In the coming decades, a number of factors will strain the world’s freshwater supplies, increasing the need for effective water management. A growing number of companies have begun to prepare for the ensuing risks and opportunities–and they hope to gain a competitive edge by being better positioned for a future of water scarcity.

why should businesses conserve water?

Freshwater worldwide is limited, mostly inaccessible, and coming under increasing strain from several factors. According to the U.S. Geological Survey (USGS), only three percent of all the water on earth is freshwater. Of that, three percent, 68.7 percent is locked in icecaps and glaciers, 30.1 percent is groundwater, and only 0.3 percent is surface water–water found in lakes, rivers, and swamps.

Available freshwater may face a growing threat from climate change. If the polar ice caps melt, the nearly one-third of the world’s freshwater classified as groundwater could become contaminated along coastal aquifers from rising ocean levels. Changes in weather patterns could reduce the snow or rainfall in areas reliant on those sources of water. An increase in global temperatures could force farmers to use more water to grow crops.

Climate change is not the only force that could increase demand for freshwater. The growing global population and the rising wealth of third world nations are among a myriad factors sure to boost demand. According to the United Nations Population Fund, the world’s population has tripled over the last 70 years, yet water consumption has grown six-fold. Satisfying the needs of 77 million additional people each year requires a greater percentage of the available water.

The current world population is using 54 percent of the accessible freshwater. If consumption rates remain steady, by 2025 our global use of freshwater will reach 70 percent. But if per-capita water consumption rates increase worldwide to the levels in developed nations, 90 percent of freshwater supply could be in use by 2025. As the world’s freshwater needs rise, water management will become an integral part of doing business.

risks and opportunities

The World Resources Institute, Goldman Sachs, and General Electric Co. announced last month an initiative to measure water risks and opportunities. The initiative would include an index to identify and mitigate water-related corporate risks and would provide advice to business leaders and clients on water-related investments. The Water Index would use publicly available data on physical scarcity and water quality, and would examine the regulatory, social, and reputational factors not previously incorporated in water risk assessments. The creation of the index is evidence that these organizations believe water management will be a growing business issue. Some companies, including Walmart and Coca-Cola, are already attacking the water risk issue.

In a study conducted for Walmart, on site water recycling programs were found to save 80 to 90 percent of the water required from municipal water utilities, and 85 percent of the energy required to deliver that water to Walmart. The energy savings from on site wastewater recycling was found to be more significant than the savings from installing solar panels on the roof of that Walmart store.

Coca-Cola, a company already familiar with the social and reputational risks of water scarcity, announced via Chief Executive Neville Isdell that it plans to become water neutral. Though Isdell did not commit to a timetable, he said Coca-Cola wants to ensure that the more than 80 billion gallons of water it uses each year either returns to the earth, or is offset by conservation programs.

While we have already covered the business risks of water scarcity, the creation of a Water Index clearly indicates that leading organizations believe there are worthwhile opportunities for water management. For instance, aging water infrastructure in developed nations will need upgrades and replacement–providing project opportunities for many companies. In the developing world, the construction needs will be even greater.

There are other opportunities, too. Companies like Walmart and Coca-Cola will need technologies to help along their water recycling and management programs. New water extraction methods like desalination will see further deployment to meet rising demand. One such plant is being planned for Southern California. In nations where waterborne illnesses are rampant, purification or filtration technologies are needed to rein in what the World Health Organization calls the “world’s number one killer.” Rivers, lakes, and groundwater have been polluted by industrial waste, giving rise to the need for technologies that could extract the pollutants. Perhaps the most universal opportunity for water management is in agriculture, which accounts for an astonishing 70 percent of the world’s freshwater use annually.

In the greater business community, there seems to be a lack of awareness about impending water scarcity issues, and the business implications of decreasing available freshwater. Water prices worldwide are expected to rise in the coming decades. With demand for freshwater on the rise and supply remaining relatively constant, water volumes available to businesses will be smaller, more difficult to obtain, and more expensive. Water supply shocks in states like California, Texas, and Georgia did little to convince businesses to address the problem, but it’s clear that companies that move first to assess water risks and take action will have an advantage in what is sure to be a big business in the future.

photo credit: Hyflux Ltd

When Neville Isdell, the former Chairman and CEO of Coca-Cola, spoke at the Gathering of One Hundred conference in Washington D.C., he expressed his thoughts on how business can tackle climate change. He called for the formation of new partnerships between business, government, and civil society, as part of what he referred to as the “triangle of sustainability.” Adding, “the political climate has changed. There is a new urgency among governments to address climate change.” Mr. Isdell also observed that this change must come amid our current economic recession, and that the role of business is to:

• Address our footprint;
• Extend our handprint; and
• Help shape the regulatory blueprint

In an effort to address their footprint, Coca-Cola is working on reducing their packaging, and increasing the amount of bottles they recycle. To better extend their handprint, Mr. Isdell says Coca-Cola has changed their refrigeration technology from HFC’s to a more efficient CO2 variety, and has challenged the rest of the industry to join them so the price can come down and the technology can be more broadly deployed. Finally he spoke of helping to shape the regulatory blueprint by endorsing the Caring for Climate Leadership platform of the UN Global compact in 2007.

For all that companies are currently doing, we need to do more.  As Mr. Isdell said, “The mindset of business needs to move from ’should,’ to ‘must.’”

What do you think of Coca-Cola’s initiatives? Are they on the right track or is there another motive?

photo credit: World Economic Forum (flickr)