The availability of water is set to be the next global issue and, like climate change, the effects will be profound unless it is managed adequately.
The report by Insight Investment might be dismissed as unimportant by those working outside business sectors that do not depend heavily on water for their production processes. However, to do so would be at least short-sighted if not catastrophic.
There is concerning evidence that water tables are falling on every continent across the world. The US Central Intelligence Agency in their report of global trends to 2015 state that within less than ten years more than 3 billion people will live in countries that are “water-stressed”. Looming water shortages on this scale present a real threat to geo-political security. Many developing economies are using underground water reserves at a rate faster than they are being replenished. When the water reserves run out, agricultural and manufacturing productivity will plummet. China and India are two countries with high population growth which both face the prospect of severe constraints on development in a water-scarce world. This is likely to have profound effects on future investment patterns, economic growth and social stability. Like climate change, the issue of water management is a global problem that will have a disproportionate impact on certain localities. While companies like Nestlé are at the vanguard of action on this front, expect to see many more entering into the debate on strategies to combat water scarcity.
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Water the next oil?
Companies in sectors that rely heavily on water – such as beverages, metals and mining as well as food – must consider water in their business strategies and develop effective and proactive strategies to deal with the risk posed by future water shortages.
Water: the next oil? – published by Insight Investment, the UK investment management company, at the end of March – points out that water “may emerge as this century’s most essential – and contested – resource” and that business risks associated with water are increasing. The briefing points out that water scarcity can affect profitability and that poor management of water-related issues can also damage brand or reputational image leading to a possible loss of ‘license to operate’.
Nestlé has pledged to change the management of its water by looking at its operations, consumers, agricultural activities and local communities and the way in which water is managed in each of these areas. In the Water Management Report the food manufacturer pledges to do the following:
Strive for the highest standards possible in water extraction, use and disposal;
Encourage farmers to promote good water management in agriculture, thereby passing on knowledge of best practice to its supply chain;
Plan to share best practice to “improve the state of water management throughout the world”.
Nestlé concludes the report by outlining its Commitments on Water, which it presented at the World Water Forum in 2006. These are:
Working to continue reducing the amount of water used per kilogramme of food and beverage produced;
Assuring that their activities respect local water resources;
Taking care that water discharged into the environment is clean;
Engaging with agricultural suppliers to promote water conservation among farmers;
Reaching out to others to collaborate on water conservation and access, with a particular focus on women and children.
Water can be a business opportunity according to a report from the World Business Council for Sustainable Development. Business in the World of Water: A WBCSD water scenario to 2025 provides businesses with a tool to address water challenges. The aim of the publication is to help businesses to engage with the growing need for global water management. It is hoped that corporate action on water issues will lead to governments and civil society meaningfully engaging with business about water development.
Contact World Business Council for Sustainable Development 0041 22 839 3100 www.wbcsd.ch
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