Bridge Over Troubled Waters: How Boards Can Manage the Risks of the Global Water Crisis

In brief: Climate change continues to be an area of focus for investors and stakeholders alike, and boards must consider what risks climate change poses to their companies. Water risks in particular are already impacting the corporate bottom line and the integrity of supply chains. This brief, written by Ceres and originally appearing in the 2020 Governance Outlook: Projections of Emerging Board Matters, delves into where boards should be working with their management teams to consider water risks within the sphere of environmental, social, and governance issues.

This resource can help your board to

• consider the material impact that water risks pose to the organization,

• work with management teams to address exposure to water risks, and

• integrate water risk into the overall oversight of corporate strategy. 

Most relevant audiences: Risk committee chairs, risk committee members, audit committee chairs, and audit committee members

Introduction

“Day Zero”—the crisis moment when a local water supply goes completely dry—is fast becoming part of business vernacular. The phrase, which got its start when Cape Town, South Africa, nearly went dry in 2018, is now spreading as other global markets face similar water crises.

For example, India—one of the biggest, fastest-growing economies in the world—is experiencing the worst water crisis in its history. The Indian city of Chennai is in the midst of an historic drought, leaving its population of 9 million without water security. According to the Indian government, 21 major cities will run out of groundwater by 2020, putting around 100 million people at dire public-health risk.

The human tolls also exact business costs. India is not only one of the largest consumer markets in the world, it is also a major technology and manufacturing center. Water embedded in the production of Indian exports uses almost four times the amount of water used by Indian households and industry, suggesting that water scarcity will be a serious risk to economic activity in the future.