Australian water utility study reveals wider impact of profit & loss

Nov. 21, 2016
Yarra Valley Water is the first water utility to measure annual environmental and social impacts, both positive and negative, in monetary terms, according to a new report...

MELBOURNE, Australia - One of Australia’s leading water utilities has generated $72.4 million worth of benefits to the environment and society, according to a quantification study on integrated profit and loss.

Developed in partnership with international environmental data analysts Trucost and GIST, Yarra Valley Water (YVW) is the first water utility to measure annual environmental and social impacts, both positive and negative, in monetary terms.

Yarra Valley Water managing director Pat McCafferty said the integrated profit and loss (IP&L) report offers the utility a tool for more thoroughly informed decision making.

“It’s about being curious: are people in our society and the environment better off because we exist or not? And whereabouts are the benefits we are generating and where are the impacts we are causing?” he said.

“We know that we’ve got things like climate change, pollution, inequality in society – all of those sorts of things that actually do have a cost, but aren’t measured.

“It’s the same old story: what gets measured, gets done. If you are not measuring it, you are not going to know. This has really been a journey for us all about insight.”

And insight will be key to ensuring water utilities stay relevant, McCafferty said.

“Sometimes you make a decision based on gut feeling. You say, ‘I think this is worthwhile doing’. We are not always necessarily in a position to be making decisions based on hard measures,” he said.

“We live in a really complex world and it’s only recently that we have realised we are all totally interconnected. And so, what is a viable, long-term and sustainable business model in this context?

“There are so many organisations that have ignored all of these things to their own detriment and they no longer exist. We want to stay relevant and part of staying relevant is being able to use insights to inform how we respond.”

The IP&L details in 2014/15 YVW created environmental benefits worth $53 million through wastewater treatment operations, staff benefits worth $13 million through activities like training, and social benefits worth $6.4 million through its Choose Tap and Hardship Grants Program.

McCafferty said having this information quantified monetarily provides the utility with a strong position from which to communicate with community, government and regulators.

“It’s a platform for conversation, to help us unpack what we do in a broader way. If you are just working from a narrow, financial basis, you won’t be taking account of all the benefits or impacts that are being generated,” he said.

“We are part of a bigger picture in terms of society and the environment. All organisations, in one way or another, have a broader impact than their financials.

“For us, it’s about looking at our business through a broader lens to see if we can get strategic insights that might lead to better decision making, that ultimately lead to better outcomes for the community.”

Trucost CEO Dr Richard Mattison said taking all impacts and benefits into consideration is crucial for more sustainable decision making, too.

“Today’s world contains many risks that are not considered in the financial reports of most companies. Climate change, for example, could potentially reduce water yields by up to 50% in Victoria, but is not reflected on balance sheets,” Mattison said.

“Measuring and reporting positive and negative environmental, social and employee impacts on an equal basis with financial performance will lead companies to consider how these issues affect their businesses and what they must do to put them on a more sustainable footing.”

YVW’s IP&L Report can be found here.


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