Climate Change and the Global Water Crisis:
What Businesses Need to Know and Do
May 2009
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Climate Change and the Global Water Crisis:
What Businesses Need to Know and Doi
0. Introduction
Virtually every business decision is also a decision about the use of natural resources. In this
paper, we describe how global warming is affecting water and energy resources, and the
challenges and opportunities this presents globally. We summarize the way in which connections
among climate, energy, and water are likely to affect business and offer general guidance on how
companies can respond to the challenges in an integrated way. The paper highlights how regions
of the world that will experience the worst impacts of climate change are those near the equator
and overwhelmingly impoverished. And we conclude by focusing on the UN Millennium
Development Goals (MDGs) as they relate to climate change and alleviating the global water
crisis, and suggest ways that business can partner with the UN to work toward their achievement.
1. Linkages among climate change, energy, and water
There is overwhelming scientific evidence that burning fossil fuels has altered the chemistry of
the atmosphere. Figure 1 shows that atmospheric CO2 concentrations are reaching levels that are
likely higher than in the last 20 million years.
Rising CO2 concentrations along with other
greenhouse gases (GHG) are changing the
planet’s climate. Global mean temperatures
have increased three-quarters of a degree
Celsius since 1900 and 11 of the 12 warmest
years since 1850 have occurred since 1996.ii
These climatic changes are expected to
accelerate over the coming decades.
Figure 1: Variations in atmospheric carbon dioxide concentrationsiii
“Water and its availability and quality
will be the main pressures on, and
issues for, societies and the environment
under climate change.” IPCC 2007
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In its most recent report, the Intergovernmental Panel on Climate Change (IPCC) concludes that
“water and its availability and quality will be the main pressures on, and issues for, societies and
the environment under climate change.”iv Climate-related impacts on water resources are already
being documented. In all corners of the world, there is growing empirical evidence of increased
severe weather events, flooding, and diminished ice cover, all of which can be attributed to
climate change. Numerous scientific studies also show increases in the intensity, duration, and
spatial extent of droughts, higher atmospheric temperatures, warmer sea surface temperatures,
changes in precipitation patterns, and diminishing glaciers and snowpack. In the future, climate
change will affect water supply, quality, and demand in the following ways.
Climate change will affect water scarcity and sustainable supply. It will:
• Increase water shortages due to changes in precipitation patterns and intensity. In
particular, the subtropics and mid-latitudes, where much of the world’s poorest
populations live, are expected to become substantially drier.v Reduced precipitation in
some arid regions could trigger exponentially larger drops in groundwater tables.vi
• Decrease natural water storage capacity from glacier/snowcap melting, and subsequently
reduce long-term water availability for more than one-sixth of the world’s population that
lives in glacier- or snowmelt-fed river basins, including major regions of China, India,
Pakistan and the western U.S.
• Increase the vulnerability of ecosystems due to temperature increases, changes in
precipitation patterns, frequent severe weather events, and prolonged droughts. These
factors, in turn, will further diminish the ability of natural systems to filter water and
create buffers to flooding.
• Affect the capacity and reliability of water supply infrastructure due to flooding, extreme
weather, and sea level rise. Most existing water treatment plants and distribution systems
were not built to withstand expected sea level rise and increased frequency of severe
weather due to climate change.vii Furthermore, climate change will concentrate snowmelt
and precipitation into shorter time frames, making both water releases more extreme and
drought events more sustained. Current infrastructure often does not have the capacity to
fully capture this larger volume of water, and therefore will be inadequate to meet water
demands in times of sustained drought.
• Impair non-consumptive water uses, including transportation on inland waterways such
as the Mississippi River in the U.S. and Rhine River in Europe, where freight transport
has already been disrupted due to floods and droughts.viii Tourism sectors that are
dependent on the availability of water or snow are also vulnerable to water scarcity due to
climate change. Freshwater fisheries, many of which supply food to the world’s poorest
populations, also depend on abundant, high quality water resources to remain productive.
Climate change will impact water quality. It will:
• Increase extreme precipitation and flooding,
which will increase erosion rates and wash soil-
based pollutants and toxins into waterways.
• Contaminate coastal surface and groundwater
resources due to sea level rise, resulting in
The subtropics and mid-
latitudes, where much of the
world’s poorest populations
live, are expected to become
substantially drier.
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saltwater intrusion into rivers, deltas, and aquifers.
• Increase water temperatures, leading to more algal and bacterial blooms that further
contaminate water supplies.
• Contribute to environmental health risks associated with water. For instance, changes in
precipitation patterns are likely to increase flooding, and as a result mobilize more
pathogens and contaminants.ix It is estimated that by 2030 the risk of diarrhea will be up
to 10 percent higher in some countries due to climate change.x
Climate change will increase water demand. It will:
• Increase water demand for agriculture, primarily for irrigation, due to prolonged dry
periods and severe drought. Some research estimates an over 40 percent increase in land
needing irrigation by 2080.xi
• Increase water demand for hydration needs for billions of farm animals due to higher
atmospheric temperatures.
