Water Shortage - Focus on the GPT Group - Case Study Example

Water Shortage: Focus on the GPT Group Introduction While people had been largely focused in energy-related issues when talking about global environmental concerns, water shortage is increasingly taking the spotlight. The world has experienced an increase of human population since the start of the 20th century. The growth has increased the demand for basic consumption of food and water. Drinking and sanitation has become a concern as well. During the second part of the century, it was noted that the proportion of people living in urbanized areas around the world grew to 47% from 29% (UNESCO, 2006). Because of this, it is expected that population growth will occur in urbanized areas. As the eating and drinking habits of the populace changes, an increased water input is required. Improved standards of living likewise lead to the necessity of water for lifestyle and sanitation purposes. These trends lead to a dramatic increase in water consumption and water shortage (Bjornlund, 2008). Already, a large number of countries including Australia are experiencing water shortage. Access to water, which had largely been taken for granted in the past, is now a challenging part of doing business. Real estate companies including companies involved in engineering and construction have to take this into consideration when building concrete structures. Economic Impact of Water Shortage in Business The United National Environment Programme Finance Initiative (UNEPFI) has summarized three risks factors involving the financial health of a company due to water scarcity. Among these include: Profit loss because of disruption Increased investments required for water treatment including for water use and waste treatment purposes Profit loss because of delayed or cancelled growth The impact of these risks will vary depending on the businesses' access to water and pricing issues. Industries where water is a main input are most vulnerable particularly when water is scarce in the area. Implications of Water Shortage in Business Two separate water markets can be observed in Australia: the water entitlements and the water allocation (Marsden Jacob, 1999). Water entitlement is the right to receive water allocation during each season for the long term. Meanwhile, water allocation is the seasonal rights to use water that is being traded. Drawing on the parallel in real estate, water entitlements is the property "bought and sold" while water allocation is the property that is "rented or leased". It is clear that something needs to be done before the problem gets worse. Developers play a crucial role for sustainable development. Climate change has a variety of negative effects in the surroundings. From energy to water shortage, everything is attributed to climate change and everyone is feeling its adverse effects. Role of Developers It is estimated that more than 70% of the world's greenhouse gases are generated by commercial and residential buildings. This figure, derived from the Green Cities Conferences in Australia, clearly shows the importance of building sustainable structures. Climate change is a problem Australian businesses needs to deal with. Consequently, it is also essential to involve the government in urban planning (Hall, Lobina, & de la Motte, 2005). The good news despite these adverse developments is that governments and organizations are becoming more aware of the problem. Aside from Australia, two other countries that are making huge efforts in building a sustainable environment include the United States and China. For example, China has built five "eco cities" which are powered by bio-waste, wind turbine, rice husks, and photovoltaic cells. Green building is attracting the interest of investors. Going green is not only environmentally-friendly, it can equate to profitability as well. Surveys consistently show that people are willing to pay more for sustainable properties. Currently, Australia's fight against the adverse effects of climate change is being strengthened by research associates including the Australian Research Institute in Education for Sustainability (ARIES). The organization works together with the Australia Institute of Landscape Architects, Engineers and the Royal Australian Institute of Architects. Port Phillip Port Phillip is within the proximity of Melbourne. It has a variety of environmental problems including storm surges, flooding and sea-level rise because of its place near the bay (Parker & Went, 2002). In response to these challenges, the city adopts a climate change initiative. The city aims to reduce its greenhouse gas emissions and adapt to climate change. To address these issues, some notable developments include the estimated 20% decrease in water consumption from 1996 to present. Port Phillips can be an example for other communities in Australia. In coastal communities, there is a challenge to reduce greenhouse gas emissions so temperatures will not rise to dangerous levels (Parker & Went, 2002). This is