How monitoring water consumption provides a simple and cost-effective way to improve ESG ratings

Industry comment by Craig Mellor, Director, Deer Technology Ltd

Businesses are coming under pressure to improve their ESG (Environmental, Social and Governance) performance, particularly now agencies are calculating and awarding ESG ratings. These range from CCC for laggards not managing their long-term exposure to ESG risk factors, up to AAA for those managing the risks well and taking advantage of the opportunities.

ESG ratings are becoming more important for investors interested in long-term performance and value, as well as private company owners – especially those who may consider divesting in the future. For this present article, we are focusing on the needs of property landlords in the industrial and commercial sector, and the importance of them managing water consumption.

Currently there is no standard for what ESG ratings include or how they are calculated. However, all ESG ratings should take into account the Principles for Responsible Investment (PRI) initiative developed by a United Nations-led international network of investors. 

The factors considered when calculating an ESG rating are many and varied. For example, the social score includes human capital issues, product liability and social opportunities such as access to healthcare for workers. For the governance score, factors range from the diversity and independence of the board, through to accounting practices and business ethics. In this present article we are primarily interested in the environmental score. This section is broad-based and considers pollution and waste, climate change and environmental opportunities. Drilling down further, we find two points of particular interest: carbon emissions and water sourcing.

It may sound surprising until you think about it, but every litre of mains water has a carbon footprint. According to the UK Government conversion factors for greenhouse gas reporting [1], 0.344 kg CO2e can be attributed to each cubic metre of mains water. These emissions stem mainly from the energy required for pumping and treating water, and for servicing buildings and vehicles. Water and sewage treatment also result in direct emissions of two greenhouse gases, methane and nitrous oxide. 

It should also be borne in mind that greenhouse gas emissions for hot water are around ten times higher because of the heat energy required.

Clearly, reducing water consumption has a direct impact on carbon emissions. As well as improving ESG ratings, minimising water usage also benefits companies that are striving for net zero emissions. 

In addition, cutting consumption helps to improve ESG ratings through the reduced demand placed on the water source. In some areas of the UK, water is in relatively short supply, especially in the summer and if drought conditions prevail, so the responsible course of action is to use less. For areas not classified as being in serious water stress, an increasing population means consumption needs to be managed.

There is no doubt about the increasing importance of ESG ratings though it has to be said that they are not without controversy. This is partly because there is no international standard against which ratings can be calculated and partly due to the reliance on qualitative metrics. However, water consumption can be measured, so reliable values for reductions in consumption can be obtained. An old adage states that you cannot manage what you cannot measure and, fortunately, water consumption can be measured.

According to the Environment Agency [2], 50 per cent of households in England have water meters, ranging from 28 per cent for Portsmouth Water to 84 per cent for Southern Water. In contrast, almost all non-household (NHH) customers have metered supplies and a portion of the bill normally relates to the volume of water consumed. However, the reality is less straightforward for a variety of reasons.

Many commercial and industrial (C&I) users have meters that are classed as Long Unread Meters (LUM), or their bills are based on Business Assessed price bands or estimates, rather than meter readings. There are several reasons for meters being unread, such as their whereabouts being unknown or their location making them difficult or hazardous to read. Where meters are equipped with pulse counters that enable volumetric consumption to be calculated from pressure and flow, these can suffer from drift, resulting in inaccurate readings. Periodic manual (visual) readings are therefore required but patterns of data are difficult to analyse – if not meaningless – for facilities managers implementing water-saving measures.

A further benefit of accurate, timely water consumption data is that it can help identify leaks. If a company is billed on the basis of meter readings, the cost of a water leak can soon become very high, so it is vital to find and repair leaks quickly. This financial saving is, of course, on top of the benefits relating to ESG ratings.

Ideally, every water supply would have a smart meter and the data would be visible to consumers – in much the same way as smart electricity meters have been rolled out for households. However, smart metering is more difficult to implement on water supplies. For a start, there is no integral power supply unlike electricity meters and, furthermore, water meters are typically installed below ground level, often submerged in water or mud.

Despite these challenges, property landlords and facilities managers seeking to improve ESG ratings by reducing water consumption now have an option to retrofit ‘smart’ technology to existing analogue meters. Implementing the patented technology costs less than conventional alternatives, only takes around ten minutes per meter, and there is no need to interrupt the water supply.

Known as the LimpetReader, the hardware is battery-powered, withstands long-term submersion in water or mud, and does not suffer from drift. The LimpetReader is bonded to the meter’s faceplate, though the meter’s register remains visible in case a visual read is necessary. However, there should be no need to take confirmatory readings because the system is immune from drift and readings are treated as visual readings.

Developed by Deer Technology, the LimpetReader incorporates opto-electronics and is connected to an AutoReader that uses GSM (mobile phone) or Wi-Fi communication technology. Time- and date-stamped images of the meter’s register are uploaded to secure servers, where they are converted to numerical values. Customers can then access the consumption data in a variety of ways. Deer Technology’s comprehensive service covers everything from installation through to data management.

Landlords and facilities managers can therefore monitor water consumption in an accurate and timely way. If changes are made to the way water is used, the impact can be seen almost instantaneously, with no need to wait for meter readings to be supplied by the water company. Furthermore, the data is accurate because the LimpetReader takes an image of the meter register and therefore does not suffer from drift. This hard data can be used when calculating carbon emissions and, therefore, the company’s ESG rating.

Find out more about Deer Technology’s LimpetReader for remote water meter reading at https://deertechnology.com, telephone 01639 363146 or email hello@deertechnology.com. 

References:

[1] ‘Greenhouse gas reporting: conversion factors 2020’, UK Government, https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2020 (accessed 26 January 2022).

[2] Environment Agency quoted in a written answer to Parliament on 16 January 2018, https://questions-statements.parliament.uk/written-questions/detail/2017-12-21/121058