KPMG

How Businesses Can Mitigate Water Scarcity Risks

According to expert predictions, by 2025, an estimated 1.8 billion people will live in regions with absolute water scarcity, and two thirds of the world will be living under water-stressed conditions. These statistics predict a global water crisis with serious impacts. Business leaders need to be aware of the clear and increasing business risks posed by water stress. And, more importantly, what their companies can do to mitigate this risk. 

What is Water Stress?

Water stress occurs when demand for safe, usable water in a given area exceeds supply. These pressures can come from population growth, economic development, climate change, and natural resource depletion. Widespread water stress threatens businesses because it can lead to production disruption and decreased employee productivity, reputational damage, and regulatory compliance issues. In other words, water stress is a threat to companies’ bottom lines. 

So, what can companies do to mitigate risks posed by the global water crisis? 

1. Discover the Value of Water Across Your Supply Chain 

Businesses should be clear on how water directly impacts their business operations and supply chain, according to an opinion editorial by KPMG in Singapore’s sustainability expert. This awareness will enable them to identify the role they wish to play in a water-stressed world. 

KPMG in Singapore notes that mapping out water use across the supply chain should be among the first steps companies take to help them understand the value of water to their business and their water risk exposure. This will allow them to get to the next step of tackling how they can manage their water resources sustainably. 

2. Encourage Efficiency and Engage Your Employees

The first step companies can take to alleviate water stress is to encourage efficiency across their value chains — from suppliers all the way through to customers. Many businesses are already doing this through voluntary initiatives and environmental sustainability programmes. 

No matter the industry, it is crucial to realise that there is always room for improvement, and one should take care to ensure that growth. Whether procuring the most efficient technology available, investing in new partnerships, or adopting suppliers with better practices, businesses must consistently have plans to improve water use efficiency over time.

Secondly, it is essential to engage employees in sustainability strategies. As the business’s most valuable asset, employees can be a powerful force for change when navigating a response to water stress and its potential consequences.

Encourage employees to conserve water at work and home through education and engagement programmes like environmental corporate social responsibility efforts. Companies can also implement policies that incentivise employees to conserve water. For example, they could offer rebates to employees who purchase energy-efficient appliances. 

3. Disclose Your Water Risks 

Lastly, publicly listed companies in various jurisdictions are required by law to disclose their material risks — including those related to sustainability and water stress. Such disclosure is not just a legal obligation but also good for business. By disclosing water risks, companies show investors that they are aware of any current and potential impacts of water stress and have plans to mitigate them. 

This is also an opportunity to showcase the innovative ways that companies are tackling water challenges head-on. Additionally, these efforts can attract potential employees, as increasing environmental consciousness drives people to work for companies with sustainability goals. Therefore, by keeping the companies accountable and informed while ensuring transparency of business processes, there will be more positive effects than possible negative consequences for corporations. 

Case Study: KPMG in Singapore 

KPMG in Singapore is building a more resilient future by taking action on ESG issues, including water scarcity, across its global firms. The firm is also supporting its clients on their sustainability journeys. Guided by the four pillars of KPMG’s Our Impact Plan – People, Planet, Prosperity and Governance – the firm is addressing issues, including water-related climate risks and water pollution, to enable responsible growth. KPMG in Singapore offers various services to allow clients to integrate ESG throughout corporate processes actively. This can manifest in changes like improving the efficiency of operations, making more responsible investments or improving accounting and finance strategies. Such measures can actively encourage sustainable growth and resistance towards issues like the consequences of the water crisis.

The global water crisis is a pressing issue that businesses can no longer afford to ignore. By encouraging efficiency across the value chain, engaging employees in ESG efforts, and disclosing water risks to stay transparent and accountable, leading companies are setting an example for others. 

It is evident that sustainability efforts are not just good for the environment; they can also be good for business. Every company should relook at its approach to ESG and consider how it can operate more sustainably for the benefit of the planet and its people. 

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