Water Scarcity Is a Business Risk That's Blindsiding Firms

Corporations need to address water scarcity. Their future survival depends on it.

That was the resounding message from business leaders and water research experts speaking at a panel on the future of water at Fortune’s Global Sustainability Forum in Yunnan, China on Thursday.

All businesses need water to run, whether for large-scale industrial factory use or to power electricity to keep the lights on. Issues like water pollution and contamination and severe droughts like Cape Town’s recent water crisis, the panelists said, will only become more common in the future, and business and government need to tackle these problems now to avoid economic and existential catastrophe.

“The world has enough water. The crisis is not due to physical lack of water, but poor management,” said Asit Biswas, chief executive of the think tank Third World Center for Water Management. Biswas added that scientists have not succeeded in communicating the urgency of water scarcity to governments or the public.

Vishal Sharma, the Asia Pacific senior vice president for Nalco Water, a chemical and water treatment company, echoed Biswas and said that a lack of awareness of the financial risks of water scarcity has led to companies shutting their operations and spending “millions of dollars relocating.”

“I can count 50 examples of companies that have shut, I can count 500 examples of companies that are going to shut in the next 10 years if they don’t do something about [water management] right now,” Sharma said.

He called for further efforts by researchers to bring attention to these risks so that businesses take action.

“Business initiatives are game-changers,” Sharma said. “The game is going to change when people sit up and say, ‘This is necessary for survival.’ […] The problem is most people are still not realizing it.”

Sharma said that big industry and agriculture need to take responsibility for recycling and conserving the water they use, and suggested governments introduce new financial incentives to encourage businesses to invest in water management.

Arnaud Penverne, Veolia Group’s senior vice president in China, said one of the challenges facing corporations is to find the right business model, one that can strike a “sustainable combination” of strategies to address ballooning costs and growing public demand for high quality water.

“Almost drinkable is not drinkable, almost perfect is not perfect, almost sustainable is not sustainable,” Penverne said. “A 100% quality product has a cost.”

Penverne pointed to China, where government regulation of industrial water use has increased “drastically” in the last five years, and companies have complied and moved towards more sustainable models.

Marjorie Yang, the chairman of Chinese textile manufacturer Esquel Group, said that better water management is “the biggest opportunity” for companies in China to become more sustainable, and to turn a profit in the process.

“In China, I believe that that is the area where you can do it, and people will make more money,” Yang said.