Principles and Requirements of the Compensation Scheme

Projects generating positive impact measured in Positive Water Credits (CAPs, or Credit Aqua Positive), and organisations managing their water footprint adhering to the Act4Water movement, must be governed by principles that ensure transparency and methodological rigour, to achieve real positive impact in the territory. 

Likewise, the Act4Water Standard is designed to be equitably applicable to any type and size of organisation or entity that wishes to certify a Project or support it through the acquisition of Positive Water Credits to manage their water footprint and generate positive impact.

The standard guarantees its application in any country*, region or sector, ensuring that all interested organisations have access to the benefits of the collaboration and compensation scheme under equal conditions.

To obtain the Act4Water Water+ Certification, entities and/or organisations must contribute to Act4Water’s Vision and Mission, applying the specific principles and requirements established:

1. Principle of Contribution to Water Security, Climate and Sustainable Development
2. Safeguard Principle
3. Additionality Principle
4. Stakeholder Inclusion Requirement
5. Impact Sustainability Requirement
6. Requirement for Compensation Project Developer Entities

Compliance with the Principles and Requirements will be demonstrated in the Project’s technical-economic Report, subject to external verification and finally, assessed in the Water+ Act4Water certification assessment process. In the case of organisations that have requested Water Active or Water Positive certification and claim to have generated positive impact outside their business perimeter equivalent to compensating part or all of their water footprint, the projects or initiatives that have been promoted must also at least comply with the Principles and Requirements, even if they do not have Act4Water Water+ certification.

*Registered certification marks in EU IPO (WATER+ num. 018873998, Water Positive no 018902711, Water Neutral num. 018902620), UK (registry number WO0000001787938) and USA (registry number  7,772,773). 

I. Principle 1: Contribution to water and climate security and sustainable development

Compensation projects under Act4Water must demonstrate a clear net positive impact on water and climate security compared to a baseline situation, as well as on the sustainable development of local communities. To achieve this, they must ensure that:

• Projects must belong to one of the eligible project types or must undergo eligibility approval by Act4Water.
• Projects must define their Baseline Scenario and their Post-Project Scenario.
• The compensation of the direct water footprint should, where possible, be carried out through projects located in the same watershed where such footprint is generated.
• Projects must address real local issues and contribute positively to water security, climate security and sustainable development in relation to the Baseline.

Compliance with this principle is demonstrated during the assessment process of the Act4Water Water+ mark application, incorporating its justification in the Project’s Technical-Economic Report, passing external verification and assessment by the Act4Water team, according to the Act4Water Standard.

1. Types of Eligible Projects

Projects must demonstrate an improvement in water resource quality or quantity and belong to one of the main categories of projects generating Positive Water Credits (CAPs). These categories include:

• Water Efficiency: Actions that enable increased resource availability in the watershed.
• Territory Water Resilience: Actions that improve a territory’s water resilience against climate change effects.
• Aquatic Environment Quality: Actions in aquatic or terrestrial environments that enable improved water quality in the watershed.
• Ecosystems and Biodiversity: Actions that promote the improvement or preservation of ecosystems and biodiversity.
• Reuse: Actions that enable wastewater regeneration for use in agricultural, industrial, urban, or environmental applications, saving natural resource extraction.

For project types that are not automatically eligible, a Project Developer may request guidance from Act4Water by requesting a Pre-assessment service.

2. Project Scenario Definitions

The Project must define both the Baseline Scenario and the Project Scenario, defined as follows:

• Baseline Scenario: The reasonable and conservative scenario that would exist in the absence of the project. When establishing the Baseline Scenario, the Project Developer must select the appropriate geographic and temporal scope according to available information about the watershed, its various resources and water uses that will be affected by or affect the project.

• Project Scenario: The scenario that will exist once the actions comprising the Project are implemented and the Project is in the phase of generating positive impact or saving water footprint.

The Baseline and Project Scenarios must be included in the Technical-Economic Report and serve as the basis for the other Principles described in this section.

3. Local Compensation

Compensation of an organisation’s direct water footprint should be prioritised within the same watershed where it originates. Consequently, entities seeking collaborators to promote projects that generate savings in a watershed’s water footprint must consider this local component. Organisations wishing to go beyond internal footprint management and decide to compensate for their water impacts are recommended to first identify Positive Water Credits (CAPs) generated by projects located in that same watershed whenever possible, or stakeholders with whom to establish alliances to solve local water challenges. This approach directly contributes to the restoration and preservation of local water resources, ensuring that compensation benefits are applied in the effectively affected territory. Only when there are no viable alternatives within that watershed or when the organisation’s direct footprint impact is very locally disseminated, it will be advisable to concentrate efforts on priority regions or projects, considering the use of CAPs from other watersheds, always respecting criteria of territorial coherence and impact effectiveness.

