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?
At the World Economic Forum in Davos two weeks ago, I was struck by how often the issue of water risk was raised by business executives. As the global economic turmoil is receding, many CEOs and global leaders are turning to other threats—and water is high on the list. For the second year in a row, water crises were named among the top four global risks at the WEF.
It’s easy to see why. More than 1.2 billion people already face water scarcity. By 2025, two-thirds of the world population will experience water stress. That’s largely due to population increase and climate change, but also behavior patterns: Water use grew twice as fast as population growth in the 20th century. The “food-water-energy nexus” was one of the top four megatrends to watch in the recently released Global Trends 2030 report by the U.S. National Intelligence Council.
CEOs increasingly recognize that water is essential for their business models and economic growth. Disrupted availability of affordable, clean water leads to business interruptions, increased commodity costs, and reduced earnings. The extreme drought gripping much of the United States is likely to cost up to one percent of GDP, potentially making it the costliest natural disaster in U.S. history.
Some people say that water is the oil of the 21st Century. If only water were that simple.
Water is very complicated. It’s affected by large-scale issues like climate change and globalization. International commerce moves virtual water (the water it takes to grow or produce a product) from farms in Brazil to grocery stores in China and Egypt.
But water is also inherently local, impacted by site-specific weather, geography, and other environmental and land use conditions. Managing and using water, then, requires understanding it in its full geographic context.
Today, WRI is launching its new Aqueduct mapping tool to do just that. Aqueduct provides businesses, governments, and other decision makers with the highest-resolution, most up-to-date data on water risk across the globe. Armed with this information, these decision-makers can better understand how water risk impacts them—and hopefully, take actions to improve water security.
This story is part of the “Aqueduct Sneak Peek” series. Aqueduct Sneak Peek provides an early look at the Aqueduct team’s updated global water risk maps, which will be released in January 2013.
The days leading up to Hurricane Sandy’s landfall were a testament to the power of global data systems in helping to understand and manage risks that natural phenomena can create. A vast, worldwide network of weather monitoring stations and sophisticated remote sensing allowed meteorologists to track and predict Sandy’s progress—and give ample warning to those of us in the hurricane’s path.
The map below is one way to visualize the global data network that makes such analysis possible. It shows Integrated Surface Database (ISD) stations, a widely distributed network of weather stations that all report regularly to a centralized hub.
This piece was co-authored by Lijin Zhong, Senior Associate from the WRI China office
The Yellow River has played a critical role in the growth and prosperity of Chinese civilization for thousands of years. But today, the Yellow and the people who depend on it face severe challenges. Stress of limited water resources, pollution, and flooding pose significant risks to communities and businesses that rely on the river. As these stresses grow, China’s water managers and users face the daunting challenge of implementing policies that balance economy, ecology, and community.
There is no shortage of troubling statistics to prove that water management is a global challenge. About 1.2 billion people currently face water scarcity, and a population expected to grow to 9 billion by 2050 will put increased strain on already pressured water supplies worldwide.
But while the water challenge is truly global, it also demands solutions that are tailored to local conditions. Availability, use, and quality of water vary dramatically from place to place.
They also teach another lesson: Natural resource challenges like water scarcity cannot simply be viewed as environmental issues. They are real, material drivers of risk that governments, businesses, and investors must carefully consider in the context of the global economy.
This piece was authored by Jon Freedman, Global Government Relations Leader for GE Power & Water. It originally ran on May 12th on GreenBiz.
Last weekend, Jessica Yu's new water documentary "Last Call at the Oasis" took us on tour of the impacts water scarcity is creating around the globe, from the parched pastures of Australia's farmlands to the sewage-polluted banks of the Jordan River. This film shines a much-needed light on the various water challenges we all now face at a critical time. The numbers alone are eye-opening.
If current water usage trends continue, by 2025, two-thirds of the world's population -- or 5.3 billion people -- will be vulnerable to water shortages. What many here in the U.S. may not know is that we are far from immune to water stress. One need look no further than Texas, where a record-breaking drought last year created massive water shortages that significantly impacted the state's water supplies, agriculture and industry.
For many companies, water issues have recently migrated from corporations’ social responsibility departments to finance and risk management departments. Companies have been reporting a growing exposure to water-related risks like flooding and pollution, and many have already started to experience water-related business impacts.
This trend prompted WRI’s Markets and Enterprise Program to build a tool to help companies and investors identify water-related risks across their operations or portfolios. The tool, named the Aqueduct Water Risk Atlas, is based on an indicator framework that quantifies and maps different drivers of water risk, otherwise known as the Water Risk Framework. After testing this framework in various regions, WRI recently released its revised version. This updated framework will eventually be used to assess water risks in every part of the world.