Focus on collaboration to reduce water related risks

As the global water shortfall is set to increase significantly in the years to come and more and more regions will be exposed to water stress, businesses should focus their water management on collaboration, research by PwC shows. The firm outlines the steps to take to successfully establish this.

Professional services firm PwC recently released its ‘Collaboration: Preserving water through partnering that works’ report, in which it explores the risks for businesses associated with water and how businesses can collaborate with stakeholders to share water successfully.

With the availability of water declining and the demand for water increasing, with the Organisation for Economic Cooperation and Development (OECD) projecting an increase of 55% by 2050*, a global shortfall of water is becoming increasingly real. According to the World Bank, this shortfall between forecast demand and the available supply of water will be 40% by 2030.

In the World Economic Forum’s Global Risk Report 2015, water crises are ranked as the top risk in terms of impact, ahead of diseases, weapons of mass destruction and conflicts. Almost half (46%) of CEOs partaking in PwC’s 17th Annual Global CEO Survey say resource scarcity and climate change will transform their business in the next five years.

UN-Water predicts that by 2030, 47% of the world population will live in areas of high water stress, which reflects how well the availability of water meets the human and ecological demand. This stress is partly caused by economic development as this leads to an increased demand for water, resulting from urbanisation, increased wealth, the rise of middle classes, changing diets and an increased need for energy. Especially the Middle-East and Africa, where water deficits already exit, are expected to experience elevated levels of water stress.

As most, if not all, business are dealing with water in some way, either to cool, heat and/or clean or as a part of their supply chain, a shortfall of water can result in very challenging business conditions. According to the consulting firm, the risks linked to water are obvious for businesses: from not having enough to flooding, from increased costs to disruption and financial loss, and ultimately the risk of losing their license to operate. When asked, 68% of FTSE 500 companies say water was a substantive risk for their business in 2014, a number that is up from 59% in 2013.

To anticipate the water risks and to strengthen their resilience to these risks, businesses should follow three steps:

• Identify and understand how water-related risks will impact growth
• Take action to reduce and better manage your water use
• Collaborate with the right partners for sustainable systemic resilience to water issues

Especially the last step – collaboration is very important as businesses share the need for water with other businesses, communities, industry, farmers, and other stakeholders. To help businesses to set up the right kind of collaboration, PwC has outlined a plan, based on its experience working with clients:

“Continued effective water management is becoming more complex and costly for business.  Identifying and managing the potential material risks both in direct operations and in the supply chain - for example, pollution, flooding, irregular or reduced supply, governance, regulation, climate change, disaster threat, reputational issues etc. - is an important step to managing the bottom line and avoiding sudden costs,” explains Malcolm Preston, Global Sustainability Leader at PwC. “Ultimately, securing water will come down to effective collaboration with other users in the water basin and when stakeholders come together, even with the best intentions to work together, they often have hugely differing perspectives and demands.”

* This increase will mainly come from manufacturing (+400%), electricity (+140%) and domestic use (+130%).