The time is now for business to mobilize differently on water
The World Economic Forum's annual global risks report and BlackRock CEO Larry Fink's annual letter to CEOs, both published earlier this month, point to the urgent need for more private sector action and leadership when it comes to addressing the global water crisis.
First the report by the WEF and Marsh & McLennan Companies, which discusses the challenges of water within the category of a social crisis: As it defines, the water crisis is "a significant decline in the available quality and quantity of fresh water, resulting in harmful effects on human health and/or economic activity."
For 2018, the water crisis is ranked fifth in terms of impact but not in the Top 10 in terms of likelihood. For perspective, the water crisis has been in the Top 5 in terms of impact since 2012, and it was ranked No. 1 for this metric in 2015. The water crisis was ranked within the Top 5 in terms of likelihood for 2012 and 2013.
It is not a surprise that the water crisis continues to be ranked as one of the Top 10 global risks in terms of impact. However, the water crisis was not ranked in the Top 10 in terms of likelihood. Really?
Unless I am missing something, the water crisis is here and now. If you are living in Cape Town, South Africa; Flint, Michigan; or Karachi, Pakistan, you are living a water crisis. Also, the water crisis impacts more than economic activity and human health — let’s add impacts to ecosystems and the importance of water in cultural and spiritual beliefs (such as the relationship between the Ganges and Hindus).
While rankings are usually the highlight of the WEF report, the discussion provides deeper insights on the water crisis in terms of how it relates to other risks. In this figure from the report shown below (click for a larger version), the water crisis is in the upper right quadrant along with extreme weather events, natural disasters, failure of climate change adaptation, biodiversity loss, man-made environmental disasters, ecosystem collapse, large-scale involuntary migration and cyberattacks.
The chart illustrates the relationship of the water crisis to other global risks and its ranking with regards to likelihood. The data clearly illustrates that the water crisis is closely tied to other significant global risks such as climate change and the food crisis.
Highlighting the water crisis as a global risk helps to increase awareness with public and private sector stakeholders. However, the public sector is not offering adequate solutions for the numerous dimensions of the water crisis. As a result, there is an increasing expectation that the private sector will need to participate more actively in solutions or take the lead. (South Africa offers an example of what I'm talking about, where public-private partnerships are forming to address the crisis.)
If the private sector is to be part of or the solution to the water crisis the question is how does happen? What is the call to action? How does the private sector lean in on this issue?
Perhaps the answers to those questions reside, in part, in Fink’s latest annual letter to CEOs. I do believe that we will only solve issues such as water scarcity and quality when investors and the private sector commit their scale, resources and skills to addressing them.
This is not about corporate social responsibility, corporate responsibility or sustainability programs. This is about mobilizing the private sector to accomplish what the public sector has not been able to accomplish. With respect to water, that means ensuring universal access to safe drinking water and water for economic growth and to improve (or at least maintain) ecosystem health.If you are living in Cape Town, South Africa; Flint, Michigan; or Karachi, Pakistan, you are living a water crisis.
From Fink’s letter:
We also see many governments failing to prepare for the future….As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. . . .To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
Long Haul Capital President Patrick Doherty, writing about Fink earlier this week, said:
If institutional investors begin to spend on sustainable infrastructure, they will fill the yawning gap left by the federal government. This will put people back to work, generating more demand generally and increasing contributions to retirement savings while reducing our collective environmental footprint.
Let’s mobilize investors and the private sector to take the lead in solving the water crisis. That's not a new strategy, but I believe it's the one to invest in.
We will not solve the wicked problems of water by waiting for the public sector to respond (there are exceptions) or by framing water as a private sector CSR issue. The private sector mobilizes entrepreneurs, the public sector and civil society to address global water risks.
I applaud Fink’s view of the role of the private sector. I would now like to encourage the private sector to mobilize to do what the public sector is slow to do: Ensure adequate water for economic development, business growth, and social and ecosystem health.
Perhaps 2018 will be the year for that change.