• Increase quantities of water needed for industrial cooling due to increased atmospheric
and water temperatures.xii
The impacts of climate change on the water cycle will vary regionally (Figure 2). While some
areas will benefit from having more water, these benefits are “tempered by the negative effects
of increased precipitation variability and seasonal runoff shifts on water supply, water quality
and flood risks.” Overall, the report IPCC concludes, “the negative impacts of climate change on
freshwater systems outweigh the benefits.”
Figure 2: Future climate change impacts on freshwater by world regions.xiii (Color-coding
signifies estimated percent change in annual run off by the end of the 21st Century under IPCC
scenario A1.)
In addition, hundreds of millions of people who live in the floodplains of rivers and along the
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coast will face more severe flooding if nothing is done to
protect them. Investments to prevent future catastrophes will
be made in some regions, but poor countries lack the
financial resources for needed infrastructure. These
conditions have the potential to create environmental
refugees at a massive scale. It is estimated that 60% of the
population live below an elevation of 1 meter in Bangladesh
alone. Some islands, like the Marshall Islands or Kiribati,
will have to be abandoned altogether.
Providing a safe and reliable supply of water already poses a challenge for water managers
throughout the world. Almost 900 million people lack access to improved drinking water, and
another 2.5 billion lack proper sanitation. Population and economic growth will likely exacerbate
these challenges. Furthermore, feeding more people and the rising percentage of meat based diets
can increase water demand in agriculture, which already uses about 70% of the world’s water. In
many industrialized nations, the environment has suffered from over-allocation and pollution of
water resources, and many citizens are urging that these aquatic systems be restored. Climatic
change will make meeting these existing and future challenges even more difficult.
Water and energy are strongly interconnected
Another important aspect of the water-climate change linkage is the strong connection of both to
energy. Upon hearing the terms water and energy, most people immediately think of
hydropower. And while hydroelectric generation is certainly reliant upon large quantities of
water, the connections between water and energy run much deeper. Water is used for extracting,
refining, processing, and transporting all forms of energy, from coal to solar. Large volumes of
water are used as cooling water in conventional thermal generating plants. Energy production
can also cause significant water pollution.
A much less recognized connection between water and energy are the vast amounts of energy
used to treat, distribute, and use water. Water is heavy (1 liter weighs one kilogram), so moving
it requires a lot of energy. Energy needs are particularly high for places where water is pumped
from very deep wells, or where it is piped over long distances and steep terrain. Additionally,
heating water is energy-intensive. In California, for example, 19% of the electricity use, 33% of
the non-electricity natural gas, and 33 million gallons of diesel consumption is water-related.xiv
Presently, the risks of managing water and energy/climate change in isolation of one another are
woefully underappreciated by policy-makers. Indeed, water and energy policies often compete
with one another, with decision-makers frequently inadvertently valuing energy production over
water protection. Further, many current activities to manage and reduce GHG emissions require
large amounts of water, often inadvertently increasing water-related risks. For instance, first-
generation biofuel production has an especially large water footprint, and can also compromise
water quality through the leaching of pesticides and nutrients.xv A large-scale replacement of the
gasoline-guzzling U.S. vehicle fleet with plug-in electric vehicles – an important potential
solution to reducing GHG emissions from tail pipes – would have significant implications for
power production, and thus water use. Recent research in the USA has found that generating
electricity for plug-in hybrid electric or all-electric vehicles requires as much as three times the
water per mile as gasoline production given the country’s current power mix.xvi
The risks of managing
water and energy/climate
change in isolation of one
another are woefully
underappreciated by
policy-makers.
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Similarly, some measures to manage water scarcity or
quality issues require significant amounts of energy. For
instance, water pipelines that transport water from water-
rich to water-scarce regions – a popular solution for
addressing water scarcity – require considerable amounts
of energy. Likewise, seawater desalination, increasingly
considered an option to meet growing water demand, is
extremely energy intensive. In California, for example, more energy is required to produce water
from desalination than from any other water-augmentation or demand-management option. The
future cost of desalinated water will be more sensitive to changes in energy prices than will other
sources of water, presenting reliability risks. Water recycling and re-use are seen by many as a
low-cost, sustainable water supply option, however, treating water to the high standards required
for potable re-use consumes significant amounts of energy.
While these links present challenges, they also provide opportunities, particularly as managers
seek to develop climate change adaptation and mitigation strategies. An analysis by the
California Energy Commission found that water efficiency programs could provide 95% of the
energy savings of traditional energy efficiency programs at 55% of the cost. Thus, saving water
is likely to be an important part of reducing energy use and GHG emissions and helping to
mitigate climate change. Additionally, water conservation and efficiency reduces vulnerability to
climate change by alleviating scarcity and can be an important adaptation strategy.
2. Business risks of water and climate change
Climate change will exacerbate many water and energy-related business risks. As discussed,
climate change is likely to exacerbate water availability and quality, which will have a wide
range of implications for business.
