Sustainable: Protecting Profits in a Water Scarce World

January 25, 2010

While water is plentiful on Earth, the amount that we can access for business and personal use is scarce – and shrinking. In water-intensive industries, developing and executing on a corporate water strategy is critical to the future of your business.

By Thera N. Kalmijn and R. Paul Herman

Sustainable Life Media (January 25, 2010)

While our bodies are more than half water (highest when you are born, decreases over time) and the earth is two-thirds covered by H2O, we can’t easily tap either of these sources.  Less than 1% of the world’s fresh water is available for human use – leading to severe negative human impact:  3.5 million people die each year from water related diseases like diarrheas, and almost 1 billion people do not have ready access to safe water supplies. By 2025, projections estimate more than 50% of the world’s population will not have access to water, suffer health issues be engaged in water conflicts, or a similar challenge1

These challenges also risk profitability, revenue, jobs and energy volatility.  A temporary shutdown of a semiconductor plant could cost Intel or Texas Instruments $200 million in revenue2.  In 2001, hydroelectric power shortages forced the shutdown of aluminum plant smelters in the Pacific Northwest, resulting in the loss of 8,000 jobs3. In 2007, “drought in Ghana severely reduced hydropower production, forcing Unilever Ghana to cut power consumption by 25% and purchase expensive diesel generators to make up for lost power from the grid.”4

Hence, leading companies are starting to pursue excellence in water management as a potential to deliver both Human Impact + Profit1.   How can managing water be more HIP?  In three ways: selling products that solve a human need, improving everyday operations, and new management practices.  SureGround has developed a unique framework just on water management – to assess how much Gain and Good can be realized, or is at risk.

With increased pressure on water due to population growth, climate change, and increase in consumption associated with urbanization and industrialization, efforts focused on water efficiency are only the tip of the iceberg.  A comprehensive water management plan focuses on the following 10 R’s of Water Management protect profits, society, and the environment.

A survey of industries and companies leading in water practices using these 10 R’s of Water Management shows some are on the right track, and much work remains to be done.  To start, assessing water risk is a challenge.  Water risk varies greatly by geography and industry, and has significant variability due to fluctuating weather patterns.  Industries with the greatest exposure include agriculture, manufacturing, food and beverage, extraction, and power generation5.

The food and beverage sector alone has a direct consumption of 575 billion liters per year, enough to meet the basic daily needs of everyone on the planet.  Risk assessments for the food and beverage industry are complex as supply and value chain exposures dominate the water footprint with over 90% of water use outside of the company “fence-line”6

Reporting according to emerging water foot printing guidelines being developed by the and future water metrics requirements (such as those already required by the Norwegian government’s pension fund of the 1,100 companies it invests in) will help industry focus water management efforts where they are most needed.

Unilever, a global food and beverage giant with operations in 50 water-vulnerable countries, is recognized as a leader in water management practices and is among the first to measure and report its water footprint.  Only 3% of Unilever’s water footprint comes from internal operations.  The remaining 97% is upstream in the supply chain (10x internal use) and downstream in consumer product use (10x internal use)7.  While Unilever does work to reduce internal operational impacts, efforts up and down the value chain are more significant and often more profitable financially, socially, and environmentally. 

In their focus on the environment, Unilever employs a responsible catchment management policy.  As part of this policy Unilever Bestfoods Brazil helps prevent toxic pesticide run-off from reaching streams and rivers by planting a native buffer between fields and streams (as required by local regulations). 

Rainwater harvesting and water recycling at factories in water-stressed Hindustan have reduced Unilever’s groundwater use by 50%, positively impacting Unilever and the local community8.  Unilever also focuses on reinventing products to reduce water impacts. Unilever’s Surf Excel Quick Wash, sold in India, cut water need by two buckets per wash — and product sales jumped 20% in 2008. 

One Rinse Fabric Conditioner sold in Vietnam shrunk water need by 66% — and sales jumped 30%.8 These are HIP Products that generate both increased Human Impact + Profit.

Whether it is manufacturing a product, constructing and operating a building, fostering an economic cluster such as information technology in the Silicon Valley, or developing the resource industry in Northern Alberta, the efficient use of water is of central importance to longterm corporate success and sustainability.

References:

1.  “Watching Water: a guide to evaluating corporate risks in a thirsty world”, JP Morgan, March 31, 2008  – and Water.org – Learn about the Water Crisis.  (http://water.org/learn-about-the-water-crisis/facts/#water)

 2.  “A Watershed Moment:  Calculating Risks of Impending Water Shortages”, Susan Arterian Chang, December 1, 2009, RiskMetrics in the News

3. – 6.  “Manufacturers Prepare for Summer of Shortages”, Bob Felton, July 3, 2001.  InTech

7. – 8. http://www.unilever.com/sustainability/environment/water/?WT.LHNAV=Water

Source: sustainablelifemedia.com

http://www.waterfootprint.org/?page=files/home

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