Mitigating water-related risks through integrated asset management
Exploring how critical asset types and their management approaches can help to mitigate shared risks within a complex system
Words by Dark Matter Labs | published in EWSC Research & Insight
Article Overview:
The article is structured into three sections:
- 1. Understanding the context: This section provides an overview of the current context, highlighting shortfalls in capability and capacity faced by organisations.
- 2. Building opportunity: We will outline three critical assets and their management strategies. These assets play a crucial role in creating opportunities for collaboration and risk mitigation within the system. By introducing each asset type, we propose specific actions and mechanisms to implement them;
- 3. Proposition: The article concludes by emphasising the concept of organising a whole-city common asset pool, as a transformative approach to reshape the system.
By exploring these key areas, the article aims to harness collaborative actions that contribute to unlocking multiple benefits.
1. Understanding the context: Overburdened capability and capacity
In order to discover the range of options for enabling Water Smart Communities, DML undertook a series of interviews with key stakeholders in the field. An initial takeaway was that organisations not only felt overburdened by the breadth and scope of transition challenges, but individually they had limited capacity and capabilities to deal with it.
Water-related challenges such as quality, scarcity, and flood risks present intricate complexities when identifying underlying factors that support solutions for improvement or mitigation. Driven by involvement of interconnected multiple factors, climate disruption, results in a wide-ranging scale of impact with high uncertainty in projection. This interdependency blurs the boundaries between incentives for improvement and penalties for harming common resources. For example, in flood risk mitigation efforts, one actor’s contribution to improvement, such as tree planting in their garden can benefit others, while another actor who improved their garden to tackle flood issues may still be impacted by flooding from their neighbour’s paved garden.
The lack of clarity in responsibility poses significant hurdles for private investment in implementation of targeted interventions that address shared issues across a wide stakeholder group. Capturing the impact of such interventions often remains uncertain, leading to a lack of collective buy-in. However, without contributions from all stakeholders involved, risks will continue to escalate, leaving investments unable to guarantee returns.
Notably, local authorities, who are responsible for public services, face the strain of budget cuts. At the same time, the demand for increased capacity and capabilities to tackle such complex challenges effectively has grown.
The following section explores the scope of asset types and approaches to managing common assets with shared accountabilities that can unlock opportunities for addressing the challenges outlined above.
2. Building opportunities: Critical assets and their managements
Inadequate investment and incentives, despite high demand, give rise to challenges associated with the capabilities and capacity gap. As a result, a shortage of resources allocated to effective asset management leads to an inability to provide desired outcomes. In this regard, we highlight three types of assets management that play a critical role in delivering outcomes in water infrastructure:
- Identification of common assets and building collective actions;
- An asset pool that manages aggregative outcomes with integrity;
- Recognition of organisational innovation as a critical asset in organising shared outcomes;
By uncovering the root causes of the capability and capacity gap, we aim to identify distinct asset types and highlight tools and actions that can lead to managing them effectively.
2.1 Common assets and building collective actions
2.1.1 Identification of common resources
Common resources, like clean water or soil biodiversity, offer inclusive services to the entire site-specific community, benefiting everyone universally. However, managing such resources often falls under the responsibility of specific organisations, tasked with restoring or mitigating emerging risks resulting from resource decline. Particularly, common resources create the dilemma of collective action. Potential individual exploitation of shared resources hinders joint contribution to improving the common resources.
Dispersed outcomes valuation and incentivisation can hinder the implementation of multi-functional infrastructure, like Sustainable Drainage Systems (SuDs). Compared to the high-cost investment to implement and manage, the limited returns to individual actors do not provide enough incentive for investment.
For example, the implementation of SuDs delivers a great multifunctional infrastructure that yields numerous benefits across private and public sectors. Green roofs and facades, and urban tree management contribute to reducing run-off and enhancing ecosystem services of the area, such as mitigating urban heat island effects, and promoting biodiversity. These impact benefit city authorities, local communities, and private properties by providing various advantages, such as energy cost savings and flood risk mitigation. Additionally, this reduction in run-off can lead to cost savings for wastewater treatment systems, as it eases the loads on sewage systems, improves water quality, benefiting water companies as well other stakeholders can also benefit from the implementation even if they did not participate directly in the implementation (Johnson & Geisendorf, 2019).
Managing and improving shared resources creates multiple benefits for a vast pool of actors. To maximise these benefits, it is important to arrange a governance model that ensures that assets are effectively coordinated, through a collective decision-making and with accountability.
