Iso Fdis 24540
Iso Fdis 24540
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
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
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
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committee has been established has the right to be represented on that committee. International
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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).
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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.
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.
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
[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.
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;
— 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.
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).
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.
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.
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.
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).
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.
— 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.
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.
7.2.1 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).
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.
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.
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
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.
8 Implementation
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.
Water utilities should establish their own monitoring system with the aim of achieving the required
service levels.
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.
Establish a customer service quality assessment and monitoring system to enhance services and
improve customer satisfaction.
In order to gain the trust of customers, water utilities should establish effective, efficient and
transparent governance systems and internal control systems.
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.
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.
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.
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.
These responsibilities are dependent on the public, private or political nature of the organization.
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.
8.5.1 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.
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.
Figure 2 — Monitoring
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.
9.2.1 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.
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.
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.
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).
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;
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.
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.
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.
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.
10.2.2.1 General
According to the local organization, the responsible body should act upon its responsibility according
to Table 1.
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.
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.
10.2.3.1 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.
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.
10.3.1 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.
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.
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.
10.4.1 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.
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.
10.5.1 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.
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.
Annex A
(informative)
Annex B
(informative)
Stakeholder engagement
Annex C
(informative)
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.3 How are the key functions of the WSS service performed?
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;
Bibliography
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