supply in particular, consists primarily of case studies.

An overview of some of such studies together with their respective results can be

found in the table 1.

Table 1

Casarin et al. 2007:

Failures in Water Reform: Lessons from

the Buenos Aires’s concession

As a consequence of privatization of

water the actual bill for an average

residential customer increased with more

than 80 percent in real terms.

Bakker, K. (2005):

Trickle Down? Private Sector

Participation and the Pro-poor Water

Supply Debate in Jakarta, Indonesia

Shows that after a water supply Private

Sector Participation (PSP) contract was

signed, the number of new connections

was lower than the target and that those

connections were preferentially targeted

at middle and upper-income households.

Dorem, M.H.I., Kushner, J., and Klemen,

Z. (2003)

Privatization of Water in the UK and

France- what can we learn?

In de UK water quality improved as a

result of privatization of the sector but

also the prices and profitability rose. In

France privatization took the form of

private-public joint-ventures that

eventually led to a price increase of about

40 percent.

Galiani t al. 2003:

Water for Life: The Impact of the

Privatization of Water Services on Child

Mortality

In Argentina child mortality fell eight

percent in regions that privatized their

water systems, such effects were largest

in the poorest areas.

WATER SCARCITY

11

The majority of case studies in this field reveal the negative consequences associated

with the privatization of water supply. However, it should be noted that it is difficult

to generalize from case studies as they are usually not randomly chosen, but rather

tend to focus one exceptional cases (Wallsten & Kosec, 2006).

3.1 Private water market

Since the nineties there has been a trend among development banks to invest in

private water projects in Central and Eastern Europe as shown in figure 4. This

acceleration is most likely due to the restructuring, consolidation, and legal changes

taking place, which have made private sector involvement more feasible (Hall et al.,

2003).

Figure 4

Source:Hall et al. (2003)

Especially the lending patterns of the World Bank (WB) and of that of the European

Bank for Reconstruction and Development (EBRD) indicate a general preference for

the involvement of the private sector. However, the total number of internationally

active private water companies is still small, reflecting the dominance of the public

sector. The major private companies are concentrated in two countries, namely,

France and the UK. In the UK the water sector is largely privatized but still regulated

by an independent body. In France 80 per cent of the actual management of the water

WATER SCARCITY

12

systems is privately owned, although the supply of water is entirely controlled by the

government. On the contrary, other countries such as Germany, only 4 per cent of the

total market is privately owned, whereas in the US this number is 15 per cent.

When assessing the market dominance, figure 5 shows that two French companies,

Suez (whose water division is Ondeo) and Veolia (previously part of Vivendi Water,

and now known as Generale des Eaux), hold the majority of the private water business

(Hall & Lobina, 2007). Figure 5

Source: Hall & Lobina (2007)

An important characteristic of the private water market is the limited competition

resulting from fierce takeovers and joint ventures and from legal provisions. Such

provisions are embedded in the European Union’s Public Sector Procurement

legislation which is a set of rules intended to promote fair and open competition but

exempts water concessions. Van Tulder and Van der Zwart (2007) define concession

contracts as arrangements in which governments retain ownership of the entity while

the private sector manages and operates the services (See also table 2). Typically,

water concessions have a length of 25 to 30 years and do not allow for competitive

tendering within that period making the barriers to entry into this market

exceptionally high. Besides this, the business environment in Europe is becoming

increasingly interesting for multinational water companies due to the decentralization

of responsibility for water services and provisions to municipalities; the rise of power

of liberal market-friendly political parties; the increasing availability of multilateral

WATER SCARCITY

13

finance from institutions such as the EBRD; and the strict EU quality standards that

are imposed on investments stimulating local governments to delegate water

operations to the private sector.

According to a study conducted by Hall & Lobina (2007) water multinationals usually

have a proactive attitude towards interacting with key policy makers in supranational

and national institutions, with the purpose of creating favourable business

opportunities for private sector participation. They have built networks with

international research and professional institutions and they participate in international

congresses. For instance, Both Suez and Veolia were involved in the Fourth World

Water Forum held in Mexico on March 2006, and the Third World Water Forum in

Kyoto on March 2003. Creating a political network and exerting influence on policy

makers is an important part of the competitive strategy of water companies. Another

reason why water multinationals value political networks is because of the threat of

local governments renationalizing the water sector. In 2000 the Brazilian government

renationalized water after Suez’s subsidiary invested only half of the required amount

in the country’s water system. Suez found itself in a comparable situation when it

filed a claim against the government of Argentina at the World Bank’s international

tribunal. The Argentinean government wanted to renationalize the water sector, but

before doing so, Suez claimed, it should first compensate all private parties that might

be harmed by the decision. Legislations, details of contracts, governmental bodies,

and availability of public finance all, substantially affect the profits that can be made

from the water business and therefore, marketing efforts are mainly concentrated on

promoting the (international) political agenda.

3.2 Public-Private Partnerships

Public-Private Partnership (PPPs) are defined as “the combination of a public need

with private capability and resources to create a market opportunity through which the

public need is met and a profit is made” (Heilman and Johnson, 1992, p. 197). Such

contractual agreements may vary from service contracts, management contracts,

leases, operations and maintenance concessions, capital investments to divestures and

asset ownerships. Table 2 summarizes these different types of arrangements in the

water and sanitation sector.

WATER SCARCITY

14

Table 2: Allocation of key responsibilities under the various options for private sector participation

Source: World Bank, (1997) Toolkits for Private Participation in Water and Sanitation

PPPs became very popular in developing countries in the nineties but their

effectiveness in terms of attracting private financing, providing services to the

population who would otherwise not have been serviced, and lowering consumer

prices is still questionable. Ogunbiyi (2004) concluded from his study that PPPs in

Africa can have negative influence on the poorest people within a society due to

unaffordable tariffs placed on water. He further asserts that PPPs involving

management contracts in which concessions on technical and commercial operations

are applied are the most successful contracts for water supply and sanitation in Africa.

Another study, conducted by the South African Institute for International Affairs

(SAIIA), inferred that PPPs will yield the desired results only in the presence of

thorough planning, good communication, effective monitoring, strong commitment

from both the public and private party, and regulations enforced by the government.

The SAIIA also acknowledges that PPPs are complex, demanding and time

consuming, and that generally these arrangements are more successful in sectors as

ports, telecommunications, transport, and eco-tourism than in sectors as power and

water. Yet, some case studies performed by the World Bank have shown that

arrangements between public and private parties in the water sector of developing

countries have indeed led to an increase in the amount of people gaining access to

WATER SCARCITY

15

basic water services. One study even revealed that the overall domestic welfare

benefit as a consequence of private sector participation was 23 million dollar in

Guinea, and 1.4 billion dollar in Buenos Aires.

3.3 Activities in developing countries

The United Nations Environment Programme (2004) has estimated that the private

sector spent 25 billion US dollars on water supply and sanitation in developing

countries in the period 1990 to 1997 compared with 297 million US dollars in 1984 to

1990. Most investments were concentrated in Latin America and Asia, while Africa

received less than one per cent of the total investments. The skyrocketing number of

new private enterprises that arose in the nineties now seems to follow a reversed trend

as suggested by the UN. A large amount of the big international water companies are

rethinking their role in developing countries due to the political and economical risks

associated with their operations. As a consequence of shrinking profit margins, and

increasing criticism affecting company image many international private water

suppliers have retreated from water service contracts and investments in developing

countries. Some examples include SAUR, that had withdrawn its operations in

Mozambique and Zimbabwe, and Suez that has downsized its investments in

developing countries by one third of total current investments. Multinational water

companies are now focusing again on less risky markets of Europe and North

America.

WATER SCARCITY

16

4. Problem definition & research question

In this section we will define the problem definition and research question based upon

the findings of the first three chapters of this report.

The problem definition:

The research question:

The issue of water scarcity concerns all three dimensions of the societal triangle;

Civil Society as the domestic users of water, Market as the industrial users and the

providers of water, and State as the providers and regulators of the water market

landscape. Given that the water sources that are currently present are sufficient to

meet the demands of civil society, market and state, the actual problem lies in the

accessibility of water resources. Especially poor regions struggle with this

problem as the people in such areas are confronted with low purchasing power

and unstable economies making FDIs hard to attract. This in turn, keeps

developing countries from achieving sustainable economical growth.

“What is the attitude of MNEs in the water supply and sanitation sector towards

fighting the issue of water scarcity, especially in developing countries?”

WATER SCARCITY

17

5. Stakeholder analysis; causes

An adequate supply of freshwater is the most important prerequisite for sustaining

human life and for such reason, it can be stated that everyone is a stakeholder in this

issue. Therefore, in the following section we will examine how each dimension of the

societal triangle contributes to the water scarcity problem.

5.1 Civil society

Population growth

We have shown that there is already a significant water stress in some problem areas,

mainly in the developing countries, where the situation is likely to become worse as a

consequence of the growing world population. In the last 50 years the world

population has increased with 150 per cent from two billion in 1950 to six billion in

2000. During these years the population living in developing countries has almost

tripled. Most of the future growth in the next 30 years will also occur in these regions,

with a world population of 8.1 billion to 8.9 billion in 2030 (UN, 2003; UN, 2006).

Also Falkenmark and Lannerstad (2005) have shed light on this demographical

development; they pointed out that the growing consumptive water demand is the

most important cause of water scarcity and based upon present water productivity,

additional future consumptive water use will equal almost twice the present

consumptive water use from all withdrawals.

The increasing number of people living in urban areas also strongly effects the water

scarcity in a region. The percentage of people inhabited in rural areas has dropped

from 70 per cent in 1970 to around 50 per cent in 2020. Initially, this was only taking

place in developed regions as Europe, America and Asia, but this trend seems to have

set also in Africa as the estimated urban population is expected to be 500 million in

2020 which is an increase from 138 million in 1990 (UN, 2006). Incorporating these

developments it can be stated that the availability of water per capita in water stressed

areas will decrease in the future.

Management of water resources

The most important water resource is groundwater. It is represents 96 per cent of the

total volume of the Earth’s unfrozen freshwater (Shiklomanov and Rodda, 2003).

WATER SCARCITY

18

According to Falkenmark and Lannerstad (2005) a reserve of 30 per cent of the

natural streamflow must remain to safeguard aquatic and coastal ecosystems. But

many areas are already using more than this critical amount of 70 per cent, some even

above 100 per cent. The consequences are groundwater overdraft and river depletion,

which will affect the limited water resources permanently. The map below shows the

current groundwater abstraction.

Figure 6: Groundwater abstraction rate as a percentage of mean recharge

Source: IGRAC, 2004

It is clear that the consumptive use in primarily Sub-Saharan Africa and the Middle

East is harming the environment. The limited knowledge of water-management in

these areas has led stakeholders to using water regardless of possible environmental

impacts and the long term availability.

Already over-appropriated regions can only be restored through reduction of present

consumptive use. Otherwise groundwater levels will fall, resulting in aquifers

becoming economically unfeasible and a decreasing quality of water (Falkenmark and

Lannerstad, 2005). For this reason, it is necessary that more attention will be paid to

sustainable management of groundwater with the aim of finding the balance between

consumptive water use and a healthy environment.

