Businesses Warned to Heed Potential for Water Scarcity

March 3, 2009

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Too few businesses and investors are taking into consideration the potential for economic upheaval if water resources become as scarce as predicted, according to a recent report from CERES.

Industry has traditionally taken for granted the availability of clean, reliable and inexpensive water, however decreasing availability, declining water quality and growing water demand are straining resources – and the bottom line. Manufacturing and agriculture sectors can expect decreased water allotments, shifts towards full-cost water pricing and ever-more stringent water quality regulations, according to CERES. With the strain on overall water resources, the public will more intensely scrutinize corporate water-use practices.

Climate change and a world population predicted to grow by 50 million people a year will exacerbate the issue. Among regions affected, China, India and the western U.S. are already grappling with limited water supplies. Additionally, CERES reports agricultural and power plant production is being scaled back because of the frequency and intensity of heat waves and droughts in large parts of Australia, California and the southeast U.S.

In particular, the report singles out eight industries.

Electric Power: Drought has caused power plant shutdowns in Europe, Brazil and the southeast U.S., resulting in price spikes and hampering economic growth. The power industry comprises 39 percent of freshwater withdrawals in the U.S.
High-Tech: Eleven of the world’s 14 largest semiconductor factories are located in the Asia-Pacific region, where a severe risk of water scarcity remains. IT firms require huge amounts of clean water. For example, in 2007 Intel and Texas Instruments burned through 11 billion gallons making silicon chips. A water-related shutdown at a fabrication facility operated by these firms could result in as much as $200 million in missed revenue during a quarter.
Beverage: With parts of India facing water shortages, some Coca-Cola and PepsiCo bottlers lost their operating licenses. All newly proposed bottling plants in India face opposition.
Agriculture: Less water means higher food and commodity prices. About 70 percent of the water used globally is for agriculture.

Also identified by the report were industries related to apparel, biotechnology/pharmaceuticals, forest products and metals/mining.

Governments have taken note. By 2020, China’s water resources ministry seeks to slash water consumption per unit of gross domestic product 60 percent.

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