Measuring and managing total impact: Strengthening business decisions for business leaders - Water scenario

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Question: How can a wastewater treatment company reduce its impact on the marine environment?

High levels of nitrogen and phosphorus in effluent water contribute to algal blooms and hypoxic dead zones, which negatively impact coastal waters by reducing water quality and killing fish stock and other coastal species.

In this example, a waste water treatment company is discharging its effluent water into nearby coastal waters. The company is under pressure to reduce its impact on the marine environment and wants a balanced view on the wider long term impacts of the options it could pursue to achieve these. Conducting an impact assessment can help the company understand the full breadth of impacts associated with the different options available to it. Whilst helping aid the company’s strategy, this method will also help manage stakeholder challenges and pressure by showing an informed decision has been made.

Overview of the Options

Water treatment plant operating 'business as usual'

In this example, the TIMM framework is used to assess the total impact of the treatment plant’s activities on the local area under both options. Impacts are considered over the remaining operational lifetime of the plant including materials and construction, and by-products and co-products of the system.

Implementation of either option would lead to better outcomes for the local marine environment compared to the water treatment plant operating ‘business as usual’ (BAU).

Upside:

  • No additional investment required

Downside:

  • Harming marine life

Option 1: Expand the water treatment plant to include a tertiary treatment process such as sand percolation.

Upside:

  • This would reduce the nutrient content of the effluent water and so reduce algal growth in the local waters.
  • Increased economic impact during construction (jobs created)

Downside:

  • Higher air emissions
  • More land used

Option 2: Establish mussel farms along the coastline.

Upside:

  • Mussels are filter feeders that consume algae; they would reduce algal accumulation and eutrophication of the coastline.
  • The harvested mussels could be sold for human consumption and/or chicken feed.
  • Waste mussel shells from harvested mussels could be sold to farms as a fertiliser and liming agent (alkaline pH).

Downside:

  • Increased air pollutants (e.g. particulate matter and NOx)

Summary output of TIMM Analysis

TIMM can be used to value not only the business financial performance, but also the wider social, tax, economic and environmental implications. The TIMM wheel provides a simplified analysis of the results of the TIMM analysis for the two options. The inner circle shows the Financial Performance in terms of total upfront capital costs and ongoing expenditure, and overall net present value (NPV) for the road over the lifetime of the water treatment plant. Each bar represents a positive (green) or negative (red) impact. These different impacts can now be compared and aggregated.

Business financial performance:

  • Expanding the waste water treatment plant in Option 1 would involve a higher upfront capital expenditure than establishing mussel farms in Option 2, due to land acquisition and building costs.
  • However, the operating costs of Option 1 once it has been built are lower than the operating costs of the mussel farming system in Option 2.

As a result, both options in our hypothetical example have the same financial NPV.

 

Environment:

  • Both options would reduce water pollution in the area relative to BAU. Option 2 has a higher ‘waste and water pollution’ impact because it allows more algal growth than
  • Option 1. Depending on depth and location, mussel faeces and dead mussels falling off the ropes could cause hypoxic mud and reduced biodiversity on the sea floor beneath the farms. Additionally, there is a risk that mussel growth may be poor in some years resulting in fewer nutrients being removed from the marine system.
  • There are GHG emissions associated with the construction and operation of both options. In Option 2, however, the GHG emissions are lower due to partial offsetting by carbon sequestration in mussel shells.
  • Option 1 would involve the expansion of the water treatment plant and so a greater land use impact than the small amount of land needed in Option 2 for mussel farm buildings and processing facilities.

Trade-off: Do the reduced GHGs and land use impacts in Option 2 outweigh the lower risk of ‘waste and water pollution’ in Option 1?

 

Economic:

  • During the construction period, Option 1 would see some increase in economic benefits, such as payroll and profits for the building contractors and suppliers. Option 2, however, would have longer lasting economic benefits due to employment created in mussel farming, processing and distribution activities.
  • Both options could generate positive and negative impacts in terms of intangible assets such as brand value, intellectual property and reputation for the water treatment company and its contractors, but in this case, we have assumed that the effects balance out.

Trade-off: Which option will deliver the greater economic benefits during construction and after completion?

 

Social:

  • Mussel farming could provide a new source of protein that, depending on current diet and availability of protein, may have a positive impact on health in the local community. [In a developing country context, this positive impact is likely to be much greater.]
  • The on-going employment in Option 2 has a larger positive impact on livelihoods than the short term employment generated for Option 1’s construction and maintenance. Employment in Option 2 includes low-skilled jobs for the young and unemployed, which would empower local people. [In a developing country with higher levels of unemployment, the livelihood and empowerment benefits of Option 2 could be even greater.]
  • Option 2 would increase awareness of the use of ecosystem services and improve aquaculture skills, thereby having an educational benefit.
  • Creation of commercial opportunities in an industry helping to improve conditions in the local coastal area means Option 2 would be likely to have a high positive impact on
  • community cohesion.

Trade-off: The social impacts seem higher for Option 2, but how do these weigh up against impacts in the economic, tax and environmental areas?

 

Tax:

  • During construction, higher taxes will be payable for Option 1 due to larger areas of land acquisition and the environmental taxes incurred.
  • During operation, Option 2 will likely generate a higher tax contribution due to greater employment and sales taxes generated in the mussel trade.

Trade-off: In the long term which option will generate greater positive tax impacts?

Summary

In the absence of total impact thinking, this kind of decision would generally be made using financial analysis, perhaps with some qualitative overlays. TIMM brings a new perspective that can be articulated to multiple stakeholders to have richer, more informed discussions.

Using TIMM to put a value on each impact, we see that both options lead to better outcomes for the local marine environment compared to the water treatment plant operating under BAU. The total impact of each decision becomes clear and the many trade-offs between Options 1 and 2 can be identified in a holistic manner.

  • Option 1 offers a low risk method of reducing the water polluting impact of the water treatment plant, but has higher upfront capital costs and lacks positive community impacts.
  • Option 2 requires lower upfront costs and is likely to deliver greater social and economic benefits, but also entails higher risk that some water pollution will continue.

TIMM gives management significantly more insight into how the water treatment plant operations impact external stakeholders. This allows decision-making to be undertaken on a more informed basis.

Contact us

Tom Beagent

Director, Impact Strategy and Analytics

Tel: +44 (0)20 7212 3493

Will Evison

Director

Tel: +44 (0)7718 864854

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