Securing Food & Water
28 June 2012
Cambridge Judge Business School, Cambridge
2012's CIBAM Symposium on 'Securing Food and Water' brought together leading business people, academics, policymakers and representatives of NGOs and international organisations to discuss the challenges presented by the uneven distribution of global resources, the increasing demand for food, and shortages of adequate, safe drinking water. Professor Sir Leszek Borysiewicz, Vice-Chancellor of the University of Cambridge, proposed the theme of the Symposium, which was endorsed unanimously by the CIBAM Advisory Board.
Food has become a driver of world politics. Soaring food prices are considered to be a major trigger for the riots that destabilised North Africa and the Middle East, beginning in December 2010 in Tunisia. Environmental factors related to global warming exacerbate the supply problem. Bad weather, such as this year's drought in East Africa, has had catastrophic human costs. These and other factors that contribute to the trend of increasing demand and decreasing ability to supply will be explored.
A related problem, water scarcity, already affects every continent and more than 40 per cent of the world's population. By 2025, 1.8 billion people are expected to be living in countries or regions with absolute water scarcity, and two-thirds of the world's population could be living under water-stressed conditions. The water scarcity situation is being exacerbated by climate change, especially in the driest areas of the world, which are home to more than two billion people and to half of all poor people.
Welcome Addresses & Introductions
Professor Christoph Loch, Director, Cambridge Judge Business School
The CIBAM-Cambridge Judge Business Global Business Symposium started with Dr Christos Pitelis, Director of the Centre of International Business and Management (CIBAM), introducing Professor Christoph Loch, the Director of Cambridge Judge Business School. Dr Pitelis informed the attendees that, unfortunately, Professor Sir Leszek Borysiewicz, Vice-Chancellor of the University of Cambridge, would not be able to deliver the Academic Keynote Lecture due to a personal hardship, but added that Professor Loch would be covering some of the Vice-Chancellor's points too.
Professor Christoph Loch, Director of Cambridge Judge Business School, mentioned that he would cover some part of the Vice-Chancellor's talk, but would also add to it some insights of his own as a scripted version of the Vice-Chancellor's talk had already been distributed to the participants of the Symposium. He initially raised the importance of some keywords in the Vice-Chancellor's talk, notably the use of the term "collapse" that he connected with the book of Jared Diamond entitled Collapse: How Societies Choose to Fail or Succeed. After supplying a couple of examples from Diamond's book he moved to the interesting connection between agriculture, education and health, that was mentioned in the Vice-Chancellor's talk.
Referring to this connection as the triangle model, he focused especially on the role that education and universities can play in the development of agricultural products and the promotion of better health conditions for humankind. Especially universities can play a critical role in mobilising knowledge through their lively or dynamic research activity. Toward this direction, he referred to the work of important Research Centres in Cambridge Judge Business School, like the case of the Cambridge Conservation Initiative (CCI). He added that the triangle problem can be addressed if society as a whole is mobilised and expressed his belief that Symposia like this can help significantly towards this aim.
Moving to his main presentation, Professor Loch proposed that water is becoming a globally scarce resource, referring especially to a personal experience of water imports from France in the region of Barcelona. Within this context, he raised the question whether the solution to water shortages should be sought in international trade terms. He deliberated that this should not be the case, especially since in the case of water, evidence seems to imply a management problem rather than physical shortage.
Professor Loch proposed that water management should cover three broad areas of action. First, we must invest more in broadening our knowledge, e.g. to examine current water networks and to pinpoint all existing water leaks (in UK the estimated loss from leaks is circa 30 per cent). Second, societies must be ready to alter their attitudes and habits. He explained that rigid patterns of human behaviour are evident, because the thinking of humans tends to be rather short-sighted, and thus they are less inclined to take action for a problem that they may not even perceive as pressing. For this reason, a critical alteration in human attitudes is needed. Finally, the right incentives have to be set up, in order for humans to have a solid reason to take action and resolve the problem. Based again on personal experience and the case of a water waste recycling project in Israel, he mentioned that agents are usually in favour of supporting a noble cause, but most of them are not willing to participate when it comes to paying and sharing the costs of a novel project.
In closing his presentation, Professor Loch proposed that the government can play a crucial role in resolving all these participation, agency and free-rider problems, but businesses need also be active and take responsibilities. Overall, an efficient solution can be reached only if all parties work together toward a sustainable solution for water management. He finished his talk by expressing his hope that this Symposium will play a critical role toward this direction.
Director of the INSEAD Israel Research Center (2008-2011) and Dean of the PhD Programme (Sep 2006-Aug 2009), INSEAD, Fontainebleau, France. Associate (client consulting team member), McKinsey & Company, San Francisco, USA, and Munich, Germany (Oct 1991-Dec 1993). Strategic Analyst (competitor and industry analyses), Siemens AG, Munich, Germany (Summers 1986-1989). Lecturer (evening MBA course on Management Science and undergraduate course in Operations Management), University of Tennessee, Knoxville, USA (Jan-Jul 1987). Non-executive Director of educational software start-up company Prendo (2000-present).
Professor Loch has been the Chairman of the Behavioral Operations Management section of INFORMS (2008-2010), Department Editor for both Management Science (R&D and Innovation department) (2004-2009) and Production and Operations Management (2003-2007, and the special issue on behavioural operations management in 2011), and Associate Editor of Management Science (2000-2004, 2009-2011), Manufacturing and Service Operations Management (M&SOM) (2003-2011) and Operations Research (1998-2004).
Prior to joining the School, Professor Loch was the GlaxoSmithKline Chaired Professor of Corporate Innovation (2006-2011), Professor of Technology and Operations Management (2001-2011) and Assistant and Associate Professor (1994-2001) at INSEAD, Fontainebleau, France. From 2009 to 2010 he was Visiting Professor of Operations Management at the Stockholm School of Economics in Sweden, and in 2002 and 2003 was Visiting Professor in the Information Dynamics Lab at Hewlett Packard Labs in Palo Alto, California.
Dr Christos Pitelis, Director, Centre for International Business and Management
Dr Pitelis, Director of the Centre for International Business and Management (CIBAM), thanked Professor Loch for his welcome address and started his presentation by pointing to the 15 consecutive years of CIBAM Global Business Symposia, highlighting the relevance of this year's theme on "Securing Food and Water", which was recommended by the Vice-Chancellor Professor Sir Leszek Borysiewicz.
Dr Pitelis began with a short introduction of Cambridge Judge Business School as a leading provider of business education worldwide and moved on towards explaining the role of CIBAM within it. He mentioned that the Centre explores the conditions for sustainable value and wealth creation and appropriation in the semi-global, knowledge-based environment. He emphasised the foresight that the CIBAM Global Advisory Board has shown in consistently selecting themes that have enjoyed high relevance and topicality at the time of the event. These included the prediction of the current financial crisis, by Board Member Mr Jonathan Garner.
He then went on to provide some statistics regarding the development of world population in the coming decades, and proposed that these will lead to considerable increases in food and water demand. For example, an estimated 9.1 billion world population in 2050 is expected to lead to a 70 per cent increase in food demand by that time, while by 2025 the United Nations expect that around two thirds of the world population could be under conditions of water stress. Dr Pitelis went on to provide some maps illustrating hunger and water stress on the globe today, but also in two decades from now.
Focusing mostly on water, he proposed that the problem of water management is rather complex, as people can access only one per cent of global water resources easily! He went on to mention that the problem of water management is already, or is expected to be, aggravated by a whole set of demand and supply-related factors like for example:
- Pressures from population growth, changing class structures and dietary habits
- Intensive agricultural production for larger global needs
- Expected increase in energy demand from hydropower, renewable energy resources and bio-fuels production
- Climate change and environmental pressures
- Waste in the food chain
Dr Pitelis concluded his introduction by highlighting the pressing questions that societies should answer if they desire to work towards a sustainable future; namely how can we secure sustainable food and water, but most importantly what should be the role of individual and collective action in such a context. He closed his presentation by expressing his hope that the CIBAM Global Business Symposium could help in this respect by gathering global leaders from business, government, polity and academia to discuss this pressing problem.
