Water Stress Poses Huge Risks for Companies: These Tools Can Help

Photo: Lake Mead in Nevada, where water stress has long posed risks to the surrounding region.

Water stress is a perennial problem, and is only projected to worsen with climate change. One of the United Nation’s Sustainable Development Goals (SDGs) related to water is to “ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity” by 2030.

It’s a lofty goal, especially considering every continent already faces some level of water stress. Further, in order to have any hope of reaching that goal, public and private stakeholders alike must fully commit to action. Corporations, in particular, will need to address water use, at every stage of the process.

More corporate risks are driven by water stress

Companies understand that water stress poses risks to both their profits and sustainability performance. According to CDP, an organization that helps companies and cities disclose their environmental impacts and risks, in 2020 companies reported financial impacts of water risks at $301 billion, five times higher than the cost of addressing those risks. The disparity between impact and costs is particularly stark in the food and beverage, agriculture and materials industries.

But knowing and taking action are two different things. Luckily, coalitions and tools exist to help companies make a plan of action for the most effective and efficient water stewardship targets and goals. For example, in 2007 the United Nations Global Compact created the CEO Water Mandate, a public-private initiative that establishes a platform for cross-sectoral collaboration and multi-stakeholder partnerships to develop and share best practices and actions. So far, 190 companies across virtually every sector have endorsed the initiative.

In 2020, the CEO Water Mandate created the Water Resilience Coalition, an industry-driven coalition aimed at reducing water stress by addressing six different commitment areas: direct operations, supply chain and water management, collective action, public policy, community engagement and transparency.

To date, 19 companies have signed the Water Resilience Coalition’s pledge, which includes developing and implementing a water-resilient value chain and achieving a measurable and net-positive impact on water basins, all by 2050.

Companies have several tools to help them manage water risks

The past few years have also seen an increase in the number and sophistication of tools available to help companies achieve sustainable water stewardship. The World Resources Institute (WRI), an NGO and partner of the CEO Water Mandate, has been at the forefront of providing resources for decision makers in both the public and private sectors.

For example, in 2011, WRI launched the prototype of Aqueduct, an open-source platform that includes maps and peer-reviewed data to help understand and pinpoint water risks worldwide. Since then, the tool has become one of the most trusted sources for data on water stress in the world. WRI has since expanded the tool to include data on floods, droughts, water stress, and, most recently, the NGO introduced Aqueduct Food, which maps water-related risks to food production.

Ecolab, one of the founders and leaders of the Water Resilience Coalition, has developed a tool that takes it one step further: the Smart Water Navigator. The Smart Water Navigator builds on the foundation that WRI and others have built by placing a monetary value on water quantity and quality risks and help users develop an action plan to mitigate such risks. Colin Strong, a research associate who works on corporate water stewardship at WRI, noted that the Navigator could help all water users in a basin participate effectively in addressing water stress risks as it helps companies responsibly manage water issues. The tool helps provide companies an action plan for improving facility water management, target setting, stewardship and conservation.

Ecolab developed the Smart Water Navigator in partnership with S&P Global Trucost and Microsoft; the Minnesota-based company also has a strong set of data partners and advisors, including WRI, the Pacific Institute, the UN CEO Water Mandate and the Alliance for Water Stewardship.

Even before the launch of the Navigator, companies took advantage of the Water Risk Monetizer, now part of the Navigator tool, to help with better water management. For example, in 2017, Microsoft used the Monetizer to prioritize a water management project at its San Antonio data center to create a site-specific water efficiency and quality plan in a region with high levels of water stress.

Climate change will intensify water stress

Climate change will continue to stress water supplies, and with it, water stress will further stress the economy. Companies may understand the risks to their bottom line but they also must actively address them. The most straightforward initiatives are at the operations level, but water use in the supply chains is greater and often in water-stressed areas. This reality is especially true for companies with agricultural suppliers, such as the food and beverage, CPG (consumer packaged goods) and apparel. For example, agriculture accounts for 85 percent of General Mills’ global water footprint.

It’s no longer enough for companies to focus solely on operations. Addressing supply chain water demands is more complicated, but tools like Aqueduct, the Smart Water Navigator and others can help chart a path for a more sustainable water future for companies, even in the regions with the highest risks.

Image credit: Nick Fewings/Unsplash