Underestimating the risk?

Updated: Apr 4

Water scarcity is a risk many people and organizations take too lightly, particularly in the West, where we are experiencing megadrought with little end in sight.


A group of climate scientists from UCLA, NASA and Columbia University as recently as 2018 and 2019 studied, among other statistical data, tree rings to help determine soil moisture. They found soil moisture deficits have doubled in the last 22 years.


That does not bode well for many reasons. Landscapes are less drought resilient and more prone to scarring wildfires. The condition perpetuates itself as water flows off, carrying more sediment and leaving parched earth behind.


We all use water as a valuable resource. So do businesses and corporations. I thought I would take a look into the water risks of the corporate world.


As you Sow (https://www.asyousow.org) is a non-profit based in California that does a lot of work on environmental, health and climate change issues. Shareholder advocacy is one tool they utilize and have been reasonably successful.


“Water scarcity is a material risk to companies; it has the potential to impact operations and supply chains as water shortages increase across the globe -- an issue that is exacerbated by climate change.” (As you Sow)


“Our entire global economy is vulnerable to the increasing incidents of floods, drought and pollution, among other water-related risks. Building a water-secure future will require an unprecedented response from the private sector.” (Greenbiz 2020) (https://www.greenbiz.com/article/companies-blind-risks-water-pollution-and-scarcity-and-untapped-opportunity-address-it)


This same article goes on to state, “Almost half of the water consumed by Arizona’s agricultural sector is supplied by the Colorado River, alongside 40 percent of all industrial and municipal water use. Without this water source, Arizona’s GDP could drop by over $185 billion and put more than 2 million jobs at risk.”


The Carbon Disclosure Project (CDP) indicates reporting on this real business risk is underwhelming. CDP maintains a list an “A” list for companies that prioritize water risk and act upon it. Much has been said and done regarding water efficiency, though much more needs to be done. CDP has a few suggestions including these two very difficult ones.

  1. Reduce overall water withdrawals and consumption in direct operations and throughout value chains, with particular attention to water-stressed areas and products with high water demands. While this might be somewhat attainable in operations, garnering success along the supply chain will be much more elusive, as will measuring success. A defined market incentive needs to be created.

  2. Set and make progress against targets for water consumption, withdrawals and pollution that decouple growth from a dependence on water. This is very tough unless there is either a true market penalty or reward. Interestingly, when gas prices go up there is serious angst, but I rarely hear about water bills being too high. Perhaps water is simply too inexpensive for the value it provides.

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