Christos Pitelis is Director of the Centre for International Business and Management (CIBAM) and Reader in International Business and Competitiveness at Cambridge Judge Business School, as well as Fellow in Economics at Queens' College, University of Cambridge. Christos has published extensively in scholarly journals such as Organization Science, Journal of International Business Studies, Organization Studies, and Industrial and Corporate Change. He is Editor of the Cambridge Journal of Economics, the Collected Papers of Edith Penrose, and on the editorial boards of, among others, Organization Science, Organization Studies, and Management International Review, as well as a Guest Editor for leading journals, on the theory of the firm, globalisation, international business, regulation, global governance and global finance. Christos has researched, consulted and co-ordinated projects for governments, the European Commission, the United Nations, USAID, the Commonwealth Secretariat and the private sector. He has been Visiting Professor in Europe, Russia, China, Latin America and the United States (Berkeley, Copenhagen Business School, MIT, China-Europe Management Institute, University of St Petersburg). He is included in the Marquis 'Who is Who in the World', the Cambridge 'Blue Book' and other bibliographic sources.
Commissioner Maria Damanaki, EU Commissioner on Maritime Affairs and Fisheries
Ms Maria Damanaki, EU Commissioner on Maritime Affairs and Fisheries, addressed the audience via video and spoke on the risks that the fish population is facing due to increases in population dynamics and fish consumption, but also due to over-exploitation of fish stocks by the fish industry. She expressed her firm belief that fish stocks would produce more if fished sustainably.
The Commissioner briefly introduced the audience to the core of the reform of the EU Common Fisheries Policy that she has tabled last year. The policy aims to stop the wasteful practice of discarding unwanted fish by foreseeing the obligation to conform to a conservation standard known as maximum sustainable yield. This standard would allow the fish population to continue normal reproduction. Ms Damanaki claimed that this would increase the industry's fishing opportunities as well as their profit. The Commissioner added that the EU proposal has also an external aspect, namely to implement the same rules for fishing outside of Europe as for EU waters. This connects with the EU new market policy and labelling and traceability rules that secure a level playing field between EU fishermen and EU neighbours.
In concluding her message, Ms Damanaki proposed that policy makers have to carry a dual responsibility, namely to ensure that on one the hand human populations are sustainably fed, but on the other hand to guarantee competitive and environmentally sound standards for European industries. She expressed her firm belief that aquaculture can address a big part of both challenges, as it is a success story on the pan-European level with high environmental standards, high-quality products, a high degree of animal health and consumer protection. She ended by proposing that the reform of the Common Fisheries Policy was a comprehensive set of measures designed to ensure seafood supply on one the hand and green and smart growth for the industry on the other.
Active in the underground student opposition to the dictatorship in Greece (1970-1974), Commissioner Maria Damanaki played a leading role in the coordination of its activities. During the three days of the popular uprising against the dictatorship, known as "the Polytechneio revolt", she broadcast from of the clandestine radio transmitter set-up inside the occupied National Technical University of Athens. Her voice thus became known as "the voice of the uprising". First elected as a Member of Parliament in 1977, at 25 she was the youngest ever Greek MP. Since then she was continuously re-elected till 1993, including in the position of Vice-President of the Greek Parliament, the first woman to hold this role.
In the years from 1993 to 2000, Commissioner Damanaki's roles included President of the Coalition of Left and Progress (becoming the first woman to lead a Greek political party), running as a candidate for Mayor of Athens (1994 and 1998) and heading up the opposition in Athens' City Council. In 2000 she returning to Parliament as an MP. She was Head of the PASOK (Socialist Party) group in the Select Committees on Education and Culture, a member of the Parliamentary Assemblies of the Council of Europe, the Western European Union and NATO, a member of the Inter-parliamentary Union, the member of the Political Council of PASOK responsible for education (2004-2006), social affairs (2006-2007) and culture (2008-2009).
Commissioner Damanaki has a Master of Science degree in chemical engineering from the National Technical University of Athens, and a diploma in Political Sciences from Lancaster University.
Business Keynote Lecture
Mr José Lopez, Executive Vice President of Operations, Nestlé
Securing food and water: a food industry perspective
After the video policy message, the floor was given to the Business Keynote Speaker Mr José Lopez, Executive Vice President, Operations & GLOBE of Nestlé, who introduced himself and explained his role. Mr Lopez briefly described the activities of the company that counts 150 years of history, operates 465 factories worldwide and employs 320,000 people.
Mr Lopez started his presentation by sharing his belief that the food industry was first introduced at prehistoric ages, as people had to decide between time spent on hunting and agriculture or leisure, with cascading effects on early food storing and preservation technologies.
Entering the core of his presentation, Mr Lopez presented the audience Nestlé's "one billion products", namely products that succeed in one billion sales per year worldwide. He also mentioned that Nestlé is not a typical multinational company that produces centrally one kind of product and disperses it worldwide. On the contrary, Nestlé tries to differentiate its products according to the tastes of the local customers; thus the same brand may be quite different in various locations (e.g. Nescafé). Mr Lopez noted that scale does not necessarily deliver economy in an inter-connected world like the one we are living, and that the whole discussion of economies of scale has to be drastically re-considered, especially in the case of agriculture. He elaborated further that Nestlé collaborates with a high number of small holders and farmers (they procure from 670,000 farmers). Even if the company were able to succeed in some kind of customisation, this would not work in the long-term as farmers usually do not intend to pass the farm to their children, in the hope for a better future for them.
Mr Lopez proceeded by mentioning a number of long-term issues that may intensify the global feeding problem, namely growing population and urbanisation, losses in the food value chain, land allocation problems and land grabs, as well as bio-fuel policies, towards which he was critical. He added that while in general it is usual to talk about profits and losses, in global terms it is not easy at all for someone to check the global balance sheet. Steps toward this direction should be made. The proceedings of Rio+20 have made some progress in the field.
Concerning specifically water allocation, Mr Lopez indicated that only one per cent of global water is accessible. Nevertheless, the estimated flat changes in water demand 20 years from today will force significant pressure in the stock of accessible water (i.e. a two per cent increase in water demand until 2030 implies a 40 per cent decrease in river basins stock) and will lead to major challenges in water management. Another issues that may possibly arise in the immediate future is the "right to water", something that could lead to critical international conflicts. Mr Lopez shared with the audience the case-example of Ethiopia that hosts 68 per cent of the sources of Nile, but holds no rights on them.
Turning to agriculture and food security, Mr Lopez noted that we should not consider this as a long-term problem, but as a quite pressing one, as we should be ready to face it in a maximum of five years' time. Feeding a rapidly increasing world population is maybe the most serious challenge, with 2.5 billion people in two countries alone (China and India). Especially in the case of Asia, he noted that global production as a whole is not yet cable to meet the changing consumption habits of the Asian population. For example, if every Chinese decided to eat one chocolate bar every day, then the world does not produce enough cocoa in order to meet such a demand! This is apparent also in water terms, and Mr Lopez presented the water footprint of common nutritional elements like sugar, vegetable, fruits, cereal, milk, chicken and meat in order to portray the urgent need to re-think the whole food and water security agenda as soon as possible.
Mr Lopez wondered whether the world is ready to take this step forward in securing food and water. He attacked the idea that the market is able to solve all problems via the price mechanism. He admitted that the market has a certain role, but there are limits to it. Companies should have ambition and social responsibility. Partnerships are crucial and seem to be one of the major ways forward. Finally, he noted that governments and politicians do not seem to be able to find consensus, except at the lowest level, because politicians are concerned more about getting re-elected than addressing evident problems that would present them with 'political cost'.
Mr Lopez then introduced Nestlé's agenda towards environmental sustainability (200-300 million USD spent each year on such projects), bringing the example of a powder milk factory in Mexico that is able to produce powder milk without a drop of underground water. Nestlé is very sensitive to water management as 120 factories are located in water stressed areas. Additionally, Nestlé succeeded in a 75 per cent increase in the volume of production over the last 10 years, but at the same time managed to reduce total water withdrawal by circa 25 per cent. The latter was achieved through the work of specialised agronomists who collaborate with and consult local producers in sustainable water and agricultural management, as well as through technological innovation in the field.
Nestlé is working collectively with other organisations, like the United Nations, the World Economic Forum, SIWI, McKinsey, etc., on a number of initiatives like the 'CEO Water Mandate', the 'Alliance for Water Stewardship', the '2030 Water Resources Group' and the 'Water Footprint Network'. Additionally, they engage in various community projects like Project Wet.
