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Iso Fdis 24540

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91 views34 pages

Iso Fdis 24540

ISO

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nabil_ghabi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FINAL INTERNATIONAL ISO/FDIS

DRAFT
STANDARD 24540

ISO/TC 224
Secretariat: AFNOR Principles for effective and efficient
Voting begins on:
corporate governance of water
2023-01-27 utilities
Voting terminates on: Principes pour une gouvernance d’entreprise efficace et efficiente des
2023-03-24 services publics de l’eau

RECIPIENTS OF THIS DRAFT ARE INVITED TO


SUBMIT, WITH THEIR COMMENTS, NOTIFICATION
OF ANY RELEVANT PATENT RIGHTS OF WHICH
THEY ARE AWARE AND TO PROVIDE SUPPOR­TING
DOCUMENTATION.
IN ADDITION TO THEIR EVALUATION AS Reference number
BEING ACCEPTABLE FOR INDUSTRIAL, TECHNO­
LOGICAL, COMMERCIAL AND USER PURPOSES, ISO/FDIS 24540:2023(E)
DRAFT INTERNATIONAL STANDARDS MAY ON
OCCASION HAVE TO BE CONSIDERED IN THE
LIGHT OF THEIR POTENTIAL TO BECOME STAN­
DARDS TO WHICH REFERENCE MAY BE MADE IN
NATIONAL REGULATIONS. © ISO 2023
ISO/FDIS 24540:2023(E)

COPYRIGHT PROTECTED DOCUMENT


© ISO 2023
All rights reserved. Unless otherwise specified, or required in the context of its implementation, no part of this publication may
be reproduced or utilized otherwise in any form or by any means, electronic or mechanical, including photocopying, or posting on
the internet or an intranet, without prior written permission. Permission can be requested from either ISO at the address below
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ii  © ISO 2023 – All rights reserved



ISO/FDIS 24540:2023(E)

Contents Page

Foreword...........................................................................................................................................................................................................................................v
Introduction............................................................................................................................................................................................................................... vi
1 Scope.................................................................................................................................................................................................................................. 1
2 Normative references...................................................................................................................................................................................... 1
3 Terms and definitions..................................................................................................................................................................................... 1
4 Overview........................................................................................................................................................................................................................ 3
5 Corporate governance for water utilities................................................................................................................................... 4
6 Governance framework................................................................................................................................................................................. 6
6.1 General............................................................................................................................................................................................................ 6
6.2 Define the vision, mission and strategic objectives of corporate.............................................................. 6
6.3 Identify governance gaps............................................................................................................................................................... 6
6.4 Establish decision-making process....................................................................................................................................... 7
6.5 Mapping and definition of roles and responsibilities........................................................................................... 7
6.6 Stakeholder engagement for inclusive water utilities.......................................................................................... 7
6.7 Encourage the development of capacity building and sharing of information.............................. 8
6.8 Adoption of monitoring and evaluation............................................................................................................................ 8
7 Influencing factors.............................................................................................................................................................................................. 8
7.1 General............................................................................................................................................................................................................ 8
7.2 Legal aspects............................................................................................................................................................................................. 8
7.2.1 General......................................................................................................................................................................................... 8
7.2.2 Legislative framework................................................................................................................................................... 9
7.2.3 Water policy............................................................................................................................................................................. 9
7.3 Guidelines..................................................................................................................................................................................................... 9
7.4 Business model........................................................................................................................................................................................ 9
7.5 Users.............................................................................................................................................................................................................. 11
7.6 Other stakeholders........................................................................................................................................................................... 11
7.7 Overall system operation............................................................................................................................................................ 12
8 Implementation...................................................................................................................................................................................................12
8.1 Purpose of water services.......................................................................................................................................................... 12
8.2 Objectives of water services..................................................................................................................................................... 12
8.3 Viewpoint of system to ensure publicity....................................................................................................................... 13
8.3.1 General...................................................................................................................................................................................... 13
8.3.2 Reliable achievement of required level ....................................................................................................... 13
8.3.3 Implementation of corporate social responsibility........................................................................... 13
8.3.4 Enhancement of user service................................................................................................................................ 13
8.3.5 Effective governance system and internal control system........................................................ 13
8.3.6 Response in the event of a disaster................................................................................................................. 13
8.3.7 United Nations Sustainable Development Goals.................................................................................. 13
8.4 Organizational functions............................................................................................................................................................. 14
8.4.1 General...................................................................................................................................................................................... 14
8.4.2 Executive board, board of directors or municipal council committee............................ 14
8.4.3 Management committee............................................................................................................................................ 15
8.4.4 Auditing.................................................................................................................................................................................... 15
8.5 Monitoring the implementation............................................................................................................................................ 15
8.5.1 Overview................................................................................................................................................................................. 15
8.5.2 Monitoring body............................................................................................................................................................... 15
9 Monitoring or assessment of corporate governance................................................................................................... 16
9.1 General......................................................................................................................................................................................................... 16
9.2 Assessing the corporate governance of water utilities.................................................................................... 16
9.2.1 General...................................................................................................................................................................................... 16
9.2.2 Vision, mission and strategic objectives..................................................................................................... 16

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ISO/FDIS 24540:2023(E)

9.2.3 Basic organizational decisions............................................................................................................................ 16


9.2.4 Preparation of day-to-day activities............................................................................................................... 17
9.2.5 Responsibilities matrix — Who does what.............................................................................................. 17
9.2.6 Stakeholder mapping and engagement........................................................................................................ 17
9.2.7 Outcomes of corporate governance of water utilities..................................................................... 17
10 Recommendations of corporate governance....................................................................................................................... 18
10.1 General......................................................................................................................................................................................................... 18
10.2 Cooperation and relationship between key players............................................................................................ 19
10.2.1 Ownership.............................................................................................................................................................................. 19
10.2.2 Responsible body............................................................................................................................................................. 19
10.2.3 Operator of water utility........................................................................................................................................... 20
10.3 Openness and transparency..................................................................................................................................................... 20
10.3.1 General...................................................................................................................................................................................... 20
10.3.2 Recommendation 6: openness and transparency............................................................................... 20
10.4 Stakeholder engagement............................................................................................................................................................. 21
10.4.1 General...................................................................................................................................................................................... 21
10.4.2 Recommendation 7: Stakeholder engagement....................................................................................... 21
10.5 Monitoring of operational improvement....................................................................................................................... 21
10.5.1 General...................................................................................................................................................................................... 21
10.5.2 Recommendation 8: Operations......................................................................................................................... 21
Annex A (informative) Consensus-oriented decision-making process........................................................................ 22
Annex B (informative) Stakeholder engagement................................................................................................................................. 23
Annex C (informative) Specific performance indicator examples.....................................................................................24
Bibliography.............................................................................................................................................................................................................................. 27

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ISO/FDIS 24540:2023(E)