2.1.2 Common resources peer-governance model: Common Asset Trust
A Common Asset Trust is a potential governance structure that serves to effectively manage a pool of common resources among multiple stakeholders, leading to the creation of mutual benefits. This structure is built on a board of trustees who shares common goals, enabling collective actions by responding to emerging issues collectively, while manage shared assets and prevent individuals from overusing them. This legal mechanism arranges a collection of agreement to maximise the realisation of a shared purpose: the sustainable management of common assets (Costanza et al., 2021, p. 3). The mechanism has been successfully applied in various sectors, including:
- Land for promoting public health: Endowing the Future, (forthcoming) an initiative led by Dark Matter Labs and Civic Square Birmingham, in the UK;
- Community practice energy transition: Solar Commons operated by the Solar Common Trust model, hosted by Minnesota Design Center at the University of Minnesota in the United States;
- River restoration: Colorado Water Trust, posits that river and stream water supports our ecosystems, communities, and local economies.
These case studies share common attributes that can be considered in organising the model:
- Operating around place-based physical assets through the shared decision makings, monitoring, and recourse allocation from the community;
- Establishing shared ownership amongst partners through a legal arrangement such as a community trust or non-profit institution;
- Implementing a peer-governed revenue model that involves partners and local communities, empowering partners and beneficiaries involved;
- The utilisation of initial gifts (donation) for constructing the asset allows for the generation of credits and verified benefits which finance the model. This approach enables positive accumulative financial impact over time (Brehm & Lillis, 2018).
- Aim to generate outcome-oriented bundles of mutual benefits for the community.
It is crucial to recognise that the diverse outcomes of different interventions need to be coordinated to achieve maximum outcomes.
2.2 Aggregative benefits from common asset pool
For the effective provision of outcomes, managing assets as a pool is necessary This aggregated pool of assets, such as trees planted in conjunction, can capture various ecosystem services, including creating microclimate, increasing biodiversity and providing cooling effects. To achieve meaningful outcomes, a sufficient combination of assets is essential. Managing assets in small scale, in segregation result in higher total costs, and not be effective in mitigating risks and delivering outcomes.
Sponge City, a concept that has gained popularity in China, provides great resilience in managing water challenges. Another renowned concept, Water Sensitive Cities, demonstrates city-scale water catchment applied across Australia and around the world. The concept prioritises the urban water cycle within the urban landscape, including actively protecting the health of waterways and wetlands as well as creating public spaces that recycle water. These approaches embrace diverse biological and physical urban environments to adopt flood risk management effectively. By recognising the inherent interconnectedness of urban challenges, it can enable the coordination of diverse urban risks and deliver multiple outcomes. For instance, implementing Sustainable Drainage Systems (SuDs) in a city facilitates effective storm-water management. and also provides green infrastructure to alleviate the urban heat island effect. However, the existing knowledge focus on the implementation of these approaches in the EU and UK has primarily been dominant at the neighbourhood and building level (Gimenez-Maranges et al., 2020).
2.2.1 Managing a common asset pool with integrity
Multiple interventions of all scales within the same region have a significant influence on one another. A portfolio of shared asset pools, consisting of interdependent intervention, creates mutual aggregative values and outcomes (Gillingham et al., 2016). The interplay and coordination among these interventions create opportunities to finance and steward effectively.
Financing small-scale or single assets individually results in inefficiencies as well as higher total costs, including management, accounting, and measurement resources. Moreover, this approach fails to deliver the necessary scale and speed of impact to mitigate the escalating risks. On the other hand, providing finance at a whole city level for a portfolio of interventions can offer efficiency and the real potential higher value-based returns. A high concentration of economic activities in a city, known as the agglomeration effect, brings benefits significant benefits to economic productivity, resulting in an uplift in Gross Value Added (GVA). Investing at whole city-level and improving the urban environment, ensures the repayment from investment while generating additional benefits as well.
However, scaling and replicating the management of a shared asset pool should be approached with a highly locally sensitive context, rather than adopting a one-size-fits-all approach. In the publication, “Local housing, community living: prospects for scaling up and scaling out community-led housing”, by the Smith Institute, emphasises the importance of addressing the needs of the local community and focusing on the quality of outputs, rather than imposing a fixed size or number. Implementing and replicable and scalable investment models that rely on the local context to create outcomes need to facilitate such an approach. Tom Chance, CEO of Community Land Trust Network, also proposes a model that functions as a combination of building blocks adapting to diverse local contexts, allowing the deployments to spread in speed and scale, while avoiding one-size-fit-for-all.
