In Pakistan, one-third of the land was submerged after devastating floods. Much of Nigeria is also flooded, and the gulf coast of the United States has been punished with hurricanes and torrential rains. In fact, extraordinary flooding has made headlines several times this year globally, and yet other regions do not have enough. Viral pictures show dried-up rivers in Europe and the U.S., and the western U.S. is suffering yet another year of severe drought conditions. This is all part of climate change related to the greenhouse gas emissions that we know the world must address. If we continue down the path we are on, the resulting impact to weather patterns will become even more unpredictable with devastating consequences likely to increasing in frequency and severity .
The dichotomy of floods and droughts is not the only water-related consideration when analyzing sustainability risks. Record floods do not provide usable water. For those who were required to read the “Rime of the Ancient Mariner” in school, the line “Water, water everywhere nor any drop to drink” comes to mind. A United Nations resource panel projects that global water demand will exceed supply by 56 percent by 2030, putting water scarcity and quality issues as a top concern for businesses and investors.
The water problem is not “new news”
The term “sustainable water management” refers to how we use water to meet ecological, social, and economic needs without compromising the ability to meet those needs in the future. It is striking that, in researching this topic, we found many articles on water and sustainability in scholarly sources such as Scientific American published over a decade ago. In other words, we’ve known about the need for better water management for a long time, but no meaningful mitigating actions have been taken.
Water technology provider Aquatech explains that groundwater represents over 50 percent of global freshwater and is critical in providing potable water. It bears repeating that “sustainable” requires consuming resources at a rate that does not exceed the rate of replacement; but, when it comes to groundwater, that equation is unbalanced in a way that threatens our future water supply. Reclaimed water can be a sustainable source that reduces the stress on primary sources, namely surface and groundwater. In most cases, however, reclaimed water must be treated before it can be reused, and the cost and energy involved in doing so must be taken into account. Still, reclamation could be an important tool in addressing the need for more water.
According to GreenBiz, the most overlooked aspect of water management is what happens to water onsite, in a factory or other kind of building, versus water supply and treatment. However, ignoring that “last mile” of the entire water “system” can be costly. This gets back to a theme we keep repeating: ESG is about economics and pursuing sustainable profitability. GreenBiz notes that “water has an uncanny ability to leak to where it can cause the most damage” and only makes itself known after significant damage has already occurred (how many of us have had a corroded pipe burst under the house?!).
What is being done?
Pensions and Investments (P&I) reports that a year ago, a coalition of 64 institutional investors (both pension funds and asset managers) that together represent $9.8 trillion in assets, formed the Valuing Water Finance Initiative to influence corporations with respect to water-related financial risks. Among their goals: better disclosure and water risk management. Now, a year later, the group is planning to engage directly with some of the biggest water users in the corporate world to persuade them to address water as a financial risk.
P&I states that the initiative will focus on 72 companies in four sectors — food, beverages, apparel, and high technology — using a methodology developed by Ceres, an organization that makes the business case for sustainability. The investors “are poised to engage with portfolio companies around the corporate expectations for valuing water and help the private sector value and act on water as a financial risk,” according to a senior program director at Ceres.
According to Statista, paint and coating manufacturing is the most water-intensive industry in the U.S. per capita, requiring 123 gallons per dollar output. In terms of total water consumption, the apparel industry is second only to agriculture, using 79 billion cubic meters of freshwater each year (the industry is also a significant source of water pollution). This is largely because it takes a lot of water to grow and dye cotton. It takes 7,000 liters of water to produce one pair of jeans—roughly the amount one person drinks in five or six years. A single t-shirt requires 2,700 liters of water. Remember that the next time you go shopping for clothes.
Fluence reports that Barclays bank analysts recently highlighted the importance of water as a financial risk in terms of shortages, cost, and regulation. “In high consuming sectors such as global consumer staples, water risk should top the list of ESG concerns,” according to Barclays. Governments should emphasize the need to invest in water solutions. Leading the way, the city of Rotterdam in the Netherlands has developed a reservoir catchment system that has allowed the city to achieve one of the highest water reserve levels in the world.
Technology to the rescue?
Technology can help. For example, HydroPoint’s WaterCompass provides real-time information on water usage and leak detection to property and facilities managers, prompting maintenance calls to fix leaks before a disaster occurs. Think of it as similar to how a city monitors water use and pressure in its underground pipes, but on a much smaller scale. WeatherTRAK’s technology solution improves onsite water management with smart irrigation management systems that use real-time data to reduce water waste, which saves money. According to WeatherTRAK, their technology allows companies to reduce water use and related costs by 25 to 40 percent.
OWL ESG helps investors to identify sustainability risks across companies, putting accurate and comprehensive ESG data at your fingertips, and providing the sources for verification. Using Owl’s data and technology, you can assess both a company’s policy practices in areas of ESG that are important to you. Here is one water-related example:
We investigated whether Starbucks has a water management policy and found that, yes, Starbucks has committed to conserving or replenishing 50 percent of the water it uses by 2030, measured by its direct operations, stores, packaging, and agricultural supply chain. We verified this on the company’s website. Curious about how to quantify the impact of this policy, we reviewed our data to determine how Starbucks actually measures its water consumption. We found that, in fact, Starbucks does not measure water consumption, specifically with respect to how much water goes into its beverages. Furthermore, according to our source the company does not anticipate tracking this water usage metric in the future.
As with most (all?) of the sustainability problems the world faces, solutions will require a combination of determination, political will, profit motive, innovation, and the realization that doing nothing is the road to ruin. Given that the presence of water on other planets suggests the possibility of life there, it makes sense to invest in the water resources on planet earth.
OWL is redefining the standard for quality ESG data, so that you can be confident in your decision making to mitigate risk, promote sustainable practices, and invest your conscience with confidence.
