May 14, 2012
Water Use in Many Large Economies Is Unsustainable
by Robert Kropp
China, India, and the US contain regions of extreme risk due to water scarcity, threatening global
commodities prices and even increasing the possibility of social unrest.
A new study
from the UK-based Maplecroft analyzes the risk to businesses of unsustainable water use in 168
countries. The study concludes, "Viability of water supplies throughout key regions of China,
India, Pakistan, South Africa and the US are under threat from unsustainable domestic, agricultural
and industrial demands."
"Businesses should undertake impact assessment and monitoring of
water stress and water security and other areas of risk that conflate with such pressures including
food security, conflict and energy availability," warned Maplecroft CEO Alyson Warhurst. "Supply
chain risk, if not managed strategically, can lead to business discontinuity and unforeseen costs
that undermine the profitability of projects."
Maplecroft's newly released Water
Stress Index determines that the arid nations of the Middle East and North Africa—including Saudi
Arabia and Egypt—are most at risk from water stress. The ten most water-stressed nations, according
to Maplecroft, are all from the region.
However, countries such as South Africa and
Pakistan contain regions that are at extreme risk as well. "Investors in these countries,
especially those in the water intensive mining sector in South Africa, need to take steps to ensure
the long-term viability of projects and supply partners," Maplecroft states.
impact from water scarcity on the global economy could come from some of the world's largest and
fastest-growing economies. China's South-North Water Diversion Project seeks to reroute water to
the more populous northern provinces of the country. The project has cost $22 billion already.
Furthermore, because of the potential impacts on water availability from climate change, "doubts
have been raised about the long term sustainability of the project, raising concerns for business
with interests in the most water stressed areas."
In India, where 90% of freshwater
extraction in used for agriculture, "continued unsustainable use of groundwater supplies has the
potential to reduce crop harvests with dire implications for global food prices."
socio-economic impacts of water shortages, especially in India and China, have the potential to
create unrest and affect stability, as populations and business compete for dwindling supplies,"
according to the study.
Even in the US, which is considered to be at medium risk, many
states—including Arizona, California, Kansas, Nebraska, New Mexico, and Texas—received more severe
classifications. The Ogallala Aquifer, which accounts for 30% of irrigation water in the US, "is
being depleted faster than it can be recharged," according to Maplecroft. "The resulting effects on
US agricultural outputs could cause significant inflation on the global commodities markets."
Earlier this year, the Interfaith Center on
Corporate Responsibility (ICCR) published a Statement of
Principles on water. It recommends that investors engage with corporations to ensure that a
human right to water policy is in place; that companies report on water use, both in their own
operations and in those of their supply chains; and that they "return water to the watershed from
which it was abstracted in environmentally safe and usable condition."
implement sustainable water stewardship policies that are both environmentally and socially
sustainable and that respect the universal human right to water," ICCR stated.