March 28, 2024
Water scarcity is becoming a global issue, with experts estimating a potential 53% shortfall in global water supply by 2050. This shortage could lead to negative economic growth, mass migration and regional conflict. As a result, corporations will be expected to play a significant role in finding solutions to the water crisis. Business leaders are already recognizing the risks and taking action to reduce, conserve and reuse water resources.
The risky road ahead
Businesses face various water-induced risks, including physical, market, operational, regulatory and reputational risks. Ignoring these risks may make it difficult to secure capital and customers. Therefore, many financial institutions and investors are using climate and water security data for investment decisions, and purchasing organizations are engaging with suppliers to improve environmental performance. The number of companies disclosing their water risk has tripled between 2015 and 2021. Water-related risks could generate a substantial impact on businesses, with an estimated maximum potential financial impact of USD 225 billion.
Recent water crises in the mining & resources sector
Water risks can close operations and strand assets in industries such as manufacturing, oil and gas extraction, coal mining and power generation. The mining sector is exploring water risk and opportunity by integrating sustainable water management practices and exploring innovative solutions to minimize water-related impacts. However, the narrow approach to water risk assessment may limit long-term growth, especially in the context of climate change.
To encourage a holistic approach to water risk, a framework can be used that captures the dynamic nature of water and the variety of potential impacts water may have on a business's long-term success.
- Diagnose
The first step for businesses is diagnosing the nature and severity of water risk, understanding water availability and requirements, and assessing vulnerability to climate change. - Design
Mitigation measures can then be designed based on the unique water risk profile, setting targets and budgets. Additionally, considering social and environmental impacts is important in addressing water-related opportunities. - Do
In the implementation stage, the water risk mitigation plan is rolled out - typically starting with your highest risk sites - with progress measured against the metrics developed in the previous stage.
The beauty and harsh reality of water is its necessity. While not every company 'sells' water, water is indeed everyone's business. Organizations must begin addressing the growing risk of water-related impacts to their global operations today – and prepare for a future that is likely to be drier and more unpredictable than ever.
To find out more about managing the water crisis, download the full study below.
RB contacts
Bill Malarkey, Partner
Mathieu de Kervenoael, Partner