Water is never far from the news these days. This summer, northern India experienced one of its heaviest monsoon seasons in 80 years, leaving more than 800 people dead and forcing another 100,000 from their homes. Meanwhile, Central Europe faced its worst flooding in decades after heavy rains swelled major rivers like the Elbe and the Danube. In the United States, nearly half the country continues to suffer from drought, while heavy rainfall has broken records in the Northeast, devastated crops in the South, and now is inundating Colorado.
Businesses are starting to wake up to the mounting risks that water – whether in overabundance or scarcity – can pose to their operations and bottom line. At the World Economic Forum in Davos this year, experts named water risk as one of the top four risks facing business in the twenty-first century. Similarly, 53% of companies surveyed by the Carbon Disclosure Project reported that water risks are already taking a toll, owing to property damage, higher prices, poor water quality, business interruptions, and supply-chain disruptions.
The costs are mounting. Deutsche Bank Securities estimates that the recent US drought, which affected nearly two-thirds of the country’s lower 48 states, will reduce GDP growth by approximately one percentage point. Climate change, population growth, and other factors are driving up the risks. Twenty percent of global GDP already is produced in water-scarce areas. According to the International Food Policy Research Institute (IFPRI), in the absence of more sustainable water management, the share could rise to 45% by 2050, placing a significant portion of global economic output at risk.
To maintain its economic growth and provide for its massive population, China must reconcile two powerful, converging trends: energy demand and resource scarcity. One prime example of this tension is the country’s coal use and water supply.
A new study from the United States Geological Survey (USGS) reveals troubling news: The aquifers that millions of Americans rely on for freshwater are being depleted at an accelerating rate. In fact, aquifer depletion in the years between 2004 and 2008 was nearly triple the historical average.
Population growth and increasing demand—in particular for irrigating crops—are straining these underground freshwater sources. In many cases, aquifers have accumulated over the course of millions of years.
There are two lessons we take away from this USGS study:
Growing demand is increasingly coming into conflict with our finite global water supply. Even in places that are historically water-abundant, growth in water demand is outstripping available supply. (That’s why WRI’s Aqueduct project focuses on water stress – the ratio of water supply and demand – more than measures of water quantity.)
Investors need to understand a wide variety of business and market risks facing the companies in which they invest. In the 21st century, that includes water risks.
An increasing number of companies are experiencing detrimental water-related business impacts, including operational or supply chain disruptions and property damage from flooding, to name a few. These impacts can be costly--in 2011 they cost some companies up to $200 million--and have caught the attention of investors around the world.
A new report from CERES draws a connection between water risk and hydraulic fracturing in the United States. The report adds an important dimension to the conversation about how energy use and water stress will play out in the years ahead.
The report, Hydraulic Fracturing & Water Stress: Growing Competitive Pressures for Water, brings together Aqueduct’s high-resolution water stress maps with FracFocus.org data on the location and water use of U.S. shale oil and gas wells. The complete map (see below) shows where potentially water-intense hydraulic fracturing is happening in water-stressed areas.
The results of the study are eye-opening: Almost half of the more than 25,000 oil and gas wells mapped by Ceres are in water basins with either high or extremely high water stress.
We know less about one of world's most pressing challenges today than we did 10 years ago. It's no secret that water - or the lack thereof - will be one of the defining issues of the 21st century. And yet, the United Nations World Water Report, in 2009, stated that when it comes to water, "less is known with each passing decade."
The World Economic Forum recently named the water supply crises as one of the top risks facing the planet - edging out issues like terrorism and systemic financial failure. Water risks permeate almost every aspect of global society. We got a taste last year with crops scorched by drought, shipping lanes threatened and energy plants shut down by low water levels, and coastlines devastated by flooding. Exacerbated by climate change and population growth, such crises will become more common and costly. Yet, the world largely lacks the data we need to monitor, understand, and respond to these water challenges. We are flying blind when it comes to global water issues.
