Over the past 30 years the water sector has become more efficient, raised standards of drinking and bathing water as well as cleaning up beaches and rivers but issues over public trust remain stubbornly high profile.
The environmental challenges ahead and the burden of the growing population add huge pressures to water companies (as identified in the first article in our H3O series). The cases for and against public ownership arguably take attention away from main issue, but the underlying issue is that trust with the public has been slowly eroded.
Ofwat recognises the role companies should be playing and has been instrumental in banging the drum to rebuild public confidence in water companies by addressing financial practices as well as connecting better with customers.
Last year the regulator’s chair, Jonson Cox, set out a programme of reform that he said should “bring the water sector back in balance, including getting back to a proper sense of public service provided under public ownership”.
In October this year Rachel Fletcher spoke to the Institute of Economic Affairs about the importance of embedding social purpose into business and the benefits yielded for the company and the public. She mentioned to some commentators the “public service nature of these companies was overlooked” 30 years ago when water companies were privatised but urged the steps to be made now.
Public service is becoming more central to companies, with a duty to customers as well as to the wider community and environment often spoken about.
While the regulator mulls a compulsory commitment, several companies have proactively brought social contracts into their business models.
Anglian and Welsh Water have each taken this to the heart of their businesses. Anglian changed its Articles of Association to embed public interest within the constitutional makeup of the business. It plans to publish annual statements setting out how it is performing against key environmental, social and ethical targets. Meanwhile Welsh Water is preparing to vote on changing its own constitution in a similar fashion – a move which could come into practice from next year.
Pennon Group, including South West Water and Bournemouth, is introducing a scheme from April next year that will make customers shareholders, giving them a voice at the AGM.
Concurrently to individual plans, the water companies in England and Wales have set out Public Interest Commitments (PICs) – spearheaded by Water UK as the trade body representative. The five goals focus on some of the most important issues for society – affordability, protecting the environment and conserving water.
Each company has committed to the voluntary goals and one or more chief executive has been nominated to oversee and coordinate the industry’s efforts on each PIC.
Peter Simpson, chief executive at Anglian explains the PICs: “These are a series of goals like net carbon neutral emissions by 2030 – ahead of government targets, things we know our customers value. We’re serious not just about delivering the status quo, we’ve got some real ambition in there.”
He adds: “Companies have stepped up with business plans and the public interest commitments to go much further than before. We have enshrined in our articles of association social consequences and environment. Other companies are doing similar. This is to address the concerns that companies were making too much returns companies have responded they have put independent directs on the boards even though privately owned we have majority of non-executive directors on the boards.”
Triple the rate of sector-wide leakage reduction by 2030
The first relates to leakage. As well as featuring heavily in Ofwat’s goals for PR19, leakage is central to these commitments.
Championing this mammoth task are three chief executives: Pauline Walsh, Affinity Water; Peter Simpson, Anglian Water and Bob Taylor, Portsmouth Water. On behalf of the three, Taylor tells Utility Week that the goal to triple the rate of leakage reduction by 2030 is a major upward step in performance.
“ represents an unprecedented rate of improvement to help us meet the wider challenges posed to water supplies and the environment by climate change and population growth,” he says.
The three chief executives jointly presented a keynote speech at the 20th Annual Leakage Conference in October.
Taylor says: “The presentation focussed on ways in which we need to up our game, as an industry to secure success in this area. The keys to this success were identified in a number of areas; an increase in the sharing of know-how and good practice across the industry; more collaborative efforts to identify research and development needs and potential solutions; ensuring we have a pipeline of talented engineers and technicians with data analysis skills; making better use of the large volumes of network performance data in order to identify ever smaller leaks more quickly and efficiently; and industrialising the repair process to deliver improved efficiency and better customer experience.
“In terms of immediate actions, a steering group to manage the achievement of the leakage PIC has been mobilised and we are working closely with UKWIR to develop a heat map highlighting leakage technical capabilities and challenges across the industry. Jeremy Heath from SES Water will soon be visiting all water companies to collect data to inform the heat map project and we would seek the support of all involved to help facilitate this.”
Make bills affordable for all
Along with efficiency, bills have risen since privatisation by around 40 per cent above inflation – mostly in the early 1990s. The regulator stepped in and set a requirement to cut bills by £50 during PR19.
The commitment to make bills affordable and end water poverty by 2030 is not insubstantial, explains Heidi Mottram of Northumbrian – co-champion of the pledge – who says 24 per cent of customers spend more than 3 per cent of their household income on water bills.
Chief executive of United Utilities, Steve Mogford also champions affordability. He told Utility Week the pledge is to assist households that find it difficult to pay their water bills.
“All water companies provide an array of excellent schemes to help customers, but this commitment recognises how we need to continue and, more importantly, enhance our efforts to help those most in need of support.