because when it occurs on beachfront properties, properties will be lost. Brisbane Water shortages combined with other variety of problems will also occur when rising temperatures are combined with restricted water use at the same time. Capital cities around the world cannot maintain trees because of its large number of concrete buildings. Trees are important factors in cooling. When trees are lost, people will start to use air-conditioning which can actually make the situation worse because of their high energy usage. Other cities In cities with Greenfield development, it is not that complicated to make changes to improve sustainability. However, in built-up urban areas, sustainable development means retrofitting which can be a complicated task. Governments need to deal with infrastructure as well. Take the example of cities such as Botany Bay, Melbourne, and Werribee. Botany Bay contains varied refinery and chemical plants and their airport goes along the bay. In Melbourne, the wastewater treatment site has to deal with seawater infiltration. And in Werribee, the Western Treatment Plant is susceptible as well. Governments are tasked to create programs aimed at adaptation (Carrad, 2004). They should also act as stakeholder as geographical events continues to pose challenges to urban areas and the businesses within it. Developers play a crucial role for sustainable development. Climate change has a variety of negative effects in the surroundings. From energy to water shortage, everything is attributed to climate change and everyone is feeling its adverse effects (Bjornlund, 2008). The GPT Group The GPT Group's main line of business is in real estate investment and trusts but it also engages in the tourism and hotel industry. The company is one of the most influential real estate companies in Australia so it follows that it can influence buying behavior and practices in the real estate industry. According to their Corporate Social Responsibility page, "we take this issue seriously in our dealings with our stakeholders," this refers to their impact on the real estate market. Quadruple Bottom Line Reporting The GPT Group is one of the few companies that use the quadruple bottom line reporting. It is committed to transparency and accountability even outside its financial performance. Quadruple bottom line refers to four elements including financial, social, environmental, and governance accountability or sustainability reporting (Boxall, 2000). It seeks to align its reporting practices with the notion of sustainable development and management practices. Decisions in the quadruple bottom line reporting are becoming the popular approach in tacking the idea of sustainability. It takes into consideration the company's impact on human, financial, and natural resources when the company makes its decisions. Environmental elements are the effects from the company's products, services, and processes. Social elements are the effects in the local, nationwide, and global community. Its public policies relate to equality, employee relations, and public health among others. Financial considerations are the company's financial viability. It also includes community contributions and employee salary. Governance considerations are the management practices as to whether decisions are transparently made. The GPT Group created a body of information that relates the ecological impacts of its activities. Through these data, the company is able to address vulnerable areas within the company and improve on trends that need immediate concern. GPT Corporate Responsibility The GPT Group knows their responsibility in sustainable development very well. According to the corporate website, "GPT recognizes the interest of all stakeholders and is committed to behaving ethically and operating in a sustainable manner that enhances economic, societal, and environmental values." It was further added that "We are committed to advancing corporate responsibility practices and performance in a manner that meet the needs of the present without compromising the needs of future generations". To achieve this end, the GPT Group created the Corporate Responsibility Steering Group which addresses issues related to development, management, operations, and services of all its properties. In 2005 alone, the GPT Group was able to garner a variety of awards for its commitment to the environment and to decrease water shortage. Among these are: Dow Jones Sustainability Index Listing No. 1 Australian Sustainable Property Fund – form the AMP Capital 7th Placer in the 2005 Investor Perception Study SAM Aussie Sustainability Index Listing Banksia Award for the National@Docklands development Bankasia Business Environmental Award – the Ayers Rock Resort development Sydney Water Every Drop Counts Business Program – GPT was recognized for its water conservation efforts GPT Financial Viability on Sustainable Development The GPT Management Ltd as Responsible Entity for General Property Trust has purchased the P&O Australian Resorts (PPOAR) which is