Recurring instances of combined sewage overflow into the country’s waterways are raising reputational risk for water utility companies in England, as Penta’s latest Stakeholder Intelligence report reveals.
The combined drainage system in England is an antiquated labyrinth encompassing thousands of miles of Victorian brick sewers, carrying rainwater and domestic wastewater to sewage treatment works. The capacity of these pipes, built for a smaller, lower-consumption population, means storms can inundate sewage plants, causing backup floods into houses, gardens, and roads. To combat this, combined sewer overflows (CSOs) funnel wastewater and sewage into open waterways during heavy weather.
But the system is flawed, resulting in excessive and unnecessary spills from CSOs – and these incidents can be hard to track. Sewage overspills are not included in the Environment Agency’s water company Environmental Performance Report while CSO reporting is self-regulated – a system that environmental campaigners believe lacks transparency and accountability.
Environment Agency (EA) data shows that in 2020 water companies discharged raw sewage into English rivers and coastal waters more than 400,000 times. By contrast, only 1,919 incidents were reported by water companies in that year. Wastewater regulations cover permits to release untreated waste from CSOs after storms. However, these licenses don’t account for the thousands of discharges made, many after a light rain or in dry weather.
Questions are being asked over failures to increase the capacity of the sewage network. Since 1991, just £123bn has been spent on improving pipes and water treatment plants. Meanwhile, £57bn in dividend payments have been made to water utility shareholders, suggesting profits are being put above service provision. That said, England’s water utility companies inherited an outdated and inadequate system – the real root of the problem – meaning that their continued struggles around these issues are at least, in part, understandable.
In 1989, the English and Welsh water industry was privatized. Most water and sewage companies are now regional monopolies. Where competition is limited, robust regulation is paramount. Ofwat acts as an economic regulator for the water industry, setting wholesale price limits and targets for leakage and pollution reduction. In November 2021, it ordered Thames Water, Southern Water, and South West Water to repay a combined £67m to customers over missed targets.
In addition, the EA regulates the environmental impact of England’s water and sewerage companies, using fines to enforce environmental protection and licensing compliance. In summer 2021, it fined Southern Water a record £90m for 6,971 cases of illegal sewage discharge between 2010 and 2015.
Public scrutiny of the financial management, service failures, and environmental fallout of the sector has intensified. There are calls for renationalization, favored by 63% of UK voters. Meeting the political, financial, and environmental challenges the sector faces will have both operational and reputational consequences.
Water industry businesses were prosecuted almost 600 times in the 20 years to 2021 – more than any other sector. And regulators are not the only stakeholders demanding better performance from them.
Access to water and sanitation is a human right and engenders passionate stakeholder activism. Southern Water customers refused to pay water rates following the company’s ongoing discharge of sewage into the sea following the EA fine. Meanwhile, NGOs and local environmental groups challenge water companies’ activities through social media.
In addition, the emotive nature of mainstream reporting around CSOs and sewage adds further risk of reputational damage. Dogs dying after playing in the sea, wild swimmers advised to keep their mouths closed by Wessex Water, Severn Trent leaving a widower “stranded” in a house surrounded by sewage, and generous pay packages for water executives all amplify the visceral response amongst everyday people.
The potential for reputational damage to England’s water utility companies from recurring CSO releases is significant. Between November 1, 2021, and February 16, 2022, an analysis by Penta surfaced 10,760 pieces of sector content mentioning CSO and sewage. This amounts to approximately one-third of all coverage generated by the sector during the same period. The research concluded that CSOs embody water companies’ highest ongoing reputational risk, with 58% of coverage registering negative sentiment – compared to just 4% of positive reporting.
Every water company in England drew CSO or sewage-related criticism during the research period. Thames Water and Yorkshire Water each registered 1,200 articles around Ofwat’s scrutiny of CSOs over unmitigated sewage overflow into waterways. South West Water, meanwhile, was heavily criticized for allowing pollution to threaten the UK’s only wild beaver colony.
When corporate reputation is threatened, external stakeholders often have the leverage to set the agenda for privately-run companies, including utilities. This can reach beyond the agenda-setting power of government agencies and shareholders. In the case of water utilities, the universal need for water and waste services and powerful imagery of untreated sewage dumped into the UK’s natural habitats can fuel consumer outrage, and drive long-term reputational risk.
By employing Stakeholder Intelligence, utilities can better position themselves to understand, and respond to, stakeholder concerns.
For insight into the reputational impact on water companies of recurring sewage overspill in England’s waterways, see Penta’s recent Water Utility Sector Report, Sewage & Combined Storm Overflow Impact Analysis.