Water is essential to the production and delivery of nearly all goods and Senior Analyst services. Pollution and overconsumption of water are making clean water an increasingly scarce resource, putting business and economic growth at risk. Companies can manage these risks by accounting for water-related impacts, understanding the financial implications of water scarcity, and integrating water management into decision-making.
WATER RISK IS FINANCIAL RISK
Economic development, population growth, and climate change are putting increasing pressure on water resources and water quality, creating risks for all sectors. For example, about 40% of power plants in India are in areas of high water stress, and 14 of the country’s 20 largest power plants experienced at least one shutdown due to water shortages between 2013 and 2016.[1] The World Economic Forum’s Global Risks Report said that microscopic particles of plastic waste were found in 83% of tap water supplies, and people eating seafood could be ingesting up to 11,000 pieces of microplastic each year.[2]
The price of water does not reflect its true cost. In many regions of the world, even where fresh water is scarce, water is underpriced and does not reflect the social and environmental costs of water pollution and scarcity (see Exhibit 1). A Trucost study found that if the full cost of water availability and water-quality impairment had to be absorbed by companies, average profits would be cut by 18% for the chemicals industry, 44% for the utilities sector, and 116% for food and beverage companies.[3]
