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Evaluating Risks in the Water–Energy Nexus: A Q&A with Microsoft’s Josh Henretig

“The combined forces of population growth, economic development, and climate change are dramatically changing our relationship with — and access to — water resources,” says Josh Henretig, senior director of environmental sustainability at Microsoft. Undervalued for far too long, water is finally being evaluated holistically with help from smart new tools.

Henretig will be speaking about addressing the challenges of sourcing water and energy at the 2017 Environmental Leader Conference in June. Recently he shared with us how water and energy are connected at Microsoft, and the company’s approach to managing the risks emerging from that nexus.

How does Microsoft source water and energy?

Microsoft has been focused on operational sustainability as well as thinking hard about the role technology can play in enabling broad scale sustainability across domains, which include water and energy. We have to practice what we preach. We have this great sandbox that is Microsoft’s operations to understand our relationship with resources, and think about the role technology can play in helping address challenges.

When it comes to energy and water, we take a long view. We have a robust energy team that is constantly looking for new opportunities to source clean energy in places where we operate. We have established principles that include standard financial metrics, proximity to sites, availability and type of power, and other facets of the energy market [such as] storage.

We look at water through a similar lens, but also through various risk factors — where water scarcity issues exist, where we operate, the costs associated with water withdrawal, the risk-adjusted prices for water based on the availability and quality of water at those specific sites. We rely on tools like Ecolab’s Water Risk Monetizer to evaluate water risk, quantify that risk, and develop the business case for water stewardship or other water services.

Where and how does water come into play for Microsoft?

We’re obviously not a water user like a food and beverage company or a hospitality company. We depend on energy in a significant way to power our data centers. We’ve invested significant time and resources in the energy part of the equation for our data centers. It’s only been in the last year and a half to two years that we’ve started to ratchet up our focus on water, and tease apart the nuances of the energy–water nexus.

Water is a factor in our real estate holdings as well as our data centers, primarily in cooling. You need energy to move water, to cool and heat water, to store and ultimately to discharge water. When we think about how to operate data centers in the most efficient and sustainable way, the relationship between energy and water is critical.

What prompted Microsoft to ramp up work around water?

What led us to refocus was, in part, the partnerships we were developing with folks like Ecolab, who helped us better understand the opportunities and risks associated with water stewardship. We have a longstanding practice of water stewardship, but what changed was the decision to take a more orchestrated approach — how we work across the organization, from data centers to real estate to manufacturing, to unite our efforts.

What are the biggest challenges involved in adopting that approach?

Water is undervalued. The relative price for water is inverse to risk. If you look at WRI’s Aqueduct tool, you’ll see a tapestry of color. In some places where you’d expect to see drought or water scarcity, like India, Africa and even parts of Europe and Asia, you don’t necessarily see the commensurate price signal for water reflected in that risk.

For example in Mumbai, India, the incoming price per megaliter is approximately 18 cents, and the outgoing wastewater price per megaliter is approximately 5 cents. Yet Mumbai is clearly water-stressed. So the challenge for Microsoft and many businesses is how do you quantify that risk in a way that’s material for your business? A partnership with Ecolab was important because they have been able to quantify that risk in terms that helped us justify further investment in new technologies, water recycling and reuse, and other applications of water stewardship.

What is a specific example of a solution?

Our San Antonio, Texas, data center sits in the Leon Creek Watershed. It’s a large data center that still relies on cooling towers, which largely depend on water. So leveraging the Water Risk Monetizer tool, we identified this location as one in which we had critical operations in the margin of a water-stressed region.

We also discovered through this tool that the risk-adjusted price for water was eleven times more than the price we were paying the local San Antonio water utility. Eleven times. If you’re operating in this water-stressed region, you have to factor in other criteria to absorb the relative risk you face. That helped us make the business case for deeper investment in new technology to save water.

That led to a direct investment in the data center, from water meters to other technologies that Ecolab provides like 3D Trasar, to make better use of recycled water. It resulted in a $140,000-a-year cost savings, and a 58-million-gallon avoidance of fresh water use at that data center per year.

What one key lesson learned in this process that could help other leaders?

Water, like many sustainability issues, is a thread that you have to pull. The same water we may depend on for a data center in San Antonio, the citizens in that watershed depend on.

Companies need to step back and understand the full value of water to their operations. If you think about an iceberg, the water and sewer bill are at the tip. But underneath, that iceberg includes effluent water quality, and operational water costs to move, store, and discharge that water. There are things like regulatory risk, price risk, water quality, and water availability sitting below the surface. The Water Risk Monetizer is free for anybody to upload their organization’s information about water use, and begin to map and prioritize a water stewardship plan.

What happens if companies don’t make water value a priority?

Companies that did not anticipate the water risks are playing defense rather than offense. They’re not able to make smart investments in new technologies and in mitigation efforts that would move production from one facility to another. They’re putting their brands and their reputations at risk. They’re also taking an inefficient path to natural resource management.

At Microsoft, we feel more comfortable when we’re proactively managing these issues, taking the time to understand our relationship to resources, and identifying new partnerships, technologies, and opportunities to become a more sustainable company.

Josh Henretig will be speaking at the Environmental Leader Conference in Denver June 5-7, 2017. His workshop, The Energy/Water Nexus – The Challenge of Sourcing Energy and Water, starts at 1 pm on June 5.

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