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The efficacy of Water Footprint Accounting in biofuel project design and sustainability in the South

African context

B.M.J. Mnthali, BSc Civil Eng, MBL

ABSTRACT

The scrutiny of the manner in which businesses manage the use of scarce resources has led to urgent need for

business to identify broadly applicable monitoring and reporting tools that enable sustainable business project and

operational decision-making across businesses and industries. This research conducted a two part evaluation of a

promising tool and framework, Water Footprint Accounting. The first part of this evaluation consisted of a detailed

literature review, and the second part of the evaluation consisted of a survey of an expert panel on the subject of

sustainability. The evaluations were carried out to establish evidence of a congruence between theoretical

applicability of a framework and the perceived applicability of the same framework in practice, by professionals

who would implement such a framework in a business project or operational context. The results of the research

indicate that there is great scope for the application of Water Footprint Accounting both as a stand-alone

framework, and in combination with other traditionally utilized project and investment decision making

frameworks. It is recommended that further research be undertaken on the incorporation of the existing Water

Footprint Accounting standards into best practice regionally and globally through avenues such as industry forums

and guidelines. If this incorporation were to be successful, it would allow the implementation of benchmarking

programmes. Another area for further research is the utilization of Water Footprint Accounting as an educational

tool on the demand side in order to achieve sustainable demand decisions by the aggregate of consumers.

1. INTRODUCTION

Besides the environmental impact reporting required in the Triple Bottom Line (TBL) paradigm (Institute of

Dirctors SA, 2009), water scarcity is a threat to the viability and growth of industry in a water stressed nation like

South Africa (Blignaut and Van Heerden, 2009). Emerging from earlier work in the area of product life cycle

analysis, the water footprint analysis as a tool, lends itself to the task of addressing this issue effectively in the

business context (Gerbens-Leenes and Hoekstra, 2008). The focus of this research will be to assess the concept’s

propagation in global and South African industry, and to assess its efficacy as a tool.

Water scarcity is a reality acknowledged by all, and widely researched, with numerous regulatory and policy

efforts aimed at addressing it (Carden, 2011). Further, the Food-Water-Energy Nexus has been widely discussed

and researched as a paradigm in the management of scarce natural resources (FAO UN, 2014). The manner in

which businesses manage the use of scarce resources, water in particular, has come under great scrutiny from

stakeholders. As part of the TBL reporting paradigm, several sustainability based frameworks and tools have

emerged (Finkbeiner, 2012). One such emergent tool for the analysis of product level, business level and national

level, water usage is Water Footprint Accounting (WFA).

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Biofuel production is a contentious industry as it is allocated directly at the heart of the Food-Water-Energy Nexus.

The Southern African region has had varying experiences with Biofuel projects, and driven by the current

electricity and fossil fuel supply crises, biofuel has moved up the agenda for strategic energy mix planning (Sparks,

Madhlopa, Keen, Moorlach, Dane, Krog & Dlamini, 2014).

Critics of WFA have argued that it is inappropriate and inadequate as a framework for decision-making. They

have argued that water scarcity issues be determined at regional policy level, and their impact on trade be

addressed through trade policy (Gawel and Bernsen, 2011). Education in the formal sector needs to take place at

all points on the education timeline, from the early years through to higher learning. Capacity development should

also be undertaken with the different stakeholders and professionals already involved with water management and

climate change (SADC, 2011).

The work "Renewable energy choices and their water requirements in South Africa" highlights that for South

Africa, there is limited data on all aspects of water usage in the production of energy. It is important to take into

account all aspects of the energy life cycle to enable isolation of stages where significant amounts of water are

used (Sparks, et al., 2014). This may create an opportunity for project optimisation if these aspects can be clearly

identified.

The focus of this research will be to assess the WFA concept’s propagation in the South African industry, and to

assess its efficacy as a tool. The best place to make an assessment of efficacy is its application on business projects

that is situated in the food-water-energy nexus, namely biofuel projects.

THE PROBLEM AND SUB-PROBLEMS

For a look at potential alternative sustainability measures to WFA, Finkbeiner (2012) details the gradual

development of Life Cycle Analysis (LCA) methodology and the measures that have emanated from it. Focusing

on Material Flow Cost Accounting (MFCA) in particular, Christ and Burrit (2014) explain how MFCA as a sub

discipline of Environmental Management Accounting (EMA) was largely driven by normative arguments and

attempts to appeal to common sense with a lack of theoretical explanations, leading eventually to the pursuit of

stronger theoretical frameworks, therefore leading the development process that evolved the various footprints.

Pfister and Hellweg (2009) proposed a spatially varying Water Stress Index (WSI) to weight the water

consumption (shoe-size) as a function of water scarcity. The Water Stress Index (WSI) ultimately shows

differences that reflect the global distribution of biofuel production and the according water scarcities. Laurent,

Olsen, and Hauschild (2012) found that a focus on CFP brings the risk of problem shifting when reductions in

CFP are obtained at the expense of increase in other environmental impacts. Their study further showed that some

environmental impacts, notably those related to emissions of toxic substances, often do not co-vary with climate

change impacts.

With the promulgation of the Water Footprint concept, Hastings and Pegram (2012) investigated the concept’s

entry into the South African context and explored what value it could add to the sustainable management of water

in the industrial sector. They found that while the water footprint has significant potential to contribute to corporate

water management and to integrate water into decision-making, significant challenges should still be addressed

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in order for the water footprint to be a reliable and meaningful indicator. In this research, the issue of applicability

in the specific context of biofuel projects from the perspective of biofuel and sustainability professionals will be

investigated.