Foreword
ISO (the International Organization for Standardization) is a worldwide federation of national standards
bodies (ISO member bodies). The work of preparing International Standards is normally carried out
through ISO technical committees. Each member body interested in a subject for which a technical
committee has been established has the right to be represented on that committee. International
organizations, governmental and non-governmental, in liaison with ISO, also take part in the work.
ISO collaborates closely with the International Electrotechnical Commission (IEC) on all matters of
electrotechnical standardization.
The procedures used to develop this document and those intended for its further maintenance are
described in the ISO/IEC Directives, Part 1. In particular, the different approval criteria needed for the
different types of ISO documents should be noted. This document was drafted in accordance with the
editorial rules of the ISO/IEC Directives, Part 2 (see www.iso.org/directives).
Attention is drawn to the possibility that some of the elements of this document may be the subject of
patent rights. ISO shall not be held responsible for identifying any or all such patent rights. Details of
any patent rights identified during the development of the document will be in the Introduction and/or
on the ISO list of patent declarations received (see www.iso.org/patents).
Any trade name used in this document is information given for the convenience of users and does not
constitute an endorsement.
For an explanation of the voluntary nature of standards, the meaning of ISO specific terms and
expressions related to conformity assessment, as well as information about ISO’s adherence to
the World Trade Organization (WTO) principles in the Technical Barriers to Trade (TBT), see
www.iso.org/iso/foreword.html.
This document was prepared by Technical Committee ISO/TC  224, Drinking water, wastewater and
stormwater systems and services.
Any feedback or questions on this document should be directed to the user’s national standards body. A
complete listing of these bodies can be found at www.iso.org/members.html.

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ISO/FDIS 24540:2023(E)

Introduction
Water is a global issue. Actions and subsequent decisions regarding water utilities are local issues. The
United Nations has set 17 Sustainable Development Goals (SDGs), many of which are water related.
Specifically, SDG  6 addresses water and sanitation and is intended to be applied at the local service
level. People are aware of climate change and its impact on water availability but also the changes in
weather, such as rain intensity or frequency, which can increase the risk of flooding events. The Paris
Agreement takes these risks into consideration at the international level, but the question still remains
on how they are considered at local level.
The water utilities sector is changing more rapidly than ever before and new solutions are being created
and conceived. It is of vital importance that appropriate corporate governance systems exist and are
implemented to support these changes and ensure that water services are provided which take into
account user and stakeholder needs and expectations in a sustainable way.
The information provided in this document improves decision-making processes and outlines roles
and responsibilities of responsible bodies and other relevant stakeholders in the governance of water
utilities.
The roles of relevant authorities, responsible bodies and water utilities can differ between and
within countries and result in different minimum requirements for the operations. Nevertheless, it is
recommended that such organizations recognize the importance of effective and efficient corporate
governance to allow for the water utility to operate properly.
The Organisation for Economic Co-operation and Development (OECD) Principles on Water Governance[10]
are considered as a reference in this document. The OECD principles deal with overall “governance”, in
contrast to this document, which deals with corporate governance.
This document describes three levels of corporate governance mechanisms, as follows:
a) The first level of corporate governance relates to authorizations that are necessary for a water
utility to operate. Typically, authorizations required for the water utility to be able to operate
include:
1) drinking water services, e.g. abstraction of raw water, water protection areas, building and
operating facilities;
2) wastewater services, e.g. discharge of wastewater treatment plants, discharge of non-domestic
wastewater into the sewers, sludge disposal;
3) assets, e.g. building and operating facilities;
4) stormwater management services, i.e. collection and storage or treatment of stormwater prior
to release into the environment.
Authorizations can be taken at the national, regional or local level.
b) The second level of corporate governance considers the owner’s mission, including setting the
objectives of the service to be provided, the level of service, the setting or negotiation of water
prices, and the investment and asset management strategies.
c) The third level of corporate governance relates to the management of the water utility and the
implementation of decisions made by the owner within the relevant authorizations.

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FINAL DRAFT INTERNATIONAL STANDARD ISO/FDIS 24540:2023(E)

Principles for effective and efficient corporate governance


of water utilities

1 Scope
This document establishes the basis for a framework for water utilities to operate efficiently and
effectively considering stakeholder needs and expectations.
This document is applicable to all water utilities, regardless of ownership and management model
(public or private), size, service provided or location.
This document proposes principles for effective and efficient corporate governance of water utilities
with a focus on the roles and responsibilities of the responsible bodies and operators and on the
decision-making process involving the relevant stakeholders. It also includes key types of decisions to
be made.

2 Normative references
The following documents are referred to in the text in such a way that some or all of their content
constitutes requirements of this document. For dated references, only the edition cited applies. For
undated references, the latest edition of the referenced document (including any amendments) applies.
ISO 24513, Service activities relating to drinking water supply, wastewater and stormwater systems —
Vocabulary

3 Terms and definitions


For the purposes of this document, the terms and definitions given in ISO 24513 and the following apply.
ISO and IEC maintain terminology databases for use in standardization at the following addresses:
— ISO Online browsing platform: available at https://​w ww​.iso​.org/​obp
— IEC Electropedia: available at https://​w ww​.electropedia​.org/​
3.1
corporate governance
system by which utilities are directed and controlled
Note 1 to entry: Corporate governance is organizational governance applied to corporations.

Note 2 to entry: From Cadbury 1992[5] and OECD 1999[8].

[SOURCE: ISO/IEC 38500:2015, 2.4, modified — “utilities” replaced “corporations”. Note 3 to entry
removed.]
3.2
governance
system of directing and controlling water utilities (3.3), corporate governance systems, responsible
bodies (3.4), relevant stakeholders, relevant authorities and responsible authorities
Note 1 to entry: This includes all of the processes of governing – whether undertaken by the government of a
state, by a market or by a network – over a social system (e.g. family, tribe, formal or informal organization, a
territory or across territories) and whether through the laws, norms, power or language of an organized society.

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ISO/FDIS 24540:2023(E)

3.3
water utility
whole set of organization, processes, activities, means and resources necessary for abstracting,
treating, distributing or supplying drinking water, for collecting, conveying, treating, disposing of or
reusing wastewater or for the control, collection, storage, transport and use or disposal of stormwater,
and for providing the associated services
Note 1 to entry: Some key features for a water utility are:

— its mission, to provide drinking water services or wastewater services or the control, collection, storage,
transport and use of stormwater services, or a combination thereof;

— its physical area of responsibility and the population within this area;

— its responsible body (3.4);

— the general organization with the function of operator (3.6) being carried out by the responsible body, or by
legally distinct operators;

— the type of physical systems used to provide the services, with various degrees of centralization.

Note 2 to entry: Drinking water utility addresses a utility dealing only with drinking water; wastewater utility
addresses a utility dealing only with wastewater; stormwater utility addresses a utility dealing only with
stormwater.

Note 3 to entry: When it is not necessary or it is difficult to make a distinction between responsible body and
operator, the term “water utility” covers both.

Note  4  to entry:  In common English, “water service” can be used as a synonym for “water utility”, but this
document does not recommend using the term in this way.

[SOURCE: ISO 24513:2019, 3.3.1]


3.4
responsible body
body that has the overall legal responsibility for providing drinking water, wastewater or stormwater
services for a given geographic area
EXAMPLE A local or municipal government (e.g. for a village, town or city), a regional government or a
national or federal government through a specified agency, or private company.

Note 1 to entry: Responsible body is a category of stakeholder.

Note 2 to entry: The responsible body can be legally distinct, or not, from the operator(s) (3.6). The responsible
body can be public or private.

