At the recent World Economic Forum in Davos, I was struck by how often the issue of water risk was raised by business executives. As the global economic turmoil is receding, many CEOs and global leaders are turning to other threats — and water is high on the list. For the second year in a row, water crises were named among the top four global risks at the WEF.
It’s easy to see why. More than 1.2 billion people already face water scarcity. By 2025, two-thirds of the world population will experience water stress. That’s largely due to population increase and climate change, but also behavior patterns: Water use grew twice as fast as population growth in the 20th century. The “food-water-energy nexus” was one of the top four megatrends to watch in the recently released Global Trends 2030 report by the U.S. National Intelligence Council.
CEOs increasingly recognize that water is essential for their business models and economic growth. Disrupted availability of affordable, clean water leads to business interruptions, increased commodity costs and reduced earnings. The extreme drought gripping much of the United States is likely to cost up to 1 percent of GDP, potentially making it the costliest natural disaster in U.S. history.
More than half of the Global 500 companies that responded to the 2012 Carbon Disclosure Project Global Water Report cited “detrimental” water-related impacts. These effects include property damage from drought or flooding, higher prices for water itself, poor water quality requiring on-site pre-treatment, and fines and litigation over pollution. According to the report, the associated costs for some companies ran as high as $200 million, up 38 percent from the previous year.