WaterSubject

There seems to be little argument that it is regulation that has been the most important driver in encouraging the water industry to move towards sustainability. Most in the water industry would accept that the difficult part is the turning of sustainability principles into practice, in other words operationalising sustainability. It is in this respect that formal regulation has had a pervasive influence in guiding and overseeing the measures and actions that have been undertaken within the water sector.

However, water companies and their trade association Water UK are increasingly questioning regulation in its present form as to its appropriateness and effectiveness. Even the government acknowledges, albeit tacitly through the establishment of the Better Regulation Task Force, that there might be room for improvement. Yet before we succumb to the lure of self-regulation, we would do well to remind ourselves why regulation, even for sustainability, is there in the first place. More importantly, we also need to understand what kind of sustainability is being talked about and how this relates to what we do about it, i.e. how we as a society go about regulating it. Viewing how sustainability is regulated in the water sector, one can infer that the approach has brought about improvements, especially economic and environmental improvements. The water sector is aware that there are deficiencies (however, these can be overcome with better knowledge) and that the business model provides the best vehicle to achieve sustainability and a sustainable water sector. In this paper, it is argued that this equates to a form of weak sustainability and one that privileges the economic and subordinates the environment and societal spheres of sustainability. As a result, it has proved easier to agree on short-term solutions rather than more difficult holistic approaches that affect the ways in which water companies and their customers interact with the environment, society and the economy.

In a formal sense, regulation is an outcome of a legislative process. The legislative process expresses what are to be regarded as norms of acceptable conduct by, among others, the water industry; it establishes the framework, the rules and the expected behaviour of all parties and lays out the formal structures to ensure that acceptable conduct is encouraged. Regulation and regulatory practices are not static, but mirror the interplay of norms and the construction of acceptable social behaviour by water companies and regulators that markets alone cannot reconcile. Regulation also implies the idea of judgement, the means of sanction and competence to judge as well as the boundaries within which this competence can be exercised. Regulation is at the foundation of a liberal market economy.

There are a number of reasons as to why there is a need for regulation. The most often cited reason arises from economic considerations: the fact that water companies are natural monopolies within their geographic area of operation. Furthermore, the incentives for water companies to act in an entirely altruistic manner are weak given that companies have to ensure adequate returns to shareholders, thus demonstrating their commercial acumen and acuity. All consumers have to make use of their services regularly and the efficient supply affects the whole economy. There is also a widespread view that the water sector is special and as such should not be subject solely to commercial considerations. Regulation is a means of countering the commercial power of industry and limiting the scope for exploitation. The absence of markets for social and environmental goods and services means that they too could be exploited, without regard for the potential damage that this may cause, for short-term gain rather than maintaining long-term use. As has been observed, ‘Another problem with a purely market-driven approach is its blindness to environmental virtue’; in a commercial environment with competitive advantage, the environment and society often lose out against the gains made by a few. Environmental goods and services are often externalities, which regulation can provide a means of internalising, and so market imperfections become the rationale for intervention promoting a longer term perspective. On the other hand, regulation grants industry the rights to act in a certain manner, create conditions of relative certainty and protect their commercial interests. Thus, effective regulation can be beneficial to the economy and can act as a surrogate market.

For all the same reasons identified above, sustainability needs to be both included in and regulated for. It is not something that can or should be left outside the ambit of regulation or of the activities of the water industry. Sustainability for businesses is not just about being profitable. Some have argued that in order to be a useful concept, sustainability should be about people and avoiding extinction, and therefore the activities of industry and regulators should be supportive towards these ideas. The strategy for this should be promoting approaches that emphasise and encourage adaptive capacity. Understandably, opinions differ as to what sustainability is and even more about how water companies should operationalise sustainability and measure progress. The reason for this is that meaning and interpretation cannot be free of the nature of the underlying assumptions made; they are not neutral or value free.

From some theoretical perspectives, sustainability is associated with normative principles such as preoccupation with human well-being, provision of basic needs, welfare of future generations, preservation of environmental resources and global life-support systems, integrating economics and environment in decision making, and popular participation in development processes. It is not some form of present status quo that is sought but rather the potential transformation and evolution of the current economic and social paradigm. How water companies cope with these ideas in what they do in providing water services is a challenge and a balancing act. As economic and social circumstances change, they present an array of choices that open up new sets of options and foreclose on others. The challenge for companies and those that regulate them is to stimulate and encourage the capacity for adaptation to preserve future opportunities and prevent deterioration of social, environmental and economic states.

In trying to make sense of sustainability and provide means to translate what it means into a blueprint for action, a continuum of conceptualisations have been suggested, ranging from the very weak through weak sustainability to strong and very strong sustainability. In essence, this attempts to describe a state of the world as it should be. Because they are based on different philosophical standpoints and visions of the world as it should be, they are contested.

Strong sustainability seeks to maintain not only natural capital (i.e. nonrenewable resources, renewable resources and environmental services, as distinct from human capital) but also some critical minimum endowment, whereas weak sustainability seeks to maintain well-being, conceived in anthropocentric terms. Strong and weak sustainability are often presented in the form of two different, opposite and conflicting conceptualisations of sustainability. However, it is probably fairer to view them as being at different ends of a continuum.