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date: 24 November 2020

Abstract and Keywords

Acknowledging the economic value of water provides incentives to prioritize water uses society deems important. However, there is a lack of understanding of the costs water tariffs should cover to enable its environmentally, socially, and economically sustainable use. Nestlé uses different tools to orient its business regarding water, including water scarcity indices and the notional cost of water. A new methodology to determine the cost of water stewardship could become a game changer. Unlike current practice, where externalities of water are calculated ex-post, this methodology guides decision makers to better pricing decisions prior to the occurrence of negative externalities, based on the observed gap of financing. Preliminary results indicate that, first, urban water tariffs seem higher than the full cost of water stewardship; second, we often overestimate the financial means required to close the water supply-demand gap; third, costs of action upon water challenges are lower than the costs of inaction.

Keywords: Water stewardship, water stress, water valuation, water tariffs, private sector, corporate sustainability strategy, water economics

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