This implies that projects promoted to cover indirect water footprint, associated with the value chain, must take place in the watersheds where the impact is generated.

4. Contribution to Water Security, Climate Security and Sustainable Development

All projects must demonstrate a clear and direct contribution to water security, climate security and sustainable development, defined as the generation of demonstrable net positive impacts compared to a baseline. This contribution materialises mainly in the form of Positive Water Credits (CAPs), considering both the saved water footprint and the environmental, social, and economic co-benefits.

Positive impacts must be a main result of the project, meaning they must arise intentionally and directly. They should not be limited to specific moments or manifest only in certain project phases.

The project must identify positive impacts by comparing the baseline scenario with the scenario resulting from the execution of the actions that make up the project. Positive impacts must demonstrate a positive effect beyond what would be expected to occur naturally in the Baseline Scenario. However, in general, projects whose main objective is compliance with current legislation will not be admitted.

II. Principle 2: Safeguarding Principle

Projects must carry out a preliminary assessment in accordance with Act4Water’s Safeguard Principles and Requirements, to ensure that, while generating positive impacts in water terms, they do not transfer or cause significant negative impacts on the environment or society. This assessment must allow for the identification of possible cross-cutting environmental and social impacts, such as:

• Impact on biodiversity in adjacent areas
• Soil degradation or loss of vegetation cover
• Conflicts over water access or distribution
• Alteration of traditional resource uses
• Involuntary displacement or impact on local livelihoods

In line with the DNSH (Do No Significant Harm) principle of the European Investment Taxonomy (or similar frameworks applicable to each geography) projects must avoid causing significant environmental harm to any of the six established environmental objectives.

This implies that:

1. The project conducts a structured assessment of cross-cutting environmental and social risks and impacts, based on the criteria established in the Safeguard Principles and Requirements document.
2. The project defines and justifies specific measures to prevent, mitigate, or compensate for identified negative impacts, ensuring their coherence with current regulatory and social frameworks.
3. All this information, along with impact monitoring indicators that allow for monitoring, reporting, and continuous improvement, is incorporated into the project’s Technical-Economic Report, in the section corresponding to the Safeguard Principles and Requirements.

III. Principle 3: Additionality

The financing of projects through the purchase of CAPs by organisations or other entities must be additional to activities already fully funded by public bodies or with some type of public funding. Thus, the CAPs financing scheme aims to be incentivising, meaning that the project would not have been executed, maintained, or expanded without this financing framework.

Furthermore, the additionality criterion implies that improvements in water resource quality or quantity would not occur naturally without the actions that make up the project. Consequently, double financing of activities already covered by other sources will not be accepted, unless it is clearly demonstrated that the income from CAPs is allocated to a new phase or additional component of the project, or there is proof of a firm agreement with the funding body to allocate them to another purpose of similar nature.

Thanks to this requirement for financial clarity and traceability, it also helps reduce the risk of double allocation or double counting of Positive Water Credits (CAPs). This is because each project must justify its unique and incremental contribution to water resource improvement, ensuring that benefits attributable to the same action or water body are not counted multiple times.

By successfully following these requirements and procedures:

• The project demonstrates alignment with the Additionality principle and, therefore, can apply for Act4Water Certification as a water compensation project.

The following requirements apply according to each project’s status:

Regular Projects: The project is not carried out unless there is an entity interested in supporting the project from its inception and receives funds in advance to start project activities.

Co-financed Projects: Projects eligible to generate Positive Water Credits may be co-financed by public funds. The distribution of generated credits will be weighted according to the funding distribution. Only the part not subject to public funding will be eligible.

Executed Projects: Projects that have been fully or partially executed before their registration in the Act4Water scheme, but can qualify to generate Positive Water Credits if they demonstrate they would not have been viable or sustainable without additional financial contribution from CAPs buyers.

1. The project has a non-profit purpose

The water footprint compensation scheme has a purely incentivising and standardisation purpose for project developer entities and compensating or positive local impact generating entities. Project financing through CAPs sales should not have a merely profitable or speculative purpose, beyond covering direct and indirect costs linked to the service. Since the credit price is determined at the time of certification, developers are allowed to contemplate a small industrial benefit for project development that corresponds to what is expected according to project activity and local market context. The industrial benefit value used, and its justification must be explicitly mentioned in the technical-economic Report submitted for external verification.

