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The Five Commercial Risks Of Water Scarcity

Water is a vital resource for your business and is key to not only sustaining, but also driving profitable growth.

As awareness for the climate crisis grows, consumers, governments, governance and providers of capital will respond with higher expectations of brands and companies. It’s important for you to adapt and respond to these demands and expectations, benefiting from first mover advantage, while ensuring a resilient, future-proof business.

Action on water is only becoming more critical for your ongoing success.

Commercial success, under threat?

Water is a resource under increased stress due to a convergence of factors, with water management now cited as one of the greatest risks to business continuity and growth.

The majority (76%) of risks reported are physical, relating to water scarcity and declining water quality, typically disrupting operations and increasing operating costs. These risks aren’t a distant threat: businesses expect half of them to materialise within the next three years.

But what are the present water risks? And what impact would they have on your business?

1. Increase in operating costs

As we’ve seen with gas, when demand outstrips supply, costs increase. In this case, wholesale gas prices have risen exponentially, increasing by 250% since the start of 2021 alone. Subsequently pushing up electricity prices.

This acts as an early warning sign for what’s to come with water. As demand for water resources continue to increase (demand for water could outstrip supply by 2050), prices increase, amplifying your operating costs.

For manufacturing, retail, leisure, hospitality and industrial businesses, a slight increase in operating costs could jeopardise the overall profitability of your business.

A 2015 drought in Brazil drove up General Motors’ water costs there by a staggering $2.1 million.

2. Revenue, down the drain

If you were to lose access to water, what would happen?

Without a supply of freshwater, the chances are, you’ll have to close your site/s. Production will grind to a halt. Service will be paused. Customers will become agitated. Trade will be lost.

The loss of water to a site, and its subsequent closure, will not only have a significant direct impact on short-term revenue generation, but also your reputation. The closure of a single site could therefore have an almost infinite long-term impact on your ongoing business success.

If your site is without water due to wholesaler works, GSS payments may be made by the wholesaler. Though typically, the value in lost trade due to a site closure will far outweigh the potential payments made by a wholesaler.


Think you know water? Take the water quiz to test your knowledge and learn more about the UK’s position.
Take the water quiz to test your knowledge


 

3. Reputational damage

“It takes many good deeds to build a good reputation, and only one bad one to lose it.”
— Benjamin Franklin

Reputational damage can be caused by many different factors, but namely, it’s how a business responds to disruption.

In the case of loss of water supply, and subsequently closing of your site/s, the consequential damage to your reputation can have a catastrophic impact on your success, and should be a key consideration regarding water risks (and climate change risks for that matter).

Additionally, if customers feel they have been inconvenienced in any way, they are likely to take their business to a competitor, resulting in loss of sales and custom. Consumers, more specifically, may vent their anger on social media platforms which may further damage your business reputation. In the age of ‘single-tweet public relation crises’, the best defence is proactively addressing issues before they hit.

In the worst case, national water shortages leading to closures across your portfolio could result in organisational failure.

Consumers, stakeholders and governments are putting increasing pressure on businesses to take positive environmental action. After all, 33% of consumers now make purchasing decisions based on whether they believe the brand is doing social or environmental good. By not taking proactive, concerted action on water, leading to loss of supply, mains bursts and site closures, reputational damage could be exacerbated.

Download the business case for water action

4. High business continuity costs

In the event of loss of supply, or intermittent supply, ensuring business continuity is key. Though often, arranging provisions at a time of need can not only be time consuming (where time is certainly of the essence), but can also come at a huge cost.

In these instances, you may need to arrange:

  • Bulk water tankering
  • Emergency and wholesale bottled drinking water
  • Chemical toilets

It’s important to know how much water each of your sites need to run each day. Supplying the wrong amount could further jeopardise business continuity – too little and you’re back to square one.

5. Location, location, location

Soon, water access will be regarded as a competitive advantage as more and more UK regions are classified as ‘seriously’ water stressed by the Environment Agency. This may force you to consider the location of your sites, potentially relocating where possible.

At a minimum, the significance of regional water scarcity means businesses like yours must now prioritise:

  • Securing site water supply: avoid loss of/intermittent water supply
  • Reducing site consumption: ensure own water use isn’t compromising the community’s water resources

Getting in the flow

Businesses are starting to become more aware of the risks related to water. Some 75% of businesses surveyed by CDP say they are exposed to substantive water risks, up from 70% in 2015.

Despite almost a doubling of the number of companies setting targets to reduce water withdrawals from 2015 to 2018, there has also been an almost 50% rise in the number of corporates reporting higher water withdrawals.

More can be done to deliver a secure water future. Getting proactive on water, securing your supply and reducing your consumption will not only have a vast impact on your bottom line, contributing to a resilient cash flow, but also reduce the water risks your business is exposed to. With better water management, businesses can have a substantial positive impact on our environment. It’s time to make water work.

In three simple steps, you can get proactive on water, take action, reduce risk and make significant commercial and environmental progress:

Step 1: Visibility
The first step is understanding your water usage. How much you use. Where. And when.

Step 2: Efficiency
Time to take action. Solving problems, achieving efficiency and saving costs. Set targets and develop plans for hitting them.

Step 3: Resilience
Create your own unique water management strategy. So, whatever happens, your business is water secure.

To learn more about how you can make water work for you, driving financial efficiencies, operational resilience and safeguarding our most precious resource, schedule a call with one of our experts here.