WRI Opens Toolbox to Track Water-Related Risks

WRI Opens Toolbox to Track Water-Related Risks

The New York Times last week reported on China's $62 billion plan to divert at least six trillion gallons of water each year from the Yangtze River to cities located hundreds of miles to the north. The South-North Water Diversion Plan has already resulted in the relocation of hundreds of thousands of people in the south.

Yet the Yangtze River itself is already experiencing severe water scarcity issues of its own, as the recently launched Aqueduct project of the World Resources Institute (WRI) indicates. WRI describes the Aqueduct project as "a database and a suite of practical tools that measure, map, and explain water-related risks facing companies and their investors. The objective of the project is to provide companies and their investors with the actionable information they need to effectively manage and reduce their exposure to water risk."

The project has already finished its analysis of the Yellow River in China, into which the water of the Yangtze will be diverted under China's plan. The analysis reveals that of the ten access and growth constraints, five exceed the critical threshold, indicating areas of concern for companies and investors.

An analysis of the Yangtze River is currently underway, where, as WRI Senior Program Coordinator Rob Kimball told SocialFunds.com, "Over a billion tons of cargo are transported every year. It's an incredibly important shipping corridor, but water levels are so low in certain parts of the river that it's impassable. The entire supply chain is being disrupted."

As evidenced by such recently launched high-profile initiatives as CDP Water Disclosure, water scarcity is rapidly becoming a significant issue for businesses. Driven by such factors as climate change and population growth, water scarcity threatens to disrupt corporate operations and supply chains as well as add regulatory and reputational risks to those operations.

In the US this year, members of the Interfaith Center on Corporate Responsibility (ICCR) have submitted at least four shareowner resolutions addressing the human right to water.

Kimball told SocialFunds.com, "We are going to be encountering these problems more and more all over the world. But we still talk about water in simplistic terms. We think about having access to water to operate, but water impacts businesses, people, and the entire economy in complicated ways."

"All the water issues we're encountering are extremely local and extremely complicated," he continued. "There are numerous factors associated with water-related risks."

Through hydrological modeling of the physical availability of water as well as an analysis of additional water-related risks, the project "helps users identify, measure, aggregate and map the water risks they face in targeted river basins around the world," according to WRI. "Aqueduct's approach acknowledges the fact that different types of companies, investors, and water users are exposed to different water risks."

"The heart of the tool is the database, but the exercise itself is quite productive," Kimball said. "It opens people's eyes to the various forms of water risk."

Aqueduct's analysis of the Yangtze River, for example, reveals that in addition to disruptions of shipping routes, manufacturers have had to ration their power use due to electricity shortages of as much as 20%. Because of reduced hydroelectric power production, China may have to burn as much as an additional one million metric tons of coal per week.

Furthermore, the drought in China has forced farmers to delay their planting of cotton, leading to an increase in the price of the commodity in global markets.

"Aqueduct aims to compile locally specific data on the physical water risks, as well as all the other drivers of water risk, and compile them into interactive maps of overall risk levels in high-priority river basins," Kimball said. "The aim is provide information to companies and investors that are trying to manage water risks. They need to think about them in as complicated terms as they actually exist."

"The key for Aqueduct is providing multidimensional water risk information," he continued. "We start with the straightforward physical water risk, and then layer on top of that a number of other indicators. For example, are other consumers already being efficient? If so, it's going to be difficult to free up water from them. Are other consumers being productive, generating lots of gross domestic product (GDP) or high priorities for society such as food or drinking water?"

"There are socioeconomic factors too," Kimball observed. "How concerned is the population with water issues? These are things that companies have to be aware of, because these companies are inherently dependant upon water. It they're not looking at all these factors, they're not conducting a complete risk analysis."

As an outgrowth of the Aqueduct project, WRI is putting together a Water Risk Alliance which will consist of leading sustainable companies in key water-dependent industry sectors. The Alliance will provide strategic advice on the establishment of indicators and sector-specific weights, as well as informational and financial support.

As for the Aqueduct project itself, "We're working right now on the Colorado River, and we plan on expanding this year into Australia and Southern Africa," Kimball said. "The objective over the three-year life of the project is to map in great detail ten high-priority river basins around the world."

This article originally appeared on SocialFunds.com and is reprinted with permission.

Photo CC-licensed by Mike Conte.