Istanbul:
Declining water availability and quality coupled with growing demand for the resource are creating immense challenges for global companies but very few are appreciating the new category of risk to their future businesses, experts have said.
Global climate change is exacerbating water scarcity problems, but few businesses and investors are paying attention to this growing financial threat.
While some companies have made significant improvements in using water more efficiently in their own operations, they will need to look deeper into their supply chains and into the performance of water regulators, warned experts from the World Wildlife Fund (WWF) and US-based water research body, the Pacific Institute, at the ongoing 5th World Water Forum.
Water is so basic a commodity and has so far been taken for granted that many businesses have failed to realise the extent to which disruptions in supply or an increase in its prices can affect their future operations. As of now, a strained supply as well as increase in procurement cost is predicted with increasing frequency.
For India, the warning serves as a wakeup call. India Inc has been known to be somewhat environmentally conscious and some of the Indian companies have been reducing their carbon footprint and selling carbon units in the international market, but little efforts have been done to bring down the water footprint. With availability of water in the country coming under pressure, Indian companies stand to lose their competitive advantage if they do not step up efforts to be more water conscious.
In the wake of the global economic slowdown, companies are being prompted to reassess their entire set of risks to not only remain competitive but in some cases, to even remain in business. By assessing their water risks, companies are also expected to regain the trust of investors, who have seen massive erosion in their investment value.
Polaris Institute program director Jason Morrison said the companies that will best shield themselves from the unexpected would be those that have assessed water requirements and risks in both their direct and indirect operations and in an integrated way with other emerging risk categories such as climate and energy.
",Water risk assessment should include physical risks, such as running out of water, and reputational risks where companies can be perceived as irresponsible users of a scarce resources by communities, consumers of their products, regulators or financiers",, added Morrison.
Decreasing availability and growing demand are also leading to decreases in companies' water allotments for manufacturing, shifts towards full-cost water pricing, more stringent water quality regulations and increased public scrutiny of corporate water practices.
Even investors want companies to measure not only their direct use of water, like that required and used in making of their products, but also water used deeper down the supply chain. Reports indicate that some companies have already started to drill down the supply chain to measure their water footprints. The move is similar to what a host of companies did to measure their carbon emissions and remain environmentally conscious.
Morrison said companies should also consider the risk of more onerous and costly regulation and financial risks as water shortages translate into higher energy prices, higher insurance and credit costs and lower investor confidence.
WWF International freshwater manager Stuart Orr was of the view that companies would need to focus beyond their own water efficiency too.
",If you are an efficient business sitting in a poorly managed river basin, you are still exposed to extremely high water risk",, he said, adding, ",It will be better for business to be seen making a positive contribution to public policy processes over water in a climate of water shortages rather than as a powerful player interested mainly in grabbing or defending its share of water",.
A report released earlier this month by the Pacific Institute along with Boston-based coalition of investors, Ceres, identified water-related risks specific to eight key industries, including electric power, hi-tech, beverage and agriculture.
On the beverage industry, which is dominated by two players, Coca-Cola and PepsiCo, the report says that the two bottlers lost their operating licenses in parts of India due to water shortages and all major beverage firms are facing stiff public opposition to new bottling plants -- and to buying bottled drinking water altogether.
On the socio-economically important industry like agriculture, the report says that reduced water availability is already impacting food commodity prices, as shown by last year's sharp increase in global rice prices triggered by a drought-induced collapse of rice production in Australia. Roughly 70 per cent of the water used globally is for agriculture, with as much as 90 per cent in developing countries where populations are growing fastest.
Experts have warned that the growing scarcity of water could deeply impact Indian agriculture and the livelihood of lakhs of people attached to the sector.
Disclaimer: Girish Chadha is a freelance journalist and NDTV.com takes no responsibility for the views expressed in the article. The article published does not in anyway reflect the opinion of NDTV.com.)
Global climate change is exacerbating water scarcity problems, but few businesses and investors are paying attention to this growing financial threat.
While some companies have made significant improvements in using water more efficiently in their own operations, they will need to look deeper into their supply chains and into the performance of water regulators, warned experts from the World Wildlife Fund (WWF) and US-based water research body, the Pacific Institute, at the ongoing 5th World Water Forum.
Water is so basic a commodity and has so far been taken for granted that many businesses have failed to realise the extent to which disruptions in supply or an increase in its prices can affect their future operations. As of now, a strained supply as well as increase in procurement cost is predicted with increasing frequency.
For India, the warning serves as a wakeup call. India Inc has been known to be somewhat environmentally conscious and some of the Indian companies have been reducing their carbon footprint and selling carbon units in the international market, but little efforts have been done to bring down the water footprint. With availability of water in the country coming under pressure, Indian companies stand to lose their competitive advantage if they do not step up efforts to be more water conscious.
In the wake of the global economic slowdown, companies are being prompted to reassess their entire set of risks to not only remain competitive but in some cases, to even remain in business. By assessing their water risks, companies are also expected to regain the trust of investors, who have seen massive erosion in their investment value.
Polaris Institute program director Jason Morrison said the companies that will best shield themselves from the unexpected would be those that have assessed water requirements and risks in both their direct and indirect operations and in an integrated way with other emerging risk categories such as climate and energy.
",Water risk assessment should include physical risks, such as running out of water, and reputational risks where companies can be perceived as irresponsible users of a scarce resources by communities, consumers of their products, regulators or financiers",, added Morrison.
Decreasing availability and growing demand are also leading to decreases in companies' water allotments for manufacturing, shifts towards full-cost water pricing, more stringent water quality regulations and increased public scrutiny of corporate water practices.
Even investors want companies to measure not only their direct use of water, like that required and used in making of their products, but also water used deeper down the supply chain. Reports indicate that some companies have already started to drill down the supply chain to measure their water footprints. The move is similar to what a host of companies did to measure their carbon emissions and remain environmentally conscious.
Morrison said companies should also consider the risk of more onerous and costly regulation and financial risks as water shortages translate into higher energy prices, higher insurance and credit costs and lower investor confidence.
WWF International freshwater manager Stuart Orr was of the view that companies would need to focus beyond their own water efficiency too.
",If you are an efficient business sitting in a poorly managed river basin, you are still exposed to extremely high water risk",, he said, adding, ",It will be better for business to be seen making a positive contribution to public policy processes over water in a climate of water shortages rather than as a powerful player interested mainly in grabbing or defending its share of water",.
A report released earlier this month by the Pacific Institute along with Boston-based coalition of investors, Ceres, identified water-related risks specific to eight key industries, including electric power, hi-tech, beverage and agriculture.
On the beverage industry, which is dominated by two players, Coca-Cola and PepsiCo, the report says that the two bottlers lost their operating licenses in parts of India due to water shortages and all major beverage firms are facing stiff public opposition to new bottling plants -- and to buying bottled drinking water altogether.
On the socio-economically important industry like agriculture, the report says that reduced water availability is already impacting food commodity prices, as shown by last year's sharp increase in global rice prices triggered by a drought-induced collapse of rice production in Australia. Roughly 70 per cent of the water used globally is for agriculture, with as much as 90 per cent in developing countries where populations are growing fastest.
Experts have warned that the growing scarcity of water could deeply impact Indian agriculture and the livelihood of lakhs of people attached to the sector.
Disclaimer: Girish Chadha is a freelance journalist and NDTV.com takes no responsibility for the views expressed in the article. The article published does not in anyway reflect the opinion of NDTV.com.)
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