WATER SCARCITY

19

5.2 Market

Industry

Not only is the demand for water in the civil society increasing, the same holds for the

market sphere; in areas associated with dense settlement and advanced levels of

economic development the industrial water consumption is particularly high.

Water is used for numerous purposes; cleaning, heating, cooling, generating steam,

and transporting, but also as a raw material. Figure 7 illustrates that that the total

amount of water withdrawn by industry is much greater than the amount that is

actually consumed.

Figure 7: The world industrial water use, 1950 - 2000

Source: Shiklomanov, 2000.

More important than the actual volume of water used by industry are the negative

environmental impacts it has. When wastewater is not adequately reclaimed and it is

discharged directly into the water cycle, water quality can be significantly

deteriorated. If the water upstream is polluted with heavy metals, chemicals or

particulates, or loaded with organic material the level of oxygen in downstream water

may deplete making it more difficult for fish, insects and other species to survive.

What should be taking into consideration here is that a much larger amount of water

may actually be affected by such practices than volume of the industrial discharge

itself.

WATER SCARCITY

20

Agriculture

Most of the water used for agriculture is called green water; water stored in the soil

from rain. Irrigation takes place in case of drought and dry spells when rainwater is

insufficient to supply crops with water. Although agriculture uses green water for a

majority of its activities, still 70 per cent of the world’s freshwater, the so called blue

water, is necessary to meet food demands. Consequently, a strong increase in the

demand of fresh water has occurred and currently, approximately 60 per cent of the

groundwater is being used for agriculture related activities (UN, 2006). The

agriculture sector has developed rapidly during the last centuries, resulting in

irrigation structures and significant technique improvements (Falkenmark and

Lannerstad, 2005), but yet, it remains the largest and least productive consumer of

water resources (see figure 8 and 9).

Figure 8: Water consumption

Source: World Bank: World Development Indicators 2007 Section 3

WATER SCARCITY

21

Figure 9: Water productivity

Source: World Bank: World Development Indicators 2007 Section 3

5.3. State

Governance systems within the water sector determine who gets what water, when,

how and decides who has the right to water. Given that local as well as international

governmental bodies largely determine the regulatory landscape of the water market,

it may also be argued that they hold responsibility for water scarcity. Postel (2000),

for instance, has claimed that a substantial part of water scarcity is artificially created

by making it available for free or at a price well below the true production costs (by

means of subsidies). As a result, water-intensive sectors as agriculture and industry

often have an incorrect perception that sufficient water supplies are available and

hence, huge amounts of water are used non-productively.

As has been explained in chapter two, sometimes regulatory bodies are accountable

for uneven distribution of water in countries or regions due to lack of effective

monitoring and/or poor enforcement of legislation. Moreover, it has repeatedly been

the case that subsequent to a (partial) privatization of the water supply a large amount

of people lost their accessibility to basic water services as result of increased prices. In

these cases it is essential that governments maintain a strong commitment to the water

business, even after privatization, in order to ensure equal water distribution.

Finally, governments may cause water scarcity by engaging into armed conflicts. For

example, wars in Kosovo, Afghanistan and Iraq have led to the demolition of

WATER SCARCITY

22

economically vital water infrastructure depriving a large number if people of safe

drinking water, sanitation and sufficient water for productive uses.

WATER SCARCITY

23

6. Stakeholder analysis; consequences

In this part of the stakeholder analysis we will lay emphasis on the consequences with

which the stakeholders are faced with. Again we will analyse all three dimensions of

the societal triangle. Finally, we will call into attention the issue of global warming

and its relationship with water scarcity.

6.1 Civil society

Because water is one of the first priorities in life, a lack of it has a magnificent impact

on society. An amount of 1.1 billion people in developing countries already have

inadequate access to water and 2.6 billion lack basic sanitation. This is directly related

to health problems in these societies; 1.8 million children die each year from

diarrhoea and another 1.4 million die from other related diseases caused by lack of

water (Globalissues.org). The development of children is also limited as each year

443 million school days are lost because of illness related to water. Of even major

concern is the total massive economic waste associated with water scarcity; in Sub-

Saharan Africa, one of the affected areas, about five per cent of the GDP is lost on

costs as health spending, productivity losses and labour diversions (Globalissues.org).

All these interrelated difficulties are keeping developing countries from reaching

sustainable economical growth.

6.2 Market

Industry and agriculture have engaged R&D activities as a response to the growing

scarcity of water. Membrane technology is an outcome of such efforts; it is a filtration

system that separates a wide and growing range of substances present in water from

the water itself. These systems are used for industrial and drinking water treatments,

wastewater treatment and desalination of salt water. Costs have reduced substantially

and the technology is now available worldwide.

Countries where water scarcity exists usually also deal with issues as economical

stagnation, unstable local currency, lack of democracy and high levels of corruption

which increases operational risks for businesses. As explained earlier, this is leading

multinational firms to withdraw their activities from these risky markets. Romilly

(2006) also stressed that companies facing large sunk costs associated with operating

WATER SCARCITY

24

in certain developing countries are likely to avoid investments in these regions and

turn to less risky alternatives.

6.3 State

Societies facing water scarcity problems experience increasing competition for

freshwater between agriculture, domestic and industrial usage causing tension

between rural and urban areas and possibly, threatening regional or national food

security. The different causes of water scarcity mentioned earlier rarely occur alone;

usually they arise in combination and coupled with other obstacles such as weak

institutions and unresponsive governments. Consequently, conflict situation may arise

between stakeholders about the rights on the use of water. Statistics regarding water

disputes have shown that most conflicts occur within nations. In the last 50 years

approximately 37 water conflicts involved violence, 30 of those took place between

Israel and a neighbouring country, and five occurred outside the Middle East. In

addition, 157 treaties have been signed regarding the same issue.

6.4 Water scarcity and climate change

According to Arnell (2004) climate change increases water resources stresses in some

watersheds, but decreases them in others. This is a result of the weather which will be

more intense in certain periods of the year. However, the decrease in water stress is

for some areas misleading, as heavy rainfalls during the high flow seasons can result

in flooding. In such situation the rainfall will only damage the existing infrastructure

and will not decrease the water stress, depending of course, on the capabilities of a

area or country in managing great varieties in rainfall. As concluded by Arnell (2004),

watersheds that really benefit from the climate change are limited and are especially

located in East and Southern Asia.

The impact of the increasing intensive weather is also researched by Romilly (2006).

He pointed out that a relatively constant increasing temperature has a lower impact

than extreme conditions which occur only a few months in a year; from flooding or

other natural disasters a society can suffer a whole year. For this reason Romilly

(2006) looked at the volatility of the weather in different regions aiming to predict

which regions will suffer the most from greenhouse effects in the foreseeable future.

He researched the weather in eleven regions over the period of 1870 to 2004 and

WATER SCARCITY

25

concluded that the risks of climate change are not distributed uniformly across the

globe; the regions Canada and southern Alaska, central Asia and northern Africa are

the three regions with the highest risk. This is an important finding given that Central

Asia and Northern Africa are exactly those regions where the problem of water

scarcity is already the biggest in terms of the amount of water stress (UN, 2006). Both

authors concluded that the biggest challenge in the future is how water resources

ought to be managed.

WATER SCARCITY

26

7. Action groups

Besides the stakeholders described in the previous chapters, also action groups play

an important in role in fighting water scarcity. In the following section we will

describe some of these action groups and report their achievements.

7.1 Business representative organizations

WBSCD

The World Business Council for Sustainable Development (www.wbcsd.org, 2007) is

a CEO-led, global association of 210 companies dealing with business and sustainable

development. Its mission is to provide business leadership as a catalyst for change

toward sustainable development. Businesses have to be invited by the WBSCD to

become a member. Members have to make available their knowledge, experience, and

appropriate human resources.

The WBSCD mainly works with business cases to provide members with an example

of how other businesses have turned a problem into a competitive advantage. These

business cases are merely an example for members; they do not impose any

regulations upon WBSCD members. However, a WBSCD novice that was developed

during the writing of this research is the Global Water Tool. It helps member

companies to compare water uses with water and sanitation availability information,

calculate water consumption and efficiency, establish relative water risks, and to

create key water Global Reporting Initiative (GRI) Indicators.

Global Compact

The global compact is a UN initiative to provide a framework for businesses that want

to align their operations with the ten universally accepted principles in the areas of

human rights, labour, environment, and anti-corruption. Currently this association

consists of 4685 members.

At July 5, 2007, six CEOs had signed “the CEO water mandate”

(www.unglobalcompact.org, 2007) at the Global Compact leaders’ summit. So far,

four CEOs from three other companies have joined them. They have declared to

specify their progression by making use of the relevant performance indicators from

in the GRI guidelines, publish and share water strategies in corporate reports, and to

WATER SCARCITY

27

be transparent towards governments and other public authorities. Because the CEO

water mandate has only been signed in July 2007, the results have not yet been

published.

7.2 State organisations

UN

The UN is an organisation with 192 member countries, founded “to maintain

international peace and security; to develop friendly relations among nations; to

cooperate in solving international economic, social, cultural and humanitarian

problems and in promoting respect for human rights and fundamental freedoms; and

to be a centre for harmonizing the actions of nations in attaining these ends” (The

United Nations: Organisation, UN website). The UN family of organisations is made

up of the United Nations Secretariat, the UN programmes and funds (such as UNICEF

and UNDP), and the specialised agencies. They have their own governing bodies and

budgets as well as their standards and guidelines.

The UN have signed two major recent declarations concerning the problem of water

scarcity; The Millennium Declaration (2000) has as goal “To halve, by the year 2015,

the proportion of the world’s people whose income is less than one dollar a day and

the proportion of people who suffer from hunger and, by the same date, to halve the

proportion of people who are unable to reach or to afford safe drinking water.” And

the Johannesburg declaration on sustainable development (2002): “We welcome the

focus of the Johannesburg Summit on the indivisibility of human dignity and are

resolved, through decisions on targets, timetables and partnerships, to speedily

increase access to such basic requirements as clean water, sanitation, adequate shelter,

energy, health care, food security and the protection of biodiversity.”

In 2006, the Millennium Development goals’ progress was as follows: “With half of

developing country populations still lacking basic sanitation, the world is unlikely to

reach its target. World targets for safe drinking water are in sight, but coverage

remains spotty in rural areas” (The Millennium Development Goals, Report 2006).

WATER SCARCITY

28

World Bank

The World Bank is made up of two development institutions: the International Bank

for Reconstruction and Development and the International Development Association

(http://web.worldbank.org, 2007). The World Bank is owned by 185 member

countries, which are generally represented by their ministers of finance or ministers of

development, who make up the board of governors. Their duties are delegated to a

board of 24 directors. The overarching goal of the World Bank is poverty reduction by

building a climate for investment, jobs and sustainable growth and by investing in and

empowering poor people to participate in development.

The World Bank has granted quite some loans in favour of water supply around the

world. For instance, in 2005 the World Bank had set up a Development Marketplace

competition providing five million dollars for the best idea to provide clean water,

sanitation, and energy to local communities in developing countries lacking these

basic services. It has granted twenty million dollars to Iraq water supply, sanitation,

irrigation and drainage systems. Finally, the Bank signed a loan agreement with

Peruvian President Toledo for 50 million dollars to improve water supply and

sanitation facilities in rural regions of Peru.

