It is too soon to claim that the issue of global warming has come and gone; we are just getting started. However, it is never too early to anticipate the next big issue on the horizon. According to a global opinion poll recently made public by GlobeScan, an international public and stakeholder opinion research firm, and SustainAbility, a think tank and business strategy consultancy, water scarcity will prompt global industrial transformation. The conclusion of the opinion poll of more 1,200 sustainability experts concluded:
“Population growth, urban development, farm production and climate change is increasing competition for fresh water and producing shortages so acute that virtually every industry in the world anticipates sweeping systemic transformation over the next decade in their strategic planning, production practices and business models.”
(Circle of Blue WaterNews, March 16, 2010)
With corporations and governments still arguing and lobbying over how carbon management/carbon reduction legislation will look like and attempt to achieve, why do we need to add water scarcity to the equation? Water is all around us; it is in the lakes, rivers and streams we fish; it falls from the sky on a fairly regular and predictable schedule; we open a tap and fresh clean water flows. While this is all true, water remains a finite resource and it is only through the wonder of the water cycle that we have the “luxury” of viewing water as an infinite resource. However, only three percent of the water in the world is freshwater and less than one percent is readily usable by humans.
It is predicted the global population will reach nine billion by 2050 with the bulk of this growth occurring in developing countries where water resources are already stressed. As these countries industrialize, their demand for water resources will grow to facilitate manufacturing and energy production, their capacity to have access to usable water to foster this growth will be the limiting factor to growth for these countries. With roughly 60 percent of the world’s usable water resources being trans-national boundary resources, conflict and protectionism is inevitable. For the developed world, the commercialization of water will be a contributing factor to agricultural production; financial and insurance risks; market and manufactured goods price volatility; and regulatory restrictions.
As the reality of water scarcity reaches boardrooms across the country, decisions are being made on how to mitigate and manage the latest global environmental concern. The physical risks to businesses are scarcity, abundance (flooding) and degradation (pollution). Regulatory risks include government imposed water use restrictions and the pricing structure for supply and disposal. Community/reputation risks include the creation of unsteady social and political environments not conducive to a stable business operating environment, particularly for those organizations that have taken a stand on corporate responsibility and stewardship investment risks: as water resources increasingly become contested, water-related disclosures and assurances will be demanded by investors; the trans-boundary nature of water resources will lead to geopolitical conflict over ownership and usage rights and when you add the potential for trade restrictions on countries who have an increasing demand for water resources conflict may ensue; operationally scarcity of water will affect the bottom line through increasing infrastructure, supply and disposal costs.
With risks identified, how are you going to mitigate and manage them? Will you be reactive or proactive? Are you as a corporation going to be in a situation where you have to respond to an operational crisis around water availability? What about your product supply chain, is there a strategic risk to your operation that could result from water scarcity? Have you positioned your organization to be responsive to your client’s or market’s needs for a corporate responsibility platform? The answers to these questions will depend on your organization’s operations, corporate values, location and risk management culture. What will your management strategy be?
The two most popular methodologies to gauge your risk of water scarcity are to calculate your corporate water footprint and conduct a life cycle analysis of your product(s). The water footprint, like a carbon footprint, will quantify the direct and indirect water usage and impacts of this usage on your local and global environment. The other methodology would be to perform a life cycle analysis; this evaluates the environmental performance of your product throughout its useful life. The core goals of these evaluations will be to quantify how much water you use and discharge; how your water usage affects local and regional water resources; what the cumulative impacts this usage has on the local and regional water resources; and the impacts your usage has on future demographics, economic factors and climate change.
Water scarcity is a real environmental business concern. How you identify, manage and mitigate your organization’s response to this issue will affect how successful your facility will be in the environmental future.