At ESI Monitor, we regularly support clients in finding the best ways they can reduce their footprint on the world around them. Clearly, this is the responsible thing to do – by reducing our carbon emissions, our waste or our resource consumption, we reduce our impact on the planet, its biodiversity and its people. But this approach also allows companies to measure and manage their exposure to these ESG (environmental, social and governance) factors, such as finding out how heavily they rely on scarce critical resources.
One critical resource is water, a precious substance vital for life and many parts of the economy. Only a small proportion of water on Earth is freely available. Most of the water on our planet is very salty seawater, leaving only 3% as freshwater – and of this, nearly 80% is bound up in ice in glaciers and the polar ice caps. Most of the rest is in groundwater, some of which is available to people through wells and boreholes, but not all. And only 1% is surface freshwater in rivers, lakes and soil.
This limited resource has to go around nearly eight billion humans, as well the millions of other species on the planet who need water as well. The direct human usage for drinking, washing and other household activities is around 150 litres per day in countries such as the UK, but consumers also rely on a significant amount of indirect water that is used while making the products they consume.
This indirect water demand can be significant. For example, producing each kilogram of beef requires the consumption of over 15,000 litres of water throughout the supply chain, both in watering cattle and producing their feed. In a similar way, the series of production steps means a kilo of cheese or nuts can require over 100,000 litres of water. This kind of embodied water impact brings the total water footprint of a UK consumer up to over 4,000 litres per day.
This is a significant issue because, globally, much of the world suffers from water scarcity. Today, two-thirds of the global population (4.0 billion people) live under conditions of severe water scarcity for at least 1 month of the year, while half a billion people face severe water scarcity all year round. These issues are particularly acute in certain countries, with 180 million people living under constant severe water scarcity in India, 73 million in Pakistan, and millions more across Africa, Central America and the Middle East.
Many contemporary business models are founded on the continuing availability of cheap water at production locations around the world. Yet the regions which currently provide countries such as the UK with food, textiles, minerals and other materials are under increasing water stress, with £1.8Bn of the UK’s crop-based annual food imports having a ‘high’ water risk. In fact, 70% of the UK’s overall water footprint is overseas, because of this concentration of imports from water-scarce areas.
When climate change is considered the situation is likely to become even more difficult in the future. Under possible scenarios explored by the CMIP5 project, the high latitudes and the Equator are forecast to become wetter and the mid-latitudes will become drier. Many areas that are already dry and water stressed – such as the Mediterranean, parts of the Middle East and Central Asia and the Americas – are forecast to be worst affected, with precipitations reductions of greater than 20% under the RCP 8.5 scenario.
Furthermore, climate change may also interrupt or exacerbate seasonal variability, disruption the seasonal monsoons that much of the world depends on. It could also increase the occurrence of extreme weather events such as droughts and storms.
The first step in managing water-related impacts and exposure is measuring the water footprint of a product or an organisation. A water footprint is the fresh water ‘used’ to produce a product, summed over the entirety of its production chain. Water use occurs whenever water is evaporated, embodied into a product, polluted, lost to another area or otherwise made unavailable for other local, timely usage. It includes both indirect components and direct components – in other words, water usage of upstream, supply-chain operations as well as usage that the organisation’s operation is directly responsible for.
The diagram below is reproduced from the Water Footprint Assessment Manual, 2011, and shows how direct and indirect water footprints are added up over the course of a product’s production until they reach the end consumer.
Footprints can also be calculated at the organisational level, by taking account of the products the organisation produces and the entirety of its direct and indirect usage.
Organisations increasingly disclose non-financial information, either because it is mandatory or because they simply know that it is a good thing to do. Increased disclosure and transparency is generally received positively by customers, investors or other parties, who want to know that organisations are conscious of their impact on the world as well as their vulnerability to climate change.
Without knowing how much water an organisation uses (both directly or indirectly), it is difficult to assess how exposed it would be to possible future changes such as:
While current disclosure frameworks such as TCFD (Taskforce for Climate-related Financial Disclosure) may seem to be a separate subject from water risk, the two topics are fundamentally linked. Water is actually mentioned 23 times in the TCFD recommendations report, including specifically as a source of climate change risk alongside energy, waste and land use and as a focus for target setting.
Water risk is a key component of any disclosure following TCFD principles, particularly for organisations that have operations, supply chains or investments in water-dependent sectors such as agriculture, energy and textiles. It can be a complex area to navigate, with potential for environmental, social and geo-political impacts to act together across a range of spatial and temporal scales.
ESI Monitor can assist organisations who wish to measure and reduce their water footprint, whether because of their risk exposure or desire to reduce impact. We can carry out a high-level screening exercise to identify areas of possible impact and exposure, provide a more comprehensive footprinting study including the wider supply chain, or support TCFD scenario analysis into the implications of climate change. Our consultants and associate consultants have extensive experience in supporting companies to assess and manage the environmental and social impacts and exposure of their operations, supply-chains and investments.
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