New Metrics
Why Water Scarcity-Adjusted Targets Are Not Context-Based Water Targets

Around this time last year, during World Water Week in Stockholm, a session was hosted which sought to explore the concept of Context-Based Water Targets (CBWTs). The event featured the first working version of the paper (subsequently released in April 2017), “Exploring the case for corporate Context-Based water targets,” jointly developed by CDP, United Nations Global Compact, The Nature Conservancy, World Resources Institute and WWF, which outlined a case for why company water targets should be informed by the best available science on hydro-ecological conditions at a basin level and informed by contextual social needs that are aligned with local and global public policy objectives.

More recently, The Embedding Project published the “Road To Context” guide, which puts forward a framework for how companies can begin integrating the concept of “context” into their corporate strategies. As part of this work, the Embedding Project also developed a casebook that sought to highlight the efforts of early adopters of “context.” Often, these companies don’t appreciate or understand the full extent of the commitments that come with developing a context-driven target. In some instances, these misunderstandings can lead to declarations that targets that are adjusted to reflect local water scarcity (targets being more stringent where levels of water scarcity are higher) are therefore “context-based.” So, the question becomes: Have these companies, which have scarcity- and pollution-adjusted targets, already set true CBWTs? The short answer to this question, in most cases, is no. Often, this is because these companies incorrectly apply the concept of “context,” which may seem like an unimportant detail, but it is this detail that determines whether the levels of water use (quantity or quality) by the facilities within a company’s portfolio are sustainable or not.

What is a context-based water target?

Often, companies who describe water-scarcity and pollution adjusted water targets as being context-based, go on to highlight that by setting a more stringent water use or quality target, the local context is therefore reflected and so this makes the target context-based. This explanation is partly true, but often this description aligns more to the traditional dictionary definition of context (namely, the circumstance that forms a setting). However, the sustainability term context-based takes on an extra dimension and demands an explicit consideration of: ecological thresholds, economic water uses, social water needs, a wellbeing allocation process and public-sector objectives (e.g., the SDGs) tied to water use.

Mark McElroy defines context-based targets as “science- and ethics-based goals or metrics that also prescribe organisation-specific allocations of the shared or exclusive burdens to preserve or maintain vital capitals at levels required to ensure stakeholder wellbeing.” In relation to water, “Exploring the case for corporate Context-Based water targets” defines a CBWT as “a specific, time-bound objective that sets the desired outcome to include both a component that speaks to the company’s water performance and a component that speaks to the basin’s conditions. Context-based water targets better inform audiences on the extent to which performance respects the agreed-upon thresholds of the basin or supports public policy.” At an operational level, a CBWT explicitly measures the sustainability of water use or pollutant load in the context of the surrounding basin by placing a numerator (facility water use or pollutant load) over a denominator (the basin’s contextual availability of water resources – be it a volumetric water balance or a total pollutant load that the system can dilute).

By formulating the target in such a way, it is possible to explicitly determine the degree of sustainable use of water by a given operational unit. Determining if water use is at sustainable levels within a basin has enormous implications for mitigating water-related basin risks, not only for the facility in question but also for other water users within the basin. So, in its purest form, a water target can only be considered context-based if it allows a facility to explicitly show if its ‘share’ of water use or pollutant load, which then accounts for others’ water use or pollution loading, is either sustainable or unsustainable, with respect to the basin.

A different type of relative target

Commonly, scarcity- or pollution-adjusted water targets that are described as context-based typically are in the form of: water (pollution) volume per unit of product/area of facility*.* These targets are then adjusted, in some way, to account for local water scarcity or pollution. These targets therefore allow a facility to demonstrate the effectiveness of its internal water-efficiency initiatives and gives the appearance that the facility is responding to local water scarcity or pollution levels. If we apply the true definition of a CBWT to the targets described above, we see that these targets often fail to meet the requirements of a CBWT for three main reasons, namely:

1. No formal link to water scarcity or pollution levels

Often, companies that use these scarcity- or pollution-adjusted targets don’t clearly outline how these targets have been linked to water scarcity or pollution data. When this happens, it is impossible to tell if these targets have been arbitrarily adjusted to account for a higher level of scarcity or pollution and if any in-depth work has been done to consider the nuances of the water scarcity or pollution data available to the company. Indeed, when one digs below the surface, scarcity data is often derived from global models that are inaccurate (both in time and space) at a finer, local scale. A CBWT, by definition, explicitly considers local water scarcity or pollution by supplementing global data with more detailed local data. But without a clear explanation of how local water data has impacted the magnitude of a scarcity- or pollution-adjusted target, it is impossible to describe it as being context-based.