G8

The G8 was initiated by the French President Giscard d’Estaing in 1975 to discuss the

current world issues (which were dominated at the time by the oil crisis) with

important leaders in a frank and informal manner without armies of advisers. It started

with Germany, Japan, the United Kingdom, the United States and Italy, but later

Canada and Russia joined. The G8 has turned to a structural and global perspective

and has added a wide range of political and social issues, especially in the areas of

sustainable development and global health.

From the 2003 G8 summit, held in Evian, France, the water action plan resulted. It is

a plan that builds on the Millennium Declaration, the Plan of Implementation of the

World Summit on Sustainable Development, the Monterrey consensus and the Third

World Water Forum. However, no data can be found on the results of the water action

plan (www.g8.fr, 2007).

WATER SCARCITY

29

EU Water Initiative

An example of a governmental body addressing this issue is the EU Water Initiative

(EUWI) that is based on a participative multi-stakeholder approach. The EU launched

the EUWI to contribute to the achievement of the Millennium Development Goals

and the targets of the World Summit for Sustainable Development in Johannesburg.

Various strategic partnerships in specific regions draw together government, civil

society, private sector and other stakeholders. A number of working groups are

established. Working groups have either a regional/thematic focus (e.g. Water Supply

and Sanitation in Africa) or concentrate on cross-cutting issues (e.g. Research,

Finance) (www.euwi.net).

Because the EUWI was only launched in 2002, most programmes have only just been

launched and results will – for the larger part – still have to be seen. The first annual

report was published in 2006, and described contemporary operations and the

obtained results of 2005 and before:

• The EUWI has made agreements between the EU and other water sector

programmes or organisations for reinforcement of political commitment

towards action and innovation oriented partnership.

• Eleven cooperation processes have been launched and four are under

preparation to promote improved water governance, capacity building and

awareness.

• Ten trans-boundary river basin management support programmes have been

planned, and some already launched. Five of which in Sub-Saharan Africa,

four in Eastern Europe Caucasus and Central Asia – EECCA and one in the

Mediterranean. The African trans-boundary basin management support

programme is contributing to the establishment and operationalisation of the

Volta River basin organisation.

• Additional financial resources and mechanisms to ensure stable financing

have been set up by making country-specific financing strategies.

WATER SCARCITY

30

7.3 NGOs

WWF

The World Wildlife Fund is an independent foundation governed by a Board of

Trustees under an International President. Its headquarters are in Switzerland and it is

registered under Swiss law. Seventy percent of its funds are raised via school children,

corporations and foundation that make contributions. Twenty percent of its funds are

received from Swiss national organisations, and governments and aid agencies.

The WWF sees opportunities in managing water in cooperation with managing rivers

and wetlands, resisting harmful infrastructure, curbing water waste in agriculture and

reducing poverty. They have different programmes for different issues:

• Rivers; river basin management deals with the river from source to sea,

involving stakeholders from many countries who share a river basin.

• Wetlands: involving conservation and sustainable use.

• Dams: “alternatives to damming rivers for power generation or irrigation

water supply, to erecting dykes to protect against floods, and to canalising

river beds for ship passage” (WWF, Turn Policies into Practice).

The WWF believes that better management practices can reduce agriculture’s direct

environmental impacts by decreasing the use of water, pesticides, or fertilisers.

Some examples of fruits of WWF action are:

• The approval of a National Water Resources Plan to implement its national

water law by Brazil’s National Water Council. The plan promises to make

conservation of fresh water an important part of future infrastructure projects

and water policy. River basin commissions are coming up with practical action

such as increasing treatment facilities for waste water and restoring degraded

habitats.

• WWF helped stop the Ebro Transfer of the Spanish National Hydrological

Plan to redistribute water from the Ebro River in the north to the south by

demonstrating and prevent European Union support. The plan would have

meant that 120 dams would have been built and would have threatened

habitats of 60 per cent of Europe’s bird species.

WATER SCARCITY

31

Welt Hunger Hilfe

Welt Hunger Hilfe/German Agro Action is a German NGO with the German Federal

President Horst Köhler as its patron. It receives funds from both donations directly

from the population as well as from the German Federal government, the European

Union and the United Nations. The projects are carried out by local partners and their

target group is the poorest people: landless, small farmers, women, children and

youth, people who lost everything as a result of war or environmental disasters and

people who need start-up aid to lead a secure life.

Welt Hunger Hilfe has carried out twelve projects dealing with the effects of drought

and flooding in 2006. After the floods in Kenya it has offered relief in several ways.

Through emergency aid they have secured short-term drinking water supplies in the

rural regions of Southeast Kenya. Collection tanks for drinking water and wells

enabled 188,000 people better access to drinking water. They offered training in

drinking water hygiene, equipment maintenance and management (Annual Report

2006 Deutsche Welthungerhilfe).

UNICEF

UNICEF is actually a hybrid organisation between state and civil society. UNICEF

was founded by the UN and also became a part of the UN in 1953. It gets 64 per cent

of its funds from governments and most of the remaining 36 per cent from raising

funds by National Committees for UNICEF (which are NGOs) and by selling greeting

cards and other products.

UNICEF works in more than 90 countries around the world to improve water supplies

and sanitation facilities in schools and communities, and to promote safe hygiene

practices (UNICEF Water, Environment and Sanitation Programme). They sponsor

activities and work with partners, including families, communities and governments.

They provide relief in emergencies to communities and countries threatened by

disrupted water supplies and disease. The water and sanitation programmes are

designed to contribute to the Millennium Development Goal for water and sanitation.

Through its programmes, UNICEF has achieved a lot: in Afghanistan, UNICEF

ensured that water and sanitation efforts continued despite the bombing campaign, in

Bangladesh, UNICEF comes to rescue with the annual floods, in Burundi, the

emergency programmes have resulted in improved awareness and practices, and in

WATER SCARCITY

32

Iraq, extensive emergency interventions helped meeting the immediate needs of

people during and after both wars. UNICEF continues to focus on rehabilitating

infrastructure and reversing the declines in coverage. In Sudan, drilling, installing

hand pumps, constructing piped water systems, building latrines and hygiene

education is done on an ongoing base.

WATER SCARCITY

33

8. Empirical Analysis

In this section we will analyze the sustainability activities of five international water

companies in order to obtain a better understanding of their efforts to combating

water scarcity.

The five companies subject to this analysis were selected based on their geographical

spread and their online accessibility of elaborate corporate social responsibility

information. The major companies which have been identified are the French

companies Suez (acquired ONDEO and United Water Resources and Aguas

Argentinas) and Veolia Water (acquired Compagnie Generale Des Eaux, was then

called Vivendi Environment, later the firm sold its interest in Vivendi Environment

and re-branded to Veolia Water), the American company American Water (currently

still a division of the German RWE Group), the Spanish Agbar Group, and the British

Severn Trent.

The sources used for this analysis included Sustainability reports of the year 2006 and

the company’s website. The framework used to assess company performance and

disclosure may be found in the appendices.

8.1 Veolia Water

Veolia Water is a division of Veolia Environment, a world leader in environmental

services. This multinational operates within the sectors of water management, waste

management, energy management and passenger transportation to meet demands of

municipal and industrial customers. Its water division, Veolia Water, is headquartered

in France where also the majority, 48 per cent, its business is performed, the rest of

Europe takes a share of 31 per cent, and also in North America Veolia Water is

present representing 8 per cent of total business. Asia, Africa, Middle East and India

together add up to a final 7 per cent of the firm’s total geographical presence.

Veolia Water is committed to encouraging local communities to become more

involved in the management of public water and wastewater services and to

encourage better dialogue with consumers and their representatives. The company

achieves this by organizing events for students where they receive environmentally

aware education. The firm also engages in efficiency improvement practices to create

WATER SCARCITY

34

sound water management. In so doing Veolia Water had set itself the goal within the

European Union, to increase efficiency levels of water supply systems to more than

80 per cent

Veolia Environment’s sustainable performance has been acknowledged by several

external agencies as the company has been listed Dow Jones Sustainability Indexes,

where Veolia Water has been selected as the leading company in the water sector for

DJSI World and DJSI EURO STOXX, the FTSE4good (Financial Times and London

Stock Exchange), the ASPI Eurozone Index (Advanced Sustainable Performance

Indexes), and the Ethibel Sustainability Index.

Veolia Environment was ranked in 2006 second among French companies for the

quality of its reporting in a study by Global Reporters, sponsored by the UNEP. On

the website Veolia Water provides an in-dept report on its operations in Africa,

Middle East and India (AMI). Its operations in these regions are mostly represented

by PPP arrangements with concessions as the most common contract type. Such

contracts are combined with so called formal-informal partnerships, between Veolia

Water and local non-profit organisations. As a part of its expansion strategy in

emerging countries, Veolia Water has gradually opened up to cooperation with NGOs,

medical practitioners etcetera as they recognize the necessity of stakeholder

involvement in achieving sustainable development. The firm’s emphasis on

stakeholder dialogue is also noticeable in the Sustainable Development Report of

Veolia Environment where an extensive table is provided in which 28 commitments

and priorities are mentioned (e.g. employment, conserving water resources, social

policy innovation etcetera), to which all stakeholders express their interest. Examples

of Veolia Environment’s lobbying approaches are also stated and a clear description

in terms of reasons, objectives, means and results is given.

Furthermore, Veolia Water listed detailed information regarding five water companies

in the AMI regions where it was able to provide basic water services to more people

in a period of four years. Also, substantial information is provided regarding the price

policy in developing countries. It is stated in the report that “Applying the principle of

“water pays for water”, which works in developed countries, is unrealistic in many

Southern hemisphere cities and countries. The concept of “acceptable costs recovery”

needs to replace that of “total costs recovery”. Should it not be possible to recover the

full cost of the service from customers, public authorities have a duty to arrange for

WATER SCARCITY

35

socially pricing policy which can take many different forms…”. The report provides

many examples of various solidarity measures that have been put in place to make

prices socially acceptable. Some other ways in which the multinational helps to

enhance local economies is by promoting environmental health awareness, creating

new jobs, providing training, and ensuring social protection for employees and their

relatives.

Finally, it is noteworthy that unlike the Veolia Environment Sustainability Report, the

report based on Africa, Middle East, and India is independently audited. Veolia

Environment’s report is far less detailed, even vague, regarding its water operations

compared to the specialized report.

Sources used for this analysis: Veolia Environnement Sustainable Development 2006

Report; 2006 Overview - Veolia Water AMI.

8.2 Suez

The Suez Group is an international industrial and services group that operates in the

water, waste and energy business. It is the second supplier of environmental services

in Europe (water and waste services). Suez is present in Europe, South America,

North America, China, North Africa, Australia, and the Middle East. For this analysis,

a combination of the sustainable development strategy report, the sustainable

development report of 2006 and the website have been used. The information given in

the reports is quite scattered, work a lot with examples, and therefore never exclusive.

This makes it often unclear if the company has more practices of a certain example or

not.

