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Tutorial Using A Quantitative Triple Bottom Line Approach To Make A Strong Business Case Fully understanding and explaining the financial, social, and environmental benefits of a water project can be keys to gaining approval. By Robert S. Raucher, Ph.D. I t is always good practice to make a sound and effective business case — or value proposition — when a utility is seeking support for a large capital outlay or other investment. Utility managers, governing boards, and economic regulators (such as public service commissions) are keenly interested in moderating future rate increases on water and wastewater utility customers, especially in difficult economic times. They need to be well convinced that the problem to be addressed is real, that there are high costs or other serious consequences if the utility fails to act, and that the proposed investment is a wise choice that will leave the community better off than if no action were taken, and also better off than if an alternative potential solution were selected. Utility customers and local stakeholder organizations may also be skeptical of the need for a specific large-scale investment that their utility is considering. Concerns may reflect a broader array of issues than just the cost and the ultimate impact on rates. There may be strongly held opinions about the environmental or social consequences of a proposed utility project. For example, utilities often face opposition to efforts to invest in desalination, water reuse, reservoir expansion, or other such options to increase local water supply reliability for the community as it grows and as its current water sources become fully tapped. Such public concerns extend beyond the overall fiscal costs and often include potential impacts on local ecosystems, community identity, energy demands, carbon footprints, and so forth. Ultimately, utility professionals need to be able to convince themselves, their managers and boards, their customers, and other stakeholders that they are proposing a wise course of action. They need to effectively communicate that even if a proposed action entails a costly investment, the community will be better off for having taken that action. An objective, quantitative triple bottom line (TBL) assessment can provide a highly effective and useful approach for assessing the overall impacts of a potential investment. A well-executed quantitative TBL can be extremely valuable as a way to assess a project's potentially diverse array of benefits and costs, and also can serve as a highly effective means of engaging and communicating the issues and outcomes with various stakeholders. What Is A Quantitative Triple Bottom Line Assessment? TBL is an approach intended to reflect all the impacts — 16 wateronline.com ■ both positive and negative — associated with a project or program. As such, it may be considered as a comprehensive type of benefit-cost analysis. As implied by the name, the impacts are organized and portrayed according to three bottom lines: • Financial: reflecting the cash flow implications for a utility, such as revenues gained and expenditures or other costs incurred. This is similar to a traditional accounting style bottom line, as might be reported in a utility's fiscal annual report. • Social: reflecting impacts on the broader community, such as public health and welfare, water system reliability, contributions to employment or other community values, affordability, and so forth. • Environmental: reflecting impacts to watersheds and other ecosystems, carbon footprints, and other consequences for natural systems. The TBL concept emerged from the sustainability field, as a suggested approach for corporations and other entities to expand how they conduct their annual reporting.1 In lieu of reporting a single financially oriented, accounting-based bottom line in an annual report, the suggestion was made to have businesses and public sector entities report annually on how their activities also affected social and environmental matters. Water utilities in Australia and other parts of the Commonwealth now provide such annual, enterprise-level TBL reporting routinely (although much of the reporting is highly qualitative rather than quantitative). Applying the TBL concept can be greatly expanded beyond annual enterprise-level reporting, and the TBL approach now is often applied at a project or programmatic level as a form of business case evaluation. Over the past several years, we have been applying the TBL framework as a way of organizing and communicating quantitative benefit-cost analyses for specific utility projects or programs. In our quantitative TBLs, we aim to identify and describe, and then quantify and monetize (to the extent credible and feasible), all the important consequences of a potential project (and its alternatives). We then structure the resulting outcomes in a simple graphic or table, accounting for all three bottom lines. Several examples of practical applications in the water sector are provided later in this article, where each bottom line is depicted as a corner of a TBL triangle figure. The TBL concept has also been applied by some practitioners across the water sector in more descriptive and less Water Online The Magazine