IV. Requirement 4: Stakeholder Inclusion

Projects must consult and integrate Relevant Stakeholders who will be affected by or involved in the project. The project design must include an analysis of impacts on stakeholders, incorporating their perspectives and contributions, and ensuring that decisions consider feedback obtained throughout project development. It is recommended to include Subject Matter Experts in the Stakeholder Groups according to the different project stages.

By successfully following these requirements and procedures:

1. The Project demonstrates how it has identified, segmented, and prioritised Stakeholders, meaning any party that will be affected by or can affect Project Development. The Project presents consultation records and evidence of how consultation results and stakeholder concerns have been considered and how conflicts of interest between them have been avoided where possible.
2. The project demonstrates that an adequate system has been developed for continuous recording and responding to stakeholder concerns.
3. The Project includes the above points in the Technical-Economic Report.

1. Stakeholder Consultation and Participation

The Project Developer will be responsible for identifying and informing all relevant stakeholders, including local communities, affected parties, and other involved actors. All Projects must conduct a Stakeholder Consultation process and maintain an ongoing participation scheme. Stakeholder consultation should be carried out before Project start. If this consultation occurs after the start, the Project Developer must justify how comments received during consultation were incorporated into project development.

The Project Developer must provide detailed information about the Project’s purpose, magnitude, and duration, its contribution to water and climate security and sustainable development, as well as compliance with safeguards, to ensure active stakeholder participation and their ability to influence the project.

The project must have a formal scheme for receiving suggestions, comments, and complaints. This system must be addressed and explained during Stakeholder Consultations. The project must describe in detail the stakeholder consultation process in the Report, documenting the entire process, including comments received and how these were considered in Project design. For preliminary review, Project developers may submit a draft consultation report. This report must include, at minimum: consultation date, list of invited stakeholders, invitation method used, information provided to stakeholders, and comments received.

All documentation must be included in the Project’s Technical-Economic Report.

2. Public Water Domain

Projects carried out in public domain or public water domain must have approval from competent authorities, according to the corresponding watershed, and comply with current regulations. The Project Report must describe the role and competencies of Stakeholders related to competent public administrations.

V. Requirement 5: Impact Sustainability

The sustainability of impact generated by projects certified under the Act4Water standard is guaranteed through a combination of technical and operational criteria that allow benefits to be extended over time and ensure their traceability. For this, projects must consider the following key elements:

1. Project Start Date

Understood as the earliest date on which the Project Developer has committed financial, technical, or human resources associated with its implementation. This milestone delimits the beginning of the eligibility period for generating Positive Water Credits (CAPs) and marks the start of the project assessment cycle.

2. Project Useful Life

Corresponds to the estimated period during which project interventions will continue generating significant hydrological benefits. This duration must be technically justified and align with the nature of implemented actions.

3. Operational and Technical Planning

Projects must incorporate solid planning that supports impact sustainability, including:

• An Operation and Maintenance (O&M) Plan, ensuring continuity of implemented actions throughout their useful life. It must describe activities necessary to preserve generated water benefits, define those responsible for execution, and establish human and financial resources required for implementation.

• An Impact Monitoring Plan, determining how both baseline and achieved progress will be measured. This plan must detail assessment methods, indicators used, and results verification mechanisms.

4. Project Evaluation: Ex-ante and Ex-post Analysis

To ensure transparent and effective implementation, projects can certify CAPs at two key moments:

• Ex-Ante: Preliminary analysis conducted before project actions implementation, allowing estimation of expected impact on water resource quantity and quality, as well as associated social, economic, and environmental benefits, obtaining Ex-ante certified Positive Water Credits and price estimation. The purpose is to facilitate the developing entity obtaining binding agreements with compensating organisations, ensuring funds to start the project.

• Ex-Post: Evaluation conducted once the project has entered monitoring and follow-up phase, annually during Project useful life, aimed at verifying actual impacts obtained versus estimates formulated during ex-ante analysis compared to baseline scenario. This assessment must be based on data collected through established monitoring system, and its main purpose is to support effective issuance of Positive Water Credits (CAPs) through verifiable and traceable evidence.

All mentioned elements must be properly integrated into project technical documentation, Technical-Economic Report, which forms the basis of Act4Water Standard Project Cycle. This cycle comprises processes designed to ensure impact sustainability over time, from initial validation to continuous monitoring.

Specifically, projects must:

1. Present Technical-Economic Report, consolidating all required technical information, including project design, maintenance plan, monitoring system, and impact tracking mechanisms.

2. Undergo External Verification, involving Technical-Economic Report audit by authorised independent entities who issue Project Conformity Declaration with Act4Water certification marks.

3. Be reviewed and approved by Act4Water, with consequent certificate issuance under Water+ mark, formally recognising positive impact generated by project (CAPs and price/CAP).