Reaching the end of his talk, Mr Lopez focused on the case-example of India, so as to elaborate on the need of governments and businesses to take a closer look at the problem of water scarcity and management. More specifically, he noted that in the case of India the cost of closing the 755,800 million m3 water gap in 2030 would be around 5.9 billion USD (specified deficit between supply and water requirements 2030), according to estimations of the 2030 Water Resources Group. Furthermore, we should be able to account things differently by adjusting the unequal and inefficient pricing of water, especially in developing countries, namely the huge differences between the price of municipal water (usually subsidised) and street vended water.
Finally, Mr Lopez claimed that there is enough knowledge, data and technology to deal with all these issues and work towards a more sustainable future, citing McKinsey Global Institute's estimates of total resource benefits from a number of opportunities, like building energy efficiency, large-scale farm yields, food waste, municipal water leakage etc. He proposed that governments and businesses should act on these issues, especially concerning food and water, as the average societal cost is expected to be low with significantly larger benefits.
To do all the aforementioned, Mr Lopez proposed that "we have to break the silos". Adopting and developing the right technologies and practices can boost production in a sustainable way. Businesses should scale up the success stories that really seem to work. Nestlé is collaborating with almost everybody in the value chain towards this direction. The latter is the most critical step forward to "breaking the silos".
Mr Lopez, an engineer and Spanish national born in 1952, is the Executive Vice President of Operations and GLOBE at Nestlé.
In a career spanning more than 30 years at Nestlé, Mr Lopez has held a number of positions including Operations Director of the Oceania region and CEO of Nestlé Japan before taking up his current role on Nestlé's Executive Board in February 2007 where he is responsible for procurement, manufacturing, supply chain, engineering, quality management, agriculture, safety, health and environment, and operations performance.
Mr Lopez is and has been present in non-profit organisations: he was Vice-Chairman of the GS1 Management Board (Global Standards) in 2009 and, since 2010, has been a member of the Advisory Board of the University of Cambridge's Programme for Sustainability Leadership. Mr Lopez has participated in a number of civil society activities, including as President of the Malaysian International Chamber of Commerce and Industry, and as Ambassador for Kobe during his tenure in Japan.
He is passionate about water and leads a specialised committee on water within the Nestlé Group.
Panel Discussion: Setting the Scene
Professor Noreena Hertz, Associate Director, Centre for International Business and Management (CIBAM)
Following the coffee break, the first panel on "Setting the Scene" took place. Professor Noreena Hertz, Associate Director at the Centre for International Business and Management (CIBAM), chaired the panel and briefly introduced the three speakers.
For more than two decades Noreena Hertz's economic predictions have not only been accurate and ahead of the curve, but crucial for the success of the world's economy. In her #1 best-selling book, The Silent Takeover, Hertz predicted that unregulated markets and massive financial institutions would have serious global consequences whilst her 2005 best-seller, IOU: The Debt Threat, predicted the 2008 financial crisis. Her books have been translated into 17 languages.
Many have described Professor Hertz as a visionary, and she is one of the most influential economists on the international stage. Her unique, integrated approach combines traditional economic analysis with foreign policy trends, psychology, behavioural economics, anthropology, history and sociology. Her work is considered to provide a much needed blueprint for rethinking economics and corporate strategy.
Hertz is the Duisenberg Professor of Globalization, Sustainability and Finance based at Duisenberg School of Finance, RSM, Erasmus University and University of Cambridge. She is also a Visiting Fellow at The Centre for Global Governance at LSE and a Fellow of University College London. She has a PhD from the University of Cambridge, an MBA from the Wharton School of the University of Pennsylvania, and a BA from University College London.
Noreena played an influential role in the development of (RED), an innovative commercial model to raise money for people with AIDS in Africa, having inspired Bono (co-founder of the project) with her writings. She advises major multinational corporations, CEOs, NGOs and politicians, as well as start-up companies, and sits on various corporate and charitable boards. Her op-ed pieces have been published in newspapers, such as The Washington Post and The Financial Times, and she is regularly profiled and featured in leading print and television media in Europe, the United States, Asia and Latin America.
Hertz is also a much sought after keynote speaker and has spoken alongside such luminaries as Bill Clinton, James Wolfensohn, Hernando de Soto and Jeffrey Sachs at corporate events and also at ones organised by international organisations, such as the World Economic Forum at Davos.
Dr Mark Mulligan, Reader, King's College London, and Leader, Project AN3 of the CGIAR Challenge Programme on Water and Food
Global biophysical capacity for water and food production: status and trends
The first panellist, Dr Mark Mulligan, Reader at King's College London, focused primarily on biophysical aspects. In the beginning of the presentation, Dr Mulligan showed an impressive map that visualised changes in the footprint of agriculture in the world over time. The audience could easily see the growth of agriculture over time to feed an increasing world population. This has major implication on the use of water, as 70-90 per cent of water use is associated with agriculture. Dr Mulligan also showed a similar map, displaying the growth in the number of water dams over time. Recently, the number of dams over 15 metres increased to 36,000 worldwide, most of them used for agriculture.
Dr Mulligan continued by talking about Evapotranspiration (ET) in detail. He pointed out that on a larger scale, no water is lost through ET, but energy is necessary to transfer it to the place where it is needed. So from a local point of view, ET causes losses of available water. Typical losses through ET amount to about 1 litre of water per produced calorie, although these numbers differ significantly per type of food produced.
Interestingly, there is often more rainfall than the amount of water lost through ET, so the main challenge tends to be to manage the available amount of water. Dr Mulligan showed another map displaying global levels in ET productivity. It became clear that there are significant differences, mainly between developed and developing countries. A correlation between agricultural yields and water productivity can also be observed; where output levels are high, water is typically used very productively. This implies that the greatest room for improvement exists where yield levels tend to be low. The CGIAR Challenge Program on Water and Food tries to increase water productivity of the poorest smallholder agriculture in water basins like Karkheh, Yellow River, Indo-Gangetic, Nile, Volta, etc. So far the program involves 66 research and capacity building projects, over 200 partners, 65 million USD from 12 donors in Phase 1 (2004-2008), and is now running Phase 2 (2010-2013).
Dr Mulligan noted the three main key outcomes of the CGIAR Challenge Program, which focus on:
- The need for local solutions, because the world is really complex as a whole. Geography and heterogeneity are important and solutions must be case-specific. In this, we must also embed the potential impacts of climate change.
- The urgency to remove the silos separating environmental, agricultural, urban and domestic water management, in order to improve water productivity and multiple use. The key to the problem is the collaborative management of resources.
- The necessity of partnerships between governments, institutions and businesses. Cooperation is as important as biophysical limits.
Finally, Dr Mulligan warned that further increases in yield mustn't come at the expense of water usable for other purposes. Therefore we need to manage landscapes for food provision alongside with their maintenance for other services. He presented three different options on how to use an ecosystem:
- Natural, in which the ecology develops mostly untouched by humans.
- Intensive cropland, which is the solution mostly used in agriculture today.
- Cropland with a restored ecosystem. The latter solution should be the goal.
Dr Mulligan closed his presentation by noting that we must carefully protect the most hydrologically critical areas in the watersheds of dams. Proposals for a global system of hydrological protected areas like that of the Brazilian Agriculture and Livestock (CNA) at Rio+20 could be a step toward this direction.
Mark Mulligan completed his undergraduate degree in geography at the University of Bristol from 1988-1991. After a brief period in the rainforests of Brunei with the then RGS Brunei Rainforest Expedition, he moved to King's College London for his PhD on "Modelling Hydrology and Vegetation Change in a Degraded Semi-arid Area", supervised by Professor John Thornes. Mark took up the post of lecturer in Geography at King's in September 1994 at the age of 24 and has been teaching and researching in the Department since with a year (2003-2004) on research secondment to Istituto di Botanica, Universita' di Napoli, Italy. In 2003 Mark was appointed Reader in Geography and in 2004 was awarded the Royal Geographical Society - Institute of British Geographers Gill Memorial Award for 'innovative monitoring and modelling' of environmental systems. Mark works with a large body of (mainly overseas) PhD students having first-supervised 13 successful PhD completions since 2000. He currently supervises a further ten PhD students on a variety of topics in the area of environmental change, at scales from local to global and with a particular emphasis on tropical forests and semi arid drylands.
