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Restoring the Blue in the Blue Planet

Posted by: Niranjan Nadkarni Date: 01 Mar 2023

Industry has to take the lead in water conservation. It is not just an ecological imperative but also makes business sense!

That the world is facing a water crisis is now part of disaster folklore. According to various reports:

• 2.2 billion people lack access to safely managed drinking water services.
• Over half of the global population, or 4.2 billion people, lack safely managed sanitation services.
• Almost 300,000 children under five die yearly from diarrhoeal diseases due to poor sanitation, poor hygiene, or unsafe drinking water.

Climate Change has exacerbated extreme climate events. This is evident from the disastrous flooding in Pakistan in August and September this year that left over 20 million people in need of humanitarian aid and the worst drought in Africa in 40 years that threatens 150 million people with extreme hunger.

In November 2022, over 45,000 global leaders, climate activists, corporate lobbyists and scientists met at Sharm el-Sheikh, a resort city in Egypt on the southern tip of the Sinai desert, for the 27th Session of the Conference of Parties (COP27) to discuss Climate Change and mitigating its impact. Yet the fear is that this very city, where the world’s future was being discussed, may run out of water soon!

Climate change’s impact on the Water Cycle is now well understood and documented. As the Sixth Assessment Report from the Intergovernmental Panel on Climate Change (IPCC) showed, global warming will lead to a surge in droughts, floods and storms, leading to enhanced difficulties in getting freshwater, growing food and producing energy.

Whether the action plan that emerges from COP27 is enough to mitigate the climate crisis will achieve its goals remains to be seen. If the past record is anything to go by, the prognosis, unfortunately, is not very optimistic.

But when it comes to tackling the issue of the freshwater crisis, there are certainly some low-hanging fruits. According to estimates, agriculture accounts for the maximum share, approximately 70%, industrial use is about 19%, and household about 11%. Unsurprisingly, the more affluent nations have a higher percentage of industrial usage of freshwater, while the poorer countries have a higher proportion of agricultural use.

This is where Industry has to take the lead. There are several reasons for this. First and foremost, of course, is the moral and ethical imperative. Ever since the industrial revolution, global prosperity has depended on the ever-enhancing exploitation of natural resources by the manufacturing sector. Now that the world is facing a crisis, it is entirely moral and ethical that the same sector takes the lead in conservation.

The second is also a question of the ability to invest. Transitioning to processes that reduce freshwater usage requires significant investments. The manufacturing sector is in a far better position to do this than a subsistence farmer from a developing country.

The third and, from a business point of view, an equally important aspect is that the risk-reward scenario is firmly in favour of taking an early transition to net-zero freshwater usage.

This is evident from the World Water Report 2020 by CDP, a not-for-profit charity that runs the global disclosure system for investors and companies to manage their environmental impacts. The report, based on responses by over 2900 companies around the world, said that in 2020 the total potential financial impact of reported water risks was up to US$301 billion – approximately equal to the GDP of a mid-sized country – while the money required to mitigate those risks was only US$55 billion.

This holds true on an individual company level as well. Based on responses, the report gave a few examples. Samsung Corporation, the South Korean electronics giant, reported a water stress-related potential financial risk of USD 3.4 billion with a potential negative impact of one per cent on its EBITA (Earnings Before Interest, Taxes and Amortisation), while the cost of the response to ameliorate this risk, the company reported, was about USD 500 million. This holds true for companies across regions and sectors – the cost of response is but a fraction of the potential financial risk.

Pressure from governments – through regulation – and civil society, as well as an enhanced understanding of the potential financial risks involved, has led to corporate actions on many fronts. Almost two-thirds of the companies responding to CDP have reported that their water withdrawals have reduced. “It appears that water savings, reuse and efficiency measures are starting to drive reductions in absolute water withdrawals,” the report said.

While this is good news, on another equally critical front, there is a cause for concern – wastewater discharge. According to data from the World Bank, only about 20% of the world’s wastewater is treated, resulting in humanity being far behind in meeting Sustainable Development Goal 6.3 on ambient water quality. Just 59% of the companies responding to CDP, its report said, were monitoring the quality of their discharges – something every company should be doing.

What needs to be done?

Companies need to focus their investments in water conservation not just only on their own operations but across their entire supply chains. A cotton textile manufacturer – a highly water-intensive industry, for example, should not only focus on achieving net-zero water usage in its own plants but also actively use regenerative practices throughout its supply chain. By not doing so, it would miss the opportunity to move from incremental to transformational change.

Even as companies pursue net-zero objectives in their own operations – either by wastewater reuse or nature-based solutions, they also need to prioritise investments that bring about fundamental, long-term enhancements to water security across their entire supply chains. This will not just help the broader community that they operate in but could also potentially open up entirely new business opportunities. Unilever, the global consumer products giant, for example, sees a USD 2-3 billion opportunity in making its personal care products water-smart.

Photographed from space, Earth is rightly described as a Blue Planet because of the presence of water that covers a little over 70% of its area. It’s time that the industrial sector took steps to restore the ‘Blue’ in our planet.

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