By mid-June last year, Chennai had gone 191 days without rain—two days shy of the longest dry spell in the city in a decade. The four main reservoirs of the city went completely dry and the acute water shortage triggered a crisis. The city of five million saw violent clashes breaking out in residential settlements, hotels and restaurants temporarily shut down, air conditioning in the city metro was turned off, and employees were asked to work from home as businesses were forced to shut down.
The situation in Chennai serves as an emphatic reminder of how our social, cultural and economic well-being is inexorably tied to natural resources such as water. It should worry us that year after year, we are drawing upon these finite resources at an unsustainable rate, creating imbalances in systems that underpin our future economic growth, societal value and environment. Sustenance of life on this planet requires an urgent shift to sustainable patterns of development—one that breaks the link between economic growth and environmental degradation.
Businesses are at the forefront of this decline of natural resources as they face risks of major operational disruptions arising from degradation of natural systems while also holding immense potential in halting and reversing this decline. As was evident in Chennai, the risks to our freshwater systems is one such material issue for businesses.
Water is a shared resource between a diverse set of actors, competing for its domestic, agricultural and industrial uses. It is vital to businesses and their processes, products and operations. It is used in heating, cooling, cleaning, and as a raw material in production or along supply chains with no cost-effective alternatives for these uses. Lack of water—in sufficient quantity and acceptable quality—can disrupt production, cause reputational brand damage and even lead to shutting down of operations in certain regions.
These risks related to the availability of water should especially worry businesses because in times of crisis, businesses are allocated residual water resources only once the demand for domestic and agriculture uses is fulfilled. Efforts to augment water supply through efforts such as desalination, drilling of deep wells or transporting surface water, are not only extremely difficult and expensive, but can also lead to other unsustainable consequences.
Businesses in India and across the world are increasingly starting to see the financial impacts from the risks water poses to them. A report from the World Resources Institute (WRI) found that water scarcity caused 14 of India’s 20 largest thermal utilities to shutdown at least once between 2013 and 2016, costing those companies $1.4 billion. According to CDP, in 2018, 64 global companies including major global brands reported 84 water related risks in India, including increased water stress, increased water scarcity, drought and declining water quality.
How can businesses work towards mitigating the risks from water? Since water is a shared resource with competing demands for agricultural, domestic, industrial and environmental uses, exposure of a business to risks related to water will not only depend on how it chooses to mitigate these risks within its own operational boundaries but also from the cumulative use of water in a river basin that they share with different users. An effective mitigation strategy for a business will be a combination of recognizing water as a core and strategic business issue and taking appropriate action beyond their operational boundaries, to ensure effective water governance at the basin level. WWF’s Water Stewardship Framework–a ladder of five sequential steps that indicates activities businesses can take in their journey to become good water stewards–can offer important guidance for businesses in this regard (see figure below).
Figure: WWF Water Stewardship Ladder
A proactive recognition of water risks as a core strategic priority can also be a source of commercial value to businesses. If the processes, products and operations of the businesses are optimized for their water and energy usage, it will be a source of long-term, competitive advantage. There is a hugely attractive space for businesses to meet the evolving demands for new products and services that help companies use water more efficiently. According to a report by McKinsey, water infrastructure will require a cumulative investment of $11.7 trillion between 2013 and 2030. A significant portion of this will need to come from businesses.
As the freshwater ecosystems and the services these ecosystems provide face unprecedented threats, it is in the long-term interest of a business, its shareholders and the larger society to ensure that freshwater resources are sustainably used and managed. Businesses in the past, be it the telecom or the digital revolution, have been the catalysts driving deep-rooted changes in the way we live. It is time they do the same for water by being a responsible water steward.
Shashank Singh is a Senior Manager with WWF’s Sustainable Business division with expertise in sustainable finance and banking.