It’s rare for water to make waves at the World Economic Forum’s annual gathering of business leaders and finance ministers.
But the most recent Davos summit was an exception. A new eye-opening report ranked water supply among the top five global risks in terms of impact– on par with systemic financial failure and fiscal imbalances.
As we mark World Water Day, the alarming statistics underlying water scarcity are worth repeating. Worldwide 2.7 billion people are currently affected by water shortages. As the global population races toward 8 billion and beyond, upward trends in food demand and economic growth promise to further strain freshwater resources, especially in the developing world. Climate change, of course, is exacerbating these water challenges.
The stories in this month’s Aqueduct News Roundup are focused on two central themes. The first theme is the importance of data in water management: February saw the introduction of compelling new data sets, as well as water users in the private and public sectors coming to grips with the importance (and difficulty) of acquiring good water data. The second theme is cost: several stories emerged in February that demonstrated the sometimes staggering price tags associated with water for governments and companies alike.
This piece was coauthored by: Joe Rozza, P.E., BCEE, Global Water Resource Sustainability Manager, The Coca-Cola Company; Greg Koch, Managing Director, Global Water Stewardship, The Coca-Cola Company; Jonathan Boright, Research Scientist, ISciences LLC; Nicole Grohoski, Research Analyst, ISciences LLC
The Aqueduct project is an effort to measure and map water related risks being developed by the World Resources Institute with the support of an alliance founded by General Electric and Goldman Sachs. As part of this effort, the Aqueduct team convened its hydrological modeling partner ISciences and experts from The Coca-Cola Company to develop and analyze a set of maps for the Bonn2011 Nexus conference that illustrate the complex relationships between water, food, and energy worldwide (see below).
Why focus on the water-food-energy nexus? Like water, food and energy are basic necessities of life that help support robust economies and stable political systems. Agriculture and power generation, moreover, account for the majority of water withdrawals in most developed countries.
For the last five months, a severe drought in central China has brought water levels in the Yangtze River to near-record lows. The drought’s impacts -- from threatened drinking water supplies to disruptions in manufacturing -- have rippled through the population and economy of China. They are a reminder of the diverse and complicated ways in which water, or the lack thereof, can pose risks for companies, investors and policy makers.
A new mapping tool identifies and measures exposure to water risk.
Concerns about the world’s most precious resource - water – are growing, and businesses are increasingly taking note. A recent survey with responses from 150 large corporations conducted by CDP Water Disclosure revealed that 39% of companies have already experienced disruptions in operations, increasing expenses, and other detrimental impacts related to water. Although water risk is a significant concerrn, 62% of the responding companies also recognized that a water-constrained world could create opportunities to reduce operating costs with efficiency gains and generate new business in innovative water solutions.
Hungary’s toxic ‘red sludge’ is a stark reminder of why mining companies need to better disclose their water-related risks.
On October 4th, the wall of a wastewater reservoir for the Ajka alumina processing plant broke, sending 35 million cubic feet of corrosive ‘red sludge’ downhill into nearby villages and ultimately the Danube River. This ecological disaster has claimed eight lives and devastated many more by destroying homes, livestock, and crops. Meanwhile workers are rushing to build emergency dams to stem a second flood that is expected to occur should another wastewater reservoir wall collapse.
For investors and financial institutions, water risks in the mining sector are difficult to track.
This summer, while Americans focused on the BP oil spill, disaster struck at a copper mine in southeastern China. The mine, owned by China’s largest gold producer, Zijin Mining Group, leaked 2.4 million gallons of waste water laced with acidic copper into the Ting River, killing 2,000 metric tons of fish – enough to feed 72,000 residents for a full year.
Just as the Deepwater Horizon disaster reminds us of the underlying risks of offshore oil drilling, the Zijin disaster demonstrates the environmental risks associated with the thousands of hardrock mineral mines in operation around the world. And, as a new paper from WRI concludes, current reporting practices mean that investors and financial institutions may not be fully aware of these risks, even though they may suffer the consequences.
Financial analysts need tools to make better decisions about investments that depend on water.
As the world observes Water Day this year, a new and rather unlikely group is starting to pay more attention to issues of water risk and water quality: financial analysts. They must take into account a myriad number of factors when making decisions, adding up tiny details to look for hints of future performance. But something as basic as water can also have a huge impact on companies’ performance, and even today, water risk is missing from many investors’ calculations.
A new project will help identify and measure the water-related risks facing companies and their investors, and lead to better environmental decisions.
Water scarcity, water pollution and water competition are various risks that could significantly harm a company’s operations. Even so, they are often overlooked by investors, financial analysts and businesses. Piet Klop, Senior Fellow in WRI’s Markets and Enterprise program, answers questions about why water matters to companies.