Mark is founding editor of the open-access ejournal Advances in Environmental Monitoring and Modelling, has a keen interest in field research as well as simulation modelling and remote sensing, and develops and maintains a series of very large environmental databases which are freely accessible from these pages. Mark is senior fellow at the United Nations Environment Programme World Conservation Monitoring Centre (UNEP-WCMC), adjunct Doctoral Graduate Faculty at Texas State University 2007-2009, trustee of PROAVES UK and chair of the conservation advisory board for Healthy Planet Foundation.
Mr Roger Calow, Head of the Water Policy Programme, Overseas Development Institute
Beyond the language of limits: new perspectives on water and food security
The next panellist, Mr Roger Calow, Head of the Water Policy Programme at the Overseas Development Institute, briefly presented the work of ODI's Water Policy Programme and its contribution to "Confronting Scarcity: Managing Water, Energy, and Land for Inclusive and Sustainable Growth" (part of the European Report on Development), he started off with the notion that water scarcity and productivity is a global issue.
For this reason, there is a need to:
- Reduce the environmental footprints not only in the south, but in the north as well
- Increase productivity of agriculture
- Reform institutions accordingly
- Price natural resources in an efficient and fair way.
Positively, Mr Calow noted that many organisations from the private sector start dealing with the issues, as can be seen by their participation in related events.
Mr Calow continued by presenting some features of available water resources and their calculation in water statistics. The largest water reserves exist mostly as groundwater (30.1 per cent) and glaciers (68.7 per cent). However, groundwater is often not considered in calculations of the available water. Interestingly, there are large resources of groundwater in Africa, for instance. Freshwater lakes make up the biggest part of surface water stock (67.4 per cent), while rivers typically only make up a small amount of the available water resources (1.6 per cent). Concerning groundwater stocks, Mr Calow reported some insight from India, where groundwater was largely overexploited during the last years. Thus, often a supply-side cap is required to prevent such overexploitation. Another common problem with metrics is that they often consider savings per given area of land, but not the net impact of a water-saving programme. What we often witness though, is that savings lead to an increase in the area used, so that the net impact of savings is close to zero or even negative.
In the next part of his presentation, Mr Calow continued by talking about some of the factors that drive water consumption. Of course, there is an increase in global population levels, but it needs to this growth today is much higher in Africa than it is in Asia. Economic growth is another factor driving consumption, as it leads to changes in diet, away from foods that can be produced with low amounts of water, to highly water-consuming products. Finally, there is also an effect of subsidies for bio-fuels, as they lead to changes in food prices.
Elaborating further on metrics, Mr Calow noted that the most common measure is availability of water per capita. There are problems with this concerning both the supply and the demand. From a supply perspective, the amount of water available is often variable in time and space. On the demand side, access to water is often not evenly distributed between all parts of the population. In Ethiopia for instance, about 50 per cent of the population has no reliable access to clean water, caused by inability to deal with the variability in rainfall. Storage facilities that can manage this variability are not available on a larger scale. In China on the other hand, water storage is not so much a problem, but the country has to deal with some environmental issues and physical trends. As it turns out, groundwater levels and river flows (especially that of Yellow River) are in continuous decline since the 1950s.
In concluding his talk, Mr Calow stated that water scarcity is not necessarily environmentally determined. Multiple pressures could be related with water scarcity, and climate change seems to be an important, but not the sole reason. Everybody's aim should be responsible growth and sustainable intensification, reducing in this way some of the challenges that may lie ahead.
Roger Calow is Head of the Overseas Development Institute's (ODI) Water Policy Programme and an Honorary Research Associate at the British Geological Survey (BGS). He leads a multidisciplinary team of eight research staff at ODI working on water and poverty-related issues in Africa and Asia.
Roger has over 20 years' experience in international development, focusing on service delivery and financing, water resources management, water rights, irrigation and food security, the political economy of sector reform and climate change impacts and adaptation. He has worked in Africa, Asia and the Middle East, and was Director of the DFID-funded RiPPLE consortium, a five-year research programme aimed at strengthening the research and evidence base for service delivery in rural Ethiopia. In 2008 he returned from a two-year secondment in China working on water rights reform with the Ministry of Water Resources in Beijing and provincial and local government in the north of the country.
Mr Marc Zornes, Engagement Manager, McKinsey & Co.
Resource revolution: meeting the world food, energy and water needs
The final panellist, Mr Marc Zornes, Engagement Manager at McKinsey & Co., presented the main findings from an intensive study done within the Sustainability and Resource Productivity Practice at McKinsey.
Mr Zornes started off by showing the development of commodity prices over the last century, as an indicator for scarcity. Despite some ups and downs over the years, generally prices had been falling until around the year 2000, ever since then prices have increased dramatically.
Mr Zornes attributed this development to five factors:
- There was a significant demand shock, caused partially by a growing population, but mostly by a growing middle class in many societies (i.e. global car fleet to double to 1.7 billion by 2030).
- There is an increased cost on the supply side, e.g. new oil dwells are substantially harder to exploit than old dwells (i.e. average real cost per oil well has doubled over the past decade).
- Resource use becomes increasingly interlinked, e.g. the amount of energy needed to supply water increases constantly (i.e. unconventional oil methods such as horizontal drilling use more than four times as much steel as traditional vertical drilling).
- There are environmental concerns driving prices (i.e. the Economics of Climate Adaptation Working Group found that some regions were at risk of losing 1-12 per cent of GDP annually as a result of existing climate patterns).
- And finally there are growing concerns in the world about access to resources, also having an impact on their prices (i.e. roughly 925 million people are undernourished in the world and about 884 million people lack access to safe water).
Mr Zornes supported these statements through some insights on how fast countries develop today. It became clear that the pace is much higher today than decades or centuries ago. For example, China and India succeeded in doubling their per capita GDP within 12 and 16 years respectively, while the United Kingdom needed circa 154 years to double its per capita GDP during the Industrial Revolution. The result of this rapid growth would be a novel three billion consumers in the middle class, mainly from Asia-Pacific.
Mr Zornes also showed some interlinks between different types of resources, such as water, land, materials, energy, and carbon emissions. Many of these interlinks exist and operate in a systemic way, and overall they impose some risks on global wealth and welfare. Mr Zornes went on to supply the audience with a number of key facts in order to illustrate the level of risks that the world is already facing.
One way to address these issues would be to dramatically increase the supply of resources. However, there are some problems with this approach. For one, there is a steep cost curve, which causes each incremental unit to be more costly to produce. Mr Zornes exemplified this by showing the cost curve for water. Also resources are often available in countries with significant political and infrastructure risks. Finally, environmental factors related to climate change need to be considered.
For these reasons, Mr Zornes proposed that reducing consumption is a more sustainable approach. He presented 15 different groups of opportunities that represent 75 per cent of the resource savings (e.g. building energy efficiency, large scale farm yields, food waste, municipal water leakage, etc.). As it turns out, the top fifteen of these opportunity groups have a combined total resource benefit potential of about 3.7 trillion USD. Additionally, he mentioned that the "productivity response" should be matched with a relevant "climate response", namely the shift to low carbon energy and additional land-related carbon abatement, in order to meet a 450 parts per million pathway, as well as the effort to ensure universal access to basic energy services.
There are certain implications for governments to consider, when acting towards capturing this resource revolution. First of all, they should adopt an integrated approach for dealing with these issues (e.g. new institutional mindsets and mechanisms). Mr Zornes presented a graph that should that unfortunately public attention is not focused on the most promising productivity opportunities, like large scale farm yields or food waste (266 billion and 252 billion USD total resource benefit respectively), but instead on electric and hybrid vehicles, whose estimated benefit reaches only 138 billion USD.
Additionally, market signals need to be strengthened, including the removal of resource subsidies and support of stability in long-term prices (i.e. direct subsidies of up to 1.1 trillion USD per year have supported resource prices). Governments need to concentrate on correcting certain market failures, for example property rights, agency issues, access to capital and innovation. Finally, governments should work towards creating long-term resilience conditions, like increasing public awareness of risks and opportunities, creating the appropriate safety nets especially for the more vulnerable and poor members of the societies, as well as affecting the consumption mindsets of individuals and businesses.