The Suez group has been a member of the Global Compact since its launch in 2000; it

is one of the founders of CSR Europe, a corporate network for sustainability; and a

member of the WBCSD. Suez employees have founded Aquassistance, in which Suez

employees work in their spare time on projects that have been proposed by local

communities. It has completed 150 projects, such as a project to provide a local

community in Brazil with much needed water infrastructure and a project installing

meters in Armenia. Suez has created the Suez Foundation at the end of 1992. Specific

information on what it does in which countries could only be found on the website,

WATER SCARCITY

36

apart from a project in France. The Suez foundation has many projects in

development countries, such as a project to assist a treatment centre for alcoholic

children in Bolivia.

Sino-French, a Chinese subsidiary of Suez together with New World, ranked first in a

national poll on water companies in the category “companies with the best reputation

in the water industry”. However, this is a relative ranking: the real meaning of it

depends on what other water companies they are competing with, which might not be

much competition as China is still somewhat of a communist country.

Suez has its own research centre, named CIRSEE (International Water and

Environment Research Centre), which does research on water treatment, plant sludge

and smells, and measurement and treatment of emergent pollutants. Techniques for

rapid detection of the presence of viruses, parasites, and bacteria are currently being

developed.

The water company deals with a lack of water in both the regions it works in and

disadvantaged regions in development countries. In France, Suez established a nation-

wide warning system to increase surveillance on sensitive drinking water production

points and anticipated the need for technical solutions for maintaining adequate

supplies in times of crisis (2006 Activities and Sustainable Development Report).

Other solutions for the lack of drinking water that are used by Suez are the recycling

of used water, which enables re-use by industry and farms; desalination of seawater,

in which Suez is also one of the world’s largest actors with 250 plants worldwide

producing drinking water through this technique; and the treatment of rainwater.

Local communities are being educated on how to use water in a sustainable manner.

Wastewater treatment is proposed in the European directive on the treatment of urban

waste water. In France, the average de-pollution rate for urban waste is only 50 per

cent. Suez claims that it is common practice in its operation to treat wastewater and

clean sludges.

In the company’s Sustainable Development Report of 2006 it is mentioned that the

firm views public-private partnerships as a tool for “local authorities to carry out their

public mission without abandoning their decision-making role, especially with respect

to prices”. This probably refers especially to local governments that do not have the

funds to run their own water sanitation services. Suez’s project in Algiers seems to be

an example of this. Some other examples of Suez PPPs are its concession contracts

WATER SCARCITY

37

with the Moroccan government in Casablanca and the city of Buenos Aires in

Argentina; it has a leasing contract with the city of Paris, France; a BOT (build

operate transfer) contract with the United Arab Emirates and the city of Sidney,

Australia. It is not explicitly stated if this is an exhaustive list or not, but since most

information in the Suez report is based on examples, it can be assumed that it is not.

Suez provides support to underprivileged clients in France by helping them manage

their water budget.

Suez does not mention either the sharing of knowledge or technology with

development countries or flexible price strategy for poor regions.

As Suez is not only a water company, but also an energy company, it is directly

involved with the energy issue. Its stance in this issue is clear: it supports the use of

renewable energy. Moreover, more than a quarter of its production originates from

renewable energy sources. All Suez wages are above minimum wage. Average

training hours per employee are higher than Agbar’s, namely 24.8 hours.

Sources used for this analysis: 2006 Activities and Sustainable Development Report;

Sustainable Development- cornerstone of our strategy; Public-Private Partnerships –

pooling skills; Memberships and Partnerships.

8.3 Severn Trent

Severn Trent is a water company divided into three divisions; water supply, research

and water services. This analysis of Severn Trent is based on the Sustainability Report

and their Code of conduct. Both reports are structured the same way, the general

statements in the beginning and the specific aspects of the divisions and the issues of

water in the middle and the end of the report.

The company strategy is focused on the home countries of Severn Trent; the United

Kingdom and the United States. In the future Severn Trent wants to expand into new

geographical areas in both the developing and the developed world. The research and

water services division is currently cooperating with developing countries like Kenya,

Tanzania and Congo. They provide these countries with their existing knowledge,

which is often funded through institutions as the World Bank or the European Union.

WATER SCARCITY

38

However, they do not want to cooperate with unstable and corrupt regimes resulting

in the avoidance of certain countries for FDIs.

In their international approach they do support the United Global Compact. It is a

helpful platform for dialogue on corporate accountability and the principles are

helping Severn Trent to make their CSR strategy more integrated. In the UK and the

US Severn Trent is involved in the relevant characteristics of the issue of water. They

support training and education for employees and societies in order to use water more

efficiently. In their internal processes they want to reduce the amount of water used to

support activities. Thereby they are doing research in the treatment of water, leakage

reduction, and environmental research. The aim is to become a more sustainable and

environmentally friendly user of water an in line with this, the company’s R&D

activities have been awarded a budget of 5.3 billion dollar. Surprisingly, there is

nothing mentioned about privatisation and PPPs or other partnerships with the local

authorities.

To improve the transparency of the report all the statements are provided with data

which is audited by Acona LTD, an independent third party. The purpose of this

review was to verify that the data is materially accurate and that qualitative statements

can be supported by evidence. The statements and commitments of Severn Trent are

specific and provided with timeframes for the coming year.

To conclude, Severn Trent is a corporately social responsible company with a strong

focus on the home country. For this reason Severn Trent is not directly involved in the

real problem areas in a way that it could. They merely share information and

knowledge with developing countries, but their plants are based in developed

countries.

Sources used for this analysis: Our Code of Conduct (2005); Corporate Responsibility

Report (2006).

8.4 American Water

American Water was founded in 1886 and is the largest water services provider in the

United States. Nowadays they are the biggest water company in the RWE group.

However, the mother company is changing its strategy with the focus on energy with

the consequence that American Water will be sold in the coming year. The analysis is

WATER SCARCITY

39

based on the website of American Water as an explicit CSR report of this company

was lacking.

The company is only present in its home country, the United States, which is likely to

remain so in the future. American Water itself is not directly involved with the issue

of water scarcity, but they are supporting several NGO initiatives to fight water

scarcity such as the Millennium Development goals and Water for People. The firm

provides knowledge and information to improve efficient water use and responds with

the necessary tools when emergencies occur. Since American Water is concentrated in

one country, it is not actively supporting international standards like the Global

Compact. The best way to manage water in its view is by creating PPPs, which is also

the way in which American Water has established most of its contracts in the United

States.

Of all the information provided on the company’s website, the main statement is

actually not harming the environment and the relations with stakeholders. Concrete

descriptions and quantified measures with regards to how to reach their goals are not

mentioned. However American Water’s current impact on the environment is limited.

The communication of the firm’s operations is still unstructured and based on a wide

range of short documents. Also the transparency of the information given is low due

to the fact that it is not clear how the verification is applied.

Source used for this analyis: http://www.americanwater.com.

8.5 Grupo Agbar

Grupo Agbar is a Spanish multinational at the head of a holding of more than 230

companies that operate in all fields related to community service, most importantly

the water business, health, inspection and certification. Forty-six per cent of its

operating revenue is attained in the water business, in which it operates in Spain, the

United Kingdom, Mexico, Cuba, Andorra, Chile, and Colombia. Operations are

concentrated in the home country, with 81 per cent of the workforce. Chile accounts

for nine per cent of the workforce, the UK for one per cent, and the remaining nine

per cent are to be found in Mexico, Cuba, Andorra and Columbia.

WATER SCARCITY

40

In its 2006 Sustainability Report the following stakeholders are defined: shareholders,

employees, customers, society: local community and environment, public

administrations, regulators, NGOs, neighbour associations, financial institutions,

opinion leaders, unions and employers associations, suppliers, strategic partners,

professional associations, the academic community, consumer associations,

communication media, and political partners. The firm joined the Global Compact in

2002. It also founded the Agbar Foundation that spreads values associated with the

value of water and promotes a reflection about the particitpation of private companies

in regulated services of public interest alongside diverse interest groups, especially the

acedemic world (2006 Sustainability Report). Together with BBVA, Repsol YPF and

Telefónica, Agbar founded the Corporate Reputation Forum for analysis and

dissemination of trends, tools and models concerned with corporate reputation in

business management.

It is noteworthy that Agbar has a collaboration agreement with the Polytechnic

University of Catalunya (Universitat Politècnica de Catalunya), for the creation of the

Agbar Chair for Quality of Life, “aimed at training, research, transfer of research

results and scientific dissemination in the spheres of the complete water cycle and

construction and certification” (Professional Organisations and Other Associations

Agbar Water). It also received the highest GRI rating (A+) for its 2006 Sustainability

Report.

The laboratory of Aguas de Barcelona, one of the subsidiaries of Agbar, was selected

by the World Health Organisation to do a study on the viability of incorporating plans

for Water Safety in the new European regulations for drinking water. Aguas de

Barcelona itself was selected by the WHO as “the representative company for supply

of drinking water in the Mediterranean area” (2006 Sustainability Report).

Agbar is looking for new sources of water, such as the desalination of seawater and

the use of treated wastewater and subterranean water for secondary purposes such as

irrigation and industrial use. However these sources are still in the planning phase and

not yet executed. As a current solution for water scarcity, Agbar recharges aquifers

artificially, looks at pipeline quality and has telereading systems for the control of the

volume of water that is consumed.

The local community in Spain and Chile is being educated on the issue of water

scarcity in many ways, such as visits to facilities, participation in fairs, awareness

WATER SCARCITY

41

campaigns, the organisation of days to put water in the footlight, and the Agbar

Museum. Agbar also wants its employees to “act as agents for the promotion of

environmental friendliness and adapt their behaviour to its development” (Agbar

Corporate Environmental Code).

Its many different projects to save energy it is apparent that Agbar clearly has a vision

on energy saving. Some examples are a project for a centralized system for heat and

cooling to provide the coast of Bèsos with heating, air-conditioning and hot sanitary

water based on steam from Bèsos waste plant; there are initiatives for reducing

electricity consumption in drinking water pumping stations; and lastly, the recovery of

energy that is generated through the elimination of hydrogen that is again generated in

nitrate cleaning. The Agbar Corporate Environmental Code states that Agbar

“promotes the use of environmentally friendly performance technologies and methods

in all its business lines and anywhere where business is developed. The Group also

favours the development of its activities under the approach of ecological efficiency.”

In selecting its suppliers, Agbar includes environmental criteria in its assessment and

favours purchases from suppliers that provide for environmental requisites in their

management.

Agbar has quite some projects to preserve biodiversity, such as the construction of the

Aguas de Ramón national park, the construction of islands for birds in Chew Lake, a

nature reservoir in Bristol.

The only thing that seems to lack in Agbar’s report is social information dealing with

employees. There are no exact data about wages, merely an indication of compliance

with host country regulations considering minimum wages. The average number of

hours of training per employee is 17.3, which is lower than that of Suez.

Sources used for this analyis: 2006 Sustainability Report; Corporate Environmental

Code; Professional Organisations and Other Associations Agbar Water.

WATER SCARCITY

42

9. Suggested solutions

In this section we will report some of the solutions that have been proposed by

different stakeholders. The most important actors in solving water scarcity are the

market and state; therefore, we will again stress the role of PPPs.

9.1 Public Private Partnerships

Often the governments in the developing countries do not have the knowledge and

financial resources to build up a sufficient infrastructure (Van Tulder and Van der

Zwart, 2006; Farlam, 2005). An alternative for such governments is to arrange PPPs.

