Managing Director & Senior Partner
With major contributions from Stuart Orr and Richard Lee of the WWF Freshwater Practice Coordination Team and from the WWF Water Risk Filter team
The world is facing a pervasive—and mounting—water crisis. Communities have too little water, or at times too much, or the water isn’t clean. Already under pressure, the ecosystems and infrastructure that sustain water resources are now vulnerable to disruptions from climate change, resulting in significant economic impacts that place business at risk.
Although access to freshwater has improved over time and businesses have become better at managing water risk, climate change is threatening to halt or reverse this progress. Governments cannot fix the problem alone; they must work with the private sector and nonprofit groups to promote and adopt a holistic approach to water management-one that prioritizes resilience. Fortunately, new ideas and emerging technologies can help us overcome these challenges and unlock opportunities arising from the water crisis.
Before describing those solutions, we need to dispel some common myths about the water crisis. Although they have some parallels, the water crisis is quite different from the crisis in carbon emissions—especially in that water issues are hyperlocal. Nor can we depend on governments alone to provide resilient water supplies, which have become so fragile that they require the involvement of diverse stakeholders. Crucial innovations must come from both for-profit and nonprofit organizations in each region.
A secure water supply is not simply a financial or engineering challenge, so there is no easy infrastructure fix to the crisis. Because water depends on natural ecosystems, solutions must work with nature on the ground. Even with the engineering approach of the past century, more than a million people die each year because they lack access to safe and affordable drinking water, adequate sanitation, and suitable hygiene facilities. As population growth, rising economic output, and changing climate patterns increase pressure on freshwater supplies, the progress made in recent decades is under threat and could be reversed. Instead of doing more of the same, we need to take a new approach.
In doing so, however, we should not make water free for everyone. Water pricing involves a complex balance between equity and efficiency: water should be inexpensive because it is a human right, but people should also have an incentive to conserve it. As for investors, they often lack the information needed to support sustainable water projects and companies.
Today the world faces severe water problems in many regions. We have not managed water sustainably and equitably—and now four drivers are raising the stakes:
Behind all of these drivers is failed governance. Many regions lack the governmental capacity to manage freshwater resources effectively. They send out weak pricing signals, rely on outdated allocations, and in many cases do not consider the ecosystem's wider ecology and hydrology. Effectively managing water use requires strong, impartial, and collaborative local governance.
Gaining a thorough understanding of the water crisis in any region or location is difficult because many factors are involved. To reduce the complexity, BCG’s Water Impact Matrix charts each region’s degree of crisis according to two factors. The first factor assesses indicators of too little water, too much water, and too dirty water. The second takes into account environmental, economic, and social dimensions. Policymakers can use the Water Impact Matrix in combination with WWF’s Water Risk Filter, which quantifies risks on the basis of indicators from 32 global data sets. Together, these tools show that 4% of the world’s environmentally rich areas, 30% of global GDP, and 34% of the world’s population are in locations at high water risk. By 2050, if we continue business as usual, 7% of environmentally rich areas, 43% of the global GDP, and 51% of the global population will be at high risk.
Among the regions at high risk are northern India, northeastern China, the southwestern U.S., and the Mediterranean. These regions must develop sustainable water management solutions to meet the needs of social and economic growth as part of their long-term sustainable development plans. (The full report includes a case study examining how the southwestern U.S. has employed four of six key strategic shifts to address its water crisis.)
With regard to industrial sectors, water is especially critical to the operation, profitability, and sustainability of agriculture, textiles, mining, and energy production—and all of these sectors are stressing local water supplies. The report includes details on the virtual water trade and the implications of a major shift to hydrogen energy.
People have traditionally used, valued, and governed freshwater as an inexhaustible commodity. To boost access to water through adoption of climate-resilient systems, we need a long-term systems-level approach that includes working effectively with natural processes such as groundwater and aquifer recharge. We propose six strategic shifts in water management for the public and private sectors:
The report looks closely at technological and social advances, and includes sidebars on precision irrigation and social innovation.
Armed with better monitoring and data, decision makers can move toward evidence-based water management, rather than simply favoring the loudest or best-connected interest groups.
The global water crisis crept up gradually, as people around the world built economies and societies that took access to freshwater for granted. Today, we can clearly see the cascading harms that arise from too much water, too little water, or too dirty water. With thoughtful, informed investments and policy shifts that encourage building in—rather than building over—natural ecosystem services, we can better prepare ourselves for expected water constraints in much of the world.
Above all, we need to work collaboratively to address the complexity of the water crisis. Governments, financial institutions, nonprofit organizations, and corporations must work together in supportive, inclusive conditions to build resilient water systems that deliver on water as a human right, facilitate economic growth, and overcome the challenges of climate change.
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