Grouping multiple trusted assets can enable coordination and connection of segregated stewardship across organisations toward shared objectives. The rivers trust aims to conserve waterways in the UK and Ireland with 63 member trusts. The umbrella organisation shares a vision and implements grounded activities, including data sharing.
Coordination of projects and stakeholders is fundamental. Establishing a cross-organisational structure is necessary to organise multiple interventions and assets with integrity, ultimately achieving shared outcomes. The essential factor is the organisational adaptation and capabilities building that facilitate coordination among different stakeholders.
2.3 Proposition: Organising whole-city common asset pool
The key to successfully implementing new assets and transitioning management approach is to establish strong mutual interrelations among the actors involved and their strategies and process (Gimenez-Maranges et al., 2020). Organisational structure and process adaptation are often neglected as investments. The effective management of place-based assets relies on soft assets (invisible or intangible assets). Such assets include knowledge, software, organisational structure and processes, and community participation. They contribute to building pathways that enhance resilience and generate multiple values, including what is considered ‘ a success’, and the entire process (planning, design, constructing, managing, operating and governance, periodic risk management)(Gimenez-Maranges et al., 2020). Organisation innovation is fundamental to building collaborative objectives, affecting the efficiency of managing tangible assets and outcomes.
For example, adopting tree planting to provide multiple ecosystem services to multiple stakeholders is a relatively new concept for many public authorities. The Interim Report of the TreesAi initiative, a pilot project operated in Glasgow, UK, led by Dark Matter Labs and Lucidminds, built an assessment tool to bundle and connect multiple projects and multiple stakeholders. The tool aims to encourage co-investment in Nature-Based Solutions by compiling an impact portfolio. However, the initiative emphasises that transforming organisational structure and processes is necessary for cross-organisational collaboration to deliver such shared objectives successfully This includes inter-organisational collaboration and the cultivation of mutual values (rather than operating in silos or focussing solely on fragmented values).
2.3.1 Using the synergy of IT and organisation innovation
Information Technology (IT), like Agent Based Modelling can enhance efficiency by facilitating the flow of information and coordinating data across a wide network, enabling proactive shared risk management and providing collective insights to support long-term goals. Uber is an example of using information technology to build a network of drivers. In “Capitalism without Capital”, the authors Haskel and Westlake highlight that technological advancement brings increased business productivity stemming from an investment in soft assets like information networks and the flow of knowledge within organisational structures. In this way, IT can provide opportunities for organisational innovation (Wataya & Shaw, 2022).
However, it is crucial to recognise the symbiotic relationship between technology and organisation, as they mutually reinforce each other. Without corresponding changes in organisational structure, technology alone cannot fully realise its impact.
3. Proposition: Organising whole-city common asset pool
This article emphasises the importance of identifying distinct assets and implementing a new management to maximise benefits and mitigate risks. Outlining three crucial assets highlights the need for collaborative actions with shared goals to tackle capacity shortages and respond to risks. A Water Smart Community (WSC) can facilitate collaboration by utilising the following assets and their management approaches:
- Establishing a Common Asset Trust arranges the legal ownership of shared assets among multiple stakeholders. The arrangement enables a peer-governed revenue model that ensures collective accountability for the bundled outcomes delivered from common assets fosters;
- Managing a shared asset pool at a city or landscape scale allows for the capture of maximum aggregate outcomes. This scheme enables efficient outcome management and encourages investment. By forming groups of trust, implementation and outcomes can be effectively coordinated;
- Adopting organisation innovation enables the operation of cross-organisational outcomes. Leveraging Information Technology, fosters synergy, facilitating innovative approaches to coordination, information and knowledge sharing across organisations;
This article is written by Dark Matter Labs (DLM). DLM contributed towards developing a transition model pathway, given its experience in building and orchestrating systemic transitions. This article is one of five produced by DML, see: How to implement and benefit from a multi-value flow in local communities, Mitigating water-related risks through local stewardship, Essential frameworks for the sustainable development of common goods, and Enhancing stewardship and decision-making for sustainable water management for more.
As Discovery research lead and series editor, Arup’s Transformation & Design Studio led the multi-partner research effort contributing public innovation and strategic design expertise.
This is one of a series of insight articles produced as part of the EWSC innovation programme, exploring how integrated water management can be delivered through innovative housing and stewardship models. For an overview of the project, latest news or to get in touch visit https://www.ewsc.org.uk/.
