Scarce Water Resources a Growing Business Risk

by | Nov 25, 2009

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WaterSupplyGapIncreasing demand for water resources is a growing business risk, a major economic threat, and a challenge for the sustainability of communities, according to a global resources water report from McKinsey. But there are measures that can be implemented to close the gap between water supply and demand, say researchers.

The report, “Charting our Water Future” (PDF), indicates global water demand will grow 40 percent from 4,500 billion m3 today (or 4.5 thousand cubic kilometers) to 6,900 billion m3 by 2030, and in some areas like developing countries demand will exceed supply by 50 percent.

Because the water situation differs by country, and by region, the study evaluates four countries with significantly different water issues: China, India, South Africa and Brazil. These countries account for 40 percent of the world’s population, 30 percent of the global GDP and 43 percent of projected water demand in 2030, say McKinsey researchers.

These case studies tackle some of the main themes of the global water challenge, including competition for scarce water from multiple uses within a river basin, urbanization, sustainable growth in arid and semi-arid regions, and the relationship between water and energy. It also looks at the role of agriculture for food, feed, fiber and bio-energy as a key demand driver for water

The report estimates it will cost about $50 billion to $60 billion annually to close the water resource availability gap through technical improvements, increasing supply and improving water productivity, and actively reducing withdrawals by changing underlying economic activities.

Researchers say governments are not the only stakeholders. The private sector, including financial institutions, agricultural producers and other agricultural supply chain players, large industrial companies, technology providers, and the construction sector, all have a role to play in contributing to water security solutions, according to the report.

Realizing that a lack of water resources is a growing risk to businesses, The Carbon Disclosure Project (CDP) recently launched a global water disclosure project to help businesses and institutional investors understand the risks and opportunities associated with water scarcity.

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