EXECUTIVE VIEWPOINT

IT’S TIME TO TALK ABOUT WATER (NOW AND NOT TOMORROW)

By Dr. Valerio De Molli (Managing Partner & CEO, The European House – Ambrosetti)

Water is a scarce and strategic resource for economic and social development. Demographic trends, increasing urbanisation and climate change are subjecting water to unprecedented stress in the world, in Europe and in Italy. To date, 25% of the world's population is experiencing water shortage and the Organization for Economic Cooperation and Development (OECD) has estimated that 40% of the world’s population will be exposed to the risk of water stress by 2050.

Now more than ever, an efficient and sustainable water value chain is a systemic priority, with externalities on the prosperity of our communities and the daily lives of citizens and businesses. Starting from these considerations, The European House – Ambrosetti, no. 1 think tank in Italy, among the most independent in the world and among the best in Europe according to the University of Pennsylvania, has launched Value of Water for Italy Community, a high-level multi-stakeholder platform dealing with management of the world’s water resources as a driver of competitiveness and industrial development. Now in its third edition, the Community counts 22 partners1 of the Italian extended value chain, which overall represent 5,8 billion Euros of revenues, over 2,2 billion Euros of Value Added, 15.000 employees and over 1,3 billion Euros of investments, covering 165.000 km of water distribution grid and more than half of the Italian population.

Analyses carried out by the Community show that Italy needs to address some

Italy is a country with a high climatic vulnerability, characterized by two opposite phenomena: on the one hand, 21% of the territory is at risk of desertification, and on the other, extreme weather phenomena are constantly increasing.

1| The partners are: A2A, ACEA, Acquedotto Pugliese, Celli Group, Iren, HERA, MM, SMAT, ANBI – Associazione Nazionale Consorzi di gestione e tutela del territorio e acque irrigue, Schneider Electric, SIT Group, Alfa Varese, Brianzacque, Consorzio Idrico Terra di Lavoro, Irritec, IWS, Livenza Tagliamento Acque, Maddalena, Padania Acque, RDR, SIAM, SOTECO.

structural issues in the water sector. Italy is a country with a high climatic vulnerability, characterized by two opposite phenomena: on the one hand, 21% of the territory is at risk of desertification, and on the other, extreme weather phenomena are constantly increasing. The paradox between the lack of water due to drought and the risk of hydrogeological emergency caused by extreme weather continues to worsen in the country.

These phenomena are further exacerbated by the obsolescence and inefficiency of the infrastructure: 60% of the national infrastructure is more than 30 years old and 25% is more than 50 years old. Moreover, almost half of the water currently withdrawn is wasted along the way (47.6%, twice the European average). Italy’s infrastructural backwardness is largely due to an inadequate level of investment. With 40 Euros per inhabitant per year (compared to a European average of 100 Euros per inhabitant per year), Italy is at the bottom of the European ranking for investment in the water sector, 2.5 times lower than France and 2.3 times lower than Germany. With the current level of investment, additional 2.9 billion Euros per year would be needed to reach the standards identified by the Italian Regulatory Authority and additional 3.6 billion Euros per year to reach the European average, assuming absence of performance improvements by other countries.

Figure 1. Average annual investment rate in the water sector in European countries (Euro/inhabitant/year), 2019 or latest available year. Source: The European House - Ambrosetti elaboration on EurEau data, 2021.

One of the main outputs produced by the Community has been the mapping and reconstruction of the extended water value chain in Italy (the first attempt ever carried out), with the aim of qualifying its relevance at an economic-strategic level. More than 1.8 million of companies operating along the water supply chain has been analysed, generating a database with more than 50 million of observations. Overall, the water resource is the enabler of 310.4 billion Euros of Value Added in Italy (comparable to the GDP of South Africa and 30% higher than the GDP of Finland). In other words, almost one fifth of the country's GDP (17.5%) could not be generated without water.

Figure 2. Value added generated by the extended water value chain in Italy (billion Euros), 2019. Source: elaboration by The European House – Ambrosetti on Istat and Aida Bureau Van Dijk data, 2021.

The Community has also carried out an in-depth data collection, analysis and mapping to assess how a sustainable and effective water management can impact the 17 United Nations Sustainable Development Goals (and their corresponding 169 targets). The results show that 10 of the 17 Sustainable Development Goals and 53 of the 90 related targets are influenced by an efficient and sustainable water management.

Based on this evidence, the Community has constructed the composite index “Water Value towards Sustainable Development” to provide a comprehensive overview of the water management contribution to the UN 2030 Agenda in the 27 EU countries and in the United Kingdom. Italy ranks 18th out of 28 countries, with a score of 5.01 on a scale from 1 (lowest) to 10 (highest), improving by 3 positions since last year.

Evidence displays that Italy still has a long way to go to improve the efficiency of water sector and to encourage the transition to more sustainable and conscious consumption patterns. The improvement achieved in several indicators shows that a positive direction has been taken over the last period, but greater effort is needed.

We should draw inspiration from ancient Romans. Instead of despising water sewages, Romans venerated them through

“Cloacina”, the patron goddess of Cloaca Maxima, the world largest water sewage system at the time. Rome was built on a swamp and sewage water management was essential for wellbeing and public health. Without Cloaca Maxima, Rome would have been a shepherd’s settlement, besieged by diseases. This is why ancient Romans considered sewages as a magic world to be accessed through wonderful doors, as the famous “Bocca della Verità”, the most beautiful manhole of all time.

About the Author

Valerio De Molli has been Managing Partner and Chief Executive Officer of The European House - Ambrosetti since 2000. In 2008, he led the management buyout of The European House - Ambrosetti along with other partners, thereby settling with the founder.

He is also Director of London’s Ambrosetti Group Limited, Chairman of The European House - Ambrosetti Middle East, Senior Advisor of the Venture Capital Fund United Ventures, and Mentor of the Kairos Society, an association of young American entrepreneurs. He has been a member of YPO (Young Presidents’ Organization) since 2011.

He is a member of the Boards of Directors of numerous companies.

He gives lectures and seminars on strategy and management for top executives, associations, and universities. He is the author of Towards Excellence. Boards of Directors: A Tool for an Effective System of Corporate Governance. Proposals and Recommendations, published by Sperling & Kupfer in May 2005, and The Fundamentals of Strategic Management - Paradigms of the Corporate System, published by IPSOA in January 2009. He founded and continues to chair important Think Tanks including Observatory on Europe in Brussels, Observatory on the Excellence of Corporate Governance in Italy, Meridiano Sanità, and Cashless Society, among others.

From 1995 to 2000, he was head of the International Division of The European House - Ambrosetti where he oversaw its activities in Europe, China, Japan and the United States.

Since 1992, he has been responsible for The European House - Ambrosetti’s Forum “Intelligence on the World, Europe, and Italy”, which is held every September at Villa d’Este in Cernobbio, Italy.

He was the local organizer of the 2004 Bilderberg meeting in Italy.

Before joining Ambrosetti he worked as a financial advisor in the corporate finance division of Paribas in Amsterdam. He also worked at one of the principle stockbrokers in Milan, Belloni & Tedeschi, and in the research and analysis department of Banca Popolare di Luino e Varese.

He obtained a degree in Business Administration from Bocconi University and is married with three children.