As water resources are nearing a critical point, with population growth and environmental factors putting the squeeze on supplies, water scarcity has been an emerging concern across the globe.
Now, big business is starting to pay attention.
Companies across a range of sectors are increasingly worried about the cost and availability of water, according to a recent CNBC report. The report cites a research note published by analysts at Barclays who identified water scarcity as “the most important environmental concern” for the global consumer staples sector.
By combing through corporate records, the researchers determined the potential financial impact from water risk was likely to be three times higher than carbon risk. Several of the largest global consumer products were said to face an impact of as much as 50 percent of their profitability (EBITDA). The staples sector includes agricultural commodities, which is extremely vulnerable to water price fluctuations and disruptions from extreme events such as droughts and flooding.
In the U.S. alone, the average price of water reportedly increased 60 percent in the 30 largest cities during the last decade. And analysts say climate change is a risk multiplier to water scarcity and warn that even companies with relatively limited financial exposure need to brace for disruptions.
If businesses can’t adapt, water scarcity could have a significant impact on their performance as well as consumer prices, both of which could ripple through the global economy.
While the news appears bleak, some businesses are working to get ahead of the game.
Pepsi Inc., for example, recently announced it would set tougher water-efficiency standards at more than 1,000 company and third-party plants. The move is expected to save more than 11 billion liters of water by 2030, while cutting the volume of water used at those facilities by half compared to 2015.
The beverage giant also wants to become net water positive by its 2030 deadline, which means it intends to replenish more water than it uses. This would happen by injecting water into aquifers and tackling conservation projects that make it easier for rainwater to filter through land into the water table.