The simple measurement of corporate water use and discharge does not provide a complete picture of a company’s water risks or impacts. Water risks and impacts depend on the highly variable local context (i.e., watersheds, ecosystems, communities, and water users) in which the company and its suppliers operate.
As such, understanding and managing water risks requires companies to assess watershed conditions. Simplistic evaluations of local context typically assess the amount of water physically available in a region. More holistic examinations of local context evaluate factors such as the percent of available water used for human purposes, the amount of water allocated to meet in-stream environmental flow needs, the adequacy of local water management and governance capacity, and the ability of nearby communities to access water services.
By using geographic “hot-spotting” techniques to identify facilities located in watersheds considered to be water stressed, companies can begin to prioritize the locations in which to invest in operational efficiencies, contingency planning, policy engagement, community outreach, or other risk-mitigation measures.
Some of the key questions companies are asking with regard to assessing water business risks associated with their operations include:
- Which of my facilities are located in water-stressed regions (including physical, economic, and social scarcity)?
- What is the nature of our water use and discharge (and possible corollary business risks) in various locations?
- What percent of this watershed’s available water do my facilities use?
- What percent of the available water in this particular watershed is used for human purposes and what are the allocations among sectors?
- Where are water governance and management capacity a concern?
- How secure/reliable is our legal access to water in those locations?
- Where is there a high potential for reputational risk due to insufficient environmental flows or inadequate access to water services among local communities?
- How will my exposure to water risks change due to population growth, climate change, economic development, and other factors?
The following tools may be particularly helpful for companies wishing to assess and identify water-related business risks: