An abundance of clean water is essential for human health, industry, agriculture and energy production. However, climate change, ecosystem degradation and unsustainable management is putting global freshwater systems increasingly under threat.
A recent report from World Resource Institute (WRI) shows that 25 countries, making up one-quarter of the global population, face extremely high water stress each year; using up almost their entire available water supply. And globally, around 4 billion people (about half the world’s populations) are exposed to extremely high water stress at least one month a year.
In terms of economic growth, data from WRI’s Aqueduct shows that, 31% of global GDP — worth $70 trillion — will be exposed to high water stress by 2050, up from 24% ($15 trillion) in 2010. And, four countries — India, Mexico, Egypt and Turkey — will account for more than half of the exposed GDP in 2050.
Water stress & the main causes
Water stress is the ratio of water demand to renewable supply and provides a measure for the competition over local water resources. The smaller the gap the more vulnerable a place is to water shortages.
Currently, demand for water is exceeding what is available globally as a result of population growth, irrigated agriculture, livestock, energy production and manufacturing. At the same time, a lack of investment in water infrastructure, unsustainable water use policies or increased variability due to climate change is affecting the available water supply. And this is only projected to increase – up to 20-25% by 2050– with very real implications for consumers, water-reliant industries and also political stability.
Businesses of all shapes and sizes will be affected by global water stress, however, the extent to which they are contributing to the problem will depend on their size, activity, area of operation and commitment to sound water management practices.
Food production companies, for example, are at the forefront of this issue as they use more than 70% of the world’s freshwater. Being in this position where they are both relying on water but also contributing significantly to water stress and pollution; it is imperative that they form part of the solution, both in order to survive as a business but also to ensure the world continues to have freshwater resources.
As WRI highlights food security is already at risk – with 60% of the world’s irrigated agriculture facing extremely high water stress — particularly sugarcane, wheat, rice and maize. Yet, in order to feed a projected 10 billion people by 2050, the world will need to produce 56% more food calories than it did in 2010. And this will need to be done whilst facing increasing water stress and climate-related disasters such as floods and droughts.
What can companies do?
- Impact assessments – to get to know their operations and the risks. These can either be based on “external” factors community access to water, ecosystem health, etc. (e.g. Life Cycle Assessment) or “internal” factors such as the company’s legal access to water supplies and services, operational efficiencies, investor confidence, consumer perceptions etc. (e.g. WBCSD Global Water Tool). Or use Water Footprinting methods which combines the two.
- Assess their operations based on levels of water stress – WRI’s Aqueduct Water Risk Atlas can be used to assess whether company operations are located in areas at risk of high- or extremely-high water stress.
- Operational changes – increase water reuse and recycling etc.
- Commit to sustainable agricultural techniques and extend these commitments to suppliers.
- Set freshwater science-based targets – The Science Based Targets Network is currently developing targets and framework to validate company freshwater targets .
Considerations for investors
For investors, keen to invest in sustainable food production companies, management of water resources needs to be taken into consideration. At Ethical Screening we provide an overview of various water-related metrics/policies within the environment section of our ESG reporting for all companies. These give an indication on how a company is faring in terms of water resource management and its impact on communities and the environment. We provide information on:
- Water use figures – how much water does the company use and has it shown a three-year reduction trend.
- Targets – has it set targets to reduce absolute water use.
- Operations in areas of water stress – does the company report on water stress and what percentage of operations are in areas of high- and extremely-high water stress.
- Water management plans – what policies or plans does the company have in place to manage its water use.
- Controversies – any significant incidents (pollution or community-related etc) within the last three years.
As water related issues increase in future, those companies more closely dependent on water, such as food producers, will need to manage the risks and minimise their impacts, to remain favourable to investors.
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