Note 3 to entry: The responsible body acts within a framework of law and governance (3.2) established by the
relevant authorities. It generally establishes the strategy, the specific policies (3.5) adapted to the characteristics
of its area of responsibility and the general organization of the relevant water utility (3.3).

Note  4  to entry:  The responsible body can operate the water utility directly with its own means through an
internal operator (direct or internal management or “in house”) or entrust one or several operators for the
operations (outsourced or contracted management).

[SOURCE: ISO 24513:2019, 3.1.8.3]


3.5
policy
intentions and direction of an organization as formally expressed by its top management

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ISO/FDIS 24540:2023(E)

3.6
operator
person or organization performing day-to-day processes and activities necessary for the provision of
the service
EXAMPLE 1 Where responsible body (3.4) and operator are not legally distinct: a technical department in a
municipality, a specific division of a regional authority.

EXAMPLE 2 Of legally distinct entities: a public organization, a private corporate company, a small contractor,
an non-governmental organization (NGO), a cooperative.

Note 1 to entry: There can be one or several operators for a given water utility (3.3), for example distinct operators
for installations’ operation, billing and recovering service. Their missions are determined by the responsible
body. An operator can subcontract some of its operations to other contractors, if allowed by the responsible body.

Note 2 to entry: The operator(s) can be legally distinct, or not, from the responsible body. They can be public or
private.

Note 3 to entry: In the context of this document, an “operator” is not a person employed within an organization to
operate a piece of equipment or process.

[SOURCE: ISO 24513:2019, 3.1.8.2]


3.7
owner
person, group of persons or organization that owns the infrastructure or asset
Note 1 to entry: The owner can be the responsible body (3.4) or other stakeholders.

4 Overview
Water is the cornerstone of sustainable development, being a driver for economic growth, social welfare
and survival of the environment. However, we are currently facing a crisis of water security in many
regions of the world, understanding water security as the availability of an acceptable quantity and
quality of water for health, livelihoods, ecosystems and production, coupled with an acceptable level of
water-related risks to people, environments and economies.[6]
The water sector is a complex one due to its intrinsic characteristics, such as being fundamental for
different sectors and development or having different stakeholders involved in its management.
Water utilities are the key actors for implementing the national water policies at the local level, thus
allowing the achievement of the human right to safe and affordable water and sanitation.
Current levels of water security are jeopardized by different pressures, such as scarcity, pollution,
unbalanced population growth, extreme weather events and climate change. Water utilities are facing
several challenges, including:
— ageing water infrastructure and a lack of investment in water assets to allow their maintenance and
renewal;
— water-related risks, such as extreme weather events (e.g. floods and droughts), water pollution and
appropriate levels of treatment or scarce availability of water resources;
— institutional factors, such as legislation at different levels, territorial reforms, fragmented
institutions, weak capacity at the local level, dispersion of competences, lack of policy coherence
among sectors related to water, weak transparency and accountability;
— environmental and socio-economic factors;
— uncontrollable disruptions, such as terrorist activities or cyberattacks.

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ISO/FDIS 24540:2023(E)

To be prepared for the future and enhance long term resilience, water utilities need to adapt to the
new global challenges the water sector is facing, combining technical and non-technical secure and
proven processes, methods and tools, and implementing a more inclusive and sustainable management,
engaging all relevant stakeholders.
To achieve these goals, corporate governance of water utilities should assess the range of political,
institutional and administrative rules, practices and processes (formal and informal) through which
decisions are taken and implemented, consulting stakeholders, as well as holding decision-makers
accountable for water management, in order to achieve effective, efficient and resilient water utilities
(adapted from the OECD definition of water governance[10]).
In order to have effective and efficient corporate governance, water utilities should develop and
implement a clear framework that covers all domains of the water utilities’ responsibilities, including
but not limited to:
a) level of service, which is defined according to customer expectations and is the expression of
political decisions;
b) water resources management strategy, providing decisions which should be taken to:
1) secure and conserve existing water resources identified by the relevant authority;
2) anticipate future needs from population change;
3) support development within the utility’s service area;
4) address the effects of climate change, anticipation, preparation and management of crises or
other events (drought, flooding, population migration);
c) asset management strategy covering the entire asset life cycle, including associated requirements
such as human resources and finance;
d) risk management, ensuring water-related risks are managed in a timely manner and at an
acceptable cost to ensure protection of the community, public health, the environment and the
financial viability of the organization, so that the next generation does not inherit liabilities and
costs.

5 Corporate governance for water utilities


Water is a key factor for sustainable growth and water utilities are key players for the fulfilment of the
human right to water and sanitation.[13]
Effective and efficient corporate governance of water utilities should be based on overarching
governance principles which should guide the key elements of the water utility’s governance framework,
such as the ones included in Table 1 (based on the OECD principles on water governance[10]).
Corporate governance should help to achieve well-managed water utilities, promoting long-term
objectives of environmental sustainability and enhancing social welfare. A multi-level and multi-
stakeholder approach, integrating the heterogeneous concerns of stakeholders, can improve the
management of water utilities.

Table 1 — Corporate governance principles for water utilities


Corporate governance principle Explanation
Clear definition of roles and Water utilities have different levels of government and water­related
responsibilities across all levels institutions involved, and it becomes necessary to clearly define and
of government and water-related distinguish their roles and responsibilities regarding policymaking,
institutions involved in water policy implementation, operational management and regulation, in
utilities. order to identify and address gaps, overlaps and conflicts of interest.

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ISO/FDIS 24540:2023(E)

Table 1 (continued)
Corporate governance principle Explanation
Foster co-ordination between the In order to avoid gaps, overlaps and conflicts of interest, effective
different levels of government and coordination at and across these actors involved in water utilities
water utilities. should be in place.
Encourage policy coherence across Water is impacted and has an impact on other sectors such as
sectors environment, health, energy, agriculture, industry, spatial planning
and land use. Therefore, cross-sectoral coordination becomes
fundamental between policies for water and these other sectors.
Enhance capability of water-related In order to achieve effective and efficient water utilities, it is important to
professionals and adapt the level of capacity of water-related professionals and responsible
responsible authorities involved authorities to meet the water challenges and duties required. Appropriate
in water utilities. capability reviews can also further promote motivation of water-related
professionals and responsible authorities to contribute to more effective
and efficient performance.
Promote information-sharing Producing and sharing consistent water-related information can be used
and education and awareness to guide, assess and improve water management, as sharing information
campaigns across all relevant is a necessary step for transparency. In addition, information, education
stakeholders involved in water and awareness campaigns focused on the external stakeholders of water
utilities. utilities, such as users or other sectors, should be a tool to engage these
actors in how to use water and contribute to the improvement of water
utilities and their services.
Encourage technological and non- Technological innovation allows water utilities to be more effective
technological innovation in water and efficient; but to improve the level of service to users, water utilities
utilities. should promote the adoption and implementation of innovative practices
across responsible authorities, levels of government and relevant stake­
holders, related, for example, to finance and economics, business models,
communication strategies or stakeholder engagement.
Promote multi-level and multi- A multi-level and multi-stakeholder approach seeking engagement and
stakeholder engagement. responsiveness should facilitate managing water utilities effectively and
efficiently, considering all stakeholders in the decision-making process
and aiming for consensus (see Annex A).
Encourage equity and Water utilities should encourage frameworks and practices that allow for
inclusiveness across water managing trade-offs across different uses, users and areas, promoting
users. equity and inclusiveness.
Foster integrity and transparency Water utilities should account for their activities and tasks, accept their
practices for greater accountability responsibilities regarding these activities and tasks and disclose results
and trust in decision-making and in a transparent way, in order to enhance trust and engagement of
water utilities. stakeholders in their corporate governance. In this sense, transparency,
understood as an open, comprehensive and understandable presentation
of information addressed to a targeted audience, and integrity, related to
moral and ethical principles and values, should be mainstreamed in the
water utility.
Promote regular monitoring and Continuous monitoring and evaluation should allow for identifying the
evaluation of the corporate need for improvement of the corporate governance scheme and adjusting
governance scheme. it when needed. Evaluating corporate governance can strengthen the ac­
countability of decision-makers and contribute to identifying challenges
and anticipating and managing some risks, as well as helping to map the
views of different stakeholders. It can contribute to overall good govern­
ance as it provides information that can improve some governance gaps.
Encourage sustainability and Sustainability of water utilities, in terms of operational and financial
resilience of water utilities. aspects, should ensure an appropriate level of services for current and
future generations. In addition, water utilities should become resilient in
order to deal with possible risks and challenges, such as natural disasters
or terrorist attacks (see ISO 24518 and ISO/TS 24520).

