Samuel Taylor Coleridge’s The Rime of the Ancient Mariner may well prove prophetic: “Water, water, every where / And all the boards did shrink / Water, water, everywhere / Nor any drop to drink.”
The world may not yet be as desperate for the “elixir of life” as the dying sailors on Coleridge’s becalmed ship but water, and its continuing availability, is shaping up to be one of the most important resource issues of this millennium.
A survey of chief executives and world leaders, carried out by the World Economic Forum for their Global Risk Report, indicated that they see water risk in the top five global risks to business, a list that also includes chronic fiscal imbalances and systemic financial crises.
A lack of water might mean you can’t operate; become involved in conflict with local communities who feel you are compromising their water needs and new water regulations that may make it uneconomical to operate in specific locations. For these reasons and many more, investors increasingly want to know what companies’ exposure to water risk is.
But even though water is critical to economies, business and public health, it has been historically difficult to work out where the high and low water risk areas are in the world. The World Resources Institute (WRI) is hoping to change that with the launch of Aqueduct, a new version of global water-risk mapping tool.
Aqueduct uses more up to date data, as well as new data sets and is higher resolution, more comprehensive and has a more sophisticated user interface that the previous version. It combines maps with 12 different water risk indicators, including physical water stress, water quality, regulatory and reputational risk, and, for the first time in a water-risk tool says WRI, groundwater stress information.
The maps are free to use and anyone can key in where they are based or upload supplier locations, and choose the sector they work in. Users can customise the level of individual indicator risks to create a bespoke risk profile. They can then view overall, as well as individual, indicator water risk scores and maps.
The tool also includes a “water risk news” feature that geocodes key water-related stories around the globe, so users can see what is happening on the ground where they operate.
Increasingly, businesses are waking up to water risk, and WRI has worked with a number of them to develop the tool, including Proctor & Gamble.
“Water is an incredibly important part of both the manufacture and use of P&G brands,” says Len Sauers, the company’s vice president of global sustainability. “We want to make sure all of our operations are in locations that are best for both our business and the environment, so partnering to understand water scarcity and related issues throughout the world is critical.”
Last year, MacDonalds asked 353 of its biggest suppliers to map their facility locations on the previous version of Aqueduct and report their water risk levels back to the corporation.
Misjudging water risk can damage a business, as Coca-Cola’s Indian subsidiary Hindustan Coca-Cola Beverages found out in Kerala. It was accused of depleting the water sources of the surrounding communities and though it disputed the claims, shut down its operation in 2005 with its reputation in tatters.
But it’s not just companies and investors that should pay attention to water risk; governments need to as well, as water stress can have serious national and international consequences.
Last year, for example, the US Department of Agriculture said 70% of US national disaster areas had been created by drought conditions and high temperatures. This has had a devastating impact on soybean and corn crops and is estimated to have led to a drop in GDP of 0.5-1%. In Brazil, a lack of water supply means the country is facing the possibility of power rationing for the first time in a decade. Two thirds of the country’s energy is generated by hydro, so dropping water levels will have an impact on energy supply and prices, which have increased by 60%.
Aqueduct’s water risk maps can help countries measure and tackle these kinds of impacts, but given the importance of water, it’s curious that few governments seem to treat water risk as a priority.
It was this inertia that inspired 45 companies to sign a special communiqué at Rio+20 highlighting the urgency of the global water crisis and calling on governments to address it.
“Part of the problem is that people see water as an inexhaustible, free resource when it isn’t,” says Betsy Otto, director of Aqueduct at WRI. “As a result we have not invested as we should in understanding it, tracking it, even pricing it and allocating it well. In a large part, this is governments’ responsibility.”
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