4. Conduct annual impact certification including updated revalidation of project information and documentation with actual data from last annual operation cycle, thus ensuring continuity and traceability of achieved positive impacts.

This set of processes constitutes the Act4Water Project Cycle, establishing requirements, timeframes, and procedures for each stage, from pre-assessment to renewal.

Complying with this cycle not only technically validates projects but demonstrates their capacity to generate real, verifiable, and sustainable impacts on water resources, enabling impact declarations issuance and generation of Positive Water Credits certified by Act4Water.

VI. Requirements for Compensation Project Developers

This section defines the criteria that entities wishing to certify projects under the Water+ mark, which generate Positive Water Credits (CAPs), must meet. Its purpose is to ensure that such projects come from entities with the technical, operational, and ethical capacity to design and implement effective, verifiable, and traceable actions that contribute meaningfully to water resource improvement.

• Nature of Activity of the Organisation Requesting Water+ Certification

Organisations whose main activity falls within at least one of the following categories may access Water+ certification:

1. Organisations Responsible for Urban Water Cycle Management

Includes public or private entities operating in areas such as drinking water supply, sanitation, wastewater treatment, urban drainage, reuse, or integrated water management in urban environments. These organisations are perfectly positioned to develop projects aimed at improving water efficiency, aquifer recharge, urban watershed restoration, or improving discharged water quality, etc.

2. Organisations Focused on Agricultural or Agro-industrial Management

Corresponds to agri-food sector entities such as cooperatives, agricultural companies, irrigation associations, or agro-industries that use water resources in their production processes. These actors can present projects focused on efficient water use, transition to sustainable agricultural practices, or implementation of nature-based solutions that generate water ecosystem services.

3. Organisations Dedicated to Natural Space Custody, Restoration, or Recovery

Includes environmental NGOs, community associations, foundations, or other entities whose main mission is conservation, restoration, or sustainable management of aquatic ecosystems, wetlands, riverbank areas, or watersheds. These organisations can develop compensation projects that generate positive impacts through ecological restoration, active conservation, recovery of hydrological functions, etc.

Any other type of organisation wishing to develop Water+ projects must first be assessed by the Act4Water assessment committee to determine eligibility.

• Differentiation between Water Footprint Reduction and Compensation

Entities supporting compensation projects must understand the difference between reducing their Water Footprint and generating positive impacts that enable Positive Water Credits (CAPs) creation. This distinction is essential, as only positive impacts external to their business perimeter—that is, directly benefiting all watershed users or third parties—can be considered as compensation.

A project that reduces water consumption or improves water quality used by the implementing organisation itself constitutes an internal Water Footprint reduction action. These actions are important but do not generate CAPs, as the direct beneficiary is exclusively the entity implementing the project. Project developer entities fitting the types described in section (a), while implementing project actions may be reducing their organisational water footprint, their objective is to benefit society or all watershed users, thus generating CAPs that can be acquired or used by other entities wishing to contribute to local water challenges solutions. An exception is the agri-food sector, which, while providing an essential service, faces enormous resource management challenges while investment capacity is very limited. Understanding that the compensation scheme can provide help for the sector and great benefit for surface and groundwater resources protection, they have been incorporated into the classification of compensation project developer organisations.

• Reduction before Compensation

From compensation project developer entities’ perspective, it is fundamental to promote Positive Water Credits (CAPs) generated by their initiatives as a tool to compensate for remaining water impacts, that is, those that could not be reduced internally by organisations acquiring them or economically supporting the project and its actions.

In this sense, developers must know that organisations wishing to compensate have Act4Water’s Water Positive and Water Neutral certification available to ensure that CAPs have been applied to the organisational balance of remaining water footprint, once the footprint has been analysed, and they have implemented verifiable measures to reduce their Water Footprint. This implies that legitimate CAPs use depends on compensating entities having demonstrated improvements in their processes and operations’ water efficiency, adopted technologies promoting water saving, reuse, or recycling, and applied effective management strategies minimising their impact on the resource.

Only once this requirement has been met by the third-party wishing to compensate, can CAPs be used as a valid instrument to neutralise the remaining fraction of their water footprint, that is, the part that could not be reduced through internal actions.

Therefore, Positive Water Credits (CAPs) should be understood as a complementary compensation tool, whose legitimate use is conditioned on the acquiring entity having previously implemented verifiable Water Footprint reduction measures. This sequence ensures that compensation only applies to unavoidable residual water impacts, strengthening Act4Water scheme integrity and consolidating its function within a responsible water management strategy, where reduction always constitutes the first step.