Catalytic Communities and Commercial Value: Impact at Speed
What is a ‘catalytic community’ and how could it help with water challenges in the Colorado River Basin? Will Sarni explores how the concept is emerging as complementary to traditional initiatives.
Water scarcity threatens the economic stability and quality of life for millions of people and impacts our ecosystems, highlighting the urgent need for Colorado River Basin collective action. Without immediate action, the risk of water shortages and the subsequent impact on agriculture, energy, urban water supplies and ecosystems will only escalate. Addressing this crisis requires collective action and innovative solutions that are enduring, where all stakeholders are unified and working together with a collective purpose.
“Water, United” was launched early this year. It focuses on the Colorado River Basin and has positively impacted how stakeholders think about collaborating to solve environmental and social challenges through creating catalytic communities.
To put catalytic communities in perspective, one needs to examine the role of collective action in water stewardship. Collective action has been central to addressing corporate water risks for decades. Collective action has delivered on its vision to facilitate cooperation and partnerships between the private sector, non-governmental organizations (NGOs), and other stakeholders.
Notable platforms include the CEO Water Mandate and the Beverage Industry Environmental Roundtable (BIER) programs. However, collective action initiatives are challenged to deliver on their full potential due to issues such as disparity in alignment and funding among stakeholders and a tendency for individual stakeholders to “go it alone.”
Due to the challenges facing collective action initiatives, catalytic communities have emerged as complementary, if not alternative, to traditional initiatives. Pursuing catalytic communities as a strategy may provide insights that can be integrated into current collective action initiatives.
One of the more important aspects of catalytic communities is the impact of commercial relationships between the stakeholders. It is increasingly clear that these commercial agreements provide alignment and speed to tackling “wicked water problems.”
The commercial relationships integrated into catalytic communities can be compared to how “catalytic capital” can jump-start longer-term strategies to address environmental and social issues.
Catalytic capital is crucial in fostering financial sustainability and scaling impact within communities. It provides patient, risk-tolerant, and flexible investments to unlock transformative solutions and mobilize additional capital toward underserved sectors or regions. The value of catalytic capital is briefly summarized below.
- Bridging Financing Gaps. One key advantage of catalytic capital is its ability to bridge financing gaps that conventional capital sources are unable or unwilling to address. This is particularly important for small and medium-sized enterprises (SMEs) in developing countries facing significant financing gaps. By providing catalytic investments, these enterprises can access the necessary capital to grow, create jobs, and drive economic development within their communities.
- Enabling Innovative Business Models. Catalytic capital can also enable development and scaling of innovative business models that address social and environmental challenges. For example, catalytic investments in the affordable housing sector can support strategic collaborations and transformative business models that improve access to safe and affordable housing for vulnerable communities. Similarly, in the clean energy transition, catalytic capital can unlock financing for communities to participate by facilitating the adoption of solar power, electric vehicles, and other sustainable technologies.
- Attracting Mainstream Investors. Catalytic investments can help build a track record that attracts mainstream investors by providing initial risk-tolerant capital and demonstrating the viability of impact-driven ventures. This “catalytic effect” can mobilize additional capital towards initiatives that might have been deemed too risky or unconventional for traditional investors.
- Promoting Collaboration and Ecosystem Building. Catalytic capital initiatives often involve collaboration among stakeholders, including philanthropic investors, development finance institutions, fund managers, and intermediaries. This ecosystem-building approach fosters knowledge sharing, synergies, and collective efforts to effectively address critical social and environmental challenges.
In summary, catalytic capital is vital in promoting financial sustainability and scaling impact within communities by bridging financing gaps, enabling innovative business models, attracting mainstream investors, and fostering collaboration among diverse stakeholders.
Similarly, commercial relationships between stakeholders in catalytic communities create value and alignment for participating stakeholders while accelerating solutions to environmental and social challenges within watersheds (i.e., reducing or eliminating non-revenue water).
I believe that commercial relationships are the cornerstone to building and scaling successful and impactful catalytic communities
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– Will Sarni is the founder and CEO of water strategy consultancy Water Foundry, one of the founding partners behind Water United.