Johannesburg - Water risk is rapidly rising on the agenda of businesses across the country, according to Environmental Resources Management (ERM).
The southern African business unit of the world’s leading sustainability consultancy says an increasing number of businesses are asking for support to better understand and address water risks and opportunities.
Clemence McNulty, ERM principal consultant, notes: “The situation is reminiscent of the early stages of the surge in corporate requests around energy risk.
“This is now happening in the area of water security risk. It has become the next big thing on the corporate risk committee agenda.”
And the implications are dire.
“There are a wide range of implications for business. The most prominent currently seems to be around business continuity, with loss of water supply impacting ability to operate - shutting down offices and/or production.
“In parallel, as we are facing significant water tariff increases, which reflect the need for large investments in water infrastructure, the costs of water are likely to increase,” says McNulty.
She adds that water issues can impact supply chains, for example, higher costs for commodities; disruptions to supply due to extreme weather events, such as floods and storms; reputation and stakeholder relationships when there is competition for a scarce shared resource and lead to regulatory risks around compliance with extended periods to get licences and permits.
The recent drought and related restrictions around water allocation have sharpened awareness across the entire business community, with all sectors recognising that managing water needs requires a co-ordinated approach.
Corporate awareness is underscored by growing international concern.
The 2015 Global Risks Report by the World Economic Forum identified water crises as the top worldwide risk for the next 10 years, based on likelihood and consequence.
The water crisis was a concern for 39.8percent of respondents to the survey, outscoring possible climate-change mitigation failures (36.7 percent), extreme weather events (26.5 percent) and food crises (25.2 percent).
Robust water management programmes are in place at some heavy water users, says ERM, but at other companies, a more fundamental assessment of risks and opportunities is necessary.
Regarding precautions that businesses can take, McNulty says: “The first step is to understand exposure to water risks, including physical risks around supply/ water quality, but also including reputational/ regulatory risks, especially when companies have a wide geographic portfolio of sites and operations.
“There are a range of tools and approaches that can support this process and will ensure any action on water is prioritised to the most sensitive parts of a company’s value chain or portfolio.
“Second, companies should analyse their water management practices - this typically consists of a process to account for water; identifying opportunities for efficiencies; increased resilience to water disruptions through storage, greywater or rainwater schemes; and defining appropriate governance frameworks.
“Corporate South Africa consumes a significant amount of water, estimated at 10 percent for the industrial/ mining/ power generation sector, with the agricultural sector being the most significant user,” McNulty says.
“Whichever sector you are in, though, there is a responsibility to care for a scarce shared resource such as water.
“Some corporates will have significant impacts on water resources through their discharges, which is a key area to manage.
“Others can drive efficiencies by improving their use of recycled water and ensuring the proactive management of water, ensuring any leaks or issues are addressed quickly and driving awareness of the importance of careful water use with their employees and in their supply chains.
“The private sector has a unique role in society to demonstrate best practice,” she says.
THE STAR