Last week, and Circle of Blue opened their World Water Day data visualization challenge, calling on designers and data experts to create visualizations on the topic of urban water issues. The challenge highlights the difficulty shared by many sectors in presenting the complexity of water issues in simple, easy-to-understand ways. For companies, the challenge is compounded by the need to present information on different types of water-related risks for multiple locations and to a variety of audiences.

By focusing on three primary areas—facility and product water use and discharge, supply and quality risks in regional watersheds, and partnerships to help manage shared risks—companies can generate the information they need to clearly demonstrate how they understand and manage their water-related risks.

Regardless of whether you are a beverage company, a telecommunications provider, or a mining company with multiple sites around the world, global trends in population growth, urbanization, and land-use changes demand a strategic response to water risks. Consider the following facts:

  • Fifty percent of global industrial water consumption is used to generate power.
  • In 60 percent of European cities with more than 100,000 people, groundwater is being used at a faster rate than it can be replenished.
  • According to the OECD, global spending on water infrastructure is projected to outpace the level of spending on all other infrastructure sectors on an absolute- and percentage-growth basis through the year 2020.
  • According to the 2008 Global Water Intelligence/OECD Global Water Tariff Survey, a significant minority of cities have introduced steep increases in what they charge for water and wastewater services.
  • State of the art (but still incomplete and imperfect) climate models consistently predict that precipitation will become more variable, with increased risks of drought and floods at different times and places.

For companies, these facts point to a high degree of uncertainty with respect to business continuity, reputation, product margins, supply chain stability, and growth markets. To mitigate this uncertainty, companies can focus on three primary areas to prioritize and manage water-related risks.

Facility Water Use and Discharge

At the facility level, a water audit—a detailed examination of where, how much, from what source, and in what condition water enters and leaves a facility—can enable an assessment of current water uses, provide data needed to reduce water losses, and forecast future demand. For manufacturing sites, many companies divide the amount of water used by the quantity of the product manufactured to determine the volume per unit produced.

Water quality throughout a facility is equally important, as this may draw attention to areas where water discharge from one process can be rerouted for use in another process.

Some key questions may include:

  • Does water used in production come from sustainable or renewable sources?
  • Are there other local users that rely on these same sources?
  • Do water discharges generated during production activities result in water-quality impacts through deposition?
  • Are there national or regional water-discharge standards that must be met? If not, does your company have a standard policy on its discharges?

Supply and Quality Risks in Regional Watersheds

One of the most significant characteristics of water-related risks is that the impacts of companies’ water use vary depending on local hydrological, social, economic, and political factors. In other words, one unit of water is not equal to another unit of water. The same amount of water withdrawn in an arid, urban area versus a rural, wet region has completely different impacts and associated risks. As a result, companies need to understand the broader regional characteristics of the regions where manufacturing facilities and key sourcing areas are located.

Therefore, on a regionally specific basis—and at a minimum for key areas of operation and sourcing—companies will need to consider:

  • Potential shortage risks
  • Potential flooding risks
  • Trends in regional demands
  • Deficiencies in institutional or political water governance capacity
  • Disparities or inequities in local and regional water access and pricing
  • Impacts of the company’s water use and waste runoff on the local community and surrounding ecosystems

The World Business Council for Sustainable Development’s Global Water Tool is an easy tool for companies to use as a first step in mapping their water use and assessing risks relative to their global operations and supply chains. The Global Environmental Management Initiative’s Collecting the Drops: A Water Sustainability Planner is another publicly available tool to help companies conduct their water risk assessments.

Partnerships to Help Manage Shared Risk

Since water is a shared resource, water management practices can be sensitive social, cultural, and environmental issues, particularly in times of drought and water restrictions. Companies can rarely achieve the best water management outcomes on their own. Most solutions to water supply, quality, and sanitation issues require an adaptive, co-management approach.

During the strategic planning process, corporate decision makers can benefit from communicating key takeaways from the water-risk assessment in order to gain valuable feedback from investors, customers, local communities, and other key stakeholders. Through early and proactive involvement with concerned stakeholders, companies can anticipate and respond better to emerging issues and expectations, such as competing water demands by local communities or industries, or local concerns over wastewater discharge. Open discussions with water providers and local communities can be an important factor in preventing or reducing the risk of future water-related disputes or disruptions. Such discussions can also identify pivotal inputs to help guide priority areas for action. In addition, these consultations are a useful tool for engaging employees across the company in supporting water programs.

Communities often feel very strongly about the use of local water resources. As a result, transparent discussions with local communities are vital to good business planning. Although public participation in local water policy has been limited in the past, civil society representatives and NGOs now play increasingly important roles in defining water policy along with the affected communities. In instances where a company has a large footprint in a community or is a substantial water user, developing early and ongoing ties with local groups can prevent or reduce the risks of future water-related disputes. Experience shows that early identification of local actors and their water-related needs, coupled with a policy of open communication, can reduce risks of controversy that, in extreme cases, can lead to the loss of a company’s license to operate.

On the contrary, proactive efforts to improve water quality or water availability—such as directly participating in the development of local water systems; providing funds, appropriate technology, or education;  or contributing to water resource planning—can help build positive relations with regional stakeholders.

Drawing the Connections

In the BSR Conference 2010 session “The Art and Science of Reporting Water Related Risk,” Andy Wales, Global Head of Sustainable Development at SABMiller, commented that it may be too early to condense the many moving parts of a company’s approach to water stewardship into a standard reporting framework. While the Carbon Disclosure Project’s Water Disclosure survey may be a useful approach to helping companies collect a broad base of information related to their water impacts, it is one step in a much larger process of understanding water-related risks, and ultimately communicating how those risks are being managed. The challenge for companies today is to demonstrate that they understand that water is valued as a vital business, community, and environmental asset.