2Sustain

A new report from Lloyd’s and WWF offers a straightforward directive that I believe can no longer be ignored:

Businesses around the world must act now if they are to fend off the threat of a growing water shortage.

After all, all goods require water at some point in their production –but water is a finite resource. According to the report, Global Water Scarcity: Risks and challenges for business,  only 3 percent of water in the world is fresh water, and only 1 percent is readily usable to humans. What’s more, this limited supply is threatened by the increased demand for food and water resulting from population growth,  climate change and higher per capita water requirements resulting from increased living standards.

Unfortunately, though, as I have pointed out before, even companies in water-intensive industries are still struggling with weak management and disclosure of water-related risks and opportunities.

“Water scarcity is already a reality for some businesses and as this trend increases all risk managers will need to consider their organization’s exposure,” says Lloyd’s CEO, Richard Ward. “The most simple risk management response is to reduce your own water use or that of your suppliers. However, businesses cannot manage this risk alone and will need to work with the wider community to improve water management and protect this critical resource.”

Specifically, the report identifies two strategies for companies to manage water risk:

• The three Ms – Producers should: measure their water risk; mitigate it; and market themselves as leaders in managing water use in the sector.

• The three Is – Businesses in the service sector can: consider water risk profiles when identifying suppliers; influence suppliers to mitigate water use or meet set standards; and consider water risk to businesses and supply chains when making investment decisions.

As the report explains, water presents several dimensions of business risk, including operational, reputational, supply chain and security. The security risk is particularly acute in parts of the world where water could become a source of inter-state conflict, such as India and Pakistan competing over access to the diminishing supply of water from the Indus river basin.