• Water scarcity directly affects business operations, raw material supply, intermediate
supply chain, and product use in a variety of ways. Declines or disruptions in water
supply can undermine industrial and manufacturing operations where water is needed for
production, irrigation, material processing, cooling and/or washing and cleaning. For
example, information technology firms require vast amounts of ultra clean.
• Water quality risks are often overlooked but may have significant financial implications.
The quality of process water is critical in many industrial production systems, and
contaminated water supply may require additional investment and operational costs for
pre-treatment.
• Water scarcity, changes in precipitation patterns, and glacier melt caused by climate
change directly affect power generation, curtailing hydro-based power production, and
also impacting any power plants that run steam turbines. Whether fired by coal, natural
gas, or nuclear energy, electricity generation relies on having an adequate supply of
cooling water. Businesses that depend on highly reliable energy from these power
sources will be at risk.
Climate change is likely to
exacerbate water availability
and quality, which will have
a wide range of implications
for business.
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• Physical water resource constraints make companies more susceptible to reputational
risks. Declines in water availability and quality can increase competition for clean water.
In water-scarce regions, tensions can arise between businesses and local communities,
particularly in developing countries where local populations often lack access to safe and
reliable drinking water. Community opposition to industrial water withdrawals and
perceived or real inequities in use can emerge quickly and affect businesses profoundly.
For instance, in Kerala, India, opposition to beverage company operations developed over
concerns about the effects of bottling plants on local groundwater levels and supplies.
When villagers’ wells ran dry, local government revoked company operating licenses,
affecting both revenues and company reputations.
• Reputational risks increase as people become more aware of their rights to access water.
The concept of “access to clean water as a human right” is gaining more recognition
globally, yet the failure of governments to provide 100 percent coverage for water
services means that international and local businesses may find themselves using copious
amounts of water in regions where people lack sufficient water to meet basic needs.
• Growing awareness around the ecological impacts of water withdrawal and discharge
increases both reputational and regulatory risks. Healthy freshwater ecosystems are an
essential part of local communities and livelihoods, not only by serving as a source of
clean drinking water, but also by providing cultural, social, aesthetic, and economic
value. As a result, significant water withdrawal or wastewater discharge, regardless of the
extent of actual impacts on the neighboring communities or ecosystems, inevitably
increase the risk of conflict with local communities. Moreover, the vulnerability of
ecosystems is expected to increase due to climate change.
• Physical and reputational pressures affecting water availability and wastewater discharge
can result in more stringent water policies. Water scarcity, coupled with increased
concern among local communities about water withdrawals, will put pressure on local
authorities and policymakers to consider water reallocations, regulations, and
development of water markets that cap usage, suspend permits to draw water, and lead to
stricter water quality standards.
• Water scarcity will increase water prices. Among other factors, water scarcity is driving
shifts toward full-cost pricing aimed at providing economic incentives for efficient water
use. In many places, artificially low water prices are rising as subsidies are phased out.
Utilities in industrial countries are increasingly implementing “block” or “tiered rates,”
where water users pay more for increased consumption. These tariff structures are
specifically designed to encourage commercial and industrial users to use water
efficiently.
• Water-intensive products and services face increased socio-political risks. As water
scarcity becomes a serious problem in many parts of the world, there may be corollary
pressure, both regulatory and reputational, on products that require a significant quantity
of water. Products and services that require large amounts of water or energy to produce
or to use may be phased out by law, lose market share to less water-intensive products, or
cause reputational damage for the company.
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Taken together, this means that businesses will face vastly increased uncertainty about the
availability and quality of their water supplies. One of the strongest conclusions in the latest
IPCC report is that “climate change will challenge the traditional assumption that past
hydrological experience provides a good guide to future conditions.” Therefore, it will become
increasingly crucial for businesses to incorporate climate change factors when assessing and
managing their water risks. Indeed, a critical driver of success in the 21st Century economy will
be how companies and investors balance the competing demands for water and energy.
3. What businesses can do to manage water-climate risks strategicallyxvii
To evaluate and effectively address water and climate change risks, companies can take the
following actions:
1. Measure water and carbon footprint throughout the value chain. Some of the most significant
water and climate-related risks can be embedded in a company’s value chain, well outside of its
direct operations or control. In many cases, such as in agriculture-based industry sectors, a
company’s direct water use pales in comparison with water embedded in the supply chain. Even
should water use or GHG emissions occur outside of a company’s sphere of influence, they can
still pose financial or reputational risks to the company. Companies can only mange what they
measure, so in order to accurately assess risks and opportunities, a first step for companies is to
conduct a comprehensive and integrated water and carbon
accounting. By aligning measurement of water and
carbon/energy, businesses can identify how the three are
interlinked, providing key basic information for
developing a holistic management strategy.
2. Assess physical, regulatory and reputational water risks
associated with climate change. Explicit attention should be paid to understanding energy-related
risks posed by water (and vice versa), as well as any potential competing demands the company
may have for water and energy. Companies should also seek to align, if not integrate, their water
and climate risk assessments. Having a detailed understanding of local water conditions,
including hydrologi