However, in order to obtain the desired results from such contracts the following must

be provided:

• Conducive regulatory framework

One of the characteristics of PPPs is that the private operator has a strong

commitment with the host country before participation (Van Tulder and van

der Zwart, 2006). In order to attract FDI from the private sector a level playing

field must created limiting the risk of doing business, this entails a stable and

predictable regulatory regime that promotes essential values such as

independence in legislation, accountability, transparency and professionalism.

In addition, appropriate regulatory frameworks must exist that monitor water

and sanitation services; distributes water rights in way that is perceived by

most actors to be fair; supports a well-developed, relatively efficient, and fair

mechanism for adjudicating water disputes, ensures a level of equity sufficient

to provoke cooperation among various stakeholders in managing scarcity; and

finally protects property rights so that firms can generate an equitable return

on investments (Richards, 2002).

• Enhanced performance of service providers

Efficient and professional management of the water utility by the private party

is essential to achieve improved water services and to enlarge water system

infrastructures. In cooperation with governments, the water company must

settle the prices that will be charged to consumers which would enable access

to all users without discriminating for income. At the same time public water

suppliers must account for effective recovery of operations and maintenance

WATER SCARCITY

43

costs in order to establish sustainable water supply and sanitation services to

meet the growing demand.

• Stakeholder dialogue

Water supply and sanitation requires a participatory approach that aims at

strengthening the collaboration among stakeholders of the societal triangle.

Stakeholder engagement should become a part of the mainstream business

practice as a way of gathering important input and ideas, anticipating and

managing conflict, improving decision-making, building consensus among

different groups, strengthening relationships and enhancing corporate

reputation diverse views.

9.2 Governments in developed countries

Looking at the next Kondratieff the challenge for developed countries is to become

less dependent on natural resources to establish future economic growth. This holds

especially for fossil fuels and water. Interestingly, a decreasing use of fossil fuels will

also decrease water stress, that is, lower levels of carbon dioxide emissions will

reduce climate change effects and hence, decrease weather variability. As has been

described in chapter six, it may be argued that high weather variability negatively

impacts water supplies. To realise these developments radical innovations are needed.

Private sector R&D expenditure in developed countries has been increasing

substantially in the past 30 years adding to the overall competitiveness and power

base of these markets (Van Tulder and van der Zwart, 2006).

Governments in developed countries may also contribute to reducing the problem of

water stress through sanctioning. With respect to ‘soft’ issues, the effectiveness of

sanctions have been quiet limited in practice given that governments are usually not

capable of imposing legislation across national borders (Van Tulder and Van der

Zwart, 2006; Jeffcott and Yanz, 1999) This is mainly due to the fact that laws are very

rigid and often lag behind technological and societal developments (Van Tulder and

van der Zwart, 2006). To stimulate innovation the challenge in the future will be to

turn legislation into a more flexible and ambitious approach with a strong

concentration on sustainable use of natural resources. Wrongful practices must be

penalized and innovations must be stimulated by friendly tax measures.

WATER SCARCITY

44

Finally, it has been proposed that governments may reduce water scarcity by seeking

better ways to manage demand. Some examples include decreasing losses in water

supply and irrigation systems, cutting subsidies to agriculture and establishing

realistic water pricing measures (Richards, 2002).

9.3 Increase water productivity

Investments in innovations that increase water productivity may also lead to the

reduction of water usage. So far some of the solution that have been generated are

advanced membrane based technologies used for water purification, sea water

desalination and membrane bioreactor wastewater treatment. These technologies

create new sources of freshwater from otherwise impaired waters such as seawater or

brackish water (Gonzalez et all, 2005). However, like nearly all new fresh water

sources, desalinated water has substantially higher production costs than do today’s

existing water sources. High prices are therefore keeping these technologies out of the

reach of many people. The challenge for water companies is to find ways to use new

water sources to meet demand such that it remains accessible for a wider range of

societies.

In addition to R&D activities, creating global awareness of water scarcity among

societies is an important tool with which companies can help reduce domestic water

consumption.

WATER SCARCITY

45

10. Evaluation In this chapter we will assess the findings of our empirical study, make comparisons

and determine whether there exists a Best Practice case. Each company’s approach to

water scarcity will be classified by using a theoretical framework.

The five water companies discussed earlier will be analysed based on a framework

provided by Van Tulder and Kolk (2007). Their attitudes towards sustainability will

be categorized in terms of in-active, active, reactive or pro-active CSR approaches. By

incorporating the literature reviewed in the previous chapters the framework by Van

Tulder and Klok has been tailored to the issue of water scarcity and can be found in

the table three.

Table 3: CSR Approaches In-active Re-Active Active Pro-active Corporate Self Responsibility

Corporate Social Responsiveness

Corporate Social Responsibility

Corporate Societal Responsibility

Internal codes Specific Supplier codes General supplier codes Joint codification Specificity: low Specificity: m/high Specificity: m/low Specificity: high Compliance: low Compliance: m/low Compliance: m/high Compliance: high Implementation likelihood: low

Implementation likelihood: medium/low

Implementation likelihood: medium/high

Implementation likelihood: high

Water approach - No explicit statements on water scarcity - Focus on shareholders, to create shareholder value - No investment in the problem areas - Protect own patents and intellectual capital -No code of conduct and/or low compliance likelihood - Private good

Water approach - Focus on not doing things wrong, trying to not be the first mover in the problem areas - Narrow BOP: mention of market changes in water scarce regions - Supports privatisation of water - Only involved after action of governments and with the help of subsidies - Focus on innovation as the most important solution, direct action is not taken - Specific code of

Water approach - Explicit statements on how to should handle the water scarcity problem - Broad BOP: explicit view on how strategy addresses water scarcity - Goals are mentioned, only how to reach them is not specified - Supports PPPs to fight water scarcity - Flexible pricing for problem areas in developing countries - Sharing of knowledge - Code of conduct

Water approach - Action plan to fight water scarcity, including goals, actions and measures - Explicit support of all MDGs, especially # 7 on environmental sustainability - Stakeholder dialogue to come to a basic healthy infrastructure - Focus on all stakeholders, active partnerships with NGOs and international organisations on water -Transfer and sharing of knowledge and technology on firms initiative - Help to manage water

WATER SCARCITY

46

conduct, but low compliance. - Support of Global Compact and modest support for GRI - Private Good

based on moral responsibility and specific - Plea for regulation - Wholehearted support for GRI - Public Good

resources more efficiently on the basis of equity - Code of conduct is ahead of regulation, very explicit code -Public Good

Source: model of Van Tulder and Kolk

10.1 Suez

Suez can be classified between re-active and active. It does not engage in flexible

prices in developing countries and nor does it share knowledge with local

governments on water cleaning techniques and technology. The only exception to this

is the Brazilian project. The company does, however, support the GRI standards

wholeheartedly, and it even has adopted some additional standards of its own.

Moreover, Suez was quick to become a member of the Global Compact. Finally, the

water multinational founded CSR Europe where it displayed good practices on

corporate social responsibility towards employees, but at the same time, somewhat

neglected the society as a whole. Suez also actively supports and engages in PPPs. It

contributes to the management of water scarcity by means of research, innovations

and expansion prospects.

A very re-active characteristic of Suez is that although some sustainability goals are

mentioned, no further information is provided concerning monitoring and auditing

practices implying possibly, a low level of compliance. An rather active approach is

illustrated in the company’s management of the complete water cycle by improving

efficiency, using alternative water sources and cleaning of wastewater.

10.2 American Water

American Water’s overall strategy in combating water scarcity may be defined as re-

active. Most probably, due to its strong home-country focus, the company’s

involvement in truly water stressed areas is rather poor. American Water supports

NGOs with information and knowledge, but avoids direct involvement. Also, the

company’s future strategy embraces a strong concentration on the United States as

opposed to entering new markets in for example third world countries. In the longer

WATER SCARCITY

47

term innovation is seen as the solution for the majority of problems related to water

scarcity. One of the main values of American Water is, as stated on their website, is

trust: “We will earn the trust of our customers and each other daily by conducting

ourselves ethically, with honesty, openness, and integrity at all times”. This

information clearly implies a re-active approach in which American Water does not

want to do the wrong things, but simultaneously, is also not running the extra mile

required to solve the true problem.

This attitude is however quite different when it comes to the firm’s home country; in

the United States American Water is reasonably active in the water issue. Local

initiatives were set up to educate people on how to use water in a more effective way.

Most contracts of American Water in the United States are PPPs, in which the

company is cooperating with relevant stakeholders as the community and the

government. The firm perceives water as a public good, with the main responsibility

for the government, but where an active approach of companies is needed.

To conclude, the specificity of the information is high but it is selective. Some

subjects are mentioned intensively like the focus on sustainable water use, others, like

the vision on water scarcity in problem areas, are missing. The overall compliance

likelihood is difficult to judge given that the information on the company website is

too unstructured which makes it complicated to assess all commitments and

verification processes within the firm.

10.3 Severn Trent

Contrary to American Water, Severn Trent has an active CSR approach. It is strongly

involved in the problem of water scarcity, especially in the UK and the US.

Although the firm’s geographic scope is quite narrow, within the company and its

direct environment there is a strong focus on what is important to decrease water

stress. Several activities have been developed to increase the awareness of society

about the importance of using water resources in a sustainable manner. Internally

there is strong focus on using water in all processes as efficiently as possible.

Currently two of the company’s divisions (Research and Water Services) are

cooperating with companies and governments in developing countries in Africa and

Asia. This commitment is only on the basis of knowledge sharing practices and is

funded by third parties such as the European Union. Even though the ambition to

WATER SCARCITY

48

really make a difference is there, an integrated approach to solving or reducing water

scarcity, in particularly the problem areas, is lacking. The specificity of both reports

of Severn Trent is medium specific depending on the subject. Within the scope of the

company, that is, improving water productivity, R&D, promoting awareness in both

the UK and US, Severn Trent discloses both quantitative and qualitative information,

implying some level of compliance. However, no such information is given regarding

its consultancy and research activities in Africa and Asia indicating lower levels of

commitment.

10.4 Grupo Agbar

Agbar is a company with a CSR approach between active and pro-active. It has the

highest rating on GRI standards and takes a pro-active stance in solving the problem

of water scarcity. Next to research that is normal for a water company, Agbar has

created the University Chair for research and transfer of research results of the water

cycle. The company also has preservation projects running beyond the necessary

scope of a water company and it shares its knowledge with governments and society.

Agbar does not seem to engage in PPPs, but it does work in an active partnership with

NGOs, in one instance in a project which provides a community in Chile with water,

otherwise mainly for dialogue purposes. However, from the firm’s CSR report it

could not be concluded that Agbar has a flexible pricing systems policy for

development countries or has a clear action plan to fight water scarcity. It does not

state anything about the millenium development goals, so support cannot be

presumed.