At the business level, Mr Zornes noted that the private sector has to face three broad categories of disruptive forces in its competitive dynamics and value creation, namely:
- Resource cost-related forces: more expensive inputs (e.g. the cost of oil has already doubled from 2000 to 2010), rising volatility and correlation (e.g. annual volatility across resources is at its highest level of the past 100 years), and rising environmental costs (e.g. potential impact on yields of greater than 10 per cent in next 20 years)
- Regulation-related forces: rising geopolitical concerns (e.g. more than 80 per cent of available arable land is in countries with infrastructure or political issues), public policy push to realise the true costs of resources, and the new social contract for access to resources (e.g. maintaining social license to operate is a top-four issue for metals/mining executives).
- Resource-related technological forces: supply-chain efficiency opportunities (e.g. consumer packaged goods players can reduce energy consumption by 20-50% on average), impact of technology on competitive advantage (e.g. learning curves for renewable power sources range from 10 to 20 per cent), and demand for resource-efficient products (e.g. half of shoppers consider green attributes in their purchasing decisions).
At the end of his talk, Mr Zornes presented the idea of a circular economy, in which basic products are fed back into the circle and are efficiently re-used. In order to present the idea of the circular economy in practice, he elaborated more on the case example of the garments industry in Patagonia and the Common Threads Initiative.
Marc is an Engagement Manager in the London office and co-author of the recent report "Resource Revolution: Meeting our World's Energy, Materials, Food, and Water Needs". Marc has significant experience in working with consumer packaged goods and retail, private equity, and resource extraction. Most recently, Marc has been taking the work on Resource Revolution to help companies understand their resource risk and to activate public and private sector dialogue on how to address key areas of resource productivity. His expertise is in the linkages between resources, resource risk for enterprises, and public-private partnerships.
Panel Discussion: Meeting (and Shaping) Food and Water Needs
Mr Jack Keenan, Founder and CEO, Grand Cru Consulting
After the lunch break the second panel started. Mr Jack Keenan, Founder and CEO of Grand Cru Consulting and Patron of the Centre for International Business and Management (CIBAM), chaired the Panel and introduced the first speaker.
Jack is currently the Founder/CEO of Grand Cru Consulting. He has been Chairman and CEO of Kraft Foods International, and CEO of the business which is now Diageo.
Jack has served as an executive director on the Diageo and Moet Hennessey boards, and as a non-executive on the boards of Marks & Spencer, Tomkins, The Body Shop International and General Mills. Jack is a director of National Angels: a theatre production company that has produced "History Boys" and "War Horse" in the West End together with the National Theatre.
Jack has been patron of the Centre for International Business and Management at Cambridge Judge Business school since 2002. The principal clients of Grand Cru Consulting are today Oaktree Capital Management where he is a senior advisor, Stock Spirits Group, Bavaria Yachtbau and Revolymer. He joined the Panrico board in November 2010. He graduated from Tufts University (Phi Beta Kappa with honours) and has an MBA from Harvard. He is a resident of the United Kingdom.
Mr Peter Madden, Chief Executive, Forum for the Future
Feeding future cities
Mr Peter Madden, CEO of the Forum for the Future, shared some basic information regarding the aims, scope and agenda of the Forum for the Future. Mr Madden's talk elaborated on the challenges that modern cities are expected to face during the coming years. The increase of the urban population will bring critical population pressures, with immediate effects on food and water consumption. The Food and Agriculture Organisation (FAO) forecasts a need of 70 per cent increase in food production, just in order to meet the pressing changes in demand.
Mr Madden noted that the most important issue that modern cities will have to face is the availability of food. This will inevitably lead to more competition for space which is already confined in urban areas, as well as food pressures with people living in the cities at the end of the food supply chain. The second critical problem would definitely be the quality of food and health-related issues. For example, it is estimated that if UK citizens continue their current eating habits, almost half of the population will be clinically obese in the immediate future. Finally, a third significant issue is the calculation of the ecological footprint of what we eat. Mr Madden claimed that all the aforementioned issues will surely affect public policy in the future, especially in the case of urban centres.
He then moved on to three questions that businesses, consumers and policy-makers will have to answer quite soon. First, how can people respond to these challenges? Mr Madden accepted that unfortunately there is no consensus on this. Second, will people living in cities be only consumers, or could they evolve to become producers of basic products? Mr Madden proposed that urban population could be able to produce some basic products for private consumption, noting for example the case of self-grown potatoes in Russia that constitutes circa 90 per cent of production. Third, will food in the future be natural or engineered? This is a huge debate between environmentalists and supporters of economic efficiency. Again the answer is not obvious, and consensus has not been yet reached, leaving space for issues of morality versus efficiency. Furthermore, we need more scientific evidence on health-related issues, in order to resolve uncertainty and thus be able to give a definite answer.
Mr Madden continued his talk by raising the main key-points that future food policy should deal with. More analytically he proposed:
- More resilience in urban centres. People should be trained to be able to produce some of their basic food. This does not mean in any case that they have to be self-sufficient.
- Increasing need to employ new technology. Novel technologies can be a valuable ally in food security, especially the case of post-harvest or post-consumer waste management and recycling.
- More democratic debate of what we want from our food system. This raises important questions especially on how we want to define and approach the notion of sustainability.
Mr Madden concluded that we needed more studies, research and evidence on these issues as well as more policy attention, in order to make future urban cities more secure, resilient and sustainable.
Peter Madden is Chief Executive of Forum for the Future, the sustainable development charity. A leading expert on green issues, Peter works with leading companies and public sector bodies on the strategies and innovations needed to prosper in a low-carbon world.
Previously, he has worked as Head of Policy at the Environment Agency, as Ministerial Adviser to the UK Government, as Director of the Green Alliance and as Head of Policy at Christian Aid.
Dr Jack Carnell, Chairman, Energy & Utility Skills
Water: controlling excessive consumption in the UK
The second panellist, Dr Jack Carnell, Chairman of Energy & Utility Skills, started by noting that although it may not be obvious the UK is short of water, and that relative to its population the UK is as dry as the Sahara! UK water demand is increasing, mainly due to population growth, especially in the South East which is the most water scarce area of the UK. The problem will become more pressing in coming years, as hotter summers will be the rule, mainly due to climate change pressures.
Dr Carnell noted that this increase is not counterbalanced by measures that decrease demand, such as pressure control, leakage reduction, metering and tariffs or better water efficiency. Pressures on supply of water add to this, namely increasing standards of treatment, deteriorating assets and time limited abstraction licences. Therefore, it is likely that the UK will see significant domestic and industrial water shortages with variations of 5-75 per cent of the current demand over the next 25 years.
Dr Carnell mentioned that on average a person in the UK uses 150 litres of water per day, which is 25 per cent more than in comparable European countries. When water had to be delivered during the flooding in Gloucester in 2007, consumption settled at about 30 litres per person per day. Among others the reasons for the higher consumption in the UK, compared to other countries, are that:
- Only 30 per cent of households are metered.
- Water is extremely cheap (e.g. it is 400 per cent more expensive in Denmark).
- There is no enhanced information labelling, in contrast with other countries.
As Dr Carnell added, access to 20 litres per day is considered to be critical and the next 30 litres are of high utility value to humans.
The UK Water Industry is incentivised to build assets as this is a perceived benefit to society, which is not though incentivised to reduce the use of water. This approach however does not consider the value of the investment - investment that could be spent somewhere else adding higher value.
A factor in water use that is often not acknowledged is the carbon footprint that is connected to the delivery of water. At 1kg per litre water is quite heavy, but needs to be pumped over enormous distances and often several hundred metres high, in order to get to customers' taps. The carbon footprint of the water industry is massive at around two per cent of all greenhouse gases produced in the UK. In this vein, as well as the background of the UK target to reduce greenhouse gas emissions by 80 per cent by 2050, it would require each person in 2050 to use only 30 litres of water per day.
Dr Carnell pointed out that water shortage can be addressed either by decreasing demand or by increasing supply and recommended to focus on one of them. Demand can be reduced by:
- Metering households
- Setting different tariffs
- Educating consumers
- Reducing leakages
- Employing novel technologies
The latter is driven by necessity, which at present is not given, mainly due to the low price of water. Supply can be increased by:
- Unlocking new resources from rivers and underground water
- Building of more reservoirs
- Investing in a better interconnection between companies
- A national water grid or other water systems
- Using previously uneconomic water resources
In concluding his presentation, Dr Carnell advocated the reduction of water consumption. Water should be priced according to the damage caused to the planet. Sharp increases in the price of water with a basic allowance at low cost to protect the poor would lead to behavioural changes as well as more water saving innovations. He also called for tougher building regulations for new homes and to address the system of incentives to the water industry.