OBJECTIVES

The objectives of this study are to:

Identify key decisions in biofuel project selection, structuring, and implementation that can potentially

be optimised using Water Footprint Accounting (WFA).

Identify the strengths and weaknesses in the applicability of WFA to biofuel project structuring.

RESEARCH QUESTIONS

The following are the research questions for this study:

Which key decisions in biofuel project selection, structuring, and implementation can potentially be

optimised using the Water Footprint Analysis?

What are the strengths and weaknesses in the applicability of WFA to biofuel project design?

METHODOLOGY

The population from which the sample will be drawn are those professionals working in the fields of sustainability

and/or biofuel production globally. Data will be analysed using simple statistical methods to arrive at general

conclusions about the subject matter. For this particular research problem, a mixed methods design, with an

element of ex-post facto design, which combines both quantitative and qualitative methods, would be most

appropriate. The ex-post facto element is introduced by retrospectively applying WFA to hypothetical biofuel

project in the region and surveying respondents on the feasibility of possible outcomes that are based on the

application of WFA and other frameworks. Key decisions taken during project selection, planning and

implementation will be reviewed and/or revised using WFA in order to arrive at a hypothetical water sustainability

optimised project.

DELIMITATION OF THE STUDY

In order for the proposed research to be meaningful, valid and reliable, limitations should be defined.

Industry limitation: The study needs to be industry specific as the impacts of water scarcity and the food-water-

energy nexus is more observable in some industries than it is in others.

Product lines: The study can be further narrowed down to a particular product and project in order to allow

focused data collection and analysis.

Time periods: Very specific time periods should be used to define the prevailing economic and environmental

conditions used to analyse the data and form conclusions.

Geographic area: The study should further be limited to a particular region, in this case Southern Africa, in order

to allow the analysis of a project in one part of the region to potentially apply to another part of the same region.

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Hypothetical limitations: In order to test the potential impact of WFA on project outcomes, it should be assumed

that application of Water Footprint Analysis does not lead to a project cancellation decision but only to project

optimisation. The potential sustainability outcome of a cancelled project is therefore not considered.

IMPORTANCE AND SIGNIFICANCE OF THE STUDY

In conclusion, this research is intended to test an investment decision-making tool that can be potentially be used

by energy companies, food and energy crop producers, and policy makers, in a time of extreme resource stress at

all points in the food-energy-water nexus. The research will also inform policy makers on the adequacy and

applicability of existing policy designed to address water scarcity in the region. This study will either answer the

question of whether or not to use WFA for some stakeholders, or simply provide a good starting point for others.

2. BIOFUEL PROJECTS AS A TESTING GROUND

In order to define the structure of a typical biofuel project, and identify the key decisions and risks at each stage

of the project, the work of Gerbens-Leenes, Hoekstra, and van der Meer (2009) is visited, together with a

presentation developed by the company Equinox, and presented by Althoff (2014), which indicates the risks

involved at each stage of the biofuel project implementation process. Roberts and Barton (2015) take an in-depth

look at the water-specific risk management practices of various food sector role-players. It may be critical to view

biofuel projects through a food lens as these projects are located directly in the food-water-energy nexus.

According to Sparks et al (2014), bioenergy is globally the largest, although not always sustainable, renewable

energy source contributing to over 50% of total renewable energy, and 10% of global energy consumption.

Biomass, the source of bioenergy, is herein defined as matter derived from natural organic sources such as

decomposing material from plants or animals. In South Africa, biofuel generation has largely been from recycled

vegetable oil with a few exceptions such as municipal waste-to-energy facilities at wastewater treatment works

and landfills for example (Brent, 2014). To be specific, the main biofuel in the South African context is biodiesel

produced for the transport market by 200 small scale initiatives (Brent, 2014). Also according to WWF (2014) to

date, bioenergy development in Southern Africa as a region has been limited by, among other factors, poor

conversion efficiency and technology transfer, poor feedstock availability and poor access and affordability. Until

recently, there has been no assurance that commercial biofuel production will actually occur due to the absence

of any obligatory national blending of biofuels into conventional liquid fuels (Brent, 2014), and this state of

affairs has led to the gazetting of mandatory blending in 2012, which has now taken effect as at October, 2015

(South African Government Gazette, 2012). The South African Department of Energy laid the foundation for this

legislation with its Biofuels Industrial Strategy, approved by Cabinet in December 2006 and published following

stakeholder comments in December 2007. The strategy adopts a modest short term focus (5 year pilot) to achieve

a 2% penetration level of biofuels in the national liquid fuel supply, or 400 million litres per annum (SA DME,

2007). Sugar cane and sugar beet crops are proposed for the production of bioethanol, and sunflower, canola and

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soya beans for the production of biodiesel. Maize and Jatropha have been excluded due to food security concerns

(SA DME, 2007).

Figure 2-1: Biofuel Project Phases, Risks and Decisions

Source: Adapted from Althoff, 2014

Figure 2.1 presents a mapping of the biofuel project cycle and defines the risks and decisions to be evaluated at

each stage, largely adapted from a 2014 presentation titled “Feedstocks: Developing a Successful Plan and

Attracting Investors to your Biofuels Project”, by the US firm Equinox LLC, a firm providing financial,

strategy and capital planning advisory services to firms in the agribusiness sector. Essentially, the project cycle

can be broken down into two distinct phases and categories of risks. The first of these phases is the Growth Phase

(Risk Category 1) which includes the activities of Farm/System Establishment, Crop Production, and Harvesting.