10.5 Best practice: Veolia Water

Veolia Water is the only company that has published a specialized sustainability

report on its activities in developing countries implying a high level of willingness to

disclose information. The company’s attitude towards water scarcity may be described

as a pro-active approach given that the water multinational meets almost all criteria as

defined by the framework (see appendix E), in addition obtained the highest score in

the sustainability report analysis. The most outstanding example is the fact that Veolia

Water has participated in the 2006 World Water Forum in Mexico where it organized

a workshop concerning ‘Conditions for the emergence of sharing knowledge’ and

‘Mainstreaming best practices’. The firm’s promotion of sustainability is also

WATER SCARCITY

49

reflected on a managerial level since the company has a Sustainable Development

Department, reporting directly to the Chairman and Chief Executive Officer, which is

closely linked to the R&D Department of the company. Veolia Water has developed

an approach of ‘Need-based Sustainable Development’ which is an eight step model

aiming to save water and energy resources, prevent pollution, develop alternative

resources, and to promote environmental citizenship. However, this approach does

lack specificity as it is not supported by quantifiable measures or explicit timeframes.

PPP arrangements are believed to remain essential in accompanying Veolia Water’s

expansion ambitions in Asia, Middle East and India. The firm also reports that it is

opening up to NGOs, medical practitioners and academia and that it is commencing

long-term partnerships with these organisations. With respect to the company’s Code

of conduct, no special section within the report is devoted to this issue, however,

throughout the report clear indications are given of the existence of a code.

From all the companies assessed in this study, Veolia Water has most subsidiaries in

developing countries. In its CSR report the company lists the number of contracts it

has with each country, the nature and duration of the contracts, the activities

performed and the number of people supplied with water by the company. In

addition, contrary to the other water multinationals, Veolia Water’s efforts for

achieving sustainable water use has been recognized by several investment fund

indexes such as the Dow Jones Sustainability Indexes and the ASPI Eurozone Index

WATER SCARCITY

50

11. Conclusion

This research has been divided into two parts; a theoretical and an empirical section.

In the first chapters we aimed to obtain a more in-dept and solid understanding of the

issue of water scarcity reviewing existing literature and case studies. Subsequently,

we narrowed down the scope of this study to the Market, more precisely, to

international water companies and we defined our research question as follows:

We argue that the current problem of water scarcity lies not in the actual, physical

availability of water, but rather, in the distribution of water scarcity. The latter may be

naturally, or man-made, i.e. through wars, pollution, poor economic conditions and

inappropriate governmental policies. Although the dimension State holds the

ownership for the issue, partnership arrangements between the public and private

sector are increasingly becoming commonplace in the market for water supply and

sanitation services. Veolia discloses a large amount of information regarding its PPP

contracts and perceive this as an important tool in its expansion strategies in

developing countries. This company engages in stakeholder dialogues and is opening

up to cooperation with NGOs. Such strategies are likely to have positive effects on

reducing the problem of water distribution in developing countries. Grupo Agbar, the

Spanish water company, also has a significant presence in developing countries and is

strongly specialized in R&D with regards to increasing water productivity. From the

information in its sustainability report it was hard to assert whether the firm has

ambitions to expand to more developing countries and if it engages in the actual water

supply to communities rather than solely on the development of new technologies.

Suez also commits to long-term PPPs with local governments and it is planning to

expand in the regions where it is already present, but just as with Agbar, it remains

unclear where exactly the company owns water infrastructure systems and in which of

these areas exactly, it intends to expand. Finally, the two companies American Water

and Severn Trent are strongly concentrated in developed countries and from the

“What is the attitude of MNEs in the water supply and sanitation sector towards

fighting the issue of water scarcity, especially in developing countries?”

WATER SCARCITY

51

information in their sustainability report it can be confirmed that their geographical

scope will remain so in the future.

We conclude that the current approach of water multinationals towards the water

distribution issue can be characterized as active. Their activities do not directly regard

the improvement of water infrastructures in developing countries and their expansion

policies within these regions remain imprecise. Veolia Water can be distinguished

from this general statement in terms of their clear and extensive disclosure about its

activities in developing countries and their contribution to improving water systems in

such regions.

WATER SCARCITY

52

12. Limitations & Recommendations

As was indicated in chapter three, it seems as if the private sector is retreating from its

activities in developing countries and is refocusing on less risky markets in developed

countries. The role of local governments is central in this topic; in order to attract

private sector FDI a level playing field must be assured. Future research may assess

the role of governments in developed countries in stimulating water multinationals to

invest in third world countries, but also international authorities such as the UN can

play an important part in such strategies.

One of the main limitations of this research is sole focus on prime resources for the

assessment of the water companies. In order to obtain a better understanding of the

actual activities of such MNEs in developing countries in-dept case studies must be

performed, incorporating a wide range of resources, and covering topics as expansion

strategies and local activities in developing countries. It may be interesting to take a

closer look at the relationship between water companies and NGOs, and the influence

of the latter on the firm. In some cases private sector MNEs may engage in such

malpractices that NGO pressure forces them to go through major strategic changes as

a consequence of reputational damage.

In addition, the PPP arrangement should be further researched in comparison with full

privatization of the water market or full nationalization of the market. PPP may not

always yield the desired results as it is dependant on many other factors such as,

strong commitment of public and private party, good communication, effective

monitoring etc. Maybe PPPs are not the most effective arrangement in order to

improve water infrastructure systems in developing countries.

WATER SCARCITY

53

Bibliography

Agbar, Professional Organisations and Other Associations Agbar Water [online].

Available from: http://www.agbar.es/eng/docs/pdfs/2007_Informe_

Sostenibilidad_Anexo_Agua_ENG.pdf [Accessed 20 October 2007].

Agbar, 2006 Sustainability Report [online]. Available from:

http://www.agbar.es/eng/docs/pdfs/2007_Informe_sostenibilidad_eng.pdf

[Accessed 20 October 2007].

Agbar, Corporate Environmental Code [online]. Available from:

http://www.agbar.es/eng/c-3_desarrollo_sostenible.asp [Accessed 20 October

2007].

American Water, official company website [online]. Available from:

http://www.americanwater.com/ [Accessed 21 October 2007].

Arnell, N.W. (2004). Climate change and global water resources: SRES emissions and

socio-economic scenarios. Global Environmental Change. 14 (1): 31-52.

Bakker, K., (2005) Trickle Down? Private Sector Participation and the Pro-poor

Water Supply Debate in Jakarta, Indonesia, Geoforum, 38(5), 855-868.

Barberis, N.M.B., Shleifer, A., and Tsukanova N. (1996.) How Does Privatization

Work? Evidence from the Russian Shops, Journal of Political Economy, 104,

764–90.

Casaarin, A.A., Delfino, J.A., and Delfino, M.E. (2007) Failures in Water Reforms:

Lessons from the Buenos Aires’s Concession, Utilities Policy, 15(4), 234-247.

Common Dreams, Lack of rain threatens the most fragile populations in Kenya,

Ethiopia, Somalia [online]. Available from:

http://www.commondreams.org/news2006/0207-09.htm [Accessed 7 October

2007].

Devezas, T.C. and Corredine J.T. (2001). The Biological determents of long-wave

behaviour in socioeconomic growth and development. Technical Forecasting

and Social Change.

Duijn, J.J. Van (1979). De lange Golf in de economie; Kan innovatie ons uit het dal

helpen? Assen: Van Gorcum.

Duijn, J.J. Van (1977). The long wave in economic life. The Economist 125 (4).

WATER SCARCITY

54

EU Consolidated Treaty, (2003) Consolidated Treaty and Protocol 20 on excessive

deficit procedure. Available from:

http://europa.eu.int/eurlex/en/treaties/dat/EC_consol.pdf [Accessed 15

October 2007].

EUWI, EU Water Initiative [online]. Available from: http://www.euwi.net/#16

[Accessed 11 October 2007].

EUWI, EU Water Initiative Annual Report 2006 [online]. Available from: http://www.euwi.net/download_monitoring.php?id=1146 [Accessed 11 October 2007].

Farlam, P., (2005) Working Together: Assessing Public-Private Partnerships in

Africa, Nepad Policy Focus Series [online]. The South African Institute of

International Affairs. Available from: http://www.oecd.org/dataoecd/44/4/

34867724.pdf [Accessed 15 October 2007].

Frydman, R.C.G., Hessel, M., and Rapaczynski, A. (1999) When Does Privatization

Work? The Impact of Private Ownership on Corporate Performance in the

Transition Economies, The Quarterly Journal of Economics, 114, 1153–91.

G8 Sommet Evian, Background to the G8 [online]. Available from:

http://www.g8.fr/evian/english/navigation/the_g8/background_to_the_g8.html

[Accessed 11 October 2007].

G8 Sommet Evian, Water – a G8 action plan [online]. Available from:

http://www.g8.fr/evian/english/navigation/2003_g8_summit/summit_

documents/water_-_a_g8_action_plan.html [Accessed 11 October 2007].

Galiani, S., Gertler, P., Schargrodsky, E. (2005). Water for Life: The Impact of the

Privatization of Water Services on Child Mortality, Journal of Political

Economy, 113, 83-120.

Gonzalez, M., Frost and Sullivan (2005). Water Scarcity Drives Membrane Market,

Membrane Technology, 2005(4), 4.

Greenpeace, Defending our oceans [online]. Available from:

http://www.greenpeace.org/international/campaigns/oceans [Accessed 7

October 2007].

Groundwater Foundation, Groundwater glossary [online]. Available from:

http://www.groundwater.org/gi/gwglossary.html [Accessed 10 October 2007].

Hall, D., Lobina, E. and De La Motte, R. (2003). Water Privatisation and

Restructuring in Central and Eastern Europe and NIS countries, 2002 [online].

WATER SCARCITY

55

PSIRU. Availble from: http://www.psiru.org/reports/2003-03-W-CEENIS.doc

[Accessed 15 October 2007].

Heilman, J. and Johnston, G.W., (1992) The Politics of Economics of Privatisation:

The Case of Wastewater Treatment. Tuscaloosa: University of Alabama Press.

Houston, W.R. (1996). Riding the Business Cycle, long range planning. London:

Little Brown and Company.

IGRAC (2004). Global Groundwater Regions. Global Groundwater Information

System Database: igrac.nitg.tno.nl/pics/region.pdf%20lvOct05.

IPCC (2001) Intergovernmental Panel on Climate Change: Third

Assessment Report – Climate Change 2001, World Meteorological

Organization. Geneva.

Jeffcott, B. and Yanz, L. (1999). Voluntary Codes of Conduct: do they strengthen or

undermine government regulation and worker organizing? Maquila Solidarity

Network

Kolk, A. and Tulder, R. Van. (2002). International Codes of Conduct. Rotterdam:

Department of Business-Society Management Erasmus University.

Kolk, A. and Tulder, R. Van (2006). Poverty Alleviation as Business Strategy?

Evaluating Commitments of Frontrunner Multinational Corporations. World

Development 34 (5), 789-801.

Kondratieff, N.D. (1935). The long Waves in Economic Life The review of economic

statistics 17(6).

La Porta, R., and Lopez-de-Silanes, F. (1999) The Benefits of Privatization:

Evidence from Mexico, Quarterly Journal of Economics, 114, 1193–1242.

Megginson, W.L., Nash, R.C., and Van Randenborgh, M. (1994) The Financial and

Operating Performance of Newly Privatized Firms: An International

Empirical Analysis, Journal of Finance, 49, 403–52.

Morris, J.C. (1997) The Distributional Impacts of Privatization in National Water-

Quality Policy, The Journal of Politics, 59(1), 56-72.