one of the largest operators of natural resorts in the country. GPT and Voyage Investments estimated to be around $227 million (Yahoo Finance Website, 2008). The acquisition is debt-financed and is anticipated to give GPT shareholders yield of 9%. The portfolio involves 571 rooms in 8 resorts including the Brampton, the Lizard, the Dunk, the Heron, Bedara, and the Wilson Island Resorts. All these properties are located in Tasmania and Queensland. According to the GPT Portfolio manager for Hotel/Tourism, the P&O resort is in line with GPT's quest to provide the beset eco tourism experience in Australia. The POAR portfolio which is estimated to be in excess of $750 million is a combination of both domestic (64%) and international (36%) and will represent around 95 of the company's total assets (Yahoo Finance Website, 2008). The GPT Group also supports a wide range of charities by making financial contributions and encouraging its employees to participate and social activities. The company is also one of the founders of Australia and New Zealand Investor Group on Climate Change; the organization was established to increase awareness to climate change and its financial implications. Overall, GPT contributed around $1.2 million for all its outreach activities in 2005. In 2005, the Group's environmental data was collected and analyzed. The data related to energy, water, waste, and greenhouse showed that significant progress was being made in the company's effort for sustainable developments. Compared to 2004 figures, the company was able to achieve 16% decrease in water consumption and 4% decrease in energy consumption (GPT Website, 2005). The progress from its Hotel/Tourism initiatives was also impressive because the accountability structure is improved. Opportunities Even as water shortages continue to pose a threat to various businesses in Australia, the opportunities it presents cannot be denied as well. Particular to developers is the opportunity to build infrastructures that provides the "sustainability" benefit. Australian developers have the power to influence the environment for the better and people will appreciate them for it once they go about this task. It was mentioned earlier that investors and the general populace are willing to pay more for sustainable buildings. The GPT Group can take advantage of this by developing more residential and commercial buildings that pose minimal harm to the environment. Through this endeavor, they will not only contribute to environmental sustainability, they will be making significant amounts in profit as well. References: Appelgren, B & Klohn, W. (1999). Management of Water Scarcity: A Focus on Social Capabilities and Options. Physical and Chemical Earth (B) 24(4), pp. 361-373 Bjornlund, H. (2006). Increased Participation in Australian Water Markets. Sustainable Irrigation Management, Technologies, and Policies. Southampton: WITPress, pp. 289-302. Bjornlund, H. (2004). Formal and Informal Water Markets: Drivers of Sustainable Rural Communities. Water Resources Research 40, W09S07. Bjornlund, H. (2008). Water Scarcity and Implications for Land Management. United Kingdom: RICS Research. Boxall, A. (2000). Security Issues for Financials. Proceedings from the 1st Australian Natural Resources Law and Policy Conference: Focus on Water. Canberra 27-28 March. Carrad, N. (2004). "Case Study of Australia". South East Asia Geography Conference Panel. Australian Mekong Resource Center, University of Sydney. Retrieved August 28, 2008 from http://www.mekong.es.usyd.edu.au/events/past/GeogConference2004/australia_casestudy.pdf Fenton, M. (2006). The Social Implications of Permanent Water Trading in the Loddon-Campaspe Irrigation Region of Northern Victoria. Report for North Central Catchment Management Authority. Huntley, Victoria. GPT Website. (2005). GPT Sustainability Report. Retrieved August 28, 2008 from http://www.gpt.com.au/GPTCorp/contentdocs/Miscellaneous/Sustainability%20Report%20AR_2005.pdf GPT Website. (2008). Investor Relations. Retrieved August 28, 2008 from http://www.gpt.com.au Hall, D., Lobina, E, & de la Motte, R. (2005). Public Resistance to Privatization in Water and Energy. Development in Practice 15, pp. 286-301. Marsden Jacob (1999). Water Trading Development and Monitoring. Report for Department of Land and Water Conservation. Victoria: Marsden Jacob & Associates. Parker, S. & Went, Y. (2002). Security Over Land and the Water Act 2000. Proceedings from 4th Australian Water Policy and Law Conference. Sydney 24-24 October. UNESCO. (2006). Water: A Shared Responsibility. France: UNESCO. World Bank. (1993). Water Resources Management. A World Bank Policy Paper, Washington. Yahoo Finance Website. (2008). Market Closes At New Record High. Retrieved August 28, 2008 from http://au.dailynews.yahoo.com/finance/20040707/iwebreports/1089184136-4094566411.html Young, M. McColl, J, & Fisher, T. (2007). Urban Water Pricing: How Might an Urban Water Trading Scheme Work. Droplet 5 February 2007. 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