With demand for water likely to outstrip supply, what are firms doing to mitigate water scarcity?
Water resource management has risen up the corporate agenda in recent years to become a primary concern for many multinationals. The reason for this is simple: global demand for water has increased in tandem with the growing global population but current infrastructures are insufficient to support the increasing demand.
The Organisation for Economic Cooperation and Development projects that, at the current rate of population growth, global demand for water will increase by 55% by 2050. The World Bank predicts a 40% global shortfall between forecast demand and the available supply of water by 2030. Furthermore, the World Economic Forum’s (WEF) Global Risks Report 2015 rated water crises as the biggest global risk in terms of impact, ahead of spread of infectious disease, weapons of mass destruction and interstate conflict.
Water scarcity is a truly global issue whose consequences are likely to be felt by every business. However, companies may reduce the impact of increased competition for water by risk managing their water supply to be efficient, resilient and cost-effective.
Environmental risk reporting agency CDP (formerly Carbon Disclosure Project) surveyed 1,603 firms globally in 2014 to build a database of self-reported corporate water risk and the mitigating actions undertaken. Its report, CDP Global Water Report 2014, analysed the disclosures from 174 Global 500 companies in sectors with high water vulnerabilities and impacts, including energy, utilities, consumer staples, industrials, healthcare, consumer non-essentials, information technology and materials. Almost a quarter (22%) of respondents reported that water insecurity could limit their company’s growth and one-third of those expected the constraint to be felt in the next 12 months.
However, only 38% of respondents assessed water risks in both direct operations and supply chains, and 40% included local communities and other water users in water risk assessments. Taking these low figures into consideration, the percentage of firms whose growth is likely to be constrained because of water insecurity is perhaps much higher than the reported figure of 22%.
Key business risks
According to CDP, the primary drivers of reported water risks are physical (60%), such as water stress, scarcity or declining water quality. The report also cites higher water prices, rising discharge costs, regulatory limits on withdrawals or discharges and community opposition as key risks for businesses.
Although many firms are lagging behind in terms of their water risk assessments, a number of companies are championing water resource management. German chemical company BASF has received gold-level certification by external auditors for two of its sites for the firm’s extensive application of the European Water Stewardship (EWS) standard, a programme designed to help companies achieve compliance with regulatory measures developed by the EU Water Framework Directive.
One of the firm’s sites that has been awarded gold-level certification is based in Tarragona, Spain, and BASF head of water management Dr Gerhard Zimmer says the EWS standard provides a detailed tool to assess the local situation of water availability, water quality and the presence of high conservation value areas.
“[The EWS standard] guides on assessing the impact of the site’s activities and on developing mitigation measures, ranging from measures taken on site level to collaboration on river basin level,” Zimmer says.
“Tarragona is located in an area with severe water stress. A special feature of our Tarragona site is the diversity of water sources, enabling us to adapt the water supply to changing needs. One of the sources is the reuse of treated effluent of the municipal waste water treatment plant. By reusing this water, a higher portion of freshwater can be used by the population.”
As is the case with many emerging risks, businesses may find unlikely opportunities for growth through effective risk management. For example, BASF estimates that water saving, recycling, reuse and drinking water treatment products offer the company potential sales of $1bn (€890m) by 2020.
Nestlé chairman Peter Brabeck-Letmathe – who also chairs the board at the 2030 Water Resources Group, a public-private-civil society consortium that includes representatives from WEF, International Finance Corporation, the United Nations Development Programme – says Big Data can play an important role in achieving water management targets.
“Discussions around Big Data are still largely about the loss of privacy,” Brabeck-Letmathe says, “but there are also productive uses of Big Data; for example, it may allow us to improve the quality of precision farming, which, among other things, could reduce water requirements and, hopefully, allow for an increase in crop volume and nutritional value of food grown.
“A tractor with the biggest wheels and the most powerful engine may no longer be best; the best may rather be the tractor equipped with an iPad and powerful software.”
With water management increasingly a priority for corporates, technology may play an important and strategic role for businesses trying to reduce their water use and dependency.