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ISO/FDIS 24540:2023(E)

6 Governance framework

6.1 General
The governance framework is directed to water utilities, including all relevant stakeholders, and should
consider both “internal governance” (interrelationships) and the links with external stakeholders.
Achieving effective and efficient corporate governance for water utilities requires defining a framework
that considers the following dimensions (based on Reference [9]):
a) Define the vision, mission and strategic objectives of the corporate governance of the water utility.
b) Identify corporate governance gaps.
c) Establish the decision-making process.
d) Map and define the allocation of roles and responsibilities.
e) Build a stakeholder map and promote stakeholder engagement.
f) Encourage the development of capacity building and sharing of information.
g) Adopt monitoring and evaluation.

6.2 Define the vision, mission and strategic objectives of corporate


Implementing effective and efficient corporate governance of water utilities requires governance of
the water utility defining the ultimate line of decision-making, the objectives of corporate governance
and the expected use of inputs, i.e. defining the strategic planning process, which should be adaptive
enough to adapt to changes and new challenges.
Strategic planning should define the ultimate reasons driving the process and include an external
evaluation, e.g. political, economic, social, technological, environmental and legal trends, as well as an
internal one.
The mission, the values, the vision and the utility’s wide strategies should be drafted, and long-term
strategic objectives defined and finally translated into goals and measures. The process should be
monitored and evaluated.

6.3 Identify governance gaps


In order to achieve sound water management, water utilities should identify and address several
corporate governance “gaps” (based on Reference [9]):
— Policy gap: including institutional fragmentation of water policy across multiple actors, no clear
allocation of roles and responsibilities, no coordination mechanisms and lack of effective policy
coherence across sectors.
— Administrative gap: related to the mismatch across administrative and hydrological boundaries to
manage water resources and supply water services at the relevant scale.
— Funding gap: regarding unstable or insufficient resource allocation and inconsistent financial
management.
— Capacity gap: including gaps in knowledge, human capital, technology and other capabilities to
design and achieve sustainable, efficient and effective water utilities.
— Information gap: regarding insufficient or incomplete water information to support decision-
making.

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ISO/FDIS 24540:2023(E)

— Accountability gap: related to ineffective stakeholder engagement for inclusive and transparent
decision-making, and lack of monitoring and evaluation mechanisms.
— Objective gap: lack of clear objectives to enhance synergies and complementarities at the right scale.

6.4 Establish decision-making process


A step-by-step decision-making process should be established to organize relevant information and
define alternatives.
The process should identify a decision, gather information, assess alternative resolutions and weigh
the evidence to choose between the alternatives, implement the chosen alternative and review the
decisions and their consequences.
Effective and efficient corporate governance requires a decision-making process aiming for consensus
(see Annex A), seeking to generate widespread levels of participation and agreement. Such a decision-
making process should be inclusive, participatory, collaborative, agreement-seeking and cooperative.

6.5 Mapping and definition of roles and responsibilities


The allocation of roles and responsibilities in the water utilities is dispersed across different levels of
government and stakeholders, involving different ministries, public agencies and departments, as well
as other actors as service providers.
It should be identified who does what in terms of strategic planning, economic and environmental
regulation, information, monitoring and evaluation, at which level of government and how such
responsibilities are defined. In addition, problems of overlapping should also be identified given that
unclear, overlapping and fragmented roles and responsibilities across policy areas and between levels
of government can be a major obstacle to effective water management.[9]
Mapping roles and responsibilities among stakeholders involved in water utilities should be the first
step to clarifying the allocation of these roles and responsibilities among actors in order to achieve
effective, efficient and inclusive water utilities.

6.6 Stakeholder engagement for inclusive water utilities


Given the fragmentation of the water sector, the impacts of and on other sectors and the wide variety
of actors involved in water utilities, stakeholder engagement becomes key for the coordination of these
actors and their interests. This approach promotes transparency and accountability of water utilities,
aligns the water services with stakeholder needs and, therefore, increases trust and confidence.
NOTE It is important to differentiate between “public participation” and “stakeholder engagement”.
According to Smith[12], public participation encompasses a group of procedures designed to consult, involve and
inform the public to allow those affected by a decision to have an input into that decision. Stakeholder engagement
has been defined by the OECD as the process through which individuals, groups and organizations have the
opportunity to take part in the decision-making that will affect them, or in which they have an interest,[10]
meaning it opens a broader perspective including different actors, not only the public (essentially civil society
and customers).

Stakeholder engagement mechanisms should be tailored to relevant contexts, stakeholder categories,


policy goals and local needs. However, setting up an enabling environment for result-oriented
stakeholder engagement should follow some general principles,[10] including:
— inclusiveness and equity;
— clarity of goals, transparency and accountability;
— capacity and information;
— efficiency and effectiveness;

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ISO/FDIS 24540:2023(E)

— institutionalization, structuring and integration;


— adaptiveness.

6.7 Encourage the development of capacity building and sharing of information


Fostering capacity building should be an essential part of effective and efficient corporate water
governance of water utilities, since limited capacity and expertise of internal actors of water utilities
can hinder the implementation of water policies, which can lead to a non-efficient provision of the water
services.
Information, education, awareness and communication programmes should be an integral part of the
strategic planning of water utilities, being accurate, trustworthy and accessible. A lack of information
can affect decision-making processes among internal actors of water utilities and trigger a lack of trust
and confidence among other stakeholders related to water utilities.

6.8 Adoption of monitoring and evaluation


Corporate governance of water utilities should be regularly monitored and assessed, and adjusted and
improved accordingly, given that without proper monitoring and evaluation, corporate governance
cannot be improved.
Monitoring and evaluation should concern both the process (considering its different stages) and
the outcomes of corporate governance of water utilities, allowing for a comprehensive picture of the
process and assessing its effectiveness.
The results of the evaluation of the corporate governance should be reported to the stakeholders in a
transparent way, to build trust and support.

