Water scarcity an immediate threat to global business: Survey

The dried cracked bed of the Qaraoun artificial lake is seen in West Bekaa, Lebanon, Sept. 19, 2014.
Mohamed Azakir | CNBC
The dried cracked bed of the Qaraoun artificial lake is seen in West Bekaa, Lebanon, Sept. 19, 2014.

The need for water and the lack of it are threats to whether some businesses can continue to grow, according to a new survey.

And some of those threats could become real within a year.

Two-thirds of global businesses polled say they face severe water scarcity risks for their operations, according to report by CDP, a nonprofit group that provides environmental information on businesses and government entities to investors.

The risks could have a dramatic impact including loss of revenue, decrease in shareholder value and substantial changes in strategies, said business execs.

But a more important finding, said Paul Simpson, chief executive of CDP, is that 22 percent of businesses surveyed said insufficient water resources could limit their growth between now and the next three years.

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"That figure is very surprising and an increase from previous surveys we've done," explained Simpson on a phone call with CNBC from London.

"It shows how serious and immediate the problem of having good water supplies has become to businesses," he said.

Competition for water

The analysis by CDP is based on the water management data of 174 companies listed on the FTSE Global 500 Equity Index. Companies include Merck, Unilever and Swedish clothing company H&M.

Key findings include:

  • Two thirds of businesses report exposure to water risk
  • 22 percent of companies anticipate that issues around water could limit the growth of their business
  • Number of investors pressing for corporate accountability on water and related information through CDP has increased by more than 300 percent since 2010
  • 62 percent of respondents believe responsibility for water issues lies at the board level, up from 58 percent in 2013
  • 90 percent of companies are integrating water into their group-wide business strategies and 82 percent setting goals and targets to reduce water use

The water scarcity businesses face can come from a lack of available clean water, water overuse, or not enough water from severe weather events like drought, explained CDP's Simpson.

"You have the western part of the U.S., especially California in drought but also places like China, India, Mexico and Brazil," he said.

"This often leads to businesses competing for water among themselves and the local population," he added.

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And that competition is likely to heat up.

The world's population is growing by roughly 80 million people each year. Plus, changes in lifestyles and eating habits in recent years are requiring more water consumption per capita, according to the United Nations.

Worldwide, agriculture accounts for 70 percent of all water consumption, compared with 20 percent for industry and 10 percent for domestic use.

But in industrialized nations, industries consume more than half of the water available for human use. Belgium, for example, uses 80 percent of the water available for industry.

Placing a value

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Simpson argued companies have to do a better job of managing their water needs going forward.

"It requires making this a top issue and taking a real water stewardship approach to the problem," he said. "Some companies are doing it, some or not."

The survey pointed to Merck and Unilever as among those making better efforts on water management, by evaluating how water quality and quantity affects their growth strategy, according to their statements to CDP.

Meanwhile the survey said companies like Germany-based BASF are trying to capitalize on water management polices by offering products for saving water, recycling and reuse, which the company says could potentially generate up to $1 billion is sales by 2020.

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But what may be missing from the discussion over water use is the true value of a dwindling resource, says Christiana Peppard, a professor of science, theology and water ethics at Fordham University. "Ethics needs to be able to trump economics," she argued.

"It's time to change the conversation about water from 'Who's entitled to what' to 'How do we sustain this vital, economic life giving resource for the short and long term future,' " she said.