The second phase is the Distribution Phase which includes the activities of Transportation (pre-processing),

Storage (pre-processing), Delivery (conveyor to processing plant), and finally the Operation stage, in which the

biofuel blend is processed for final sale and distribution ex-works. Note that Engineering, Design, and

Construction risks are not highlighted as separate phases as they follow well established project management and

risk management methodologies, not to be considered herein.

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Figure 2-2: Five key risk drivers for the food (agricultural) sector

Source: Roberts and Barton (2015)

As is evident from Figure 2-1, the Growth Phase risks far outweigh the Distribution Phase risks, and therefore,

the study will focus on the Growth Phase risks and decisions, and not further consider those affecting the

Distribution Phase.

Figure 2-2 is from the work of Roberts and Barton (2015), and presents the key risk drivers affecting food sector

businesses, and is pertinent in understanding the risks that will equally be faced by businesses undertaken biofuels

projects.

It is evident from Figure 2-2, that there are many risks faced by businesses that depend heavily on the use of

water resources. Further, many of these are beyond the businesses direct control and ability to mitigate such as

regulation, inadequate regional infrastructure, and climate change and weather variability (Roberts and Barton,

2015).

Further, the biofuel projects and/or project attempts in the Southern African context are presented in the reports

of The United Nations University, Institute of Advanced Studies (2012) on biofuel projects in Africa as a whole,

and the work of the Overseas Development Institute (2013) in its reports on the status of biofuel projects in the

Southern African nations of biofuel projects in Mozambique and Zambia respectively. The research will further

consider the work of Moyo (2013) which sought to establish the extent to which climate change creates relevant

and material risks, return, and opportunities for companies. This study found positive and statistically significant

correlations between climate-change performance and equity analyst recommendations, historical internal rates

of return, market values to book values, forecast earnings per share, beta coefficients, and return on equity.

Therefore, it may be logical that food and agriculture sector business, particularly those involved in the

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development of bioenergy, urgently consider decision-making tools and frameworks to identify and mitigate these

risks as far as possible at time of investment, and throughout the product lifecycle.

3. WATER FOOTPRINT ACCOUNTING

For the purposes of developing a hypothetical application of WFA, it is necessary to utilise the seminal work,

Business Water Footprint Accounting by Hoekstra and Gerbens-Leenes (2008), The Green, Blue and Grey Water

Footprint of Crops and Derived Crop Products (2010), and the Water Footprint Assessment Manual by Hoekstra,

Chapagain, Aldaya, and Mekonen (2011), together with National Water Footprint Accounts by Mekonnen and

Hoekstra (2011). Drilling down on biofuels specifically, this research reviews the "The water footprint of

bioenergy" by Gerbens-Leenes et al. (2009). This study gives an overview of water footprints (WFs) of bioenergy

from 12 crops that currently contribute the most to global agricultural production: barley, cassava, maize, potato,

rapeseed, rice, rye, sorghum, soybean, sugar beet, sugar cane, and wheat, plus the energy crop jatropha. When

expressed per L, the WF ranges from 14000 to 20000L of water per L of biofuel. If a shift towards a greater

contribution of bioenergy to energy supply takes place, the results of this study may possibly be used to identify

crops and countries that produce bioenergy in the most water-efficient way.

Figure 3-1: Composition of the water footprint of a business

Source: Hoekstra et al. ( 2011)

The Businesses Water Footprint (BWF) can be expressed by the following equation:

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The equation above represents the BWF as the sum of Operational and Supply Chain water footprints. From this,

one may readily derive the product WF based on the number of units produced by the business entity:

Table 2.1 provides examples of each of the component footprints comprising both the Operational and Supply

Chain sides of the equation.

Table 3-1: Examples of the components of a business water footprint

Source: Adapted from Hoeskstra et al. (2011)

Examples of early adopters in this regard are firms like brewing giant SAB Miller and SAPPI, who have used

these frameworks to evaluate their processes for unsustainable elements, and in the case of SAB Miller, to

establish water neutrality as a feature of their brewing operations (SAB Miller and WWF-UK, 2009).

Finally, the water footprint sustainability assessment is essentially a check of each of the businesses products’

sustainability expressed as a percentage of all products produced by the business, as per the methodology

prescribed in Hoekstra et al. (2011) and ISO 14046 Environmental management, Water footprint, Principles,

requirements, and guidelines (ISO, 2014). Therefore, it is plausible, given the susceptibility of businesses in the

agriculture sector to water related risks, that Water Footprint Accounting is a framework worth evaluating.

Operational water footprint Supply chain water footprint

Water footprint directly

associated with the

production of the

business's product(s)

Overhead water

footprint

Water footprint

directly associated with

the production of the

business product(s)

Overhead water

footprint

Water incorporated into

the product. (Irrigation

water)

Water consumption or

pollution related to water

use in ancillary activities

such as cooking for staff,

cleaning, office

maintenance, and

gardening.

Water footprint of

product ingredients

bought by the company.

(Fertilizer process water)

Water footprint of

infrastructure

(construction materials

and so on).

Water consumed or

polluted through a

washing process. (Process

water for fermentation)

Water footprint of other

items bought by the

company for processing

their product. (Water

used in cleaning of

feedstock)

Water footprint of

materials and energy for

general use (office

materials, cars and trucks,

fuels, electricity and so

on). Water thermally polluted

through use for cooling.

(Boiler water)

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4. WHY THE NEED TO LOOK AT CROP-BASED BIOFUELS AND AGRICULTURE?

