THE RELEVANCE OF WATER SECURITY TO THE BUSINESS SECTOR
Each year the World Economic Forum releases a Global Risks Report, based on an exhaustive survey of over 1000 business leaders worldwide. In the 2021 report, extreme weather, climate action failure and human environmental damage were the top three risks identified by likelihood. On top of this, biodiversity loss and natural resource crises came in the top ten risks by impact. Water crises have ranked as one of the top five risks to economies annually since 2012 (now categorized under "natural resource crises").
Likelihood and impact of certain key risks in 2021. Source: World Economic Forum
For businesses with high water dependency, such as food and beverage companies, the stakes are particularly high. Consider the global beverage industry, which is expected to reach nearly $2 trillion in value by 2021. A 2017 study showed that if companies fully absorbed the full costs of water availability and water quality impairment, this could equate to an average decline in profits of 116% for food and beverage companies.
Water Risks to Business. Source: CEO Water Mandate
James Quincey, CEO of The Coca-Cola Company, speaks to why water security is essential to their business.
Worse still, according to the World Economic Forum, at the current rate (business as usual), there will be a 40% gap between global water supply and demand by 2030 (WEF, 2017).
Estimated change in GDP due to water scarcity — business as usual vs. efficient water polices. The image on the left predicts changes in water availability if no meaningful measures are taken. Source: World Resources Institute.
WHAT IS WATER SECURITY AND WHERE IS THE CHALLENGE?
The Asian Development Bank (ADB, 2013) says that societies can enjoy water security when they successfully manage their water resources and services to satisfy household water and sanitation needs in all communities; support productive economies in agriculture, industry, and energy; develop vibrant, livable cities and towns; restore healthy rivers and ecosystems; and build resilient communities that can adapt to change.
Yet there are many societies that fall short of this ideal — 25% of the world’s population now live in countries that face extremely high levels of baseline water stress (WRI, 2019).
Already, the World Business Council for Sustainable Development estimates that water shortages cost the global economy over US$323 billion annually. To put this into perspective, this is roughly double the value of the entire global wheat harvest (FAO, 2018).
Arguably, the topic of water security is heavily connected to all six of the top environmental risks identified in the WEF’s 2019 Global Risks Report.
By improving water security, businesses can help address some of these key risks.
The extent to which improved water security can address some of the top 10 risks in The World Economic Forum’s The Global Risk Report 2019 (scale = 1–3). Source: TNC
WHAT CAN BUSINESSES DO ABOUT IT?
One action businesses can take to improve water security in the basins they operate in and source from is to set progressive and forward-thinking water targets. Targets should be context-based and should:
1. Respond to priority water challenges within the catchment;
- Challenges may include access to water, health and sanitation; water quality and quantity; water governance; and extreme weather events.
2. Be informed by site’s contribution to water challenges and desired conditions;
- For example, a company looking to address the challenge of water quality should figure out how much a site contributes to decreased water quality in the catchment, understand what the desired water quality condition should look like, and then take action according to the company’s contribution to decreased water quality.
3. Reduce water risk, capitalize on opportunities, and contribute to public sector priorities.