It’s no accident that New York City, the largest economy in the United States, was built between two rivers, with access to water reservoirs, an ocean and eventually the Great Lakes via the Erie Canal. Reliable access to water has always been silently essential to strong economies for what it enables, from supply to transportation. Any country or industry that wants to stay competitive must properly manage its water to ensure a long-term supply and to avoid exposure to crises like Hurricane Sandy.
Companies around the world have been making this connection for a long time. Yet it’s only getting more difficult given greater societal demands, economic competition, population growth, climate fluctuations, competing needs and fiscal pressure.
Water-intensive companies making operation location decisions increasingly consider the reliability of local water management when determining long-term strategic investments. Water and its availability can singularly propel economic success or, as history has witnessed, establish certain doom.
Areas without reliable water supplies are naturally considered high-risk, and as this trend continues, the economic consequences of poor water management will become more severe. This point was boldly made by a survey by the World Economic Forum that ranked the growing water supply crises as the leading global risk when considering crisis likelihood and impact.
Policymakers: Take note. Proper water management will increasingly be seen as an important signal for attracting business investment, particularly in areas which are vulnerable to water scarcity, such as parts of the American Southwest. Industries that are water-intensive, such as beverage, agriculture or steel, will simply be unable to locate facilities in areas with poorly-managed supply or dwindling resources.
Businesses that aren’t water intensive will also face pressures from water scarcity. Businesses require power, and power plants require a substantial amount of water to operate. Water shortages can delay the construction or operation of power plants. The EPA has cited 36 states as facing water shortages. Lack of water has stopped commercial or industrial projects not just in California, but in Georgia, Tennessee, South Carolina, Idaho, Arizona and Montana. The situation is even more apparent in water-scarce countries such as India. A recent report from the World Resources Institute notes that nearly 80 percent of India’s future power plants will be located in water-scarce or water-stressed areas, forcing very difficult decisions on the allocation of water and sometimes causing water-related power outages.