Jack spent 37 years in the water industry in the UK; the last seven as Chief Executive officer of South Staffordshire Water. He is currently Chairman of a Skills Council, teaches five subjects at Ashton University, is a non-executive Director of two businesses, a Princes Trust Mentor for several start-up companies, and also owns his own business.
Jack has degrees in Mathematics, Business, Engineering, Management and Psychology. He is a Chartered Engineer and Chartered Environmentalist.
Dr Peter Collecott CMG, Ambassador to Brazil 2004-2008
Brazil: part of the solution to global food security
The last speaker of the panel was Dr Peter Collecott, CMG, Ambassador to Brazil 2004-2008, who introduced Brazil as a microcosm of interrelated sustainability issues such as food, water and energy security, climate change, tropical forests and biodiversity. Furthermore, Brazil covers half of the geographic area of Latin America and has half of its GDP. Potentially it holds a key position for global attempts to address these issues, food security in particular. Formerly mainly rural, Brazil has met huge challenges as change in climate led to a lack of water in the arid North East. In the second half of the 20th century, migration towards Sao Paulo and Rio in the South East led to 84 per cent of the population living in cities and promoted industrialisation.
However, by opening up the savannah region of the Cerrado, state-funded technology such as crop breeding and zero tillage, as well as through the availability of water, Brazil became a world agricultural superpower. For supply of water, both the South of Brazil and Argentina depend on the Tropical Rainforest of Amazonia for 60-70 per cent of their rainfall. Brazil also depends on rainfall for the generation of 80 per cent of its electricity.
Because of these geographical advantages, Dr Collecott envisaged Brazil as part of the global solution to food security. With beef, pork chicken and soya production, Brazil is already a vital producer of protein, additionally to its historic position in the markets for coffee, sugar and orange juice etc. Dr Collecott claimed that Brazil has the potential to triple its area of production without encroaching on rainforest or other serious depletion of natural capital. As long as climate change is constrained, water will not be a problem for Brazil, as it includes 28 per cent of global flows with abundant rainfall activity. Biodiversity will support further agricultural and food development. Also, as Brazil gains a high percentage of energy from renewable resources, energy as well is unlikely to become a constraint.
Finally, Dr Collecott pointed out some upcoming opportunities and challenges. As he noted, Brazil is a leader in tropical agriculture and willing to share technologies, especially with Africa. There are extensive business opportunities in Brazil as well as in co-operation with Brazilians in Africa. However, Brazil is very sensitive over land purchases by foreigners and Africa is calling for constructive investments - rather than land-grabs. The politics could become more difficult when China and India - import countries for soya and other protein - need to prepare themselves to pay the price, when water, and hence food, will become more scarce. Globally, it will have devastating effects on food security if deforestation in Brazil and climate change are not adequately addressed.
Dr Collecott concluded that water, food and energy security, climate change, tropical forests and biodiversity are a set of interrelated non-linear problems, which will not be solved by solved through incremental solutions in silos.
Dr Collecott was the British Ambassador to Brazil from 2004 to 2008. He now acts as an Adviser to major British companies doing business with Brazil, or with the British Government; is a founder member of ADRg Ambassadors LLP, a partnership of British and foreign former Ambassadors engaged in mediation, corporate diplomacy and training; and is a Special Adviser to The Prince's Charities' International Sustainability Unit. He also lectures on Brazil.
After graduating in Mathematics from Cambridge, Dr Collecott spent a year at MIT as a Kennedy Scholar, before returning to Cambridge to obtain a PhD in Theoretical Physics, and then spending a year as a Royal Society Fellow at the Max Planck Institute for Physics and Astrophysics in Munich, prior to joining the Foreign and Commonwealth Office.
Policy Keynote Lecture
Dr Rupert Lewis, Deputy Chief Scientific Adviser, Department for Business, Innovation & Skills
Building resilience to climate risks: a national scale analysis
Following the second panel, the Policy Keynote Speaker, Dr Rupert Lewis, Deputy Chief Scientific Adviser at the Department for Business, Innovation and Skills (BIS), outlined the role of the Department of Business, Innovation and Skills (BIS) in the government's response to climate change. Within BIS the Climate Change Risk Assessment (CCRA) working group specifically works on this issue and - as Dr Lewis put it - "helps the government think systematically about the future". Predictions about the future need to be as accurate as possible. Therefore, strategic assumptions are tested by evidence and analysis. From this core analysis on certainties and the identification of priority uncertainties CCRA develops resilient and adaptable strategic plans.
Climate will affect every area of national life - security, infrastructure, environment and health. The challenge is to achieve a cross-governmental response, as successful climate resilience (adaptation) depends on action at all levels. The organisational structure of the government incorporates strong vertical accountability mechanisms within departments. However, disruptive themes such as climate change require a high degree of alignment of objectives and incentives between different departments and therefore call for horizontal accountability mechanisms. This barrier needs to be overcome to focus on driving action at national level through co-ordinated action across Government.
The Climate Change Act 2008 provides the framework for building the UK's adaptation strategy. 'Bodies with functions of a public nature' and 'statutory undertakers' (e.g. water and energy utilities) are required to report on what they are doing to address the risks posed by climate change to their work. This information feeds into the CCRA which is currently performed and will be repeated every five years. Economic risks identified in the CCRA will be used to assess which would be the most cost effective policy responses. Finally, the National Adaptation Programme (likely to be launched in mid 2013) will set out the Government's programme of action to address the risks identified in the CCRA.
Though it is vital to mitigate the consequences of climate change, by now some change is inevitable. Weather and climate impact already on the economy, society and environment: in 1995 the heatwave resulted in net costs to the transport sector of £16 million and the heatwave in 2003 led to approximately 2,000 premature deaths; the flooding in 2007 left half a million people without water and electricity and incurred £3 billion in insurance claims.
Dr Lewis went on to explain a bit further the methodology of CCRA. More analytically, the assessment takes future climate uncertainty into account by using multiple probabilistic projections and moving away from single models. The method includes several steps, namely:
- Choosing priority risks, on the basis of magnitude, likelihood and urgency
- Assessing the sensitivity of each risk to the current climate.
- Adding projections of the future climate and population are for each risk
- Comparing scores of all risks in the UK
- Assigning magnitude (logarithmic scale) and confidence scores to each risk
- Comparing by area for each risk
As Dr Lewis stated, it is a particular challenge for the CCRA to communicate the consequences of climate change. A nuanced message is necessary to put into perspective the opportunities as well as risks. Opportunities for the UK economy arise from climate change only in the short term. Thus initially, rises in temperature will lead to higher agricultural yields and fewer winter deaths, while less rain will strengthen the tourism sector. However over time and with even higher temperature and less rain, these opportunities vanish and threats to the economy increase such as decreases of crop yields, more heat related deaths and lower biodiversity.
For evaluation of the actual risks, more factors beyond the size of climate effects need to be considered. For example, water reservoirs are very susceptible to aridity while groundwater is less so. Combining the climate effect - that is less pronounced in the North than in the South of England - with vulnerability, which is more pronounced in the North, gives a much more useful picture of risk than climate effect alone. CCRA plans to summarise these kinds of risks in maps for the UK, which in some cases will include regional analysis as well.
The National Adaptation Policy Programme uses a framework for decision support that defines policy structure and economic analysis. This framework considers key findings by magnitude of the consequence, and confidence in the analysis (as well as the timescale of effects taking place). Thus it allows to categorise how to deal with different risks in the future (e.g. priority for adaptation action will be given in case risks have been identified with high confidence and severe consequences, while a "watching brief" will be sufficient for those risks that are deemed less important). A low confidence in the analysis of risks calls for more research, with high priority given to cases of potentially severe consequences. In the particular case of climate change, the certainty of scientific proof of climate change happening must be balanced with the risks of taking or not taking climate action.