2. Incomplete or undisclosed supplementary information

Companies using these types of targets often do not explicitly disclose the associated changes in the production volumes between reporting periods. Why is this important? Because without this information, it is impossible to determine what the corresponding changes were in the absolute amount of water used or pollutants discharged by the facility. A CBWT is a relative-absolute target, meaning that water use or pollution must be shown as an absolute figure, relative to the contextual availability or the adsorption capacities of the water resources within a basin. Without being able to determine the change in absolute water usage or pollution loading, assuming you had the data to determine the contextual availability or the adsorption capacities of the water resources within a basin, it is impossible to determine if the facility’s water use or pollution discharge is sustainable using a context-based lens.

3. Internally relative rather than externally

Lastly, and most commonly, these targets are often related to internal criteria (e.g., production or floor area). This approach supports internal management decision-making as it helps explain the water use or pollution discharge performance of a facility, and possibly relative to other facilities within a portfolio. On its own, this type of internal relative metric does not allow overall facility water use or pollution discharge performance to be assessed as either sustainable or unsustainable in the context of the basin. A CBWT is by nature a relative metric; however, it seeks to measures a facility’s performance relative to an external benchmark rather than internal units of production.

Contextual responses – a step towards CBWTs?

CBWTs represent, in theory, a sustainability endpoint; they are not what defines “better water use” but rather “sustainable (or unsustainable) water use.” However, CBWTs (including their methodology and the tools required to enable companies) are not yet complete. While there is a growing recognition that CBWTs may indeed become a (or even the) key future metric of water stewardship, a multi-stakeholder group is still in the process of refining the approach. As this happens, the incorrect application of the term context-based to scarcity- or pollution-adjusted water targets only compounds the confusion of what a CBWT actually is. To our knowledge, there is no company that has successfully developed a water target that meets the criteria of the CBWT definition, but we recognise that there is limited guidance available that helps companies through a process to arrive at a robust CBWT.

Therefore, while it may seem obscure and picky to focus on the nuanced definition of a CBWT, the difference of “better” versus “sustainable” is fundamental. In an effort to help clarify this landscape and avoid terminology confusion, we believe it is more accurate to say that these leading companies, which are beginning to adjust water use and discharge targets based on local water conditions, are setting “conditional water targets”: “targets that adjust performance requirements to account for local water conditions.” These sorts of targets naturally evolve out of water risk assessments, such as those enabled through the Water Risk Filter.

Perhaps more importantly, we see these “better,” conditional water targets as filling an important, interim step on the journey towards “sustainable” CBWTs. This journey is illustrated in the figure below. It is worth noting that conditional water targets improve the focus of water targets (i.e., accuracy); they do not define a more sustainable number (i.e., they are not more precise). There is a significant conceptual leap between a traditional, global water target and a CBWT. Accordingly, a company developing CBWTs will need to guide its stakeholders (internally and externally) along this journey. By starting with setting conditional water targets, a company can begin to address this shift in thinking with a smaller and more manageable step, helping to make the transition to CBWTs easier in the future.

There will be another session exploring CBWTs during World Water Week (August 27-September 1) in Stockholm this year. While it will be interesting to see how our collective thinking on CBWTs has changed over the past 12-months, we should also remember the above semantics. Global water targets are not the same as conditional water targets; and conditional water targets are not the same as CBWTs. But just because water scarcity- or pollution-adjusted targets rarely meet the requirements to be considered context-based, we should not dismiss these early efforts, but rather acknowledge that these are part of our collective learning process and journey towards developing stronger forms of CBWTs and ultimately helping to ensure sustainable water use for all.