Ogunbiyi, C., (2004) PPPs: Fad or good for SADC?, SADC PPP Pathway, SADC

Banking Association PPP Capacity Building Programme, Newsletter No. 1,

July.

Postel, S.L. (2000) Entering an Era of Water Scarcity: The Challenges Ahead,

Ecological Applications, 10(4), 941-948.

WATER SCARCITY

56

Pogramme Solidarité Eau (2006). The Right to Water at the 4th World Water Forum in

Mexico [online]. Available from: http://www.pseau.org/outils/ouvrages/

academie_eau_droit_a_eau_mexico_en.pdf [Accessed 14 October 2007].

Public Citizen, WEF’s Water Multinations: A Background Check [Online]. Available

from: http://www.citizen.org/cmep/Water/general/majorwater/articles.cfm?

ID=7094 [Accessed 19 October, 2007].

Richards, A. (2002) Coping with Water Scarcity: the Governance Challenge, Center

for Global, International and Regional Studies [online]. Paper CGIRS-2001-4.

Available from: http://repositories.cdlib.org/cgirs/CGIRS-2001-4 [Accessed

11 October 2007].

Rijsberman, F.R. (2006) Water Scarcity: Fact of Fiction? Agricultural Water

Management, 80(1-3), 5-22.

Romilly, P. (2006). Business and climate change risk: a regional time series analysis.

Journal of International Business Studies (2006) 38, 474–480.

Rouyer, A. (2003) Basic Needs vs. Swimming Pools Water Inequality and the

Palestinian-Israeli Conflict, Middle East Report, 227, 2-7.

Schumpeter, J.A. (1936). Business Cycles: A Theoretical, Historical, and Statistical

Analysis of the Capitalist process. London, McGraw-Hill.

Severn Trent, our code of conduct (2005) [Online] Available from:

http://www2.severntrent.com/ss_pdf/corporateresponsibility/workplace/Condu

ct_WEB.pdf [Accessed 18 October 2007]

Severn Trent, Corporate Responsibility Report (2007) [Online] Available from:

http://www2.severntrent.com/ss_pdf/downloads/pdfs/environmentalreports

/CR_Report_2007.pdf [Accessed 18 October 2007]

Sigman, H. (2001) International Spillovers and Water Quality in Rivers: Do Countries

Free Ride? The American Economic Review, 92(4), 1152-1159.

Smit, R. (2007). In search of a presage, using long wave cycle theories to improve

scenario analysis. RSM, Rotterdam Erasmus University, Master.

SIWI, Stockholm International Water Institute, Independent and leading edge water

competence for future oriented action [online]. Available from:

http://www.siwi.org/downloads/General/SIWI_General06(web).pdf [Accessed

9 October 2007].

WATER SCARCITY

57

Suez, 2006 Activities and Sustainable Development Report [online]. Available from:

http://www.suez.com/document/?f=groupe/en/RADD06_042007_en.pdf

[Accessed 19 October 2007].

Suez, Memberships and partnerships [online]. Available from:

http://www.suez.com/en/developpement-durable/memberships-

partnerships/presentation/introduction/ [ Accessed 23 October 2007].

Suez, Public-Private Partnerships – pooling skills [online]. Available from:

http://www.suez.com/document/?f=developpement-

durable/en/SuezPPP_GB_25-07.pdf [Accessed 23 October 2007].

Suez, Sustainable Development- cornerstone of our strategy [online]. Available from:

http://www.suez.com/document/?f=groupe/en/Brochure_DD_12_2006_vUS.p

df [Accessed 19 October 2007].

Tulder, R. Van and Zwart, A. Van der (2006). International Business- Society

Management; Linking corporate responsibility and globalization. London:

Routledge.

Tulder, R. Van and Kolk, A. (2007). Poverty Alleviation as a Corporate Issue.

Forthcoming chapter contribution to the Handbook of 21st Century

Manangement. Sage.

Tulder, R. Van. et al. (2007). From chain liability to chain responsibility. Journal of

Business Ethics (forthcoming).

Tulder, R. Van (2007). Skill sheets; an integrated approach to research, study and

management. Pearson Education Benelux.

The Water Page, International Water Companies [online]. Available from:

http://www.africanwater.org/int_companies1.htm#proportion [Accessed 20

October 2007]

UNICEF, Water, Environment and Sanitation Program [online]. Available from:

www.unicef.org/wes [Accessed 11 October 2007].

UN Economic and Social Council (2005), Public-Private Partnerships for Service

Delivery: Water and Sanitation [online]. Available from:

http://www.uneca.org/chdcs/chdcs3/PPPs_CHDCS_3.pdf [Accessed 10

October 2007].

UN Department of Economic and Social Affairs, Documents: Johannesburg

declaration on sustainable development [online]. Available from:

WATER SCARCITY

58

http://www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/POI_PD.h

tm [Accessed 11 October 2007].

United Nations Global Compact, CEOs issue global call to action on water crisis

[online]. Available from: http://www.unglobalcompact.org/NewsAndEvents/

news_archives/2007_07_05e.html [Accessed 10 October 2007].

United Nations, The United Nations: Organisation [online]. Available from:

http://www.un.org/aboutun/basicfacts/unorg.htm [Accessed 11 October 2007].

United Nations, The Milennium Development Goals, Report 2006 [online]. Available

from: http://mdgs.un.org/unsd/mdg/Resources/Static/Products/Progress2006/

[Accessed 10 October 2007].

United Nations Environment Programme 2004, Water and Development: Industry’s

Contribution, Industry and Environment, Vol. 26, No. 1.

United Nations (UN) & World Water Assessment Programme(2003). UN World

Water Development Report: Water for People, Water for Life. Paris, New

York and Oxford: UNESCO and Berghahn Books.

Veolia Environment, Veolia Environment Sustainable Development 2006 Report

[Online]. Available from: http://www.sustainable-development.veolia.com/

library/en/standalone/corporate/1603,RDD06-anglais.pdf [Accessed 21

October 2007].

Veolia Water, 2006 Overview - Veolia Water AMI [Online]. Available from:

http://www.citizen.org/cmep/Water/general/majorwater/articles.cfm?ID=7094

[Accessed October 21, 2007].

Wallsten, S., Kosec, K. (2006). The Effects of Ownership and Benchmark

Competition: an Emperical Analysis of U.S. Water Systems. International

Journal of Industrial Organization, doi:10.1016/j.ijindorg.2006.11.001

WBSCD, About the WBSCD [online]. Available from:

http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&Men

uId=MTQ5MQ&doOpen=1&ClickMenu=LeftMenu [Accessed 7 October

2007].

WBCSD (2005) Water Facts and Trends [online]. Available from:

http://www.wbcsd.org/DocRoot/F5ui0fTttflCGdiwY0B0/Water_facts_and_tre

nds.pdf [Accessed 5 October 2007].

WATER SCARCITY

59

Welt Hunger Hilfe, Lack of water is aggravating the impacts of hunger – as in Kenya

[online]. Available from: http://www.welthungerhilfe.de/948.html [Accessed

October 7, 2007].

Welt Hunger Hilfe, About us [online]. Available from:

http://www.welthungerhilfe.de/427.html [Accessed October, 14 2007].

Welt Hunger Hilfe, 2007. Annual Report 2006 Deutsche Welthungerhilfe German

Agro Action. Bonn: Deutsche Welthungerhilfe.

Wolf, A. T. (1998) Conflict and Cooperation Along International Waterways, Water

Policy,1, 251-265.

Word Bank, World Development Indicators 2007 [online]. Available from:

http://siteresources.worldbank.org/DATASTATISTICS/Resources/WDI07sect

ion3-intro.pdf [Accessed 8 October 2007].

World Bank, About us [online]. Available from: http://web.worldbank.org/

WBSITE/EXTERNAL/EXTABOUTUS/0,,pagePK:50004410~piPK:36602~th

eSitePK:29708,00.html [Accessed 11 October 2007].

World Bank, Chronology for water supply and sanitation [online]. Available from:

http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/EXTARC

HIVES/0,,menuPK:64319213~pagePK:64319278~piPK:64321483~theSitePK

:29506~topic:644287,00.html [Accessed October 7, 2007].

World Bank, 2000. Data statistics [online]. Available from:

http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,cont

entMDK:20435586~menuPK:1545601~pagePK:64133150~piPK:64133175~t

heSitePK:239419,00.html [Accessed 7 October 2007].

World Food Prize, About the Prize [online]. Available from:

http://www.worldfoodprize.org/about/about.htm [Accessed 7 October 2007].

WWF International, 2003. Facts and Figures [online]. Available from:

http://assets.panda.org/downloads/worldwaterforumwaterfacts.pdf

European Commission, Public Procurement Legislation [online]. Available from:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=

CELEX:32004L0017:EN:NOT [Accessed 6 October 2007].

World Water forum, Roundtables Sessions on Thematic Issues and Forum Processes

[Online]. Available from: www.worldwaterforum5.org/fileadmin/WWF5/

WATER SCARCITY

60

Preparatory_Process/Kick-Off/KO_report_roundtables.doc [Accessed 21

October 2007].

WWF, WWF’s freshwater successes [online]. Available from:

http://www.panda.org/about_wwf/what_we_do/freshwater/news/successes/ind

ex.cfm [Accessed 11 October 2007].

WWF, Water Scorecard, [online]. Available from:

http://assets.panda.org/downloads/water_scorecard_final_wwf_june_2007.pdf

[Accessed October 11, 2007].

APPENDICES

A. Analysis Veolia: 2006 Overview - Veolia Water AMI Veolia Environnement Sustainable Development 2006 Report Criteria Short elaboration Classification

Employment 1) promotion/ stimulation of education about how to use water sustainable in civil society 2) education and training of employers, stimulate development and career opportunities Working conditions 1) fair wages and benefits 2) provide a safe and healthy environment for employers and their societies

2 out of 2 1 1 2 out of 2 1 1

Issues

Management policies and systems 1) Vision on water stress/ water scarcity 2) Integrated approach to solve/ reduce water scarcity (actions and measures are present) 3) R&D is focussing on sustainable development and the needs of host countries 4) Vision on privatisation and PPPs 5) Strategy in developing countries (dynamic prices/ market entry) Input/ output inventory and processes 1) Sustainable use of water resources 2) Focus on using water productively in all processes 3) Desalination 4) Sludge treatment 5) Waste water treatment 6) Output: clean drinking water 7) Limited emissions of carbon dioxide and other greenhouse gasses Stakeholder relations 1) Solutions in cooperation with all relevant stakeholders 2) Dealing with unstable/ corrupt regimes in developing countries Sustainable development 1) Sharing knowledge with governments and societies 2) Sharing technology with governments and societies 3) Approach in problem regions

5 out 5 1 1 1 1 1 7 out of 7 1 1 1 1 1 1 1 2 out of 2 1 1 3 out of 3 1 1 1

Specificity

Focus

Geographic scope Global Nearly global General region Regulatory system Specific country

General region

WATER SCARCITY

62

Nature General prescription/description (general); predominantly general (frail); general and specific (moderate); predominantly specific (moderate to strong); specific (strong)

Moderate to strong

Quantitative standards

How many characteristics of the issue of water scarcity are quantified?

many

Time Horizon How defined is the time horizon for the characteristics of water scarcity?

