Emerging water scarcity puts water-guzzling industries at risk

In a recent report by the Asian Development Bank titled ‘Asian Water Development Outlook 2013’, India’s water security has been labelled ‘hazardous’.

It essentially means the lowest water security index amongst countries in the Asia-Pacific region which translates into inadequate levels of public investment, regulations and enforcement related to water. Superimpose this with the expected four-hold rise in water demand by industry over next three decades when not only will major river basins be water-stressed but groundwater sources would have shrunk too, businesses will be the first to ‘risk’ competing against domestic and agriculture sectors.

It isn’t a prophecy but a reality that businesses have confronted over recent years. If the Coca-Cola plant in Plachimada, Kerala had to face farmers’ ire for over-drawing groundwater sources in 2004, the Carlsberg brewery in Aurangabad had the government order cutting off its water supplies due to extraordinary drought situation in the region in January 2013. As industrial water demand is not only restricted to direct water withdrawal but spreads across watershed, sub-basin and basin level, businesses have little option but to share water risks with communities and the environment by relinquishing their allocation for agriculture and the environment.

Increasing agriculture and domestic demand have already shifted allocation priority away from industry. A projected shortfall of 17 per cent in industrial water supply has sent alarm bells ringing in the corporate world. Unless the industry cuts down on its water consumption alongside concurrent reduction in discharging untreated wastewater, it is likely to face serious physical, regulatory and reputational risks. While sugar industry faces physical risk of water shortages, textile and paper industry face the stringent regulatory risk on untreated effluent discharge. Thermal and beverage industry, on the other hand, has huge reputational risk to confront.

Assessing six relatively higher water consuming industries -- thermal power, pulp and paper, textiles, steel, sugar and beverages – a study by the WorldWide Fund for Nature and Accenture has concluded that neither have risks been seriously recognised nor holistically understood by the industry. The findings suggest that while sugar, beverage, pulp and paper sectors have a higher risk perception, as they had already encountered physical, regulatory and reputational risks, sectors such as thermal and steel have a relatively low risk perception on account of committed water allocation from local/central governments.

Sustaining industrial growth

Even though the thermal power industry has low risk perception, its projected water demand for cooling towers may fall short by 17 per cent even if the entire industrial water supply of 60 cubic kilometers was to be made available to the thermal power sector in 2050. One the other hand, textile sector is peculiar as it exports as much as 25 billion cubic meters virtual water through cotton textiles while contributing 4 per cent to country’s GDP. Count water guzzling sugar industry and pollution spewing paper sector in the larger picture, the tradeoff precariously hinges on sustaining industrial growth against shrinking water resources.  

Curiously, the tradeoff favours sustaining freshwater resources at the cost of industrial growth. Not without reason had 700 textile units in Tirupur been closed down in Feb 2011. Even though businesses enjoy patronage of a growth-obsessed state, there is a limit to which public opposition and regulatory provisions could be side stepped. After all, it is a non-renewable resource whose demand is growing against its shrinking supply. Per capita availability of water in the country is currently less than 1,500 cubic metres, having been 1,816 in 2001; increasing population, rapid urbanisation and a growing economy is likely to make it worse in the coming years.

While the study provides clear evidence that water related risks for industry are severe, the opportunity to derive value from addressing these risks through the ‘water stewardship’ framework is equally significant. The framework offers an opportunity for the industry to improve industrial water productivity at par with global best by adopting innovative methods for wastewater reuse and water conservation that reduce costs and drive profitability. Not only will this improve brand building but ensure water sustainability not just for the ecosystem where the business is located but also in turn for the business itself.

Ironically, the set of six high water-consuming industries included in the study have been found to be at the level of a ‘beginner’ only. The three-stage ladder of water stewardship has crucial ‘progressive’ stage before the industry becomes water stewardship ‘leader’. However, there are only a few sugar companies who are at an early ‘progressive’ level as these have moved to a stage where they are engaging with stakeholders, after achieving internal efficiencies in reducing process-related water footprints, to educate them about water efficiency, from drip irrigation to other water conservation measures.

With water-food-energy nexus becoming intense, competition for scarce water resources will grow. As societal and environmental concerns take centre-stage, companies will be under greater scrutiny and more likely to face negative publicity. It is in this regard that research undertaken by Water Footprint Network can come handy for the industry to determine its water footprints and use web-based ‘Water Risk Filter’ to assess its risks and strategise next set of actions to overcome such risks without compromising on productivity.

(The writer is a water expert with the Ecological Foundation)