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Market News

 February 27, 2007
The Private Sector and World Water Supplies

 Vancouver, Canada (GLOBE-Net) -- One billion people worldwide lack access to clean drinking water, and the debate rages on how to resolve the problem. Privatization of the water supply is controversial and has met with mixed results. But the private sector is contributing to the solution through the development of technologies that can provide safe, clean water at a relatively low cost. Some unique models are bringing water to the world's poor by combining these technologies with market enterprise and social welfare.

Around ten percent of the world's population currently lives under water stress as defined by the United Nations, and the UN predicts that by 2025, two-thirds of the earth's population will be living in areas suffering from scarcity of water. Increased water use due to growing populations and economic development, as well as droughts and changes caused by climate change will likely worsen the situation.

West Asia, North Africa, and Sub-Saharan Africa are expected to be the hardest hit. Countries such as Ethiopia, India, Kenya, Nigeria, Peru, and parts of China could face chronic water shortages within several decades. Even highly-developed Australia is facing water shortages after severe droughts in some parts of the country.

Where water is available, it is often contaminated and unsafe for drinking, resulting in residents of developing countries without adequate water treatment being vulnerable to a variety of diseases. Every year, 1.6 million deaths are caused by diarrhoea related to unsafe water, sanitation, and hygiene - the vast majority are children under 5, reports the World Health Organization. More than 1 billion people worldwide do not have access to a treated water source.

In the face of these challenges, many countries are struggling to provide clean water to residents. Water delivery and treatment infrastructure is costly, and not feasible for some rural communities. Many worry that access to water will be an increasing source of conflict as supplies become scarce.

Privatization of water supplies or market-based schemes which require those in need to pay are controversial; some have been successful, while others have been disastrous. Water is essential to life, and there is strong opposition to treating it as a commodity. There have been calls for the right to water to be enshrined as a universal human right by the United Nations.

Yet water treatment and distribution costs money, as technologies, equipment, and training must be paid for. What role then, can the private sector play in providing clean water to citizens of the world?

A growing number of companies are answering the question by launching initiatives to provide water treatment technologies to developing countries. In some cases, local communities become involved in the process, taking control over the equipment and effectively managing their own water supply. Through technological breakthroughs and innovative business models, companies and non-governmental organizations are bringing clean water to more people around the world, addressing a major obstacle to global poverty reduction.

Purifying the world's water

At the recent World Economic Forum in Davos, Switzerland, a consortium of ten corporate leaders known as The Safe Water Network and professional services firm Deloitte Touche Tohmatsu launched an initiative to field test new portable water purification technology that could be deployed to developing countries.

The one year program will target areas such as Bangladesh, China, India, Sub-Saharan Africa and Latin America, where distribution of water treatment technologies could have a large impact. The group plans to demonstrate the effectiveness of a Vapor Compression Distillation (VCD) water purification solution being developed by DEKA Research & Development. The unit will be configured for the developing world, emphasizing ease-of-use, low maintenance, versatility, portability and affordability. One unit can clean 350 gallons of water each day of virtually all contaminants, meeting the potable water needs of approximately 100 people.

The initiative does have an element of philanthropy to it, but to ensure that sustainable clean water supplies are created, the group will work with local communities to allow those in need to take control of the technology. The companies will explore models for deploying water purification solutions, including micro-enterprise programs that establish local water entrepreneurs. One option would be to provide micro-finance for locals to run the machines as a business.

The idea of helping create local water enterprises has also been employed to increase distribution of one of the world's most successful water treatment technologies, the Canadian-developed BioSand Filter.

An elaboration of a simple slow sand filter that has been in use for centuries, Bio-Sand uses microorganisms to purify the water as it passes through a sand bed. It was developed by Dr. David Manz at the University of Calgary and the technology was made available to humanitarian organizations for distribution.

The whole unit costs between US$10 and US$30 to build, and can be produced anywhere in the world using local materials that are readily available. Since 2001, the Centre for Affordable Water and Sanitation Technology (CAWST), co-founded by Dr. Manz, has helped the BioSand filter bring clean water to over 985,000 people in 43 countries.

One key to the BioSand Filter has been its distribution: most organizations offer training and support on how to build and maintain the system, but do not provide the filters for free. Communities are either given the knowledge on how to build a filter themselves, or may purchase one for a small fee.

Many organizations have found that once time and money has been invested in the filter, it is more likely to be used properly, maintained over time, and spread to other areas. Taking ownership of their own clean water supplies helps communities ensure that the solution will be long term, and creates economic opportunities. In some cases, organizations have returned to regions where they have worked to find a local business providing training and materials for the filters, or supplying clean water to a village or local health clinic.

The distribution of the BioSand filter does rely on charitable contributions to sustain the organizations who conduct the training and provide support services. But once the filter is established in an area, often local markets will take over to create a thriving water economy.

Worldwide, many companies have made successful business ventures out of supplying technologies for desalination, reverse osmosis, and other purification techniques to governments and other clients.

Some firms are also using their economic position to provide clean water to those in need, without necessarily making a profit. P&G is one of the world's largest companies, with an extensive water business, and it is leveraging its resources and knowledge in this area to help the world's poor.

P&G developed the PUR water treatment kit, a quick and easy water treatment solution. It kills viruses and bacteria that cause common diseases, and reduces parasites, pesticides, and other contaminants to make water safe to drink.

P&G sells the PUR unit at cost to global humanitarian organizations and to everyday consumers. The kit has been distributed to survivors of emergencies such as the southeast Asian tsunami and the Pakistan earthquake. In longer term projects, PUR has resulted in economic opportunities for local entrepreneurs, who can purchase it at cost and sell it for a small profit.

To date, more than 50 million PUR packets have been distributed, purifying more than 500 million liters of water.

While successful in one sense, the PUR program "was not a commercial success", said P&G CEO A.G. Lafley in the company's 2006 Global Sustainability & Philanthropy Report (PDF). "But we stuck with the program because we believed it was the right thing to do and we knew we could make a difference. And we created an innovative, market-based distribution model that makes it economically feasible to get this product where it's needed most," he says.

Meeting the needs of business and the developing world

Worldwide, the people who need clean water technologies the most are those least able to pay for it. One could question how the private sector will be able to respond to the water crisis if it must do so while sustaining a financial loss -- unless companies are large enough to absorb the burden they may put their business at risk, which would result in fewer people with clean water in the end.

Yet there are tremendous opportunities in the world water market, both for substantial profits and for simply doing the right thing from a corporate responsibility perspective. By developing affordable technologies, firms can help the developing world while driving their own innovation and opening up further opportunities for the future.

GE for example, has partnered with a university to demonstrate the integration of renewable energy systems, such as wind turbines, with membrane desalination processes. GE has a thriving water business based on a host of technologies including reverse osmosis and membrane desalination.

If successful, this latest project could help develop affordable water desalination systems to increase the quantity and quality of clean water in arid areas around the world. GE recently developed the largest seawater desalination plant in Africa - which will provide drinking water to 25% of the people in Algiers, Algeria.

Even for those areas in which the opportunity for income is limited, companies can become active in collaborations with NGOs and local governments to find clean water solutions.

There are certainly the intangible benefits that come from establishing positive stakeholder relations, giving back to the global community, and helping those in need. As well, companies can improve their technologies by making them more affordable, gain experience in developing markets, and create new opportunities which can support a traditional business venture.

As technology providers, the private sector can and should participate in the global effort for clean water. As the major actors in the global economy, companies are required to spur growth, and also to address social and environmental challenges. By engaging on an issue as vital as clean water supplies, the business community is reinforcing its valuable role in the world.