By: Cate Lamb
Photograph: DircinhaSW/Getty Images/Flickr RF
São Paulo is the wealthiest state in Brazil. It is the pulsating heartbeat of the Brazilian economy. The state’s capital of the same name is a major driver of commercial activity. A megacity and home to 20 million people, it was at one point the largest industrial city in the southern hemisphere. How then, can such an important metropolis find itself on the verge of running out of water?
Brazil has experienced its driest period since records began, the worst drought in 80 years. São Paulo city’s population has also set records: for the 20 years from 1950, it was among the fastest growing. Today it’s still increasing. The resultant demand for water and the dependency and pressure on the Cantareira reservoir – the system that serves the city – has contributed to an official crisis. The huge basin is nearly dry, having dropped to below 10% of its capacity and São Paolo finds itself locked in difficult negotiations with neighbouring states that also rely on the Cantareira.
More established economies too are becoming acutely aware of the wide-ranging impacts that worsening water security can bring. Travel up from Latin America toCalifornia and you witness a severe drought now in its third year. It has cost billions of dollars, wrought havoc with the agriculture industry and caused discomfort for residents.
There are health implications too, some of which go further than the basic need of water for sanitation. California has spent decades working to create cleaner air but its progress is hindered by the heat and extreme drought, which have worsened smog levels.
Like many, the residents of towns across California and São Paulo held the misguided belief that a natural supply of water is limitless. The reality is that water can no longer be treated as a free raw material of never-ending supply. While we’re able to find alternative sources of fuel to reduce our reliance on depleting reserves of oil, there is no alternative when it comes to water. Astute businesses understand this already and are moving to manage the related business implications.
For example, use of household goods can account for over 90% of domestic water use, such as by washing dishes, mopping the floor, cleaning hair, skin and clothes. Unilever has disclosed to its investors through CDP’s water program that the sales growth of its products is at risk because consumers experiencing water scarcity in developing countries are making trade-offs about which household tasks will get their scarce ration of water.
In fact, as detailed in CDP’s new global water report, two thirds of the world’s largest companies tell us that they are exposed to water risks, some of which have potential to limit growth. The news comes amid mounting shareholder concern around water scarcity, accessibility, poor water quality and the potential implications for their portfolio investments.
Given almost half of the 853 risks reported by 174 companies to CDP – such as closure of operations and decrease in shareholder value – are expected to impact now or in the next three years, companies could quickly find themselves at a competitive disadvantage.
Although corporate risk assessments of water are falling short, there is evidence of progress on key indicators of water risk monitoring and management. What’s more, smart companies are benefitting from innovating in response to water scarcity, poor or declining water quality and competition for and ease of access to water resources. IT and telecommunications company Cisco is using less water having made a change to a soldering practice. As a result it is saving $1m a year. Fellow IT business Infosys will save $3.1m over eight years having cut its water consumption by a third in comparison to 2010.
Leading companies are investing in order to reduce the value at risk from water stress and capitalise on opportunities such as cost savings or increased revenues. In fact, three quarters of the companies in CDP’s recent report say that water offers operational, strategic or market opportunities. Bayer Crop Sciences, for example, is developing plant strains that can thrive in water-stressed areas. Chemicals giant BASF estimates that water saving, recycling, reuse and drinking water treatment products offer the company potential sales of $1bn up to 2020.
National and local governments, along with the private sector, all have a role to take bold action. In some cases, the private sector appears to be taking the lead and is working beyond the fence line to address core drivers of water woes.
Drinks company Diageo sees an opportunity to gain competitive advantage through performance which drives a reputation for leadership in water stewardship. It is seeking to achieve this by setting aggressive targets for water efficiency, collaborating locally and internationally to address the water crisis, and providing access to clean drinking water and sanitation for communities in water-stressed areas.
This approach is a strong move towards achieving water stewardship, a concept that will benefit the bottom line and may prevent us from hitting the bottom of the well.