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Steps to Mitigate Water Scarcity Risk

As the economic costs of severe weather increase, consulting firm Ernst & Young has compiled a list of steps companies facing water scarcity should take to assess and mitigate the risks.

In 2012, the US Department of Agriculture declared more than 50 percent of all US counties as natural disaster areas because of severe drought, which affected millions of acres of cropland, suppressing farm profits and driving up the price of soybeans and corn. Drought conditions are also threatening closure of the Mississippi River – a shipping lane that carries $7 billion in coal, grain and other goods every year, according to Water Resources at the Corporate Level: Moving from a Risk-Based Approach to Active Management.

As a result of these growing problems, the consultancy says companies should:

  • Develop a corporate water policy
  • Understand the current state of water risks at the watershed level
  • Understand their business’s water footprint, both locally and across the value chain
  • Engage internally at the facility or corporate level and externally with local stakeholders to evaluate the risks and impact
  • Report externally and seek independent assurance.

Executives can start to manage water more effectively once they understand where water poses material risks to their operations and supply chains, the report says.

In October last year, consultants KPMG released a report claiming that 60 percent of the world’s 250 largest companies lack a long-term water strategy.

The study, which analyzed corporate responsibility reports across 34 countries, found that while 76 percent of the world’s largest companies address water issues in their CR reporting, only a third report on their full water footprint. One in five report on part of their water footprint.

Figures from the General Accounting Office released in 2003 predicted that by 2013 at least 36 states could face water shortages. But by 2008 at least 36 states were already dealing with periodic if not chronic water shortages, with California, New Mexico, and Arizona at the top of the list.

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