Circularity and the Water Sector Part 1

The Circular Economy is not just an environmental regulation, but is being promoted in many countries as a policy to change the very structure of the economy. How is Japan faring in this context? How does it look to those who, like investors, keep a close eye on economic trends and changes?

 In 'Talk Circular x Economy', Mr. Andre-Hottinguer, who has been involved in investments in global companies for more than 10 years and has travelled back and forth between Europe and Japan, gives his unique perspective on these topics, drawing on his background as an investor and as a foreigner.  Let's enjoy his 'way of seeing' and explore the 'Circularity x Economy

After examining the construction and energy sectors, let’s turn to water—a naturally circular system increasingly affected by human activity. Water moves through forms via natural processes like evaporation and precipitation, which help purify it. However, over the past century, urbanization, population growth, and other human actions have disrupted these cycles, leading to greater water scarcity and more extreme water-related events.

To put things into perspective, although water seems abundant, only 2.5% of the Earth’s total water is freshwater, highlighting the need for efficient management. The challenge is made worse by declining water quality, with over 80% of global wastewater discharged untreated into the environment—a figure that rises above 95% in some developing countries, according to a 2021 UN report.

Let’s examine some of the major challenges facing the water sector, along with some possible solutions.

One significant issue, yet often overlooked, is water loss due to leaks. Around the world, water utilities continue to face considerable losses within their distribution networks, with leakage accounting for 25 to 50% of total water supply in many regions. In some emerging markets, this figure can soar to as much as 75%, according to the International Water Association. The main challenge lies in the fact that most leaks occur underground, making them difficult to detect and costly to address.

Japan offers a compelling example of progress in this area. Seventy years ago, cities like Tokyo suffered high leakage rates as high as 80%. Through sustained efforts, this rate has been reduced to just 2% today, one of the lowest in the world. This remarkable improvement was achieved through systematic pipe replacement (switching from lead to stainless steel), proactive maintenance, rapid leak detection, and same-day repairs, including the use of night flow monitoring to spot hidden leaks. The Japanese government has set ambitious goals for water utilities across Japan, targeting an effective water ratio of 98% for large providers and 95% for smaller ones.

Another often overlooked issue is the vast amount of water consumed by agriculture. While essential for food production, it accounts for over half of all water use in rice-dependent Asian countries—and even higher proportions in parts of southern Europe.

In Japan, agriculture is by far the largest water user, consuming nearly two-thirds of the nation’s water—primarily for irrigating rice paddies, which account for over 90% of agricultural water use. Japanese farmers have long developed techniques to maximize the use of rainwater and groundwater. The introduction of paddy fields and sophisticated irrigation systems during the Yayoi period laid the foundation for agricultural practices that continue to shape cultivation today. To efficiently distribute and reuse water, Japan developed an extensive network of irrigation channels spanning approximately 40,000 kilometers—about four times the length of the country’s rivers. This system not only delivers water where it is needed but also allows for the reuse of water from upstream fields in downstream areas. Today, these traditional networks are enhanced by modern technologies such as sensors and automated controls, which help optimize water distribution and minimize losses. Additionally, innovative techniques like drip irrigation are being adopted, delivering water directly to plant roots and significantly reducing evaporation.

Globally, similar initiatives are emerging, especially in regions facing acute water scarcity. One example is the reuse of treated wastewater for agriculture. While not all wastewater is suitable for this purpose, some can be particularly beneficial for irrigation as it contains nutrients like phosphorus and nitrogen—key components of fertilizers.

This approach is part of a broader concept known as cascading use, where water is used sequentially for different purposes. Water—whether treated or untreated—can be reused multiple times across industrial and domestic processes. For instance, steam from energy production can later be used as condensate, then for cooling, cleaning, and, once properly treated, for irrigation. This cascading strategy maximizes the value derived from every drop of water, contributing to greater efficiency and sustainability in water management.

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