When I got up this morning, I had a shower, filled my kettle with fresh water from a tap, and walked through the rain to my office, where a water cooler provides drinking water all day. So it might seem odd that I’m writing about Thirsty Planet, CIMA’s new report about water scarcity. The truth is that, while many of us aren’t yet affected, shortage of clean water is a huge and growing problem, set to affect individuals and businesses right across the globe. I was amazed to learn that 40% of people worldwide already experience water shortages that threaten agriculture, industry and personal health. And this figure is increasing all the time, with demand for water set to outstrip supply by 40% by 2030.
We might be surrounded by lakes, rivers and oceans (and rain) but less than 1% of water on earth is suitable for human consumption. Water use is soaring due to population growth, changing lifestyles, and increased industrialisation. Add to this the impact of climate change and water pollution, and you can see why we’re heading for a crisis.
Demand is increasing most rapidly in Asia, where populations and economies are growing fast. Already, more than half the cities in China are struggling to provide enough clean water. This is bad news for many corporations, as these are the regions they’re relying on for future growth, either as low-cost manufacturing centres or as expanding consumer markets. So, while a car manufacturer in rainy England might feel protected from water shortages at home, just a small blip in the water supply in Asia could dramatically affect profits if the company uses steel produced in China.
Thirsty Planet makes it clear that water scarcity will affect the bottom line of all companies – not just those in water-intensive industries such as beverages or agriculture. It emphasises the key role that CGMAs can play in managing the risks using their risk management, analytical and forecasting skills to help create truly sustainable business models. The report also provides information about how major companies, including Puma, Coca Cola, Woolworths and Rio Tinto, among others, are putting together strategic responses to water scarcity. Most companies begin by measuring their water use across operations and supply chains, and looking at ways to reduce consumption. But it doesn’t end there. Water scarcity also brings huge opportunities for companies to innovate – designing new production processes, for example, or developing new products and services. Unilever, for example, has responded to consumer demand in India, where water is relatively expensive, by introducing a new washing detergent that works effectively with less water (saving 2 buckets of water per wash potentially saving around 14 billion litres of water a year)
I was fascinated by the concept of measuring the true value of water, which is what Puma did when it put together an environmental profit and loss account. The company valued its environmental impact at a huge €94.4m – equivalent to 46% of its net profit. When measuring the cost of water use, it included indirect costs such as the impact on ecosystems and the difficulty of replenishing supplies, as well as direct costs such as extraction and processing. CGMAs are in an ideal position to gather information that will help identify the true value of water to their organisation. Businesses that use this approach to valuing the water they use, and take steps to invest in and protect supplies, stand the best chance of surviving – and thriving – in a world with less water.
Sandra Rapacioli is Head of Sustainability at CIMA