Viewpoint



The CCG’s view on South East Water’s carbon reduction strategy - end June 2021



Part of our role as a CCG is to provide an independent view on South East Water’s performance, ensuring it listens to, and delivers for its consumers and communities. In May we put the company’s draft carbon reduction strategy under the spotlight.


Context


Let’s be honest, while attitudes are changing, not all of South East Water’s customers care about climate change and are willing to pay for it. But tackling the climate emergency is rightly quickly rising up the public agenda and with COP26 approaching it feels like almost every utility is doing some kind of PR activity in this area. But is it all ‘green wash’ or is South East Water genuinely committed to net zero?


The good news

  • Credit where credit’s due, in 2018 South East Water was one of a limited number of water companies to commit to carbon reduction targets in its business plan (SEW’s target is to reduce carbon intensity to 58kg CO2 per ML of water delivered by 2025). The company listened to and acted on the views of the majority of its customers who said this was an issue that mattered to them.

  • Since then, in 2019 the company signed up to, along with all the water companies in England and Wales, Water UK’s Public Interest Commitment, to achieve net zero in its operational emissions by 2030 (note this is not yet net zero per se though leaves the door open to meet Government’s 2050 goal or a more ambitious target). Rather than just following the pack, this is a natural evolution of its genuine earlier commitment.

  • The company has systematically mapped its Scope 1, 2 emissions and some of its Scope 3 in line with the UKWIR carbon accounting handbook and industry practice. Reporting is not new to the sector however, having been done for more than a decade.

  • South East Water has achieved a 40% reduction in carbon emissions over the last five years (2015/16-2019/20). Impressive? Well, yes and no. This is in part a result of its own actions especially more efficient use of energy, but the company also significantly benefitted from wider electricity grid decarbonisation.

  • The company is currently middle of the pack in terms of Green House Gas emissions compared to other water companies. But all things being equal (with many water companies signing up to initiatives such as Race to Zero they may not be!) it is expected to improve up the Discover Water league tables next year, as it will achieve substantial reductions in carbon emissions as a result of its planned switch to purchasing energy from renewables. In fairness, the company recognises this is ‘the easy bit’ of its strategy and has taken positive steps to ensure the shift to green energy delivers genuine additionality. It is also seemingly now on track to outperform future targets, after missing this year’s 2020/21 performance commitment of 152.3kgCO2/ML with 192.

South East Water's operational carbon emissions breakdown



South East Water's approach

  • On balance, South East Water appears to have a clear measurable strategy to achieve net zero in operational emissions by 2030, with a realistic action plan and timetable to support it. This includes all the basic activities you’d expect to see – improving energy efficiency, decarbonising energy e.g. that is needed to pump water to our homes and businesses, reducing carbon emissions from its transport fleet, encouraging customer water efficiency, a continued focus on leakage reduction with some off-setting and in-setting for ‘residual carbon’. When making new investments the company has also committed to ‘avoid’ and ‘reduce’ carbon. This is all good news.

  • South East Water is looking to install its own solar generation. This is funded by shareholder (not customer) investment of up to £15.4m due to the expected nine to 12 year payback period.

  • As with many water companies, it is also taking steps to adopt natural capital accounting. This will enable it to have a better and more holistic view of its environmental impacts and potential solutions for carbon reduction.

  • We know customers and community groups are cynical about carbon-offsetting so welcome the company’s decision that it should only be used only as a last resort. In part to address concerns, South East Water has committed to:

    • use certified schemes

    • consider the broadest range of nature-based solutions e.g not just planting trees but use of woodland and grassland and other approaches

    • focus on approaches that benefit South East Water’s local communities i.e. not offsetting in other countries or regions if it can be avoided

    • Work with local organisations with off-setting opportunities. We encourage you to get in touch with the company if you are a potential new partner or have off-setting ideas.

    • Prepare for offsetting now given the lag time for schemes to deliver tangible carbon reduction benefits.

Key Areas for development


Following our meeting in May the CCG outlined 11 recommendations and three formal challenges to South East Water to improve its net zero route map. Key amongst these are:

  • There is a strong argument for the company to go beyond the water industry Public Interest Commitment and outline its carbon reduction strategy to deliver genuine net zero (not just for operational emissions) faster and in the longer-term to strive to be climate positive. This would be consistent with the company’s Purpose, Mission and desire to be a leading responsible business. It also reflects rapidly changing stakeholder expectations and societal need. Water is one of the most cost-effective sectors to decarbonise so arguably there is a responsibility for it as a monopoly provider to do more. In practice, the company already recognises the need to better understand its Scope 3 emissions, including whole life cycle carbon impacts - embedded carbon, upstream and downstream and we look forward to seeing progress in this area. But to have confidence in the direction of travel a clear roadmap is needed and for the company to demonstrate a greater sense of strategic urgency.

  • In the short-term alongside the proposed strategy we highlight a few areas:

    • The company would benefit from clarifying what it sees as its boundaries of responsibility on carbon (i.e. what it will and won’t seek to tackle). With Covid-19 and increased home working for example, there is arguably a growing need for the company to play more of a role in supporting employees in reducing their emissions. It should also clarify its approach to tackling supply chain emissions and update its procurement policies to help drive change.

    • When making strategic decisions, we’d like to see South East Water better explore, understand and capture the social impacts of different options and better link up work on carbon reduction with action to tackle leakage, water efficiency, consumer vulnerability/build back better campaigns, water quality and wider responsible business. This is to maximise public value.

  • We are also encouraging South East Water to map and work with stakeholders interested in carbon reduction, to strengthen robust expert challenge, build trust, improve transparency, support horizon scanning, share innovation and best practice and maximise community value. The company already has some positive relationships in place including via its Environmental Scrutiny Group (ESG) but would benefit from a more strategic and comprehensive approach

So what's next and what can you do?


All the water companies in England and Wales are expected to publish their net zero route maps in July 2021 and Water UK will then update its sector-wide route map. This will allow us to benchmark and get a better sense of how South East Water’s approach compares – Leader? Middle of the Pack? or Behind the Curve? Longer-term we will continue to monitor company progress, including against stakeholder feedback from its engagement activity and third-party research. We would really welcome your feedback, questions and encourage you to contact South East Water and get involved in helping to shape and deliver the company’s future net zero strategy.



Zoe McLeod CCG Chair