According to statistics from the Food and Agricultural Organization of the United Nations (FAO, 2014), of the

total freshwater withdrawals globally, the largest user of freshwater by far is the agricultural sector at 70% and

industrial at 19%, with the remainder allocated to municipal water uses.

Figure 4-1: Global sum of all withdrawals

Source: UN FAO AQUASTAT (2014)

When one takes a view of the South African situation specifically, it is evident that the local water resource

allocation does not deviate too far from the global norm as indicated in Figure 4-1.

Figure 4-2: South African sum of all withdrawals

Source: UNEP (2008)

Figures 4-1 and 4-2 point to the need to evaluate the agricultural sector for potential efficiencies and allocation

reductions in order to cater for an evergrowing demand. With regard to industrial withdrawals, the 6% South

African share for industrial users can belie the critical need to identify potential efficiencies therein, although best

practices have been defined in a few sectors such as brewing for example (SABMiller & WWF-UK, 2009). Most

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demand side measures implemented in South Africa are aimed at the municipal sector, particularly Non-Revenue

Water and Water Conservation/Water Demand Management programmes (SA DWA, 2013).

This research evaluates the potential of WFA and the likelihood of sustainable outcome through WFA guided

project decisions and risk filtering. Sparks et al. (2014) investigated renewable energy choices and water

requirements in South Africa in light of the gap that exists between water supply and demands, in terms of trade-

offs being made amongst different users. They found that for South Africa, there is limited data on all aspects of

water usage in the production of energy. It is vital to take into account all aspects of the energy life cycle to enable

isolation of stages where significant amount of water are used. Further, Gawel and Bernsen (2011); Duvenage

(2013); and Morilio (2014) have all looked at other factors confounding the use of WFA in isolation such as

economics and trade, irrigation management socio-economic and even gender issues. This section has further

highlighted the need to evaluate WFA, however, it presents a plausible argument that potential users also need to

evaluate alternates and/or complementary frameworks to address other pertinent decisions that enter into the scope

of an agricultural business project.

5. ALTERNATIVES OR COMPLEMENTS TO WFA

The investment decision is primarily made using the Net Present Value (NPV) method, which is based on the

premise that a business exists primarily to compensate its shareholders for the risks associated with the business

and to yield a return higher than the assessed business risk (Skae, 2012).

It is generally accepted as the correct conceptual method for analysing an investment decision, however, it relies

on accurate data, which is not always available. Another shortcoming is that it is a purely monetary measure,

evaluating a project only in terms of cash flows received as a result of an investment (Skae, 2012). However, it

remains the project selection method of choice used by most project managers and included as part of the standard

for project management in the form of the Project Management Body of Knowledge (PMBoK) (PMI, 2004).

Therefore, it can be viewed as the primary method that can be augmented by other tools and frameworks towards

a sustainable project outcome. Cost Benefit Analysis (CBA) is another purely monetary decision-making tool

widely used in Project Management, and therefore, decision-making for businesses. Cost benefit or benefit cost

analysis is a benefit measurement method, and it is a systematic approach to calculate the cost to produce the

product, service, or result and then compare it with the cost of the benefits to be received. It also provides us

current worth of future earnings and helps to compare the different projects (PMI, 2004).

The Falkenmark Indicator is perhaps the most widely used measure of water stress. It is defined as the fraction of

the total annual runoff available for human use (Matlock, 2011). Multiple countries were surveyed and the water

usage per person in each economy was calculated. Based on the per capita usage, the water conditions in an area

can be categorized as: no stress, stress, scarcity, and absolute scarcity (Falkenmark, 1989). The index thresholds

1,700m3 and 1000m3 per capita per year are used as the thresholds between water stressed and scarce areas,

respectively (Falkenmark, 1989). Individual usage is the basis for the Falkenmark water stress index and therefore

provides a way of distinguishing between climate and human-induced water scarcity (Matlock, 2011).

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Gawel and Bernsen (2011) seek to address the question of whether or not the WF is an inadequate indicator to

guide trade flows or consumption decisions towards a more sustainable use of the world's water resources. They

argue that problems of water and trade have to be addressed in a more specific manner and express doubt as to

the compatibility of WF, as a tool, with economic resource and trade theory.

Returning to the specific context of the SADC Region, of which South Africa is a key member state, sharing in

several transboundary water resources, one has to evaluate the performance of SADC as a regional body, and its

legal and policy instruments pertaining to the regulation of water resources (SADC, 2013). Also according to the

SADC Regional Strategic Action Plan (RSAP) mid-term review developed by the consultants Pegasys, Aurecon

and Enviroplan, SADC has several legal and policy instruments and programmes in place, which inform the nature

of RSAP and which are used to regulate water usage, and provide strategic direction for these water usages, at

transboundary and national level.

Figure 5-1: Policy and legal instruments used to regulate water usage in Southern Africa

Source: RSAP Mid-term Review (2013)

These instruments are described in Figure 5- 1, which clearly indicates the complexity of the policy structure and

also its high-level focus in relation to the issues encountered at the project level. It can be described as dealing

with the macro project environment, but less so with the micro environment at which key decisions such as

investment, location, production volume are made.

Figure 2-6 clearly indicates that there are a multiple layers of legally binding documents, policies, strategies and

plans, and guidelines setting the compliance framework, with regard to water specifically, for a business operating

in the region to adhere to.

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SADC’s report titled Climate Change Adaptation in SADC (2011) found that the SADC region’s capacity to

implement climate change related policy and to monitor regional regulatory compliance is constrained and

requires educational interventions for both students and professionals, and the mid-term review points to specific

implementation delays and short comings such as the development of a computer based decision support system

to account for the economic value of water, and the development of common methods to account for water

pollution have not been agreed between Member States (SADC, 2013). Generally speaking, the above described

structures and state of affairs logically places an impetus on the development of business level tools and decision

frameworks.