“By setting a stretching goal for all companies, our aim is to drive innovation in developing new schemes to help customers, help us identify new partnerships with other organisations who support customers in vulnerable circumstances, and provide a platform to work with stakeholders to overhaul the barriers that make it difficult for us to help more people. We look forward to building a collaboration of groups to work with us to develop a strategy to end water poverty.”
Mottram adds: “We have multiple strands of work live right now, with a focus on building partnerships with trusted organisations such as National Energy Action and StepChange who can help us identify customers in need of support, developing a common measure of water poverty, trialling water efficiency opportunities as an affordability measure and being proactive in developing new styles of tariffs to empower customers in making the right decisions for them.”
Achieve net-zero carbon emissions by 2030
Next on the list is the pledge to achieve net zero carbon across the sector by 2030 – ahead of national goals, but in line with Green Party manifesto. Labour had previously pledged the same target for the UK, but has since distanced itself from the promise.
Simpson, who co-champions carbon emissions with Heidi Mottram, says the PIC signals a significant increase in the momentum, technology and innovation required to tackle such a big challenge.
“It’s easy to say, but it’s a huge undertaking especially as it puts the industry 20 years ahead of the government’s target of achieving net zero greenhouse gas emissions by 2050. Work has already begun on establishing our industry baseline and understanding what work and good practice is already underway and can be shared. Our next step will be to develop centres of excellence to exchange knowledge, opportunities for future projects and new ways of working.
“Building on the work already done on reducing carbon in construction we’re now looking to plant 11 million trees as an industry. Aside from looking at how we can reduce operational and capital carbon, this part of our promise enables us to give something back directly to our environment while reducing carbon and enhancing biodiversity.”
Mottram recognises the opportunities the challenge represents: “Given this will impact new technology, new ways of working and processes, it’s a measure that will touch every element of the water sector.
“It’s also not a one-size-fits-all or one where progress must be dictated – instead looking for individual and collaborative innovation to reduce carbon form our sector. At Northumbrian we already plan to be carbon neutral by 2027 – and examples like our partnership with Ørsted in the UK’s first offshore wind corporate PPA show the scale of the ambition required.”
In early 2020, an event will be held in partnership with The Cambridge Institute for Sustainable Leadership to share best practice between companies and with other sectors, and to consider progress on the road map to deliver the pledge.
Reduce single-use plastic across the sector
Addressing the problem of single-use plastics, the fourth pledge calls for industry wide action to eliminate single-use plastics in company operations and prevent the use of single-use plastic bottles in wider society by promoting refill points.
The champions of this PIC – Mel Karam at Bristol Water and Colin Skellett, Wessex Water, are leading the group that is working with stakeholders to deliver this goal.
Skellett says each company has been surveyed to set out what they are doing to tackle the issue.
“A working group has been formed to measure progress, chaired by Neil Dewis from Yorkshire Water, and the feedback has been really positive. Most companies have already started installing water refill points within their areas and, through Water UK, are working with the non-profit organisation City to Sea to support their refill work.
“We’re all taking stock of what we can do internally and within our supply chains to reduce single-use plastics, which we know is essential to protect our environment for future generations.”
100% commitment to the Social Mobility Pledge
The final pledge is to achieve 100 per cent commitment to social mobility, this commits companies to partner with schools and colleges to provide coaching, work experience and apprenticeships as well as adopting open employee recruitment practices. It is championed by Liv Garfield at Severn Trent, which supports people from all backgrounds.
HR director at Severn Trent Neil Morrison tells Utility Week social mobility is essentially about removing barriers and supporting people from any background to realise their potential.
“It’s something I’m incredibly passionate about and it’s a great honour to be the sponsor of this important and worthy commitment.
“We’ve put social mobility at the very heart of our long-term business strategy, supporting people from areas where opportunities are less readily available, known as “cold spots”. In fact, a third of the nation’s social mobility cold spots are in the communities we serve, so we have a great chance to make a real difference and create opportunities that otherwise wouldn’t be there.
“Almost half of our new hires have come from these areas and that figure is also reflected in the promotions we make. However, more could and should be done. It’s the responsibility of all of us to do more, to remove barriers, reduce bias and make decisions on employment and work, based on merit as much as possible.”
The intention to make companies more accountable and their actions more visible to the public they serve is timely at a point when trust in the industry is low and calls for renationalisation make headlines, but will it be enough to change minds and habits?
Simpson, who co-champions two of the PICs, says the commitments demonstrate what the sector is doing to change. “People want to see ‘is this our water company? Is it serving the local community?’ I’m proud to say yes, it is, the PICs from Water UK are saying, yes, it is. We want to eliminate water poverty and we want to lower bills, improve leakage – all these sorts of things are to show that companies are working for the customer.”