By Emilio Tenuta, vice president of corporate sustainability, Ecolab
The dynamics of the world’s water situation are well understood: fresh water is increasingly scarce; it is diminishing in quality at an unacceptable rate; we do not have enough of it where we need it; and demand is only increasing as populations rise, demographics shift, and the climate changes. It’s clear that global fresh water scarcity poses significant physical, economic, regulatory, and reputational risks. These are risks that not only impact businesses, but also the communities that rely on the same, often-dwindling, water sources.
So why does most of the dialogue today focus on the issues rather than solutions? Is it because the problems seem too big to tackle? Or perhaps because many of us are not yet feeling the impact? Or could it be that we simply do not know exactly how to change the way we operate to protect ourselves from risk? In most cases, it’s probably a combination of all of the above.
The good news is that we are starting to see a shift as business leaders set aggressive goals to reduce their impact on the world’s fresh water supply. Acknowledging the issue and associated risks is the first step. The next step is making the business case for water stewardship, which is often more challenging than one might expect. From there, the necessary framework is in place to operationalize a responsible water management strategy that supports business goals.
Let’s take a more in-depth look at this approach:
1. Acknowledge the issue and associated risks at the site and enterprise level
By 2030, it is estimated that the world will need 30% more water. This shared resource has complex connections to energy, food, culture, safety, and health, so scarcity will have a widespread impact. Every industry, community, and individual around the world has a role to play in ensuring the vitality of limited water resources.
For the private sector, increased demand for clean water threatens businesses’ license to operate. When water must be rationed, domestic and agricultural use are most often the public priorities. Depleted water sources spur policies that place demanding regulations on private sector water use. Public pressure can challenge the reputations of even the most trusted companies. The risks are real, and they need to be acknowledged and understood by water users.
A smart water management strategy starts with understanding the water-related risks facing your business, which could result in business disruption, supply chain interruption, rising costs of operation, and barriers to growth (both expansion and capacity). Those risks include:
- Increased demands on local water supplies
- Insufficient water quantity or quality
- Inadequate water infrastructure
- Public pressure to reduce water use
- Changing climate conditions altering historic water availability
It is important to understand these risks at the site level, as well as the broader implications for business operations in the surrounding community. The goal is to drive an overall strategy for the community that strikes a balance of environmentally sustainable, socially equitable, and economically beneficial water use.
For example, in places like Saudi Arabia, water demand is increasing dramatically due to rapid population growth, rising per-capita consumption, urbanization, and industrialization. These factors compound the challenges of limited natural water resources and increase the need to further reduce dependence on groundwater. The rapidly widening gap between demand and supply has to be carefully managed by companies operating in this region.
If we assess the real and future risks facing us at the site level, enterprise level, and surrounding community, we can begin to see how our operations will affect others in our shared watersheds and vice versa, resulting in responsible water stewardship practices at the watershed level.
2. Make the business case for water stewardship
To truly address water-related risks, the private sector needs to make the business for shifting to water stewardship. In order to do so, we need to substantiate the strategies and investments required to reduce current and future water risks.
Why is this so difficult? Because in many cases today, the market cost of water is actually inversely proportional to its availability. Today’s cost of water does not reflect current and future risks associated with the limited availability of water. This makes it hard to demonstrate a meaningful return on water-related investments.
Quantification of risk at the site level helps make the business case for more responsible water management. By understanding the physical, regulatory, reputational, and financial risks at the site-level, we can determine a risk-based premium for water use. Applying this risk premium to the cost of water helps to create a credible, rational business case that will drive smart decision-making.
3. Operationalize water stewardship practices
After identifying site-specific risks and applying risk-based premiums to the cost of water, the next step is to operationalize this thinking into business strategy. By integrating risk into business decisions, companies can target high-risk locations and choose the most appropriate water management strategies for the situation. This approach provides the context required to drive investment in water-saving innovations that will help meet operational and sustainability goals.
It is important to remember that the risks driving this process are not exclusive—nor are they controlled—by a single site. The shared nature of water makes it important to incorporate the dynamics of the local watersheds into decision-making. The Alliance for Water Stewardship’s International Water Standard provides a six-step framework that helps water users implement responsible water practices to mitigate risks related to water quantity and quality, work collaboratively with neighboring water users to address shared challenges, and minimize environmental impact. We truly will “sink or swim” together.