Clear

Measure

Reference None defined Home country Host country International; or combinations

International

Monitoring systems and processes

Good insight into system and process Reference to some parts, but criteria or time are lacking Only general reference to monitoring without details

Vague

Positing of monitoring actor

Firms themselves (1st party) BSGs (2nd party) External professionals (3rd party) Combinations of different actors (4th party) SIGs (5th party) Legal authorities (6th party)

1st party

Sanctions Measures have no large implications Warnings and exclusion of membership Fines and threat to business activities

None

Financial commitment Classification according to level of fee or relative investment

High

Com

pliance

Management commitment No Commitment (None) Commitment implied (Implicit) Business partners must sign it (Explicit)

Explicit

Source: Kolk and Van Tulder (2002) International Codes of Conduct

WATER SCARCITY

63

B. Analysis Suez: 2006 Activities and Sustainable Development Report and

Sustainable Development- cornerstone of our strategy

Suez, Public-Private Partnerships – pooling skills

Criteria Short elaboration Classification Social

Employment 1) Promotion/ stimulation of education about how to use water sustainable in civil society 2) Education and training of employees, stimulate development and career opportunities Working conditions 1) Fair wages and benefits 2) Provide a safe and healthy environment for employees and their societies

1 out of 2 0 1 2 out of 2 1 1

Specificity

Issues

Environment Management policies and systems 1) Vision on water stress/ water scarcity 2) Integrated approach to solve/ reduce water scarcity (actions and measures are present) 3) R & D is focussing on sustainable development and the needs of host countries 4) Vision on privatisation and PPPs 5) Strategy in developing countries (dynamic prices/ market entry) Input/ output inventory and processes 1) Sustainable use of water resources 2) Focus on using water productively in all processes 3) Desalination 4) Output: sludge treatment 5) Output: waste water treatment 6) Output: clean drinking water 7) Limited emissions of carbon dioxide and other greenhouse gasses Stakeholder relations 1) Solutions in cooperation with all relevant stakeholders 2) Dealing with unstable/ corrupt regimes in developing countries Sustainable development 1) Sharing knowledge with governments and societies 2) Sharing technology with governments and societies 3) Approach in problem regions

4 out of 5 1 1 1 1 5 out of 5 1 1 1 1 1 1 1 2 out of 2 1 1 2 out of 3 1 1

WATER SCARCITY

64

Geographic scope Global (general) Nearly global (frail) General region (moderate) Regulatory system (moderate to strong) Specific country (strong)

Moderate Focus

Nature General prescription/description (general); predominantly general (frail); general and specific (moderate); predominantly specific (moderate to stron); specific (strong)

Frail

Quantitative standards

How many characteristics of the issue of water scarcity are quantified?

Majority

Time Horizon How defined is the time horizon for the characteristics of water scarcity?

None

Measure

Reference None defined Home country Host country International; or combinations

Home country

Monitoring systems and processes

Good insight into system and process Reference to some parts, but criteria or time are lacking Only general reference to monitoring without details

Clear

Positiong of monitoring actor

Firms themselves (1st party) BSGs (2nd party) External professionals (3rd party) Combinations of different actors (4th party) SIGs (5th party) Legal authorities (6th party)

3

Sanctions Measures have no large implications Warnings and exclusion of membership Fines and threat to business activities

None

Financial commitment Classification according to level of fee or relative investment

High C

ompliance

Management commitment No Commitment (None) Commitment implied (Implicit) Business partners must sign it (Explicit)

Explicit

WATER SCARCITY

65

C. Analysis American Water: Company website: http://www.americanwater.com

Criteria Short elaboration Classification Social

Employment 1) promotion/ stimulation of education about how to use water sustainable in civil society 2) education and training of employees, stimulate development and career opportunities Working conditions 1) fair wages and benefits 2) provide a safe and healthy environment for employers and their societies

1 out of 2 0 1 2 out of 2 1 1

Issues

Environment Management policies and systems 1) Vision on water stress/ water scarcity 2) Integrated approach to solve/ reduce water scarcity (actions and measures are present) 3) R & D is focussing on sustainable development and the needs of host countries 4) Vision on privatisation and PPPs 5) Strategy in developing countries (dynamic prices/ market entry) Input/ output inventory and processes 1) Sustainable use of water resources 2) Focus on using water productively in all processes 3) Desalination 4) Sludge treatment 5) Waste water treatment 6) Output: clean drinking water 7) Limited emissions of carbon dioxide and other greenhouse gasses Stakeholder relations 1) Solutions in cooperation with all relevant stakeholders 2) Dealing with unstable/ corrupt regimes in developing countries Sustainable development 1) Sharing knowledge with governments and societies 2) Sharing technology with governments and societies 3) Approach in problem regions

1 out of 5 0 0 1 0 0 5 out of 7 1 1 1 0 1 1 0 1 out of 2 1 0 2 out of 3 1 0 1

Specificity

Focus

Geographic scope Global (general) Nearly global (frail) General region (moderate) Regulatory system (moderate to strong) Specific country (strong)

Strong

WATER SCARCITY

66

Nature General prescription/description (general); predominantly general (frail); general and specific (moderate); predominantly specific (moderate to stron); specific (strong)

General

Quantitative standards

How many characteristics of the issue of water scarcity are quantified?

Minority

Time Horizon How defined is the time horizon for the characteristics of water scarcity?

Vague

Measure

Reference None defined Home country Host country International; or combinations

Home country

Monitoring systems and processes

Good insight into system and process Reference to some parts, but criteria or time are lacking Only general reference to monitoring without details

Vague/ None

Positiong of monitoring actor

Firms themselves (1st party) BSGs (2nd party) External professionals (3rd party) Combinations of different actors (4th party) SIGs (5th party) Legal authorities (6th party)

1st party

Sanctions Measures have no large implications Warnings and exclusion of membership Fines and threat to business activities

Mild

Financial commitment Classification according to level of fee or relative investment

Moderate

Com

pliance

Management commitment No Commitment (None) Commitment implied (Implicit) Business partners must sign it (Explicit)

Implicit

WATER SCARCITY

67

D. Analysis Grupo Agbar: 2006 Sustainability Report, Corporate Environmental Code

and Professional Organisations and Other Associations

Agbar Water

Criteria Short elaboration Classification Social

Employment 1) Promotion/ stimulation of education about how to use water sustainable in civil society 2) Education and training of employees, stimulate development and career opportunities Working conditions 1) Fair wages and benefits 2) Provide a safe and healthy environment for employees and their societies

2 out of 2 1 1 1 out of 2 0 1

Specificity

Issues

Environment Management policies and systems 1) Vision on water stress/ water scarcity 2) Integrated approach to solve/ reduce water scarcity (actions and measures are present) 3) R & D is focussing on sustainable development and the needs of host countries 4) Vision on privatisation and PPPs 5) Strategy in developing countries (dynamic prices/ market entry) Input/ output inventory and processes 1) Sustainable use of water resources 2) Focus on using water productively in all processes 3) Desalination 4) Output: sludge treatment 5) Output: waste water treatment 6) Output: clean drinking water 7) Limited emissions of carbon dioxide and other greenhouse gasses Stakeholder relations 1) Solutions in cooperation with all relevant stakeholders 2) Dealing with unstable/ corrupt regimes in developing countries Sustainable development 1) Sharing knowledge with governments and societies 2) Sharing technology with governments and societies 3) Approach in problem regions

3 out of 5 1 1 1 0 0 4 out of 5 1 1 0 1 1 1 1 2 out of 2 1 1 3 out of 3 1 1 1

WATER SCARCITY

68

Geographic scope Global (general) Nearly global (frail) General region (moderate) Regulatory system (moderate to strong) Specific country (strong)

Frail Focus

Nature General prescription/description (general); predominantly general (frail); general and specific (moderate); predominantly specific (moderate to stron); specific (strong)

General and specific

Quantitative standards

How many characteristics of the issue of water scarcity are quantified?

Majority

Time Horizon How defined is the time horizon for the characteristics of water scarcity?

Vague

Measure

Reference None defined Home country Host country International; or combinations

Host country

Monitoring systems and processes

Good insight into system and process Reference to some parts, but criteria or time are lacking Only general reference to monitoring without details

Clear to vague

Positiong of monitoring actor

Firms themselves (1st party) BSGs (2nd party) External professionals (3rd party) Combinations of different actors (4th party) SIGs (5th party) Legal authorities (6th party)

3

Sanctions Measures have no large implications Warnings and exclusion of membership Fines and threat to business activities

None

Financial commitment Classification according to level of fee or relative investment

High C

ompliance

Management commitment No Commitment (None) Commitment implied (Implicit) Business partners must sign it (Explicit)

Implicit

.

WATER SCARCITY

69

E. Analysis Severn Trent: Our code of conduct (2005) Corporate Responsibility Report (2006)

Criteria Short elaboration Classification

Employment 1) promotion/ stimulation of education about how to use water sustainable in civil society 2) education and training of employers, stimulate development and career opportunities Working conditions 1) fair wages and benefits 2) provide a safe and healthy environment for employers and their societies

2 out of 2 1 1 2 out of 2 1 1

Issues

Management policies and systems 1) Vision on water stress/ water scarcity 2) Integrated approach to solve/ reduce water scarcity (actions and measures are present) 3) R & D is focussing on sustainable development and the needs of host countries 4) Vision on privatisation and PPPs 5) Strategy in developing countries (dynamic prices/ market entry) Input/ output inventory and processes 1) Sustainable use of water resources 2) Focus on using water productively in all processes 3) Desalination 4) Sludge treatment 5) Waste water treatment 6) Output: clean drinking water 7) Limited emissions of carbon dioxide and other greenhouse gasses Stakeholder relations 1) Solutions in cooperation with all relevant stakeholders 2) Dealing with unstable/ corrupt regimes in developing countries Sustainable development 1) Sharing knowledge with governments and societies 2) Sharing technology with governments and societies 3) Approach in problem regions

1 out of 5 0 0 1 0 0 5 out of 7 0 1 0 1 1 1 1 1 out of 2 1 0 1 out of 3 1 0 0

Specificity

Focus

Geographic scope Global Nearly global General region Regulatory system Specific country

Moderate to strong

WATER SCARCITY

70

Nature General prescription/description (general); predominantly general (frail); general and specific (moderate); predominantly specific (moderate to strong); specific (strong)

Strong

Quantitative standards

How many characteristics of the issue of water scarcity are quantified?

Medium

Time Horizon How defined is the time horizon for the characteristics of water scarcity?

Clear

Measure

Reference None defined Home country Host country International or combinations

Home country

Monitoring systems and processes

Good insight into system and process Reference to some parts, but criteria or time are lacking Only general reference to monitoring without details

Clear

Positing of monitoring actor

Firms themselves (1st party) BSGs (2nd party) External professionals (3rd party) Combinations of different actors (4th party) SIGs (5th party) Legal authorities (6th party)

1st party

Sanctions Measures have no large implications Warnings and exclusion of membership Fines and threat to business activities

None

Financial commitment Classification according to level of fee or relative investment

Moderate

Com

pliance

Management commitment No Commitment (None) Commitment implied (Implicit) Business partners must sign it (Explicit)

Implicit