7 Influencing factors

7.1 General
There are many influencing factors that can impact corporate governance of a water utility and which
should be considered when defining it, including:
— legal aspects (by lawmakers): laws, regulations, policy;
— guidelines (by professional associations): national and international standards, professional
associations;
— business models;
— users: levels of service (existing versus expected), tariffs, sustainability, industries;
— other stakeholders: government entities, regulators, funding agencies, media, NGOs, other utilities;
— overall system operation: planning (long and short term), construction, operations (including crisis,
technology, people), capacity.

7.2 Legal aspects

7.2.1 General

The list of applicable legal requirements should be identified and their impacts or requirements for the
water service well understood. Those usually include legislative framework (see 7.2.2) and water policy
(see 7.2.3).

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7.2.2 Legislative framework

The legislative framework usually includes supranational, national, state, regional and municipal levels,
covering different aspects with an impact on the provision of water service, including, but not limited
to, public health, environmental protection, right of way for public infrastructure, public procurement,
contracting, labour laws, agriculture and industry.

7.2.3 Water policy

Where a public water policy is developed, it aims at sustainable water management, addressing in a
holistic approach the following aspects:
— water resource protection;
— water quality management and pollution control;
— water rights and allocation among users;
— water supply, sanitation and stormwater services;
— water pricing and economic instruments;
— operations and maintenance of water management systems;
— stakeholder engagement and decision-making;
— environmental regulation, planning, biodiversity conservation and protected area management.

7.3 Guidelines
Beyond legislation and policies, there are also numerous guidelines and standards that are consolidated
and updated by professional associations.
While water services are pursuing similar goals everywhere, contexts and challenges can be specific.
Hence, a pragmatic application of guidelines and standards is preferred.

7.4 Business model


In most cases, the legal framework defines that the infrastructure assets belong to a public body
(national, regional and local-level authority). The asset owner is in charge of organizing the water
utility within the legal framework.
The legal status of the operator can vary depending on the legal framework and on political choices.
To achieve sustainable performance of water services, the appropriate model can vary over the time.
Hence the model should be revised periodically and updated if required.
The most common business models adopted for water utilities are presented in Table 2. For all of them,
regulation is needed to promote the service efficiency and set the quality standards and performance
requirements.
In cases where the service is provided by a public operator, the services of private third parties are
generally ruled by public procurement or contracting regulations. Apart from procurement of goods
and services (e.g. consultancy), other options of PPP can be considered.
In cases where the service is provided by a private operator, the use and selection of third-party
partners can be usually determined by the local responsible body in the respect of local regulation.
The private operator is accountable to the responsible body and/or regulator, depending on the local
context.

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Table 2 — Most common business models adopted by water utilities


Status of water Infrastructure Management structure of Possible attributes
utility ownership the utility
Public management
Public Public authority Department of water — 100 % public ownership and
administration supply is managed by management
department the public authority
— Possible integration with other public
services, such as power

— Absence of dedicated budget

— Coordination required with several


departments

— The regulation can be ensured by an


independent regulatory body
Publicly owned Public authority Board of representatives — Financial gains dedicated to water
company of the municipality service, with board of directors and
served performance objectives adopted
Shareholders are — Monopolistic activity without
representatives of the competition
municipalities served
(municipalities or — Self-determined management and
association of performance standards
municipalities)
— Subject to political interference

— The regulation can be ensured by an


independent regulatory body
Private management under public-private partnership (PPP)
Private operator Public authority Representatives of public — 100 % public infrastructure
with concession authorities or mixed ownership
contract representation of
public and private — The responsible body delegates the
majority of risks and operational
responsibilities to an operator

— Concession contract is generally


signed after a call for tender but some
exceptions exist

— The concession contract defines the


level of service required and the tariff
structure

— The asset management roles and


responsibilities are set by the contract

— Reporting and transparency


mechanisms set by contract

— The competition is part of the


regulation mechanism
Joint venture with Mix of public Mixed representation — Time-constrained operational
private operator authority and contracts
private entity
— The regulation can be ensured by an
independent regulatory body

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Table 2 (continued)
Status of water Infrastructure Management structure of Possible attributes
utility ownership the utility
Lease operational Public authority Representatives of public — Efficiency focused
contract with authorities or mixed
private operator representation of — Time-limited operational contracts
public and private
— The asset management is shared
between the private operator and the
public authority

— The public authority delegates part of


its responsibilities to the operator

— Owner-led decisions for control


Privatization
Privately owned Private entity Board of shareholders of — Operational efficiency focused
company private company
— Mechanisms generally allow the
Assets are permanently regulatory bodies to verify and ensure
transferred or sold to that the sale of private shares will not
private companies impact the control by the responsible
body

— The regulation is usually ensured by


an independent regulatory body

7.5 Users
Primarily, users receive water services and are subsequently charged a tariff for the service, either
directly via billing or indirectly via taxes. Therefore, it is essential to understand user expectations in
terms of:
— level of service: existing versus expected;
— price of the water services (affordability, i.e. how much they can pay for the service).
Once user expectations are understood, the water utility can communicate its commitment to achieve
the objectives of the services. The water utility should also regularly inform users about strategy and
service quality, as well as the availability of the service, such as sustainability of resources and assets.
See ISO 24510 for additional information.
The water utility should also pay attention to the diversity of their users and to any impacts on
their level of service, such as large industry which can have differing service requirements, e.g. high
consumption or non-domestic wastewater generation. This can influence the strategic objectives as
well as the operational management.

7.6 Other stakeholders


In addition to users, the water utility needs to map and measure other stakeholders’ expectations,
including but not limited to:
— funding agencies;
— government entities, including regulators;
— other utilities;
— NGOs;
— media.

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7.7 Overall system operation


The system operation results in the proper organization and governance of the operations and requires
the minimum key aspects given in Table 3 to be considered.

Table 3 — Key aspects for system operation


Key aspects Description
Planning (master or long and Defining long-term strategic objectives for the service is essential to ensure its
short term) sustainability (see Clause 6).
Operations (including crisis) As ensuring continuity is mandatory, operations should be organized in such a
way that they enable continuous availability of staff and assets.
Construction works Managing a water service requires construction activities to build new assets
or perform maintenance and replacement works on existing assets, to ensure
the sustainability and continuity of the service. It is essential to define the
policy and organization structures to enable such works to happen in a timely
fashion following relevant standards. Coordination with other stakeholders,
such as public administration and other utilities, is key. This can involve
consideration of the outsourcing of activities.
People (capacity) Ensuring capacity building should be a priority in the management of water
utilities (see Clause 6).
Technologies Water management involves technologies and therefore related skills are
essential. The operator of water services should have a policy related to
technologies, where a small operator may rely more on vendors or
consultancy, a large operator may invest in research and development (R&D)
and develop its own technologies.
Innovation Innovation is key to improving efficiency. It should not only be linked to
technological innovation (see Clause 5) but also to soft skills (including
sociology and cultural change).

