By Joshua Ballard, Energy Recovery CFO
A decade ago, Harvard Business School professors Michael Porter and Mark Kramer argued that companies should create “shared value”— generating economic value in a way that also produces benefit for society by addressing its challenges. Growing acceptance of this concept can be seen today in the rapid adoption of Environmental, Social and Governance (ESG) principles in both the investment community and many companies.
While the concept of “shared value” has been debated at length (and I’m not taking sides here), companies should always evaluate the long-term effects of their actions on all stakeholders – it is simply a smart approach to business. In this regard, today’s many different ESG frameworks offer a constructive approach to this important process of evaluation and continuous improvement.
Creating “shared value” is often pursued via two major paths: harm reduction (reducing one’s environmental and operational footprint) and innovation (developing new processes and products that improve one’s business and the world around it). While these concepts are often intertwined, innovation can be the greatest accelerator of both sustainability and value creation, both for companies and their many stakeholders.
The global desalination industry – Energy Recovery’s primary market today – is an incredible case study of innovation delivering value for businesses and communities alike.
Historically, seawater desalination relied upon thermal processes – essentially, boiling seawater to produce freshwater through the condensation of steam. Thermal desalination is a very energy intensive process, and so carries a heavy environmental impact and is often expensive. A rival process, seawater reverse osmosis (SWRO), which forces seawater through filter membranes to extract salt and produce clean water, was for a long time even more costly than thermal and, consequently, not widely used. This changed dramatically when Energy Recovery introduced its PX® Pressure Exchanger® (PX) in the 1990s.
When combined with the increased standardization of desalination plant design and larger plant capacities, our PX’s ability to deliver energy savings of up to 60% compared to facilities with no PX and operational efficiency up to 98%, broke down the key cost barrier for SWRO: energy intensity. When SWRO became an affordable option, the number of facilities employing this more efficient process skyrocketed and is now the global norm.
These developments were great for the industry, but they have also meant greatly improved access to affordable clean water for many around the word. They have made communities more resilient to climate change and have significantly reduced energy consumption and emissions associated with water production. While harm reduction was certainly achieved in this transformation, these benefits would not have been achieved without innovation.
The PX also allowed for growth of the desalination industry at a crucial time for global communities in need of fresh water. According to the United Nations estimates, more than 2 billion people live in areas of high or extremely high-water vulnerability, and climate change is only anticipated to increase this number. Global demand for water is projected to surge up to 30% by 2050.
We are now applying our PX technology to drive change in other industries, most recently in industrial wastewater treatment through our Ultra PX™ product. The Ultra PX is expected to bring similar increased efficiencies and lower costs to another critical industry, while generating significant shared value for stakeholders. We’re also taking a closer look at our own operations and impact through our ESG program.
While the desalination industry still has work to do, business leaders are embracing innovation alongside harm reduction to make it a better industry. This has helped the SWRO desalination business, as well as the world. There are many paths to enhancing sustainability – but do not underestimate the importance of innovation. In my experience, it is the key to achieving everything else.