Today marks the 20th anniversary of the first World Water Day, an international celebration designed to draw attention to the importance of freshwater resources. However, for a large and growing proportion of the world’s population, every day is a World Water Day. Difficult, complex water challenges including drought, groundwater depletion, pollution, and clean drinking water availability are growing in urgency and seriousness all around the world. Some even argue that we should boycott World Water Day – that our water problems are too serious to try and confine to a single day.
Although it’s true that we must keep water in mind during the other 364 days of the year, World Water Day can be useful. It helps raise awareness and serves as an annual reminder of the water problems we must collectively solve. Plus, picking a single theme – this year’s is cooperation – helps break down a very complex topic into more accessible, comprehensible pieces.
In keeping with the theme of helping make complex issues more approachable and understandable, WRI is marking this year’s World Water Day by launching the first in a new series of videos we’re calling “What’s the Big Idea?” These brief videos will feature WRI staff members explaining some of the complex, global challenges we are working to understand and solve. Our first “What’s the Big Idea?” video explains the concept of water risk and the array of challenges it poses. We also highlight a potential solution: WRI’s Aqueduct mapping tool, which helps companies, investors, governments, and others better understand and manage their water risks.
In January, Brian Richter, director of freshwater strategies at The Nature Conservancy, spelled out four water resolutions through a thought-provoking series of blog posts. One of those resolutions was to better understand and communicate the differences between water use and water consumption. This is a particularly important issue, as there has been a lot of discussion lately about water scarcity, water stress, and the risks associated with them.
So what do ”water use” and “water consumption” mean?
“Water use” describes the total amount of water withdrawn from its source to be used. Measures of water usage help evaluate the level of demand from industrial, agricultural, and domestic users. For example, a manufacturing plant might require 10,000 gallons of freshwater a day for cooling, running, or cleaning its equipment. Even if the plant returns 95 percent of that water to the watershed, the plant needs all 10,000 gallons to operate.
“Water consumption” is the portion of water use that is not returned to the original water source after being withdrawn. Consumption occurs when water is lost into the atmosphere through evaporation or incorporated into a product or plant (such as a corn stalk) and is no longer available for reuse. Water consumption is particularly relevant when analyzing water scarcity and the impact of human activities on water availability. For example, irrigated agriculture accounts for 70 percent of water use worldwide and almost 50 percent of that is lost, either evaporated into the atmosphere or transpired through plant leaves.
On February 20, WRI President Andrew Steer participated in event with GreenBiz CEO Joel Makower at the annual GreenBiz summit in New York City. This post builds off that discussion.
Sustainability has become a major business buzzword in recent years. For many, though, it’s still viewed as a philanthropic initiative, disconnected from a company’s core goals, or even a burden that competes with other strategic priorities. That must change.
Fortunately, more leaders are recognizing sustainability risks. At the World Economic Forum in Davos last month, leaders in business, government, academia, and civil society named climate change and water supply as two of the top five global risks facing companies today—and with good reason.
Extreme weather and climate impacts are becoming increasingly common and carrying a significant economic toll. According to the insurance group Munich Re, the number of weather-related loss events over the past three decades has quintupled in North America, quadrupled in Asia, and increased in Africa, Europe, and South America. In the United States alone, 11 events crossed the $1 billion mark in losses in 2012. Hurricane Sandy cost U.S. taxpayers more than $60 billion, striking at the heart of a heavily populated business and financial zone. And, drought in the United States is expected to cost 1 percent of the annual GDP, making it one of the most expensive natural disasters in the country’s history.
Likewise, water risks are increasingly on companies’ radars. More than 1.2 billion people are already facing water scarcity. By 2025, two-thirds of the world’s population will likely experience water stress. According to a 2012 report by the Carbon Disclosure Project, the associated costs of water events for some companies reached $200 million, up 38 percent from the previous year.
So, how can companies link these risks to corporate strategy? How can they push the management of sustainability issues into the center of businesses’ strategic decision-making?