8 Implementation

8.1 Purpose of water services


The purpose of drinking water supply services is to provide safe and affordable drinking water to users
with the aim of contributing to the improvement of public health and the living environment and to the
protection and preservation of water resources in coordination with other water users.
The purpose of wastewater services is to organize collection and treatment of wastewater produced by
domestic activities, before being discharged into water bodies. Some services may also treat industrial
wastewater mixed with domestic wastewater. The aim is to protect public health from water diseases
and to protect the environment, as well as allowing the use of water bodies for different purposes:
drinking water supply, recreational activities, agriculture and industrial activities.
The purpose of stormwater services is to manage the flow of stormwater, both pluvial and fluvial, and
to prevent damage to property and the environment. The stormwater flows retained can be used later
for other purposes.
All these services should be sustainable in order to be secured for future generation.

8.2 Objectives of water services


The objectives of water services are as follows:
— Supply of safe water for every user.
— Treatment of wastewater prior to discharge.

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— Continuous supply of service.


— Compliance with quality standards.
— Affordability, with mechanisms that provide affordable and equitable provision of water to all
consumers.
Cost recovery is a general principle for water services.
NOTE Depending on local conditions, wastewater is collected in a sewer and treated collectively in a
wastewater treatment plant (WWTP) or treated continuously onsite. Stormwater can be transported to
wastewater treatment plants for treatment or held in stormwater ponds (wetlands) for biological treatment, or
simply diverted to surface water systems.

8.3 Viewpoint of system to ensure publicity

8.3.1 General

Water utilities should build their corporate governance, monitoring system, corporate social
responsibility (CSR) promotion system and internal control system from the viewpoints in this
subclause in order to fulfil their management philosophy and their role and responsibility as a water
utility.

8.3.2 Reliable achievement of required level

Water utilities should establish their own monitoring system with the aim of achieving the required
service levels.

8.3.3 Implementation of corporate social responsibility

Water utilities should regard CSR as an important objective of management that helps ensure a positive
contribution from the businesses to the community that it serves.

8.3.4 Enhancement of user service

Establish a customer service quality assessment and monitoring system to enhance services and
improve customer satisfaction.

8.3.5 Effective governance system and internal control system

In order to gain the trust of customers, water utilities should establish effective, efficient and
transparent governance systems and internal control systems.

8.3.6 Response in the event of a disaster

Water utilities are key stakeholders for sustainable development of societies. As such, they should
design measures and action plans to respond promptly and adequately to cases of natural disaster.
Disasters can include the effects of climate change or the impacts of terrorism (cyber and otherwise)
in terms of incapacitating or destroying infrastructural capacity or destroying operational control and
management.

8.3.7 United Nations Sustainable Development Goals

Most of the 17 UN SDGs are water related and can be taken into consideration locally by water services
to set specific targets relating to water saving, water reuse or water rights.

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8.4 Organizational functions

8.4.1 General

The principles of good corporate governance include legitimacy, transparency, accountability and
inclusiveness, as indicated in Clause 5. The essential functions of governance should ensure that:
— all roles and responsibilities are covered, managed and integrated;
— decisions are explicitly taken and implemented;
— stakeholders can articulate their interests and have their concerns considered;
— decision-makers are held accountable.
An illustration of roles and functions essential to corporate governance is given in Figure 1.
Subclauses 8.4.1 to 8.4.4 describe the essential organizational functions corresponding to the functions
identified in the Figure 1 and to the majority of cases.

Figure 1 — Illustration of roles and functions essential to corporate governance

8.4.2 Executive board, board of directors or municipal council committee

The executive board, board of directors or municipal council committee (where applicable) is
responsible for:
— the recruitment, supervision, retention, evaluation and compensation of the chief executive or
director general;
— providing strategic direction, including vision, mission and goals;
— the establishment and monitoring of an overarching governance system for the organization;
— monitoring and control through appointment of the auditor;
— protecting the organization’s assets and investment.

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These responsibilities are dependent on the public, private or political nature of the organization.

8.4.3 Management committee

A management committee comprising the executives and heads of major departments should be
established to speed up decision-making and streamline business operations.
The executive functions should be transparent, accountable and inclusive. They should be deliberate,
cover all important business and operational matters and oversee the execution of business and
operational decisions and matters.
The following three organizational functions and related positions can be required:
— in-house executives responsible for business execution, internal control and administration, along
with monitoring and assessment (e.g. chief executive or director general);
— in-house executives responsible for risk management, service-level monitoring and CSR [e.g.
assistant chief executive officer (CEO) or deputy director general];
— in-house executives and management responsible for the operational functions of the organization
such as water supply, wastewater collection or stormwater management (e.g. director or manager
of the designated service function).
In addition, multiple outside executive functions are likely to exist to reinforce governance by utilizing
expertise and knowledge outside the water utilities, ensuring transparency in the decision-making
process and supervision of management.

8.4.4 Auditing

The auditing function should be established to monitor the state of governance and operational status of
the organization in accordance with audit policies and implementation plans established. This function
shall be transparent and public to ensure stakeholder confidence.
The auditing function can be internal or external, and audits the operational and financial performance
of the service. Ideally, where the essential function is internal, there should be a third-party auditing
function.

8.5 Monitoring the implementation

8.5.1 Overview

Water supply and wastewater system are essential lifelines and service is provided under monopoly.
Thus, monitoring should be carried out as appropriate to maintain a safe service level and ensure
business sustainability.

8.5.2 Monitoring body

In conducting the monitoring, from the viewpoint of encouraging independent and autonomous business
management, the water utilities should monitor themselves as a basis to confirm the achievement of the
required level. Auditing can also be done by external organizations. A monitoring scheme is given in
Figure 2.

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Figure 2 — Monitoring

9 Monitoring or assessment of corporate governance

9.1 General
There cannot be a single, uniform policy response to water challenges worldwide, given the diversity
of situations within and across countries in terms of legal and institutional frameworks, cultural
practices, and climatic, geographic and economic conditions at the origin.
Water utilities should develop performance indicators specific to their needs for assessing and
monitoring their corporate governance.
Such performance indicator targets, along with the monitoring frequency, should be set and clearly
defined by the relevant decision-maker within the water utility.
Furthermore, independent auditing and reporting of the results can be disclosed to stakeholders in a
transparent and understandable way.

9.2 Assessing the corporate governance of water utilities

9.2.1 General

The monitoring requirements should be designed to improve the operations and corporate governance
of the water utility. They should help to identify the gaps and fields for improvement of the water utility
in a specific context.
Effective and efficient corporate governance performance indicators for water utilities should cover
different aspects, including the key areas in 9.2.2 to 9.2.7.

9.2.2 Vision, mission and strategic objectives

Check if the vision, mission and strategic objectives of the water utility’s corporate governance are set
according to:
a) identified needs and expectations of the customers or stakeholders;
b) objectives and overall ownership framework, such as level of service, service objective, tariff
settings, asset management, sustainability, broader societal objectives, SDGs and CSR.

9.2.3 Basic organizational decisions

Identify corporate governance gaps and key coordination mechanisms through:


a) checking how all roles and responsibilities have been defined and communicated;

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b) checking if the decision of the organization model of the water utility has been decided with the
appropriate transparency;
c) checking if all necessary connections have been established with external entities at local, regional
and national levels.

