Global Corporate Water Use and Local Risks
Increased Consumption, Limited Resources, and Greater Scrutiny
The era of taking water for granted has long since passed. Globally, industries depend on water for their daily operations, and certain sectors such as beverages and semiconductors, require vast amounts. Evolving local and environmental demands are creating water-related problems for companies, such as reductions in water allotments, shifts towards full-cost water pricing, more stringent water quality regulations, and increased public scrutiny of corporate water practices. Moreover, many governments now want companies to measure not only their direct water usage, but also their “water footprint” – the impact of planned usage down the water supply chain. In certain geographies – the Middle East and China in particular – a variety of water scarcity and quality issues could directly impact resident companies.
At a minimum, global corporations can face public outcry over perceptions of their water use in water-poor areas. An example: In March 2010, a government-appointed committee suggested Coca-Cola be fined over US$ 47 million for damages to the local watershed allegedly caused by the beverage giant’s largest Indian bottling plant. While Coca-Cola disputes the accusations, it shuttered its Kerala plant in 2005 after protests and continues to fend off allegations that it drained and polluted local groundwater.
Given these new challenges related to water use and discharge, how can companies and investors protect their reputations and investments? Ergo and its partner OOSKAnews asked four experts to comment on the outlook for corporate water usage in developing countries.
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Expert 1: Kenya-based environmental journalist
Kenya: Lax enforcement of regulatory restrictions
“The Ministry of Nairobi Metropolitan Development is drafting a new building code to help in the conservation of rainwater in the country. The proposed law, if enacted and promulgated by Parliament and assented to by the President, will specifically require that all new buildings in Nairobi city make provisions for water harvesting. It is highly unlikely that the Kenya government is planning any new regulations for corporations related to water use, wastewater treatment or water pollution.
Currently, water resource management agencies have an adequate regulatory framework to police the country’s resources. Kenya’s main challenge lies in enforcement of existing regulations. It is an open secret that most of the provisions spelt out by [previous legislation] have not been operationalized. Experts point at lack of capacity – mainly financial, but corruption is also a major challenge in optimizing available resources in the sector.” -
Expert 2: News editor in India who covers regional and global water stories
India: Decreasing water supplies and increasing restrictions
“The Indian central and state governments are extremely concerned about initiating steps for water conservation, leakage control, and water recycling. The per capita availability of water in India has been reduced from 5,277 cubic meters per person per year in 1955 to 1,970 cubic meters today. By 2025, India will be a water-stressed country with water availability between 1,000-1,700 cubic meters per person per year.
Many state governments, such as Tamil Nadu, Rajasthan, Maharashtra and Delhi, have made rainwater harvesting structures mandatory in all residential and commercial buildings above a particular size. Drilling of fresh bore wells in major cities like Delhi and Mumbai is banned without the explicit approvals of the Ground Water Boards. Water metering is becoming mandatory in most cities with the objective of reducing non-revenue water and ensuring better monitoring of water losses. Major industries like refineries have to adopt zero discharge measures to get their environmental clearances to operate. Water harvesting and conservation is also a key aspect of the National Building Code, which has been announced recently. Banks and financial institutions are also encouraged to provide easier access and lower interest rates to building projects that meet the water conservation norms under the Building Code.” -
Expert 3: Leading Brazilian environmental reporter
Brazil: New legislation is on its way
“The Government, mainly through the National Water Agency (ANA), is investing in programs to identify problems related to the use of water resources so that public investments and sustainable use projects can be planned and put into practice. There is a bill proposal (number 5487/09), currently with the Federal Deputies Chamber, that will establish a National Environmental Services Policy and a Federal Environmental Service Payment Program. This will raise funds for conservation by charging for the use of water used for investments in certain hydrographic basins. In other words, the Brazilian government is about to approve a law to ensure that corporations are involved and invested in water sustainability.”
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Expert 4: Middle Eastern economist focusing on development, water issues, and environmental protocols
Gulf Region: Hidden costs of desalination
“Much of the water that is derived in the Gulf is what we call industrial water, in that the largest proportion of that water in Kuwait and Qatar and in Saudi Arabia is desalinated water; it is processed water. And this processing is literally compromising the fishery industry in the Gulf by causing higher salinity and temperatures. Everybody will try to tell you that desalination costs about $1.50 per cubic meter, and using reverse osmosis it’s just 50 cents per cubic meter. But if you factor in the total cost with salinity and its effect on the environment, you’re really talking about a cost of $12.00 to $20.00 per cubic meter.”
Insights from the Ergo Network
Ergo’s View
Water stresses in many regions of the world will present global companies and investors with difficult choices. Currently, only limited regulations and initiatives exist in water-strapped countries to address water use and wastewater treatment by industrial or agricultural firms. However, as developing nations move up the economic ladder and demand a healthier, more sustainable environment, our experts indicate there will also be increased calls for better water policies. International firms must stay abreast of evolving standards as enforcement of more stringent regulations could mean increased fees for violators and higher treatment costs for firms that abide by the rules.
While new water usage and treatment policies may have a significant impact on companies operating across the globe, shortages may reach a sudden tipping point in certain countries. For example:
• Severe water shortages are possible in China, potentially causing emigration of the local labor force or leading to demands from local officials to stop growing certain crops or using water-intensive agricultural practices.
• A major drought in Venezuela might greatly reduce hydroelectric production, thereby cutting electricity to power-starved businesses.
• The acute food supply threat already facing many regions (MENA, South East Asia, and Sub-Saharan Africa in particular) is only exacerbated by diminishing water supplies. Together, these two forces have the potential to topple regimes and destabilize regions.
In addition to water shortages, firms and investors must also be aware of other potential crises:
• Companies in the desalination business could be blamed for destruction of the regional fishing industry.
• Ongoing water disputes between countries could also lead to conflicts or cross-border tensions that impede the operations of international firms.
Ergo has executed numerous projects on natural resources, regional and national regulatory policies, and supply chain bottlenecks and challenges in a variety of global industries. Our local experts and in-country teams are well-positioned to provide deeper perspectives on emerging water use challenges and initiatives in any area of the world.