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Thirsty planet: Business responses to water scarcity 

January 25 2012

Water is a finite resource. As the National Geographic observed, “All the water that will ever be is, right now.” Indeed, water levels are maintained through a process of re-circulation. However, increased demand for water and water quality and distribution issues have led to water scarcity in many parts of the world.

The United Nations estimates that by 2025 two-thirds of the world could face water ‘stress’ situations. Already in China, more than half the cities are struggling to get clean water to their residents and recent water crises have shut down entire regions. As potable water becomes scarcer, even in developed regions, prices will rise and access become threatened.

The challenge of water sustainability is broader than securing access to this resource for businesses or individuals. Water is a vital component of natural ecosystems, essential for plants and animals, as well as the overall health of area economies. Healthy ecosystems are needed to control erosion and water run-off, to provide natural water purification processes and maintain appropriate water flows through a community.

“The invisibility of biodiversity values has often encouraged inefficient use or even destruction of the natural capital that is the foundation of our economies.” – The Economics of Ecosystems and Biodiversity (TEEB) study (2010)

Water scarcity is not simply a social and environmental issue but an economic one. Water-related issues may quickly change the way we do business. Production methods, customer requirements, investor sensitivities and capacity levels that shift in the wake of constrained water availability could threaten many successful business models.

Water-intensive industries like beverages and agriculture are obviously at risk and this is where we find many of the companies leading the discussion and implementation of water sustainability.

But even sectors less obviously in danger must consider the potential threat to their models. Ford for example, uses about 400,000 litres of water for each car it makes. Financial impacts are a critical part of water risk evaluation. It is therefore essential that management accountants understand the business risks and potential impacts on company performance posed by water scarcity.

CGMA designation holders have the skills, such as risk management, analytics and forecasting, to help their companies create sustainable business models. They can provide the right information to help decision makers understand the true cost of business so that they utilise resources more efficiently for both the short and long-term.



6 Comments


Comments
Joseph Jefferis

The "value" of water is increasing as the waater "usages" increase.  One scientific development for the deciders of water''s value need to consider is the April 2011 United States Department of Energy announcement regarding a new breakthough in water splitting techniques which expands the utility of water resources dramatically.

How does one value cheap hydrogen fuel from plain water? Cheaply? Expensively?  or should we hold off on calculating until the technology is out of the laboratory and actually commercialized.

LOS ALAMOS, New Mexico, April 22, 2011?Los Alamos National Laboratory scientists have developed a way to avoid the use of expensive platinum in hydrogen fuel cells, the environmentally friendly devices that might replace current power sources in everything from personal data devices to automobiles.

www.lanl.gov/.../cheaper-hydrogen-fuel-cells.html

The time to discuss this disruptive technology is upon us.  The technology is not a secret, just taboo for global accounting professionals.

Jun 19, 2012 8:53 AM
Comments
Sandra Rapacioli

A revised version of this report was uploaded on the 14th May. Thanks for all your feedback.  

May 24, 2012 6:07 AM
Comments
Sandra Rapacioli

Bryan- thank you for bringing that error to light. We will amend this asap. Unforunately the Ford statistics seems to have been reported incorrectly in a few places including here:

www.waterstrategies.co.uk/.../Linklaters%20Quarterly%20-%20Why%20Water%20is%20the%20New%20Oil.pdf

May 11, 2012 9:57 AM
Comments
Bryan Moore

The statement regarding water usage at The Ford Motor company (400,000 litres per vehicle) is wrong by a margin of roughly 100 times. According to the Ford Sustainabilty Report 2010/11 they use 4800 litres (4.8 cubic metres) of water per car manufactured. Ford have obviously taken water reduction in manufacturing very seriously as the have reduced the amount of water used per vehicle every year since 2001. The amount used then was 9700 litres per vehicle.

The original data can be found at:   corporate.ford.com/.../issues-water-progress

Unfortunately an error of this magnitude brings all other figures quoted into question. It was only because it was such an enormous figure that it prompted inquiry which took less than 5 minutes.

Apr 8, 2012 2:41 AM
Comments
Joseph Jefferis

Recent scientific developments with regard to water splitting, electrolysis, present unique and potentially disruptive issues for water use and preservation:

www.lanl.gov/.../cheaper-hydrogen-fuel-cells.html

The world''s most important resource could be a commercially viable cheap source of hydrogen fuel/energy very soon. The effort to rapidly commercialize this technology is underway.

Feb 10, 2012 10:50 AM
Comments
Adrian Clifton

An excellent report. Far too many of us take water for granted, yet it is by far our most important resource.

Jan 31, 2012 1:41 AM
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