9.2.4 Preparation of day-to-day activities

Establish the decision-making process by:


a) checking how the list of decisions to be made is elaborated;
b) checking how this list of decisions is regularly updated;
c) checking how the decision-making process has been communicated within the water utility.

9.2.5 Responsibilities matrix — Who does what

Map and define the following:


a) The allocation of roles and responsibilities according to the following three levels:
1) the responsible body decides on the expected levels of services, the means to allocate these
(e.g. infrastructure, human resources, funding) and strategic organization (e.g. in-house, public
management, PPP);
2) the owner (if different from the responsible body) is in charge of organizing the services
according to objectives and guidelines set by the responsible body;
3) the operator of the water utility should apply what is decided by the responsible body according
to the organization put in place.
b) The responsibilities for each role, covering internal matters and external relationships with:
1) appropriate industrial networks, e.g. international or national;
2) national, regional and local administrative bodies;
3) customers in urban, industrial and rural areas;
4) suppliers;
5) other public domain users.

9.2.6 Stakeholder mapping and engagement

The stakeholder management by a water utility in its operating environment is assessed by:
a) checking how stakeholders are identified;
b) checking how stakeholder engagements are listed and taken into account;
c) checking how stakeholders are involved (e.g. enquiries, questionnaires, complaints and requests
registered).

9.2.7 Outcomes of corporate governance of water utilities

Identification of the expected outcomes builds trust and support within the water utility and ensures
that:
a) the vision and objectives set by the responsible body, with performance indicators, are reported to
stakeholders;

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b) levels of service are reported to the responsible body and to stakeholders;


c) achievements of corporate and social responsibility are monitored and reported to stakeholders;
d) overall compliance of the water utility is reported to stakeholders;
e) continuous improvement mechanisms are implemented, evaluated and regularly reviewed.
Annex C includes a list of specific performance indicators that can be considered to monitor and assess
the corporate governance of water utilities.

10 Recommendations of corporate governance

10.1 General
This clause lists typical operational recommendations to achieve good corporate governance.
The recommendations can be used as a checklist for ensuring good corporate governance, taking
into account the national, regional and local political, institutional and administrative context. The
recommendations should be adapted to local places and changing circumstances.
The first recommendations focus on the cooperation and relationship between owner, responsible body
and operator of the water utility. The remaining recommendations are based on user expectations,
stakeholder engagement (see Annex B) and operational performance indicators.
A schematic illustration of the relationship between the water utilities, the responsible body, the
infrastructure owner and the responsible authorities is given in Figure 3.

Figure 3 — General scheme illustrating the ecosystem of stakeholders

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10.2 Cooperation and relationship between key players

10.2.1 Ownership

10.2.1.1 General

The owner may have several roles, e.g. ownership, authority, user and supplier. The owner organizes
the running of the water utility according to the different business models presented in Table 2.

10.2.1.2 Recommendation 1: Owner strategy

It is recommended that the owner draws up a strategy that summarizes its approach to the rationale,
objectives and overall framework of water services, e.g. level of service, service objective, tariff settings,
asset management, sustainability, broader societal objectives, SDGs and CSR.
This strategy should be made publicly available and become the basis for the monitoring of the water
utility by the owner and should be continually developed and updated.

10.2.1.3 Recommendation 2: Roles of the owner

It is recommended that the owner’s roles and responsibilities are clearly defined, and that actions
planned and communications between the owner and the water utility are elaborated.
To ensure clear roles and avoid conflicts of interest within the organization, different matters relating
to the infrastructure ownership of the water utility are typically addressed in different departments,
e.g. administrative departments that exercise authority and departments that are in a customer/
supplier relationship with the water utility.
The overall policy-related service levels and objectives should, as a rule, be addressed by sector
authority plans (e.g. water supply plans, wastewater plans, stormwater plans).

10.2.1.4 Recommendation 3: Interplay and communication between owner and water utility

It is recommended that a set of guidelines is drawn up for communication and interplay in the following
cases:
— between the owner and the water utilities, based on the division of responsibilities between owner,
responsible body and operator;
— between the responsible authority and the water utilities, covering the operation and authority-
related areas;
— between the owner and the water utilities, if the owner also is a customer, consumer and /or supplier.
In addition, the responsible body of the water utility should define specific goals for the strategic
development of the water utility, based on a reconciliation of expectations with the owner strategy.

10.2.2 Responsible body

10.2.2.1 General

According to the local organization, the responsible body should act upon its responsibility according
to Table 1.

10.2.2.2 Recommendation 4: Composition of the executive board or board of directors

It is recommended that the chair of the executive board or board of directors (board) takes the initiative
to draw up a comprehensive overview of the board’s expertise requirements and establishes a dialogue
with the owner if there is a need for supplementary competencies on the board.

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The board should include a balance of gender and demonstrate suitable diversity and inclusiveness
consistent with the expectations and norms of the local community.
It is recommended that clear information is provided on any dependencies that each board member or
management committee member has and that the information is made available to the general public
on the water utility website.
It is recommended that, at least once every two years, the board conducts an external evaluation in
order to ensure good cooperation and focus.
It is recommended that transparency is created regarding payments that are made to the board, e.g. by
means of a publicly available remuneration policy.
It is recommended that the board implement rules of procedure regarding their responsibilities,
including planning and expectation of monitoring reporting, audits and evaluation.

10.2.3 Operator of water utility

10.2.3.1 General

The board carries out the overall and strategic management of the water utility. The management
committee carries out the general management and operation of the water utility.

10.2.3.2 Recommendation 5: interplay between board and management committee

It is recommended that, at least once a year, the board evaluates the work and results of the management
committee in accordance with pre-established criteria.
It is recommended that management procedures for the role and responsibility of the management
committee are elaborated and approved by the board.
It is recommended that the board and the management committee continually discuss the most
significant risks and developments within the most important risk areas, including measures and
action plans.
It is recommended that the board and the management committee ensure that external audits regarding
economy, quality and environmental performance, customer or consumer satisfaction and stakeholder
communication are performed in a timely manner.
It is recommended that the board and the management committee draft the mission, vision and global
strategies of the water utility and define the long-term strategic objectives and goals.

10.3 Openness and transparency

10.3.1 General

Users’ trust and engagement in operation and corporate governance of the water utilities are
essential. Openness and transparency are key to building confidence and ensuring the inclusiveness of
stakeholders.

10.3.2 Recommendation 6: openness and transparency

It is recommended that the water utility provides a report of good corporate governance every year
and publishes this account, e.g. in conjunction with the submission of their annual reports or on their
website.
It is recommended that the board includes in the management report the most significant strategic and
business risks and the company’s risk management strategies.

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It is recommended that the water utility website, as a minimum, ensures access to the most recent
annual report, the owner strategy, the water utility strategy and the achieved performance related to
these strategies.
It is recommended that the water utility makes publicly available its work regarding environmental and
social aspects, sustainability, code of conduct, risks of corruption, social responsibility and stakeholder
engagement.

