These terms are useful insofar as they help society and organizations understand the degree and nature of water-related challenges for a geographic region and make informed decisions on how to manage them. Below we describe some of the specific applications of each term and identify applications for which they are not typically well-suited.

Applications of “water scarcity”

Water scarcity (illustrated by the red text in Figure 1), at its core, serves as one way to assess and compare the health of river systems. Indeed, WFN’s Water Footprint Assessment Tool, which aims to understand how water use by companies and others may affect the sustainability of a river basin (as opposed to assessing business risk), uses basins’ relative water scarcity (and specifically “blue water scarcity”) as a way of understanding where equivalent water footprints will have more severe impacts. Since scarcity is a relatively simple measure that reflects an objective reality, it is also useful as the basis of quantitative measurements and comparisons. However, this measurement alone is not an effective approximation for water risk, but rather is only one of many factors that contribute to and inform water risk for businesses.

Applications of “water stress”

Water stress (illustrated by the three light blue boxes in Figure 1) serves as a way of understanding where it is challenging to meet human and ecological demands for water. Since it addresses a wider range of factors, water stress is considered more useful than scarcity when evaluating water risk. As such, water stress is sometimes used as an approximation of areas that are likely to lead to water risk, especially when a more comprehensive assessment of qualitative risk factors is not available. The WRI Aqueduct tool, for example, uses water stress as a key factor in understanding where companies might face water risk. Similarly, WWF Water Risk Filter accounts for water scarcity, pollution, and impacts on ecosystems when assessing physical water risk. WFN’s Water Footprint Assessment Tool combines blue water scarcity and water pollution levels, in addition to water use efficiency benchmarks to identify hot spots or basins with water stress, which can also indicate where companies might face water risk.

However, since stress is a somewhat subjective concept and our ability to comprehensively measure it scientifically and consistently is limited, using water stress as the basis of sound quantitative comparison is not possible at present. That said, it may be possible to develop simplified proxy measures that indicate areas that would generally be thought of as water stressed, based on more easily-quantifiable metrics. This would greatly improve its utility in disclosure and communications settings.

Applications of “water risk”

Water risk (illustrated by the green circles in Figure 1) serves as a comprehensive compilation of the ways water-related challenges may affect specific businesses, governments, communities, and others. Because of this, by definition, it is the most useful term to use as the basis of decision-making and strategy planning geared toward supporting business viability, if effectively assessed and understood. However, robust water risk assessment requires a wide range of robust information and analysis. Various dimensions that inform water risk are elusive to measure with scientific certainty due to their complexity and inherent subjectivity. Thus, water risk, at the moment, is mostly an anecdotal approach, as opposed to a scientific approach, and is not well-suited for quantitative comparison. It may also be too complex for typical communications and awareness raising efforts. Risk encapsulates some factors that affect business viability, but that do not necessarily affect the degree to which a basin is managed sustainably. For example, if infrastructure delivering water to a company facility is insufficient or damaged, the company may not be able to operate optimally (and thus face risk), but the basin will likely be unaffected. As such, risk is not necessarily the most helpful concept for driving water sustainability in specific basins.

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