Figure 5-2: Republic of South Africa Water Sector Institutions and lines of reporting and accountability

Source: DWA (now DWS) (2013)

The situation at National Level is described by Figure 5-2. In terms of securing its water resource, a potential

business investment in biofuel production would need to seek approval (in this case a Water Use License) from

the Department of Water Affairs (DWA, 2013). However, this will likely require liaison, and stakeholder approval

from multiple agencies, each with a differing perspective on the project. The Water User Association (WUA)

would need to be consulted to identify potential conflicts with other users, the Catchment Management Agency

(CMA), would have to evaluate the sustainability of an allocation within a particular catchment and further, the

potential to pollute that catchment, further the Water Service Authority (WSA), or Water Service Provider (WSP)

would have to be consulted regarding the availability of supply infrastructure, or lack thereof (DWA, 2013). It is

plausible that a business would find this regulatory compliance and permitting process an onerous and expensive

process to pursue before undertaking its own constraint analysis using an available framework, or combination

thereof.

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6. RESEARCH RESULTS

PANEL OF EXPERTS

The expert panel was convened electronically from across the globe harnessing the power of social media and

social networking. Participants were selected based on their experience in sustainability related fields including

environmental, health and safety, facilities, manufacturing, design and engineering, agriculture and education. All

of these fields are directly, and indirectly, involved in the sustainability of the food-water-energy-nexus, of which,

biofuel production provides a representative project type. Participants are not necessarily directly involved in

biofuel production, and therefore the sample group are able to provide multidisciplinary view-points on the

representative project type. From a total of 55 respondents, 36 were able to complete the survey (no incomplete

or partial responses), indicating a completion rate of 65%.

SECTION A. DEMOGRAPHIC DATA OF RESPONDENTS

In the following sub-sections the demographics of the respondents will be discussed.

Experience level of respondents

Figure 6-1 describes the respondent group in a simple pie chart in terms of experience level of respondents.

Figure 6-1: Experience level of respondents

As presented in Figure 6-1, the panellists self-reported experience levels are ranging from 5 years to more than

15 years. The majority of respondents fell within the 5 to 15 year range. Overall, the panel’s experience levels

were sufficient to yield a nuanced and experience based perspective on the issues presented in the questionnaire.

Sustainability fields of expertise

Figure 6-2 describes the respondent group in a bar chart in terms of specific area of expertise in the broader

sustainability field.

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Figure 6-2 Breakdown of respondent areas of expertise

As clarified in the discussion of methodology, the broader field of sustainability encompasses a wide variety of

contributing fields that function in a systemic manner to determine the sustainability state of all human activities

in general. Therefore, the respondents to the survey self-reported a wide variety of backgrounds. The largest group

of respondents was that of Design and Engineering professionals at 46%, followed by Environmental

professionals at 29%, Facilities professionals at 9%, Health and Safety at 6%, Education at 6% and

Agriculture/Farming and Manufacturing at 3% each. It should be noted that respondents were permitted to select

more than one area of expertise. The results of this study may be linked to the findings of the International Society

of Sustainability Professionals 2010 Competency Survey Report, which found that the top most concerns among

professionals in the field were 1) the value of Sustainability and 2) dealing with climate change and related energy

needs (ISSP, 2010).

Geographic regions represented

Figure 6-3 presents the respondent group in terms of the geographic regions in which they have developed their

experience and expertise.

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Figure 6-3: Geographic regions represented

Respondents self-reported that their experience came from work done in at least five (5) continents, which gives

their views a global perspective. The majority of respondents had worked in Africa at 77%, followed by North

America at 23%, South America and Asia each at 9%, and Europe at 6%. There were no responses received from

Australia. It should also be noted that respondents were permitted to select more than one region each.

Views on Potential Impact of Water Sustainability Risk

Respondents were asked to score the items presented in the following sub-sections according to the following

scales:

Questions 4 and 5:

1 - Very low 2 – Low 3 – Moderate 4 – High 5 - Very High.

Question 6:

Very Low Low Moderate High Very High

Question 7:

Very Unlikely Unlikely Neutral Likely Very Likely

Criticality of decisions

4. Please score the key decisions and risks in the bio-fuel project cycle in terms if criticality.

The responses are are presented in Figure 6-4.

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Figure 6-4: Criticality of decisions

The respondents were asked to rate the criticality of the Key Decisions to be made on the project type selected for

evaluation, that of a crop based biofuel project (not differentiating between bioethanol and biodiesel). Referring

back to Figure 2-1, Chapter 2, these are the project decisions that are critical to the growth phase, could potentially

mitigate, or avoid what we refer to in the same figure as the Category 1 project risks: Failure to Grow, Failure to

Harvest, and Failure to Harvest an appropriate yield level (Althoff, 2014).

The ratings from the panel were very close with Crop Selection and Harvest Potential decisions scoring slightly

higher ratings than the Investment and Location Decisions.

Panel ratings on efficacy and applicability

5. Please score the available decision making and reporting tools in terms of efficacy and applicability on

biofuel projects:

Water Footprint Accounting

Net Present Value Analysis

Life Cycle Analysis

Cost Benefit Analysis

Water Stress Index

Carbon Footprint

Ecological Footprint

Virtual Water

The results are presented in Figure 6-5.

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Figure 6-5: Panel ratings on efficacy and applicability

6. Please rate the biofuel project cycle stages in terms of susceptibility to Water Scarcity Risk:

Establishment

Crop Production

Harvest

Processing

Distribution

All tools and frameworks received a majority rating of three (3) or higher on a scale of one (1) to five (5). The

highest scorers were Carbon Footprint and Ecological Footprint, while Net Present Value analysis received the

most ‘weak’ ratings, with 33% of respondents rating it at three (3) or below on a scale of one (1) to five (5). These

results may be supported by other research that points to the perceived inadequacy of the monetary project decision

frameworks (NPV) and (CBA) to address sustainability (Barbier, Markandya and Pearce, 1990).

Potential for sustainable project outcomes of applied

7. What is your perception of the likelihood of achieving a sustainable project using each of the available

tools ranked above in the project decision making processes either alone or in combination with others?

Next, respondents were asked to rate selecting degree of likelihood, the potential for achieving a sustainable

project outcome with the application of the same frameworks, either alone or in combination with one another.The

results for question 7 are presented in Figure 6-6 below.

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Figure 6-6: Panel ratings on efficacy and applicability

The results are here presented as percentages for unlikely ratings, neutral ratings, and likely ratings. The highest

percentage of ‘likely ratings’ were received by Ecological Footprint (86%) and Cost Benefit Analysis (77%), with

Carbon Footprint and Life Cycle Analysis following closely (72%). Notably, Net Present Value, the standard used

by investors and project managers alike to evaluate project alternatives, received the most unlikely ratings. This

result may also be linked to the findings of Barbier et al, 1990.

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SECTION B. BIOFUEL PROJECT DECISION-MAKING

Potential for Application/Guideline Development on Crop Based Biofuel Projects

Are crop-based biofuel projects an appropriate test case?

8. Are biofuel projects an appropriate project type for the testing of a sustainability or environmental

management accounting framework?

Respondents were asked if in their professional opinion, biofuel projects were an appropriate test case in the

broader context of project sustainability. The results are presented in a simple pie chart as Figure 6-7 below.

Figure 6-7: Appropriateness of biofuel project case

Some panellists opted out of answering this particular question, however, of those who did, the vast majority

answered in the affirmative (82%).

Is there adequate data to allow analysis and development of realistic scenarios and guidelines?

9. Is there adequate data available in both the public and private domains to allow analysis of these projects

in terms of sustainability and to possibly set methodologies/guidelines for their structuring in a

sustainability focused manner?

Panellists were further asked if they believed that there was adequate data in the public and private domains to

allow comprehensive research and the development of realistic model scenarios and guidelines. The results are

presented in a simple pie chart in Figure 6-8.

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Figure 6-8: Availability of data on biofuel projects

To this, the majority of respondents felt that adequate data was not available (61%). This finding links to the work

of the researcher Brent on the need for developing a viable bioenergy sector in South Africa, and Africa as a

whole, which finds that bioenergy is to date underexploited, hence the lack of precedents and data (Brent, 2014).

SECTION C. VIEWS ON WATER FOOTPRINT ACCOUNTING

The next questions zeroed in on Water Footprint Accounting and asked the respondents to give their view on

WFA in isolation and as a standalone concept that they might employ to make sustainable project level decisions.

Level of dissemination/Propagation of the concept

10. How familiar are you with the concept of Water Footprint Accounting?

In order to gauge the level of dissemination and propagation of the concept, the respondents were each asked to

rate their familiarity with the concept of WFA. The results are presented in a simple pie chart, in Figure 6-9 below.

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Figure 6-9: Level of familiarity with WFA

The majority of respondents indicated that they were familiar with the concept, with 56% indicating that they

were moderately familiar with WFA and a further 22% indicating that they were very familiar with WFA.

What is the comfort level in terms of self-assessed ability to apply the concept among the panel?

11. Can you apply the concept of Water Footprint Accounting to a practical situation?

Next, respondents were asked if they could readily apply WFA to a practical situation. The results are presented

in a simple pie chart in Figure 6-10.

Figure 6-10: Ability to apply WFA

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The majority of respondents answered in the affirmative (65%). These are self-reported estimates of ability, and

therefore are more of an indication of ‘level of comfort’ than a direct indication of ability. These findings can be

linked to those of the ISSP 2010 Competency Survey Report, which found that when asked to rate the importance

of pre-defined “hard” skills, the most important items cited were strategic

planning, systems thinking and project management (ISSP, 2010).

Views on Regional/National Policy Efficacy versus Project Level Decision Making

12. Do you feel that industry sustainability and water scarcity issues are better addressed and managed at

the Regional Policy and Regulatory Level than with the application of tools such as Water Footprint

Accounting?

Finally, respondents were asked if, in their professional opinion, industrial water scarcity and allocation issues

were more effectively addressed at the regional policy level than at the project level. The results are presented in

a simple pie chart in Figure 6-11 below. .

Figure 6-11: Views on regional/National policy efficacy versus project level decision-making

Although these shortcomings of the RSAP programme can be viewed as delays rather than failures (SADC, 2013),

they may indicate a need at project level for decision support systems and tools that will in the interim guide

specific users and projects until such time as the regional frameworks and their implementation and enforcement

improve.

As per Figure 6-11, the majority of respondents fell into 2 categories, and were either neutral (35%) or in

disagreement with the statement (26%). Responses to this statement serve to gauge the need for further research

at the micro (project level) rather than the macro (national/regional policy/legislature level). At national level, the

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ability to select and evaluate a project within the investing business entity itself, before embarking on a long and

complex approval process, therefore will likely become critical. Further, the information to be developed in the

project selection process may assist in compressing the approval process by developing useful environmental

impact information, and therefore save the project time and money.

