Water & Business: How to avoid the looming 'crisis'
In less than 16 years, the UN says that the demand for fresh water will outstrip supply by 40%. Businesses are acutely aware of the impending risks of managing with less water, but many are confused about exactly what to do, and where it should start. Peter Knight provides some clarity.
Given the mixed signals sent by water campaigners and the unpredictability of long-term forecasting, the confusion showed by business about the impending 'water crisis' might be perfectly understandable, but it’s a poor excuse for inaction.
Unlike the problem of too much carbon, which applies globally, water is very much a local issue. In Europe, for example, the tap is expected to continue gushing in the north but in many parts of the water-stressed south, it will soon run dry. This will harm agriculture and cause political tension as cities compete with farmers and industry for dwindling supplies.
This story is already being played out in different parts of the world. Take the USA, where a three-year drought in California and very low snow falls have brought devastation to farmers and is now causing deep concern among the city fathers in the urban sprawl of Silicon Valley.
Business is caught in the middle. Some heavy water-using sectors, like agriculture, mining and manufacturing, are very much part of the problem, while those in services know they face risks but don't know how to contribute to solutions.
Business faces three distinct risks:
- Physical - too much or too little water (scarcity, drought, flooding) and poor water quality can harm business operations and disrupt supply chains.
- Regulatory - tighter laws and regulations can restrict supply and lead to higher prices.
- Reputational - being branded as a polluter, water waster or a company that takes other people's water can ruin reputations, as Coke and PepsiCo discovered when they were targeted by water campaigners in India in the early 2000s.
Whether it's too much or too little H2O, the message to companies is the same: you have got to become a good water steward or suffer the financial consequences of disrupted supply chains, increased legislation and reputational damage.
To really grasp the essential role that water plays in the commercial world, you have to get your head around the idea of 'virtual water', or what some call 'embedded water'. This is the amount of water it takes to grow your breakfast banana or make something, like the screen you are reading now.
Some virtual water you can actually see, like that in your orange juice. But most is invisible because it was used to make the now dry item before you.
To produce an apple takes about 68 litres, an egg 200 litres and a pair of jeans 11,000 litres (infographic below). The availability of that water, its ownership and what happens to it once used, all contribute to the reason why business faces a fast-flowing crisis that it has very little control over.
Water scarcity is a fact of daily life for 1.2 billion people. With the UN forecasting that by 2030 almost half the world's population (47%) will be living in areas of high water stress.
This is serious. The long-term indications are that our climate is changing and with that comes wonky weather which affects our water supply. While the rain may be from God, water is controlled by mortals. This determines not only its availability but also the politics of regions and nations.
That orange juice, if produced in Israel, could contain water 'owned' by the Palestinians but used by Israeli farmers, and drunk by you.
Infographic 1: How much water it takes to produce...
Most virtual water is used, not consumed, and in the process it is inevitably polluted. And, as populations grow and clean water becomes increasingly scarce, so does the cost of cleaning what you use - hence the current large investments being made in water treatment works.
While those outside the manufacturing industry can rightly claim they themselves are not the users, this does not excuse them from taking responsibility for the actions of their suppliers. Water use has joined carbon, human rights, child labour and the host of other risks in the supply chain.
What to do
But what should business actually do about water and where does it make a start? We identified water leaders from different sectors around the world and looked at what they were doing to manage water. Here are three examples...
- Cisco Systems - the technology networking company based in California keeps close tabs on water in its supply chain. It does this through its code of conduct, audit processes, and sustainability metrics for its preferred partner companies.
This thorough approach can reveal win-win opportunities. For example, Cisco worked with its printed circuit assembly partners to reduce water use in product processes. Up to 75 million litres of water were being used each year just to wash the boards after soldering.
The company found a solution that used a new way of soldering which removed the need for washing. In one stroke, this eradicated the need for wash water and helped Cisco save over US$1m a year in water treatment and disposal.
- PepsiCo - the world's second largest food and drink company has experienced the consequences of reputational risks posed by water. In the early 2000s, it was dragged into political conflicts in India and accused of using too much of the scarce water needed by communities near its bottling plants.
This experience has made water efficiency a high priority throughout the company's facilities around the world. It met its goal of improving water-use efficiency by 20% per unit of production by 2015 (over 2006 levels) four years ahead of schedule.
In its agriculture operations, it is using a tool developed by Cambridge University called i-crop. This combines field measurements of soil moisture levels with online data modelling to optimise watering methods. In trials across 46 UK potato farms that supply the company's Walkers subsidiary, water use on fields fell 8% while crop yield rose 13% as a consequence of using the tool.
- IKEA - the Swedish-based retailer is one of the world's biggest users of cotton and other fabrics. The textile industry, now largely based in Asia, is one of the biggest users of water in the manufacturing sector.
IKEA asked the question: if textile dyeing pollutes water, why use water? This is the thinking behind a new way of dry dyeing that uses liquid carbon dioxide and pressure, instead of water. The development of the DyeCoo system is backed by IKEA and Nike - another big user of textiles.
"DyeCoo's waterless dyeing technology is a truly innovative system that could bring real environmental and cost benefits for the textile industry by reducing water and chemical use," says IKEA's MD of GreenTech, Christian Ehrenborg.
Infographic 2: Seven steps...
These companies, and others we studied, show a similarity in approach to managing their water risks. Our research identified the seven things that successful companies do when navigating water.
- Understand: how you use water and how much you use (your water footprint) and the risks that your business faces if the flow stops.
- Strategise: analyse usage, prioritise areas of risk for early action, and plant to shrink you footprint.
- Act: tackle your challenges and capitalise on opportunities.
- Report: disclose your performance.
- Communicate: tell your water story (especially to investors)
- Engage: listen and be humble, but inspire others to follow your lead.
- Learn: anticipate change and stay ahead of the trend.
Peter Knight is Chairman of The Context Group.