Last week, Danica May Camacho of the Philippines became the world’s symbolic seven billionth person. The occasion drew mixed feelings in the policy world — what does a booming global population mean for climate risks?

To cite one issue, leaders are worried about the declining supply of water in regions vital to economic growth. This isn’t merely a problem for the developing areas. Tuvalu is suffering its worst run of droughts in decades, and even Texas is finding its agricultural and electrical infrastructure strained by what the New York Times calls “catastrophic droughts.”

Municipalities are looking for ways to improve the efficiency of their “greywater” management facilities, and local innovations could be the key. Greywater is wastewater generated from daily activities like washing dishes and doing the laundry. It’s often recycled by cities for uses such as landscape irrigation, fountains and local wetlands.

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Managing greywater is a vital part of civic life in the Southwest United States, where every drop of water is a precious resource. States like California, Arizona and New Mexico often do battle over scarce water supplies. Finding a better way to manage water is essential.

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Sustainable water company Organica proposes a solution: BlueHouse. In a video submitted to Planet Forward, Organica explained how their new home system maximizes water management while providing all of the comforts Americans currently enjoy:

Organica says its units can process up to 50,000 gallons of water per day, making them eligible for the top tier of greywater licensing in states like Arizona and Nevada. BlueHouse treats household water on-site, without the need for pumps or external treatment facilities. This takes advantage of some pioneering new approaches to water management in Arizona.

Arizona’s greywater laws encourage individual innovation and compliance with state regulations by giving each individual or company a free hand to design a water treatment program of the right size and scope. Arizona eschews one-size-fits-all mandates by allowing industry to develop solutions for gray water management so long as they remain within the general guidelines of Arizona’s law.

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As Arizona water policy expert Art Ludwig notes, allowing individuals to design their own, situation-specific systems improved compliance by up to 50%, saving valuable water and lowering government regulatory costs. To encourage home water management, the law allows any facility processing 400 gallons of water or less per day to build a full system without any special permits. Some even qualify for tax credits!

Arizona balances its individualized law with harsh penalties for noncompliance with water management laws, including suspensions of business licenses and hefty fines. According to compliance statistics statewide, Arizona’s model has been successful at fostering a center of water management innovation. New Mexico even asked Ludwig to share Arizona’s secrets with the New Mexico State Legislature.

As the developed world comes to realize that water management isn’t just a developing world problem, more states and regions will likely need innovations and compliance-centric water laws to ensure their long-term survival. States shouldn’t be planning for the next dozen years. They should be planning for the next billion people. And the next Danica May Camacho.