SUMMARY

With respect to the response and completion rate, the structured questionnaire yielded an adequate number of

response for a purposive and non-probabilistic sampling.

In terms of the respondent demographics, the panel’s experience levels were sufficient to yield a nuanced and

experience based perspective on the issues presented in the questionnaire, and the fact that their experience base

was developed in multiple countries and continents, offers a global perspective on the issues covered. Further, the

results of this study may be linked to the findings of other studies on the views of sustainability professionals such

as the International Society of Sustainability Professionals 2010 Competency Survey Report.

With regard to the evaluation of the various frameworks in the context of biofuel projects, the results may be

supported by other research that points to the perceived inadequacy of the monetary project decision frameworks

(NPV) and (CBA) to address sustainability questions and a preference for other non-monetary frameworks to be

included in reporting and decision-making.

With regard to the appropriateness of biofuel projects as a context for evaluation of frameworks, the majority of

respondents felt it was an appropriate context, but that adequate data was not available at present on these project

for the formation and development of industry guidelines. This finding links to the work of the researcher Brent

on the need for developing a viable bioenergy sector in South Africa, and Africa as a whole, which finds that

bioenergy is to date underexploited, hence the lack of precedents and data.

With regard to the question of familiarity with, and the applicability of, WFA specifically, the majority of

respondents indicated that they were familiar with the concept and could apply it readily to a practical problem.

However, with regard to a preference for project level decision-making over the use of regional and national

policy frameworks to decide water sustainability issues, there was a high degree of neutrality in comparison to

those in favour or against.

In the next chapter, the findings, recommendations and conclusions of this research are presented.

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7. DISCUSSION OF FINDINGS

Study Objective 1: Identifying the decisions in biofuel project selection, structuring, and

implementation that can potentially be optimised using the Water Footprint Analysis

Figure 7-1: Focus on Risks and Decisions: Applicable tools and frameworks

Source: Adapted from Althoff LLC, 2014

In order to discuss and contextualise the findings of this research, it is necessary to focus on the applicable tools

and frameworks to evaluate each of the key decisions require as a result of, or in mitigation of, the Category 1

Risks (Failure to Grow, Failure to Harvest/Harvest the right Quantity/Harvest the right Crop). These key decisions

are as follows:

The Investment decision

Crop selection

Production location selection

Output quantity levels

Each of these is discussed in terms of the survey results and the literature review.

The investment decision

The survey illustrated that this is a critical decision, and possibly the defining decision of the entire project.

Possible complements to NPV and CBA are Water Footprint Analysis (harmonised and standardized under ISO

14046: 2016), Life Cycle Assessment (harmonised and standardized under ISO 14040: 2006), Cost Benefit

Analysis, and WSI (otherwise referred to as the Falkenmark Indicator).

As per the views expressed by the panel, the use of the other frameworks, in combination with the primary would

likely yield a sustainable project outcome. In a water stressed context such as South Africa, WFA and WSI become

particularly critical in properly defining the level of business risk, as the cash-flows invested in the project may

never be recouped due to water scarcity risk, in spite of an attractive NPV being presented to investors. WFA and

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LCA may further allow investors to identify efficiencies, or inefficiencies, and regulatory compliance costs that

will impact the cash-flows by analysing the business water and material usage. Cost-Benefit Analysis can be used

to further weigh the project’s potential societal impact, although, as a framework, it tends to be imprecise and

subjective. However, the panel view on Cost Benefit Analysis is generally positive, both in terms of applicability

and potential to achieve a sustainable outcome. It received positive ratings of 75% and 77% on the charts in the

discussion of results.

Crop selection

To date, most efforts to evaluate different biofuel crops have focused on their merits for reducing greenhouse-gas

emissions or fossil fuel use. Such comparisons are sensitive to assumptions about local growing conditions and

crop by-products, but even more important, their focus on greenhouse gases and energy use is too narrow

(Scharlemann and Laurance, 2008) and the full environmental impact of one crop choice over another need be

considered. The arguments that support one biofuel crop over another can easily change when one considers their

full environmental effects.

In the South African context, the environmental constraints will primarily be land availability, local food security,

and water sustainability. The South African Government’s National Biofuels Industrial Strategy has already

effectively narrowed the options available by considering the socio-political land allocation issues, and food

security and arriving at Sugar cane and sugar beet crops are proposed for the production of bioethanol, and

sunflower, canola and soya beans for the production of biodiesel, and excluding maize and jatropha (SA DME

2007). However, at a project level, investors would benefit from the available LCA methodology, combined with

WFA and CROPWAT analyses, to cover all primary and complementary evaluation areas and arrive at a sensible,

standardised, and justified selection, which would further refine the investment decision. Further, extensive

research has already been conducted into the Green, Blue, and Grey water footprints of crops and derived crop

products, which can quickly be accessed and assessed to provide preliminary decision-making information

(Meckonnen and Hoekstra, 2010).

Production location selection

The production location selection decision is critical to the process of establishing a viable biofuels project. In the

case of South Africa, this decision has largely been decided by socio-political imperatives as the former black

homelands (areas designated for forced relocation of black citizens and limited self-governance by these groups

during the apartheid era) were pre-selected as the priority locations in efforts to reverse inherent developmental

disparities (SA DoE, 2007).

The challenge with this approach is that these designated areas may not be the most sustainable locations upon

which to establish biofuel feedstock farms and production facilities. The national government’s land use

frameworks and imperatives may be further supplemented by WFA, WSI, CBA, and NPV. Investors can then

reach an informed decision on which of the designated areas is most sustainable, and will mitigate business risk.

There may arise from this process a conflict between the socio-political priorities and the investment sustainability

priorities, however, it is safer to evaluate these priorities in the project planning stages than it is to mitigate the

consequences of a poorly selected location.

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Output quantity levels are largely dependent on the outcomes of the crop selection and production location

decisions and therefore, sustainable outputs will be determined by the same process and evaluation frameworks.

Study Objective 2: Identify the strengths and weaknesses in the applicability of WFA to biofuel project

structuring.

General

This research project has arrived at several key conclusions regarding the efficacy of water footprint accounting

in the global and in particular, South African context. It has been exploratory in nature, and the views expressed

by the panel have been used in combination with a detailed analysis of available research and literature to validate

the findings of the research. However, exploratory research is by nature a starting point, which calls attention to

the potential for promising solutions that can be further developed for application using more exhaustive research.

In this regard, the following key conclusions are put forward as discussed in the next sub-sections.

Inherent harmonisation benefits

In the process of developing and refining its specifications, ISO continues to carry out pilot studies on the

application of the 14000 series Environmental Management specifications (ISO, 2009). To address water scarcity

as a business or industry risk, there is no need to reinvent the wheel by coming up with a brand new decision-

making model exclusively for each project or project type. That work has been undertaken by ISO in its

development of the LCA based tools and the various footprints.

These tools incorporate locality specific information, and are flexible for use in all nations, therefore allowing

uniform output data that can be used to establish benchmarks across business, industry, and national dimensions.

This key feature is known as harmonisation and this has proved valuable in addressing other global challenges

such as trade, and quality standardization that derive from the myriad differences in production conditions, costs,

and standards that the era of globalization has brought. The fact that the majority of an expert panel from around

the globe commonly acknowledge the efficacy of these tools speaks volumes about their potential.

Relationship to Regional and National Governmental Policy

Water scarcity is a trans-boundary issue, with ramifications for multiple countries in a region that may participate

in the same given industry, as in the case of the multiplicity of countries developing biofuel as an energy option.

For example, lower physical water scarcity in Zambia as compared to South Africa, may make that country an

optimum investment location for a South African biofuels based company. Carbon emissions trading is already

an established global practice with the goal of ultimately bringing down Green House Gas (GHG) emissions

around the planet as a whole. Virtual Water trade is only at the theoretical stage of development, but may in future

be viewed in the same light as Carbon trading. Given the trans-boundary nature of water scarcity, regional and

trans-boundary institutions, and further national and catchment level institutions, should be strong, responsive,

flexible and well informed if they are to appropriately manage the allocation and usage of this scarce resource.

However, what is evident from the research is that the reporting and accountability lines for these policy

institutions and frameworks is extremely complex and ill-equipped to deal with business level project life cycles

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and decision making. Business investors, managers, and stakeholders require real-time planning, management and

reporting tools to enable their active participation in sustainability. These tools are by no means replacements for

the important role that policy institutions play in ensuring the equitable allocation and use of resources on behalf

of the citizenry of any given nation or region, however, they shift the onus to deliver on climate change mitigation

and sustainability to the role players that utilize the greater portion of allocated water resources, namely industry

and agriculture.

End-user consumptive behaviour implications

The end-use water footprint of a product is strictly spoken not part of the business water footprint or the product

water footprint, but part of the consumer’s water footprint. Consumers can use products in various ways, so that

estimating the ‘end-use water footprint’ of a product will require assumptions about average usage. (Hoekstra, et

al., 2011). The efficacy of WFA, and indeed the other LCA based frameworks and footprint tools present an

opportunity in terms of the consumer behaviour and choice arena, which is not examined in this research due to

its focus on project selection and implementation decisions, and that opportunity is in the final consumption phase

of the project cycle once the product has reached the end-user. Consumer demand is critical in the process of

establishing the need for a project in the first place, and further, how much capacity to scope into the project’s

objectives. Therefore, footprint data can be used as an educational tool to engage with the consumer whose needs

dictate demand and supply-side activities. Consumers can be brought into the debate on which products to produce

and where to produce them if they are properly informed of the sustainability impacts emanating from their choices

as consumers.

8. RECOMMENDATIONS

It is recommended that business investors, managers and stakeholders in South African industry as a whole, not

only those involved in the biofuel sector that this research evaluated, either seek opportunities further develop, or

to derive benefit from the data and findings developed in this exploratory research exercise.

Finally, footprint data is neither age sensitive nor overly complex in its final form, and has tremendous potential

in the education of future generations. Sustainability will continue to grow in importance as production problems

started during the industrial revolution of circa 1760 continue to plague present day society, and it is recommended

that applicability as a consumer education tool in Africa be researched and promulgated.

9. CONCLUSIONS

Given the criticality of water scarcity and the need to optimize usage due to the current effects of climate change

in South Africa, and Africa as a whole, there is an imperative for responsible businesses that wish to maintain

their social license to operate to improve upon the efficiency with which they utilize this scarce natural resource.

Further, in light of another critical challenge, meeting the food and energy needs of a growing population, agri-

businesses and government especially, must push forward with the responsible implementation of vital biofuel

projects which meet these two urgent needs simultaneously.

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Effective management of the water-food-energy-nexus demands that sustainability professionals harness,

harmonize and disseminate tools such as Water Footprint Accounting in the critical task of managing biofuel

projects.

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