11.3.2 Corporate water use: why reduce it?

Generally, one can discern various drivers for companies to reduce their freshwater consumption and to develop policies on sustainable use of water.

Firstly, self-interest: as freshwater is becoming increasingly scarce, prices are going up. How companies pay for their water consumption differs per country, i.e. per m3 or according to a fixed price system (Bates et al, 2008). In many places, artificially low water prices are rising as subsidies are phased out. Water prices are increasing to cover the full cost of operating and maintaining water delivery systems such as storage and treatment (CERES, 2009, p. 16; EurActiv, 2009, EEA, 2009, p. 46). Freshwater constitutes a cost and therefore any reduction is simply beneficial to a company's bottom line (see Gege, 2004, for a review of over 1,000 examples of cost reductions achieved through environmental management).

A second driver is that many sectors need (fresh)water for the production of goods or in their industrial processes. They are dependent on the continuous availability of water. Declines or disruptions in water supply can undermine industrial and manufacturing operations where water is needed for production, irrigation, material processing, cooling and/or washing and cleaning. The semiconductor industry, for example, uses vast amounts of purified water in fabrication plants for washing the silicon wafers at several different stages in the fabrication process and for cooling various tools; a brief water-related shutdown at a manufacturing plant could compromise all material in production for an entire quarter (CERES, 2009, p. 11). Furthermore, traditional estimates often fail to address water risks embedded in the supply chain: the risks are often hidden in raw material inputs or intermediate suppliers. Another factor that is often overlooked is water quality. As the quality is critical in many production systems, contaminated water supply will require additional operational costs for pre-treatment. When treatment options or alternative sources water are not feasible options, the operations will be disrupted or require relocation. In addition, water shortages can curtail hydro-based power production, and by extension, businesses that rely on those power sources. Other power plants, operating steam turbines fired by coal, natural gas, or nuclear energy, depend on the supply of cooling water (CERES, 2009, p. 12). Consequently, it is in companies' own interest to be aware and alert of pending water shortages and to act proactively to prevent them and to reduce related risks. Obviously, dependencies differ per region and per line of business.

An important third driver is a company's wish to maintain a good reputation. As with pollution, freshwater scarcity caused by over-extraction of groundwater (Hildering, 2004) and global warming (Bates et al, 2008) are generally perceived as being caused for a large part by the industrial sector. Companies are increasingly being called upon by civil society to reduce their impact on water and the environment (see the case studies in Tulder and Van der Zwart, 2006). In addition, the competition for clean water increases due to declining water availability and quality. Hence, tensions can arise between businesses and local communities, particularly in developing countries where local populations often lack access to safe and reliable drinking water. Local conflicts can damage brand image, lead to obligations to pay compensation to local communities for polluting the water or causing water shortages, or even result in the loss of licenses to operate as was demonstrated in the Coca-Cola case in section 11.2.2. As public interest grows, companies' water practices are subjected to greater scrutiny. For instance, public criticism was directed at Starbucks when the news came out that its 10,000 coffee shops 'wasted' 23.4 million litres of water daily due to the ' open tap' or ' dipper well' policy. Despite the company's claim that this method reduces bacteria growth in the taps making the water safer, there was ample negative media coverage on the issue (CERES, 2009, p 14; BBC

News 2008, James 2008).

A fourth driver to accelerate the implementation of sustainable water practices is the risk that - due to increased awareness and concern around the ecological impacts of water withdrawal and discharge - communities will put pressure on local authorities to reapportion water allotments to support ecosystem functions, to consider new regulations, and to develop water markets that cap usage, suspend permits to draw water and lead to stricter water quality standards. Complying with new requirements may lead to additional production cost. Moreover, large-scale users face the risk that their historical access to water can be altered by policy shifts and legal rulings.1

A last driver could be the following. To address global water issues and to achieve MDG 7(10), large investments need to be made in water management. Presently, these are covered for about 95 per cent by public capital, but are still insufficient. Private capital is hardly used despite international policies that call for more private funding (Krozer et al, 2010). A study into the existing institutional arrangements in developing Asian countries concluded that they have not adequately facilitated the technologies or social behaviours needed for adequate sanitation (Kumudini et al, 2007). The authors of this study argued that businesses can play a key role, and that there are opportunities for diverse businesses to leap frogg this emergent stage. Consequently, these appeals present an additional challenge to the companies worldwide to contribute their resources and capacities to solving global water issues.