Diminishing water supplies creating profound business risk

General Electric

On July 21, GE issued its fifth annual Citizenship Report, and as part of the rollout, GE Reports is taking a closer look at critical corporate responsibility issues as seen through non-GE eyes. In Part 1 of our series, we highlighted the views of Sean Ansett — one of more than 20 global thought leaders whose essays are published, unedited, in the report. He calls on companies to include their supply chains when it comes to responsibly managing employees impacted by the gyrations of a deep economic downturn, such as the current one. Today, we turn the spotlight on the key issue of water with an essay by Mindy S. Lubber, the President of Ceres. She urges companies to begin “thinking strategically about the profound business risks they will face in a world where climate change is likely to exacerbate already-diminishing water supplies.”

Water, water, everywhere… GE’s Citizenship Report is a type of annual scorecard that charts GE’s work vs. its commitments on a wide range of business issues, corporate responsibility initiatives, and stakeholder engagement. It also provides a forum for dialogue with subject matter experts in fields both within and outside of GE’s business world. The photo above shows a treatment facility using GE’s MetClear ecomagination technology, which uses metals removal chemistry to strip targeted metals from wastewater streams.

In her submission, Mindy begins ominously enough with some all-too-real headlines: “Water Shortage Threatens China.” “California Faces Water Rationing.” “Drought in Australia Food Bowl Continues.”

“Water scarcity headlines are getting more and more ink these days — and for good reason,” she writes.

Mindy S. Lubber: As the president of Ceres (pronounced “series”), Mindy heads the leading U.S. coalition of investors and environmental leaders working to improve corporate environmental, social and governance practices.

“With global temperatures on the rise, scientists expect water shortages, like those now in California and China, to spread across the globe and become even more severe. The consequences for our already reeling global economy will be profound. A diversity of businesses — from electronics manufacturers and power producers to apparel and food companies — can expect water bills to rise, allotments to decrease, and water quality regulations to tighten.

“Water is one of our most critical raw materials — even more important than oil, for there are no alternatives. Peter Brabeck-Letmathe, chairman of Nestlé, put it starkly in The Economist: ‘I am convinced that, under present conditions and with the way water is being managed, we will run out of water long before we run out of fuel.’

“Already, China, India, and the western United States are seeing growth limited by reduced water supplies from shrinking glaciers and melting snowcaps that sustain key rivers. Meanwhile, power plants in Australia, Europe, and the southeast United States have been forced to cut back on power generation because more frequent and intense heat waves and droughts are impacting water supplies.

“A recent report by Ceres and the Pacific Institute evaluates water-related risks to eight water-intensive sectors: technology, beverage, food, electric power/energy, apparel, pharmaceuticals, forest products and mining. Our conclusion is that each of these sectors faces serious near-and long-term economic risks related to their water dependence.

“For example, silicon chips, the backbone of our information economy, require huge amounts of highly purified water to produce. Yet, 11 of the 14 largest semiconductor factories in the world are located in the Asia-Pacific region where water shortages, and water quality risks, are already squeezing industry.

“The beverage industry also faces enormous risks. Coca-Cola and PepsiCo bottling plants lost ground water operating licenses in India because of water shortages. Beverage companies, like Nestlé Waters, are facing strong community opposition from Maine to California over plans for building new bottling plants — all because of water supply concerns.

“Seventy percent of global water is used by agriculture, and water scarcity is forcing up the cost of food. Rice prices soared last year when a six-year drought caused rice production in Australia to plummet 98 percent. The global rice shortage sparked hording and riots in African and Asian nations dependent on the staple.

“Despite water’s importance, few companies are thinking strategically about the profound business risks they will face in a world where climate change is likely to exacerbate already-diminishing water supplies. To succeed in a water-constrained economy it is essential that companies:

  • Measure their entire water footprint;
  • Assess physical, regulatory, and public perception risks associated with their water use, in their operations, throughout their supply chain, and in end products;
  • Align their water footprint evaluations with the company’s energy and climate risk assessments;
  • Elevate water as a governance priority for executives and board members;
  • Disclose to investors and other outside stakeholders water management strategies, performance data, and goals;
  • Boost engagement with key stakeholders such as local communities, shareholders, suppliers, government regulators, and employees.

“Albert Einstein once said, ‘We shall require a substantially new manner of thinking if mankind is to survive.’ Though he was speaking of another threat, Einstein’s warning rings true: Businesses must revamp how they use the most essential ingredient of life: water.”

* Read Part 1 of our series: Citizen GE
* Read GE’s Citizenship Report
* Read the announcement about the report being issued
* Read Marc Gunther’s blog about the report
* Watch a video about our Stakeholder Advisory Panel
* Read about GE’s medical equipment donation in Africa
* Read Jeff Immelt’s comments about citizenship in his recent speech
* Learn about the GE Foundation’s disaster relief efforts
* Learn about GE’s Developing Health Globally program
* Learn more about GE’s healthymagination business strategy
* Read about Developing Health Globally expanding to six new sites in Cambodia

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