Two scenaria - climate change happening and action taken versus no climate change happening and no action taken - lead to moderately or low beneficial outcomes, as either the climate effects are mitigated as well as still possible or no unnecessary efforts were spent. The other two scenaria however lead to costs. If climate action was taken, but no climate change was happening, unnecessary expenses would be incurred that however in comparison to the other scenarios constitute a low cost. Though, if no climate action is taken based on a perceived low or non-existent risk, but in fact climate change is happening, the costs are extreme. Thus, a political decision maker would be well advised to avoid this last scenario.
Dr Lewis made some final remarks about the issue that while severe weather impacts on the UK economy directly, the bigger implications are indirect. For example Western Digital had costs of 199 million USD when the Thailand floods in 2011 affected 45 per cent of the global hard disc plants. Furthermore, the Ipsos MORI survey indicates that almost a third of UK businesses had been significantly affected by extreme weather between 2007 and 2012. According to the European Environmental Agency, in Europe overall averaged losses caused by weather for 1998-2007 were valued at about €6 billion higher than in the 1980s. On the other hand, the UK holds the second place after the US in total expenditure spent on research and development for climate change preparedness. This creates an opportunity to UK business and places them in a strong position to help with mitigation and adaptation activities overseas.
In concluding his keynote speech, Dr Lewis noted that "no further action" will involve serious threats and risks, in terms of human health, water supply, flooding and various ecosystems risks. The National Adaptation Programme 2013 acts pro-actively in reducing the probability and impact of these risks, by co-creating solutions timely, as well as taking far-sighted and well-informed decisions. Adaptation to climate change is a local issue, not only for the government, but a matter of co-creating solutions on a societal level.
Rupert Lewis did a marine biology degree and genetics PhD (1992) at the University of Liverpool, and research fellowships in the UK, Hong Kong and South Africa. He worked with development agencies and commercially on genetic technologies in aquaculture in SE Asia, Southern Africa and Europe, prior to joining Government in 2002. He ran research programmes and headed the advice team for Defra's first external Chief Scientific Adviser, before setting up a "Government Horizon Scanning Centre" in 2004 doing strategy work for the Government Chief Scientific Advisor. In 2007 he headed the secretariat for the PM's "Business Council for Britain" which advised on strategic business policy issues through the credit crunch period. He led a Defra agency review and in 2009 joined Defra's Adapting to Climate Change programme leading on business and EU policy, and delivering the UK's first national statutory Climate Change Risk Assessment. Dr Lewis rejoined BIS in January 2012 as deputy Chief Scientific Adviser.
Panel Discussion: What Can Business and Academia Do?
Mr Andrew Morgan, President, Diageo
Right after the end of the Policy Keynote Speech, the closing panel started, chaired by Mr Andrew Morgan, President - Europe of Diageo, who introduced the two speakers.
Andrew Morgan has been President, Diageo Europe since 2004. He spent eight years with The Gillette Company in a number of sales and marketing roles in Western Europe before joining Guinness Plc in 1987. He has held a succession of marketing, strategy and general management positions with Guinness and with its successor company Diageo. He has lived in Athens, Madrid and Barcelona, as well as managing emerging markets in Latin America, Asia and Africa.
Andrew is now based in London running Diageo's European region and is also President of AIM, the European Consumer Goods Companies Association.
Mr Ian Wright, Corporate Relations Director, Diageo
How a corporation can make a difference to the water agenda
The first panellist was Mr Ian Wright, Corporate Relations Director of Diageo plc, who introduced Diageo as the world's leading spirits, beers and wines company, which employs 23,000 people in 80 countries. Diageo has ambitious plans for growth, particularly in the new growth markets of Africa, Latin America, Asia, Turkey and Eastern Europe. As Diageo's Global Corporate Relations Director, Mr Wright explained that he is responsible for its reputation that increasingly depends on stakeholders' perception of environmental sustainability and corporate responsibility.
Water is not only the main ingredient of Diageo's products, as he mentioned, but primary component of many production processes and fundamental for the provision of agricultural raw materials as well. Thus water is central to Diageo's short and long term sustainability vision. In 2009 Diageo launched a strategic framework called 'Blueprint for Water' to addresses three action areas - Operations, Community Investment and Collective Action - and designed to affect substantial, sustainable and measurable change.
In order to reduce water impacts in production facilities and across the supply chain, Diageo improves water efficiency and decreases water pollution in their operations. Particularly in water stressed countries, Diageo also engages suppliers and encourages the adoption of strategies that promote sustainable agriculture.
To find a baseline, Diageo quantified the impact on water through its value chain. They then set themselves targets to improve water efficiency by 30 per cent, reduce waste of water in stress locations by 50 per cent and to reduce pollution of waste water by 60 per cent till 2015 compared to 2007. While some progress has been made for water efficiency and waste of water, the total pollution of water actually increased. In meeting the targets for both company growth and water performance, Diageo will have to continue implementing leading edge technologies in developed as well as developing markets.
Mr Wright went on to present how examples from Africa showed how Diageo's initiatives for improvements within the supply chain have additional positive effects for communities as well as the company. Diageo works with farmers in Cameroon to provide them with sorghum, which uses less water to grow than traditional crops and improves the quality of soil as well. In another case, a brewery in Kenya started collecting and reusing water from the bottle washers. The project improved water efficiency by five per cent, the investment also led to annual savings of more than half a million pounds which gives the project a return on investment of six months. Finally, Mr Wright used the example of three of Diageo's plants in Scotland and the US to illustrate that Diageo's invests in technology to achieve environmental sustainability leading to 100 per cent reduction in pollution of effluents, increased recycling of waste water and avoidance of carbon production. Diageo aims to build capacity to fuel long term growth through investment in environmental sustainable manufacturing which requires pushing the bounds of available technology.
Mr Wright elaborated further on the corporate social responsibility of Diageo by referring to their Community Investment programme Water of Life through which Diageo seeks to make a positive contribution to the stewardship of water resources in communities in which they operate. They aim to provide access to safe drinking water through boreholes, hand-dug wells, rainwater harvesting and domestic filtration devices for eight million people across Africa by 2015. There will be a wider impact on better health and levels of education, and reduction of poverty through combining safe water with sanitation, education on good hygiene, development of peoples' skills and communities, as well as self-financing to ensure the upkeep of equipment and technology. In future, Diageo will work in partnerships with public, private and civil society organisations to achieve practical and meaningful improvements in access to water.
Mr Wright finished his presentation with a reference to Diageo's involvement in Collective Action of stakeholders to accelerate progress on the water and sanitation aspects of the Millennium Development Goals while educating consumers and stakeholders on the value of water. One such initiative is the Beverage Industry Environment Roundtable (BIER) that develops industry-specific methods and data to support analysis of environmental impacts relevant to the beverage sector. Annual publication of water efficiency benchmarking across approximately 1,500 beverage sites and a new practical perspective on water accounting are just two examples of where competitors are collaborating effectively.
Ian Wright is Corporate Relations Director of Diageo plc, the world's leading premium drinks business. A member of Diageo's Executive Committee, Ian's remit embraces corporate, brand and employee communications, government affairs and public policy, alcohol and responsibility, corporate citizenship and anti-counterfeit. He heads a global team of more than 200 corporate affairs practitioners working across these disciplines.
Ian joined Diageo in May 2000. His earlier career included ten years in PR consultancy and five years in-house at The Boots Company. He spent a decade as a council member of the Chartered Institute of Public Relations (the professional association for public relations practitioners) and was its President in 2001. His contribution to Public Relations has been recognised with lifetime achievement awards from the CIPR and Sabre.
Ian Wright was educated at Desborough School, Maidenhead and St Catharine's College, Cambridge. He has been active in third party politics since the 1970s. He has been an adviser to Liberal Democrat leaders Paddy Ashdown, Sir Menzies Campbell and Nick Clegg. He has written and broadcast extensively on politics and communications.
Dr Michael Pollitt, Reader in Business Economics, Cambridge Judge Business School
Markets for water?
The second speaker in the closing panel was Dr Michael Pollitt, Reader in Business Economics at Cambridge Judge Business School, who started by noting that worldwide water and sewerage companies provide a wide range of services spanning from sourcing, transfer, treatment and distribution to retail of water as well as reticulation, transfer, treatment of sewerage and management of residuals. Currently in England and Wales, ten Water and Sewerage Companies and 12 Water Only Companies hold vertically integrated regional monopolies that allow little room for trading. In Scotland, a single company operates with retail competition for non-domestic water. Globally, we find a wide range of structures with integrated or separate water and sewerage companies, state monopolies, thousands of companies, multi-utilities - or no supply at all.