10.4 Stakeholder engagement

10.4.1 General

Stakeholder engagement is essential in order to develop an effective and efficient water utility.
Proper internal and external communication is needed to achieve confidence and engagement of all
stakeholders. Stakeholder engagement gives key stakeholders the opportunity to take part in and
contribute to the decision-making process.

10.4.2 Recommendation 7: Stakeholder engagement

It is recommended that roles and responsibilities among stakeholders are mapped and continuously
updated.
It is recommended that multi-level and multi-stakeholder engagement are promoted, implemented and
reported to the board.
It is recommended that a communication plan is established for how to inform all internal and external
stakeholders of governance, service-level expectation and achievement.
It is recommended that the water utility establishes a customer service quality assessment and
monitoring system to enhance services and improve customer service.
It is recommended that the water utility reports yearly on inclusiveness and equity.

10.5 Monitoring of operational improvement

10.5.1 General

Good corporate governance needs to be adaptive to the current operating environment; therefore,
there should be a suitable mechanism within the framework to facilitate continuous improvement.
Water utilities should periodically reflect on the level of service requirements, service achievements,
adequate skills, capacity and asset management and make appropriate improvements.

10.5.2 Recommendation 8: Operations

It is recommended that the water utility develops specific performance indicators and makes the
performance achievement publicly available.
Specific performance indicators should be monitored and reported on annually and may include:
— annual sustainable and resilience indicators;
— CSR;
— capacity-building activities;
— technological and non-technological innovation;
— crisis management activities, including water utility design measures and action plans in response
to natural disasters or terror situations.

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Annex A
(informative)

Consensus-oriented decision-making process

A consensus-oriented decision-making process should be:


— inclusive, involving all actors who have a stake in the water utility;
— participatory, allowing all actors involved to really contribute to the discussions;
— collaborative, allowing for constructing proposals with input from all stakeholders;
— agreement-seeking, trying to generate as much agreement as possible;
— cooperative, looking for the general interest of the whole group.

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Annex B
(informative)

Stakeholder engagement

Design and implementation of stakeholder engagement requires defining an analytical framework


which should encompass the following components:[10]
a) detecting long-term structural and conjectural drivers that push for more inclusive water utilities;
b) mapping stakeholders (see Figure B.1) in terms of their roles, responsibilities, influence,
motivations, level of connectivity and scale, paying attention not only to traditional water actors
but also to new players and under-represented groups;
c) identifying and diagnosing obstacles which impede the effective implementation of engagement
processes;
d) identifying mechanisms that are fit for purpose;
e) fostering evaluation to point out areas for improvement and trade-offs needed, as well as the costs
and benefits of stakeholder engagement.
Stakeholder engagement mechanisms should be tailored to contexts, stakeholder categories, policy
goals and local needs.

Figure B.1 — Stakeholder engagement mapping

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Annex C
(informative)

Specific performance indicator examples

C.1 General
This annex gives an example of performance indicators to assess the corporate governance of water
utilities, based on the World Bank’s Template for assessing the governance of public water supply and
sanitation (WSS) service providers[7].

C.2 Mapping water supply and sanitation service providers and their
environment

C.2.1 Overall policy environment:

a) responsibility for the WSS service and market structure;


b) unbundling of key functions;
c) service standards;
d) cost recovery and pricing;
e) autonomy of WSS service providers;
f) water resources management and environmental protection;
g) substitutes to the piped WSS service.

C.2.2 Functioning of WSS service providers:

a) mandate of WSS service providers;


b) incorporation and shareholding;
c) management teams;
d) staff;
e) training;
f) financial management;
g) corporate culture;
h) reporting.

C.3 How are the key functions of the WSS service performed?

C.3.1 Development of the WSS infrastructure:

a) mandate of WSS infrastructure developers;


b) demand assessments;

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c) infrastructure development plans;


d) financing applications;
e) project designs,
f) procurement;
g) project implementation procedures;
h) suspected corruption associated with WSS infrastructure development.

C.3.2 Operation of the WSS service:

a) mandate of WSS service operators;


b) technical operations;
c) commercial operations and customer relations;
d) affordability;
e) service to the poor;
f) PPPs;
g) suspected corruption associated with WSS service provision.

C.3.3 Financing of the WSS infrastructure development:

a) mandate of the financiers of the WSS infrastructure development;


b) central and regional government financing mechanisms;
c) government-owned lending institutions;
d) local capital markets;
e) international (and bilateral) financing institutions.

C.3.4 Economic regulation of the WSS service

a) mandate of the regulator;


b) operations of the regulator;
c) tariff-setting principles;
d) tariff resetting;
e) performance monitoring;
f) service to the poor.

C.3.5 In addition, the following issues should be described:

a) best available technology to fulfil the requirements set for the utility;
b) polluter pays principle;
c) data procurement well organized and protected;
d) public awareness;

© ISO 2023 – All rights reserved  25



ISO/FDIS 24540:2023(E)

e) data security or protection;


f) SDG achievement, specific objectives, connectivity;
g) climate change engagement;
h) resilience.

26  © ISO 2023 – All rights reserved



ISO/FDIS 24540:2023(E)

Bibliography

[1] ISO 24510, Activities relating to drinking water and wastewater services — Guidelines for the
assessment and for the improvement of the service to users
[2] ISO 24518, Activities relating to drinking water and wastewater services — Crisis management of
water utilities
[3] ISO/TS 24520, Service activities relating to drinking water supply systems and wastewater systems
— Crisis management — Good practice for technical aspects
[4] ISO/IEC 38500:2015, Information technology — Governance of IT for the organization
[5] Cadbury, A. (Sir) Report of the Committee on the Financial Aspects of Corporate Governance.
London: The Committee and Gee, 1992. ISBN 0-85258-913-1
[6] Grey, D., Sadoff, C.W. Sink or Swim? Water Security for Growth and Development. Water Policy.
2007, 9, 545–571
[7] Locussol, A., van Ginneken, M. Template for assessing the governance of public water supply and
sanitation service providers. Washington, DC: World Bank, 2010
[8] OECD. OECD Principles of Corporate Governance. Paris: OECD Publishing, 1999
[9] OECD. Water Governance in OECD Countries: A Multi-Level Approach. OECD Studies on Water.
Paris: OECD Publishing, 2011
[10] OECD. The OECD Principles on Water Governance. OECD Studies on Water, OECD Publishing, Paris,
2015. Available at: https://​w ww​.oecd​.org/​cfe/​regionaldevelopment/​OECD​-Principles​-on​-Water​
-Governance​-en​.pdf
[11] OECD. Implementing the OECD Principles on Water Governance: Indicator Framework and Evolving
Practices, OECD Studies on Water, Paris: OECD Publishing, 2018
[12] Smith, D.H. Synanthrometrics: On progress in the development of a general theory of voluntary
action and citizen participation. In: Smith, D.H., Van Til, J. (Eds.) International perspectives on
voluntary action research. Washington, DC: University Press of America, 1983, pp. 80–94
[13] UNESCO World Water Assessment Programme. The United Nations World Water Development
Report 4: Managing Water Under Uncertainty and Risk. UNESCO, 2012

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ISO/FDIS 24540:2023(E)

ICS 03.080.30; 13.060.30; 13.060.20


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© ISO 2023 – All rights reserved 

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