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A Drought Is a Terrible Thing to Waste

June 17, 2022 | Insights,

Drought and desertification are here to stay

The western United States is currently experiencing the worst drought in the last 1200 years. Most western states are experiencing ‘moderate’ to ‘severe’ drought, and some regions, like eastern and southwestern Oregon, California’s Central Valley, southern Nevada, and eastern New Mexico are in ‘extreme’ to ‘exceptional’ drought. These conditions are expected to continue through 2030, potentially leading to long-term irreversible environmental and socioeconomic impacts.

The drought in the western United States is not an isolated event. According to the World Health Organization, water scarcity impacts 40% of the world’s population, and as many as 700 million people are at-risk of being displaced as a result of drought by 2030. The distribution of freshwater across the planet is highly varied and, with the onset of climate change, many regions of the world are experiencing the impacts of rising temperatures on their freshwater resources. Climate change alters the timing, intensity, and frequency of the water cycle. Additionally, climate change leads to more severe weather events, from heavy downpours to extended periods of drought.

Droughts are characterised by a lack of precipitation over a given period, resulting in a water shortage. Although droughts are naturally occurring events, human activities, like land use change and water use, can worsen dry conditions. Other human activities such as the burning of fossil fuels cause global mean temperatures to increase, exacerbating climate change impacts. When coupled together, these activities create a positive feedback loop where higher temperatures alter the hydrological cycle, causing hotter and drier days resulting in more severe droughts, increased evapotranspiration, land degradation, and aridification expansion. These cumulative risks, as well as the continued mismanagement of natural resources, are causing a potentially irreversible shift from short-term land degradation to desertification.

The current drought impacting the U.S. is a perfect example of the shift happening in the hydrological cycle. Around 42% of the drought’s severity that has been ravaging the West is attributable to higher temperatures caused by greenhouse gas emissions. These climatic trends of drought and desertification are also occurring all over the world, and as they continue to persist, human populations and the freshwater systems that they depend on will be heavily impacted.

What’s the impact on companies?

The relationship between industry and freshwater is highly interconnected. Globally, companies across multiple industries account for 19% of the world’s water use (some regions may use a greater share of withdrawals for industrial purposes), stressing natural resource systems by changing water availability, quality, and ecosystem health. Declining water availability and water degradation as well as climate change impacts are risks that companies must recognise and respond to. According to the latest CDP report, if water risks are not mitigated, companies may face realised losses of more than $300 billion dollars.

Drought impacts across industries

Tesla in Germany

Elon Musk built a Tesla factory in Germany but hopes for operation and expansion have been put on hold due to the potential impacts on local climate change issues. Water scarcity is one of the primary reasons that vehicle production still has not begun. Germany is one of many countries throughout the world suffering from shrinking groundwater levels due to the combination of climate change and drought. As droughts worsen, these climate impacts are changing the way businesses like Tesla are allowed to operate, disrupting business continuity and future growth.

Meta in Arizona

Meta announced plans that the company is going to build a data center in Mesa, Arizona. Meta claims that the center will be among the most advanced and energy- and water-efficient data centers in the world. It is important to note that the price of water is highly undervalued and as a result, overused. The price of water does not accurately reflect the actual total cost of services, which includes extraction, transport, and discharge. Furthermore, complexities of pricing water increase when accounting for the environmental and socio-cultural values of water. The ‘true cost’ of water is estimated to be at least three times higher than what companies currently pay.

Around 80% of Arizona is experiencing severe to exceptional drought. It will take approximately 1.25 million gallons of water each day to operate Meta’s data center, while a typical data center uses about 3-5 million gallons of water per day. Although Meta’s data center may be more water efficient, this amount of water usage can still create demand issues with communities over water supply in a state where water is already scarce. Meta’s data center provides a compelling argument on the reevaluation of the price of water to account for the actual service costs required for water use. Increasing the price of water could reduce the impacts of drought and desertification by incentivising efficient water use, promoting new water technologies, and prioritising investments in water infrastructure.

Companies play a vital role in the transition to a water-secure future: they can align their business strategies to meet water reduction targets across their operations while addressing shared water challenges in the basins they operate in.

Opportunities to address drought and desertification

The world knows that drought risk is high and growing. We are seeing what the impact of drought has on the environment, on society, and on economies. However, there is an opportunity for companies, governments, and water managers to collectively address these shared water challenges and mitigate the impacts of drought and desertification. Companies in particular play a vital role in the transition to a water-secure future: they can align their business strategies to meet water reduction targets across their operations while addressing shared water challenges in the basins they operate in. To demonstrate accountability and leadership in water stewardship, companies should disclose targets and actions through sustainability reporting standards like CDP and engage with multi-sector stakeholders who share the same water basin to promote collective action and minimise negative watershed impacts. By creating the opportunity to discuss collective action, companies can become key partners in reducing barriers to effective water governance and advocate for robust water management strategies that ensure the long-term viability of water security. Not only will these efforts promote transparency and efficiency, but they could also increase stakeholder engagement and competitive advantage. Water stewardship efforts help make businesses stronger and more resilient by taking advantage of opportunities to understand and manage water-related risks to business, reducing operational costs, and capturing new market opportunities.

Infographic detailing Anthesis' Water Stewardship strategy

Anthesis service offerings

At Anthesis, we can help jumpstart and further a company’s water stewardship journey. Anthesis can guide companies on water stewardship initiatives that can reduce financial risk and improve collective water security. Developing an appropriate and effective water stewardship strategy is an iterative process that includes specific activities to minimise risk and deliver social, economic, and environmental benefits. Anthesis helps companies develop a water stewardship strategy approach to ensure that they successfully reach their water targets and goals.

A typical water stewardship strategy approach begins with an initial water accounting and analysis to assess a company’s operational performance. Next, a company should conduct a water risk assessment to determine which physical, regulatory, and reputational risks will impact their operational and value chains. From there, companies can begin the next phase in strategy development and setting water targets and goals. Developing a robust and comprehensive strategy requires collective action; thus, companies should engage stakeholders across multiple sectors to ensure that effective water governance strategies are put in place and water management goals align with the needs of the entire basin and its surrounding communities. Companies should look to reporting and disclosure standards to guide their overall strategy and ensure they are maximising opportunities to meet their water targets and goals. Finally, a company must be able to measure their value chain performance which they can do through water handprinting activities and innovation of water technologies.

Learn more about Anthesis’ Water Stewardship offerings

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