Businesses urged to view water as economic risk rather than environmental issue
Efforts to combat water scarcity are "absent from the portfolios" of investors, and it is now the responsibility of the private sector to step up water efficiency practices to build understanding that water is an economic risk as well as an environmental one.
That was the conclusion of a panel of water experts at the Financial Times (FT) Water Summit in London on Wednesday (12 September), who agreed that, even though businesses are aware of future risks associated with water scarcity, little is being done to commune with investors to fund resilient solutions.
The FT event was opened by the President of Hungary and member of the High Level Panel on Water Janos Ader, who called on businesses to answer the “most important question of the 21st century”: how can water security enhance energy security and support a “demographic timebomb”?
Ader claimed that growing urbanisation – which will see 70% of the world’s population living in cities by 2050 – along with an ongoing epidemic surrounding water pollution and plastic waste, and the energy sector’s reliance on water as issues, have created an “unprecedented challenge not seen since the dawn of history”.
“We have 20 years at most to prevent a looming water crisis and this, according to the World Bank, will require an investment of $600bn,” Ader told delegates. “When it comes to research and development, the water sector is behind other industries. We are seriously falling behind in building and mobilising global infrastructure and we are underutilising available funds.
“We need to be sure that companies from food & beverage, textiles and cars are doing the upmost to prepare for the technological changes and to replace plastic bottles and packaging.”
Ader alluded to the coal industry’s reliance on water – which accounts for 7% of global water consumption and equates to supplying water for 1.2 billion people – as an example of how humanity had ignored “invisible risks” of water consumption. He also referred to a recent Ellen MacArthur Foundation study, which warned that by 2050 there would be more plastic than fish in the oceans, as another example of how nations and businesses were failing to address water issues.
Drop in the ocean
In response to Ader’s bleak outlook on water consumption, delegates from agricultural firm Monsanto, the Organisation for Economic Co-operation and Development (OECD) and the UK’s Department for International Development all called on businesses to realise that economic growth won't be possible unless critical water issues were addressed.
The panel warned that, on top of the World Bank’s $600bn estimation, current investment levels are just a “drop in the ocean” for what will be needed. While it will eventually fall on the shoulders of national governments to secure both economic and water security, the panel claimed that the framework provided by the Sustainable Development Goals (SDGs) would allow companies to mobilise action immediately.
“We tend to place our water issues as environment issues,” the Department for International Development’s senior advisor Jean-Paul Penrose said. “Instead of looking at water as a wider opportunity for economic growth.
“Until we can get governments to move with a line of thinking that sees ministers of finance realise that the future economic growth of the nation is down to better water management, then there’s a political shift that needs to take place.
"The SDGs place the emphasis on the private sector to work with governments to influence society. A government left on its own will not be as imaginative with solutions to the problems. A multi-stakeholder approach will help others to see that water is a driver of growth, not just an environment issue.”
While the OECD’s head of water Xavier Leflaive agreed with Penrose’s comments, he felt that the water sector has “done its homework” to the point of understanding how water scarcity would impact the economy. The issue for Leflaive was that the water sector was only “talking to itself”, and needed the aid of the finance sector to address the lack of movement.
“There are a range of different investors which have the capacity to support the private sector, but water is absent in the investment portfolio. I think there’s a huge opportunity to combine different sorts of finance to boost returns,” Leflaive said.
Even with the capabilities of the financial sector, the panel noted that many businesses were failing to mobilise action on water security. Penrose pointed out that his Department is working with the World Bank to address transboundary water issues in Africa and absorbs the “high-risk” initial costs, in an effort to provide a lower-risk economic opportunity for companies to drive change in how they interact with water.
With the World Resource Institute (WRI) claiming that 33 countries will be at severe risk from water-stress by 2040, Monsanto’s director of collaborations for developing countries Mark Edge called on the private sector to turn to new innovations – even the more controversial ones – as a means to spark mass collaboration on agricultural methods.
With agriculture accounting for as much as 70% of global water use, Monsanto believes that genetically-modified crops – such as drought-resistant maize which looks set to be deployed in Africa loyalty-free by the company – could change how farmers and producers interact with water in developing countries.
“We offer a different perspective,” Edge added. “Water use is a complex set of issues with no simple answer that will apply across the globe and it really does require that attitude to collaborate.
“We have our role to play and there’s a real need to be thinking about a holistic systems approach and that there isn’t a single aspect to solving water security. Management of the whole system is needed to minimise water use and everyone has a role to play.”