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What do tourism, agriculture, forestry, electric power and silicon chip makers all have in common? All are industries heavily dependent on water. According to a report released February 26 by the Pacific Institute and Ceres, industries and investors are not paying sufficient attention to their water uses and needs.
Recently with the green movement gaining traction more companies have been examining their "carbon footprint," but very few companies examine their "water footprint." Water footprints or inventories are needed because as Pacific Institute's Dr. Peter Gleick has stated "you can't manage what you don't measure." After the water inventories/footprints are completed, the analysis can explore where inexpensive water reduction and conversation measures can be implemented. Even if water bills might not seem cheaper due to conservation measures, energy costs likely will be less.
Few companies examine water use
Researchers interviewed 190 water-intensive companies. Only 20% looked at real risks of water shortages, and only 10% looked at supply chain risks. Almost no companies disclosed water use or looked at climate change impacts to water use.
Investors need to know water related risks
Global investors need to be aware of water related risks or they could incur significant financial losses as freshwater supplies dry up. High-tech companies, farms and beverage companies have lost money because they didn't envision the risks posed by water scarcity due to climate change and other variables.
Many water dependent industries exist and will be impacted
High-tech companies may not seem to be water dependent industries, yet they rely on billions of gallons of water to produce silicon chips. For the beverage industry, water quality is an issue in addition to water quantity and this poses safety issues. The ripple effect in industries is witnessed in the following example: water scarcity affects California crop supplies, which affects companies who sell farm equipment. Crop supplies affect produce prices and availability throughout the supply chain, which impacts grocery stores and restaurants across the world. For electric power, a lot of water is needed to produce hydropower and when water is constrained energy is also effectively constrained.
Investors have already lost money due to water shortages
Investors can no longer afford to ignore the important role water plays, and by extension how it may affect their retirement accounts, said Anne Stausboll, who manages CALPERS, the nation's largest public pension fund. CALPERS, is located near California's central valley so they understand the importance of water to agriculture. Still, CALPERS expects to lose money on their investments tied to California's agriculture, which suffered $260 million in crop losses this year due to a severe drought.
Strategies for responsible water management outlined
The report outlines specific actions for companies to practice responsible water management and increase disclosures regarding water use to shareholders. Dr. Gleick, also stressed that planning and analyzing water use is cheaper than dealing with water shortages. Therefore, he doesn't see the current financial crises as an argument for not addressing this issue, but the opposite. Risk assessment isn't a cost burden, but a wise management strategy.
Good examples of companies tracking water usage
Take the example of Levi Strauss & Co. the jean company. It has been a leader in supply chain analysis for the past decade. They reduced the amount of water used to make jeans by insisting that laundries that pre-wash their jeans meet strict water conservation guidelines. This type of cradle-to-grave life cycle assessment examines the impacts from the cotton fields to the consumers. Some corporations, i.e. Coca-Cola and Intel have begun to disclose the amount of water they use in financial reports, so investors can address water risk. Still, there is a wide river to cross before companies have sufficiently addressed water resource management and conservation.
Will this report scare or inspire investors to take water risks more seriously? We may start to see more changes after Pacific Institute presents their findings at the World Water Forum next month.