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Water scarcity calls for mindful business practices

Supply chains and operations are vulnerable to water shortages, as are communities. Businesses that conserve water and innovate around using less water will be glad they did.

Whether an enterprise makes cars, food or electronics, water is important to its everyday operations. Even when businesses don't use water directly in their production processes, it still plays a major role in the global supply chain for virtually all products.

As economies all over the world grow, so does the need for water, and the amount of available clean water is at risk.

Earlier this year, the World Economic Forum released its Global Risks Report for 2016. The annual report identified the lack of safe drinking water as the most serious risk over the next 10 years, due to the hundreds of millions of people this will affect. 

With the availability of clean water shrinking, the global supply chain is feeling the effects.

With the availability of clean water shrinking, the global supply chain is feeling the effects. Without developing sustainable water usage practices, corporate water risk could have dire effects on global business. However, for companies that can take a proactive approach, there are numerous opportunities to push sustainable ideals while also improving the bottom line.

Challenges to water availability

The growing population, aging infrastructure, uncertain energy sources and climate change all contribute to water scarcity, according to the Environmental Protection Agency. Water is used along with various energy sources, and saving water also saves energy.

Overcoming these water shortages will be challenging, but it's possible. Corporations will need to develop efficient procedures to maximize their water usage, and which use less expensive alternative energy sources. In addition to the environmental benefits, there are significant financial benefits to be made from smarter water usage. 

Managing and mitigating corporate water risk

A number of leading corporations are taking important steps to use water more efficiently in their operations.

Food manufacturing giant Nestle opened a zero-water plant in Mexico in 2014. Last year, Nestle invested $7 million towards another zero-water plant in Modesto, California. These efforts, when completed, are expected to save the state of California 55 million gallons of water each year. Hormel Foods stated in 2012 that its corporate goal was to reduce water usage 15 percent by 2020, after it surpassed previous water conservation goals for 2011. 

PricewaterhouseCoopers' Lauren Koopman discussed corporate water risk with Environmental Leader recently, and identified the measures enterprises can take to mitigate their water footprints. First, they need to understand the types of risks related to water use in the supply chain. Droughts and storms can disrupt operations, and higher water prices can have negative effects on the quality of products and services. Companies that waste water also can find themselves facing government regulations, as well as damaged reputations. 

Next, companies must consider the impact that water has to their bottom lines, areas of the business that are more vulnerable to water scarcity, and opportunities to reduce consumption in the workflow. Finally, they can take a tactical approach and develop a game plan for reducing the amount of water consumed in operations. There are a number of ways this can be done, such as reducing pollution, integrating water management into business strategy and monitoring water usage management practices. 

The nonstop creation of new products has taken its toll on the global water supply.

Introducing circular methodologies

The nonstop creation of new products has taken its toll on the global water supply. Facilities that produce most products, such as electronics, require water, and when these products break down they're more often than not replace entirely by new products. Adopting the methodologies of the Circular Economy can help to reduce water waste by keeping these products in the economy for a longer period of time, either as finished products, as simple components, or as new products made from the upcycled components.

Cutting corporate water use helps companies gain a competitive edge while becoming more environmentally friendly. These sustainable practices can reduce overhead costs as water becomes more expensive. In addition, corporations with strong water usage policies also can improve their reputations among consumers and partners, while avoiding costly government regulations. Additionally, there are emerging business opportunities with ESG endeavors.

Finding business opportunities

Lauren Hepler of GreenBiz identified three primary opportunities for corporations to profit from water risk, while promoting environmental, social and governance values. One way that ESG ideals can benefit the bottom line is by allowing corporations to develop new products and services that address these issues. 

Smart water regulations can reduce the amount of water that corporations use, while opening the area up for corporate investment. Using new technologies and renewable energies to advance water purification and in turn create more fresh water is another opportunity to use sustainability for corporate and social benefit. Also, new developments in agriculture can be used so that crops use less water and yield more food. 

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