Dr Pollitt suggested that access to water and sewerage is considered a basic right and is politically sensitive. Historically, the government owns the right to collect or abstract water. One of the reasons for keeping these activities as local natural monopolies is that the supply of water and sewerage are the single-most important factors for public health. For this reason, tap water is not competitively priced: an average household (2010) spends £6.60 on water and sewerage per week but £53.20 on food; while in 2012 one litre of bottled water can be purchased for £1.20, one litre of tap water costs less than £0.001.
Within the UK, water is very differently distributed. While the Scotland and Wales in general have a surplus of water, the East and South East of England is severely lacking in resources. Water supply could be optimised through export and import of water, i.e. trading between water companies. Despite necessary investments in interconnection of pipelines substantial cost savings are possible.
Examples from other countries around the globe show the value of water trading between companies. In Australia (Melbourne and Victoria) and Germany (Munich) water supply was taken out of local control and more specialised companies took over dealing for example with sewerage, desalination, reticulation, distribution and transport or retail of water. As a consequence, costs were cut (Munich) and bench marking is now possible.
Based on the experience from electricity, in the creation of a competitive UK water market, two models are imaginable to stimulate competition, improve regulation, reduce governance costs and stimulate dynamic efficiency. On the one hand, a single independent bulk water transmission system and system operator (ITSO) could be created with associated financial markets for bulk water trading. A more light-touch organisation on the other hand could be a not-for-profit water industry independent system operator (ISO) with clear objectives to maximise social welfare from trading and a genuinely independent board to provide regulatory oversight of costs via a management contract.
Dr Pollitt noted that there are however some important differences between the markets for water and electricity. Water markets are likely to be substantially smaller and less 'liquid' than energy markets. More importantly, the water industry comes with substantial distribution issues. If the scarcity value of water was to be priced into the cost of water, the question arises who owns this scarcity rent and how it should be distributed. For example, Scottish consumers could receive a dividend if their water was sold to England. Also, at present there is no single reference price for water, which may change if due to increasing water scarcity in the UK and population growth the price of water may eventually rise to the cost of desalinated water.
At the end of this talk, Dr Pollitt drew the conclusion that water supply is a private good that should be subject to appropriate market incentives, trade and retail competition. Because of local scarcity, proper pricing is worthwhile to encourage efficiency of supply and demand; however some form of public ownership and price regulation would remain necessary.
Dr Pollitt is co-editor of Economics of Energy and Environmental Policy and a member of the editorial board of the Review of Industrial Organization. He is also a Research Associate of the Centre for Business Research (CBR) and a member of the Faculty of Economics. He is currently a member of Ofwat's Future Challenges expert panel and an energy advisor to the Consumers' Association (Which?). Since 2000 he has been convenor of the Association of Christian Economists, UK.
Dr Pollitt has advised the UK Competition Commission, the New Zealand Commerce Commission, Ofgem, ORR, ESRC, the Norwegian Research Council, the DTI, the World Bank and the European Commission. He has also consulted for National Grid, AWG, Eneco, Nuon, Roche and TenneT. He is the Coach on the Cambridge MBA's "Energy & Environment" concentration, and the University's Energy Champion for Policy, Economics and Risk.
Before coming to Cambridge Judge Business School, Michael was a lecturer in applied industrial organisation at the Faculty of Economics, University of Cambridge, from 1994-1999. He was a board member and trustee of Viva Network, Oxford, from 1999-2004. In the first half of 2003 Michael was a Visiting Associate Professor in the Department of Economics at MIT. From 2001-2005 Michael was co-leader of the Cambridge-MIT Electricity Project.
In 2005 and 2006 Michael served as Acting Executive Director of the ESRC Electricity Policy Research Group. In 2009 and 2010 he was a member of the New Zealand Commerce Commission's expert panel on Input Methodologies. From 2007-2011 he served as external economic advisor to Ofgem.
Summing Up and Dinner Speech
Dr David Reiner, Senior Lecturer in Technology Policy, Cambridge Judge Business School
The summing up of the Symposium was given by Dr David Reiner, Senior Lecturer in Technology Policy at Cambridge Judge Business School. He started his concluding remarks by first pointing out that there was a unanimous agreement among all the panellists that "silos have to be broken" in order to address the problem of food and water security in an efficient and sustainable way.
Dr Reiner supplied the audience with a number of key-points that came out of the Symposium. He stated that the triangle problem of human health, community cohesion and agricultural production will not inevitably collapse catastrophically. In this context, institutions, public interventions and politics are as important as any biophysical limits. Especially in the case of water management, he pointed out that we are not running out of water, but mostly that we do not seem to be able to manage water resources. There had been too much focus on availability and supply, and not enough on equity and access. Unfortunately, on the side of public and political intervention, politicians seem to have a single key political interest (i.e. votes) and are part of the problem. Although some parts of government try indeed to think long-term, prediction is difficult and usually leads to statements that we ridicule later.
At the business level, Dr Reiner noted that scale does not necessarily deliver economy in a resource scarce world with different tastes. Furthermore, there are pressing concerns, especially in agriculture; for example current farmers do not envisage their offsprings as a part of the farming business, but expect them to follow more prestigious and prosperous careers. Finally, at the level of the individual/consumer, it is difficult for people to change what they do, unless the system forces them to change their habits.
Dr Reiner noted that a consensus was reached regarding the need of an integrated approach on food and water security, as collaboration of various parties (individuals, businesses, government, NGOs etc.) seems to be the only way to have efficient and sustainable results. Furthermore, we need a more democratic debate on what we need in our food system, taking into account all the available novel technologies. Government officials and politicians should overcome their key political interest and work towards strengthening the market signals, addressing market failures, and creating conditions for long-term resilience. Overall, we need to change the existing economic arrangements, no matter how problematic or politically difficult they seem to be.
Dr Reiner concluded his summing up presentation with some crucial open questions that need to be addressed, more specifically:
- Can we create the institutions, mechanisms and cultural shift needed to mobilise for change?
- Is there a tension between value and wealth?
- Is there a human right to water?
- Are we worrying too much about CO2 and not enough about food and water?
- How serious is the trade-off between efficiency and resilience?
- How effective are economic incentives?
- Do we have too much knowledge or not enough?
- Is more democracy the problem or the solution?
- What sort of security do we want?
Dr Reiner is a political scientist and is currently University Senior Lecturer in Technology Policy and Programme Director of the MPhil in Technology Policy, a joint offering of Cambridge Judge Business School and Cambridge University Engineering Department. David has advised government, industry and non-governmental organisations on energy and environmental policy, with a particular emphasis on the politics of climate change and the social acceptability of carbon dioxide capture and storage (CCS) technologies. He is frequently interviewed in national and international media including The New York Times, International Herald Tribune, Bloomberg, Reuters, The Guardian, and The Daily Telegraph.
David is also a research associate of the Centre for International Business and Management at Cambridge, and of the Joint Program on the Science and Policy of Global Change, and the Carbon Capture and Storage Technologies Program, both at the Massachusetts Institute of Technology (MIT). He sits on the Cambridge Judge Business School Research Committee, the EPRG management committee and the steering committee of the International Energy Agency Greenhouse Gas Programme's Social Research Network. He has testified before the House of Commons Select Committee on Science and Technology and contributed to the World Economic Forum in Davos and Moscow. He is the recipient of research grants from the European Commission, UK Department of Energy and Climate Change, Natural Environment Research Council and the Department of Trade and Industry.
Ms Marianna Vintiadis, Country Manager - Italy & Greece, Kroll, Italy
The discussion continued at the drinks reception at Lucy Cavendish College. At dinner, Ms Marianna Vintiadis, Country Manager - Italy & Greece at Kroll, gave a fascinating speech, sharing information regarding the history of Lucy Cavendish College.
The Gala Dinner guests had also the chance to share a once in a lifetime experience in terms of Cambridge traditions, but with a twist - namely a formal dinner alongside a video screen with live-streaming of the Germany-Italy Euro 2012 match!
Reportage by Andrew Allen, Anke Friedrich, Malte Poppensieker, Konstantinos Vrettos and John Wingfield-Hill.