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Business Risk Related to Water – What’s Your Risk Exposure?

3p Contributor | Friday December 12th, 2008 | 2 Comments

d-rop.jpgby Karen Losee
According to Watching Water, A Guide To Evaluating Corporate Risks In A Thirsty World, a report issued by JP Morgan Global Equity Research (PDF Here), companies and investors have been quick to identify opportunities to invest in water-related businesses and technologies, but slow to identify the mounting business risks related to pressures on water supply.
What are your company’s business risks relative to water? What about your supply chain? Do you have water conservation and supply contingency plans in place?
The issue of business risk related to water was one of the topics at last week’s Corporate Water Footprinting Conference in San Francisco, California. The two-day conference featured a wide range of subjects such as water conservation, recycling, and risk assessment.
Kathryn Pavlovsky, Principal at Deloitte & Touche, in her presentation titled Global Water Supply Crisis: The Impacts for Business, described how future anticipated water shortages pose a serious threat to businesses that fail to develop water conservation and supply contingency plans in the near term. The overall consensus from the conference was that businesses, especially those in water intensive industries, are at increasing financial risk from global water supply issues. Leaders that fail to plan for risks related to water will ultimately be forced to address them by way of supply disruptions, increased costs, and diminished quality.


Watching Water provides business leaders with a framework for evaluating business risks related to water. The primary areas of risk are: physical (supply reduction or disruption), regulatory (the ability to obtain use or discharge permits) and reputation (public perception of a company’s use of freshwater and creation of wastewater).
Certain industries such as energy, mining, semiconductors, food, and beverages are more water intensive than others and therefore have more risk exposure related to water supply and quality. When assessing business risks related to water, it is critical to consider the difference between process water used in immediate business operations compared with water used throughout the supply chain. A retail clothing chain, for example, may use a relatively small amount of water in their daily business operations. Their supply chain, on the other hand, may be heavily dependent on cotton, a water-intensive crop, grown in regions where water is expected to become increasingly scarce and more costly.
A quick way to assess supply chain risks is to compare a map (PDF link) showing areas of the world where water is scarce with business and supply chain operations. Several tools such as the World Business Council for Sustainable Development’s Global Water Tool and the Global Environmental Management Initiative (GEMI) Water Sustainability Tool are helpful for identifying water use throughout a business and supply chain.
Water scarcity and diminished quality can ultimately result in business losses, higher business costs, and delayed or suppressed growth. According to Watching Water, these impacts can ultimately result in a higher cost of capital.
Many corporations are identifying process water use and conservation as part of their Corporate Social Responsibility (CSR) reporting. These reports tend to focus on a positive, public-relations approach to water use and conservation. On the other hand, companies are reluctant (or unable) to quantify and disclose risks associated with water use through security filings.
The key takeaway from this session on business risk is that business leaders and investors need look beyond water use identified in CSR reports and evaluate business process and supply chain risks throughout the entire value chain of the company.
For more information, see the following resources:
Water Scarcity Poses Threat to Global Business from Pacific Institute
World Business Council for Sustainable Development Global Water Tool
Water Sustainability Tool from GEMI (Global Environmental Management Initiative)
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Karen Losee is a Board Member of The Bay Institute of San Francisco, a sales and marketing professional, and an MBA Student at Presidio School of Management. As a native Californian familiar with water supply issues, Ms. Losee is working to combine her professional experience with her business education towards a career in sustainable water management. She is currently developing a strategic plan for a greenhouse gas management organization and is interested in the concept of “water footprinting”.


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  • Jen

    There was a parallel forum called “Challenging Corporate Control of Water: No to Privatization, Yes to Community Control of Water” which examined the agenda of privatization of water as well as the strengthening public institutions that deliver the public good of water to the public at large.
    Also fyi:
    http://www.foodandwaterwatch.org/press/releases/coalition-protests-corporate-water-conference-with-street-theater-and-press-conference20081202
    Coalition Protests Corporate Water Conference With Street Theater and Press Conference
    2008-12-02
    CONTACT: JEFF CONANT: 415-293-9905
    Coalition Protests Corporate Water Conference With
    Street Theater and Press Conference
    San Francisco, CA – On December 3, a coalition of public interest organizations and affected individuals will protest a large corporate water conference in San Francisco entitled “Corporate Water Footprinting: Towards a Sustainable Water Strategy.” The organizations will highlight water abuses perpetrated by the conference’s corporate sponsors with street theatre followed by a press conference.
    “A conference geared towards sustainable use of water is indeed welcome, but having the largest water abusers in charge is not,” said Maude Barlow, chairwoman of the Council of Canadians and Senior Water Advisor to the United Nations. “We call on the United Nations and all concerned governments to come together in a global water summit to advance positive solutions towards a just and sustainable water future.”
    Members of Food and Water Watch, International Campaign Against Coca-Cola, the Winnemem Wintu Tribe, the Indigenous Environmental Network, Movement Generation, and others will convene at 12:00 at Justin Herman Plaza to hold a mock trial of some of the largest conference sponsors including Coca-Cola, Dean Foods, and Nestle Waters. A press conference will follow.
    “More than a billion people lack access to safe drinking water, and climate change is further depleting freshwater resources,” said Wenonah Hauter, executive director of Food & Water Watch. “Given the absence of perspectives from those without access to water, this conference appears aimed more at polishing the images of some of the world’s biggest water abusers rather than addressing the very real global water crisis.”
    “Providing access to water cannot be ensured through privatization and must not be subject to the whims of the market. Over 3 billion people live on less than US $2.50 a day and the commodification of water literally means that a substantial part of the world – particularly the poor and the marginalized – will be unable to afford water,” said Amit Srivastava of the International Campaign Against Coca-Cola, who will also be speaking.
    Also speaking at the conference will be Caleen Sisk-Franco, Chief of Winnemem Wintu Tribe and representative of Indigenous Environmental Network, who will talk about how water mining near Mt. Shasta is threatening their future water supply.
    In addition to the December 3 action, on December 2, the same organizations will be hosting a forum at the Mission Cultural Center for Latino Arts (2868 Mission Street, San Francisco) from 7 pm to 9:30 pm., entitled “Challenging Corporate Control of Water: No to Privatization, Yes to Community Control of Water.
    Food & Water Watch is a national consumer advocacy organization based in Washington, DC. Visit http://www.foodandwaterwatch.org.
    International Campaign Against Coca-Cola mobilizes international pressure on the Coca-Cola company for its abuses in India and globally. Visit http://www.IndiaResource.org.
    Indigenous Environmental Network is a network of Indigenous Peoples in North America working towards sustainable livelihoods and environmental justice. Visit http://www.ienearth.org.
    Blue Planet Project is an international civil society movement begun by The Council of Canadians to protect the world’s fresh water from the growing threats of trade and privatization. Visit http://www.blueplanetproject.net

  • Joshua C

    In some texts risk is described as a situation, which would lead to negative consequences. It may be positive or negative. In financial aspect (investment) it may refer to a return or loss but in the case of WallStreet it can be more associated to loss when the financial advice of the most well known financial adviser Jim Cramerfailed to live up with the expectations of investors to gain the expected return on their investment.