The social contract sparks a revolution once more
Something very exciting is happening in the water industry. The social contract, which has been gaining momentum since the beginning of the PR19 process, is a movement challenging the way the water industry conceives of its own purpose and role in society. Alex Plant, Director of Strategy & Regulation at Anglian Water explained it by saying “the purpose of a social contract is to demonstrate that, as monopoly providers of an essential service, the sector can, and will, act beyond meeting the basic needs of service.” The cynics will say that the social contract is nothing more than a wishy-washy offering of corporate buzzwords designed to abate the calls for nationalisation. But when I spoke with Alex, and also with Dan Green, Head of Innovation and Sustainability at Wessex Water, I discovered it was so much more than that.
At this moment, key industry players are devising a national framework to guide companies in writing their own regionally-focused social contracts. Currently, everyone’s interpretation of what a social contract should stipulate varies slightly. But, for Alex at least, it’s about demonstrating to the public the work the water industry does, giving back to the community and acting as champions of the local environment and economy. It’s much more than a statement; it’s about repositioning water within society, to change people’s perspectives and, in some respects, to push water companies to start doing more.
Alex does emphasise that the “social contract is also about water having something that shows the public and the politicians they should be comfortable with the way water companies are run.” And he’s right to highlight the importance of public scepticism. Amid Brexit chaos and polarised opinions, Labour continues to put nationalisation of water at the top of the policy agenda for one obvious reason, it’s an idea that has (at least in the past) garnered widespread public support. The fat-cat headlines and high leakage rates play perfectly into the narrative that privatisation and neo-liberalism was all one great failed experiment. Labour’s vision of a future where public and private do not mix holds profound appeal to those frustrated by a corporatist economy that has failed them, and with whom the notion that water, a natural resource, is privately owned doesn’t sit well.
Unsurprisingly, Alex and Dan agree with the majority of commentators and industry members that when you get into it, it is clear that nationalisation isn’t any kind of solution to the challenges water faces on climate change, population growth or urbanisation. But equally, Alex emphasises that “if the industry does not effectively convey to the public the benefits of privatisation and go the extra mile, we’ve only ourselves to blame.”
It’s true that water isn’t high on everyone’s list of priorities. As Alex points out, “when it comes to government spending, people will always put schools and hospitals ahead of water”. And for Dan, “often people just want to pay their bill and be done with it, so that makes demonstrating a water company’s value tricky.” It seems as though the only way to demonstrate to people you are doing well is to do well. The social contract is a way of laying it all on the line and asking customers to hold water to account.
So how does all this work in practice? Underpinning the social contract, and implemented across the vast majority of the PR19 business plans, is the concept of “six capitals” or sustainability accounting. As Dan explained to me, this is an approach to investment where companies aim to factor in social, cultural, human, manufactured and natural capital costs and benefits on a more equal footing with conventional monetary incentives. By aiming from the outset to bring multiple positive benefits across different areas via one single action, be it building a new reservoir or creating a wetland that will naturally clean wastewater, water companies can demonstrate the value they bring to the community, whilst focusing on their own interests.
EnTrade, the trading platform designed to allow environmental improvement solutions to be exchanged online, was advanced well before the social contract became part of the national debate. So, what can be learnt from their approach? Dan and I explored how Wessex Water aims to create the ‘Wessex Water marketplace’ – an online platform that will be how the company implements the open system approach that it outlined in its PR19 submission. For Dan, open systems are about brokering relationships with interests such as technology developers, land users and the local community, that in turn lead to efficient and more innovative outcomes for the water provider. “In part, it’s about shifting away from relying solely on physical assets to create change and instead taking a more agnostic approach.” There is also a need to be both relational and technological. For example, the EnTrade platform centres on digital technology to enable exchanges, supplementing co-operative relationships which are being developed with farmers themselves.
In fact, Dan suggests there are many ways in which water companies can go beyond meeting the basic needs of service. “There’s always room for a bit of a shake-up. Sometimes, becoming more experimental, having an injection of creativity and growing a culture of innovation from within is what’s needed. If through experimental thinking, you can find potentially smarter ways of doing something like locating leaks in pipes, then you should delve deeper.” Challenging old processes will be fundamental to water companies making the necessary changes to start delivering on what customers really need.
But what about the regulators? Well, Rachel Fletcher, alongside Independent Group MP, Angela Smith and others, is an unequivocal supporter of the social contract. Alex welcomes their support, but holds some reservations about how the complex nature of economic regulation translates back to the public. In particular, the fact that “given the level of complexity we have reached in water economic regulation, it is now hard to explain it to normal people. This regulatory complexity can help to reinforce concerns about how the social contract would work.”
Overall, there’s a lot to consider when it comes to the social contract. Is the industry ready for change? How might it vary from region to region? Will the uptake of the social contract impact the way the industry is regulated? And what if, even with substantial environmental and social initiatives, public favour remains against the water companies when fat-cat headlines still dominate the news?
It’s always important to remember that in the modern Information Age, taking action is only 20% of the job and the other 80% is all about curating your message and promoting your efforts via the right mediums. Be everywhere, be seen and be consistent. Above all, be honest about what you are aiming to do and how you want to grow.
Nyree Scales, Conference Producer
Nyree Scales is a content producer for our Future of Utilities portfolio. She specialises in the water industry, following the latest developments and put together our conference agenda for Future of Utilities: Water.
Follow her on Twitter here: @Futureofutils
The UK's premier water industry event
Innovation is a core enabler for customer service, resilience, affordability and vulnerability. To help you deliver on your innovation commitments and step-up to the challenge, Future of Utilities: Water 2019 has a jam-packed programme filled with new ideas, top-level speakers and sessions you won’t find anywhere else.