Dripping Tap

Risk & Innovation

Managing Risks Associated With Water Scarcity

September 14th, 2016


A man on the moon. A decoded genome.  Artificial intelligence. Man’s achievements seemingly know no boundaries, except when it comes to water.

Throughout history, from magnificent aqueducts to sophisticated dams and hydraulic systems, societies have found ways to get water where it’s needed. Yet in the modern day, water concerns – from scarcity to cleanliness – threaten to undermine the fabric on which our institutions and societies are built. A growing population and the effects of climate change have disrupted traditional water sources. Combined with an ageing and inadequate infrastructure, the water crisis needs urgent attention. Water security is defined by the UN as “the capacity of a population to safeguard sustainable access to adequate quantities of acceptable quality water for sustaining livelihoods, human well-being, and socio-economic development, for ensuring protection against water-borne pollution and water-related disasters, and for preserving ecosystems in a climate of peace and political stability.”

As that quote highlights, this isn’t just a social issue. Water underpins the whole global economy, from irrigating the crops that keep us all alive to cooling the power stations that drive our factories. If humankind is unable to find a solution to this growing challenge, it faces a truly global crisis. Securing it, whether by infrastructure, innovation or political and corporate action is of central importance in the coming years.

In Depth

Why Should People Be Worried About Water Stress?

The first answer to this question is ecological. Whatever weight some put on humanity’s contribution to the problem, evidence is growing that the global climate is changing. This has a number of serious consequences for water supply. Shrinking glaciers are bad news for the communities downstream that depend on the meltwater. Glaciers in the Himalayas alone contribute to the water supplies of 1.4 billion people – nearly a quarter of the global population. And disruption to the El Niño current has caused a record-breaking drought in California and other western areas of the Americas.

The second major threat to the water supply comes in the form of demographic strain and political tensions, driven by a projected population growth that will see the world’s population hit 9.7 billion by 2050, putting ever more pressure on these limited resources. For example, disputes about the damming (and thus control over) the Nile river as it flows from Ethiopia through Sudan and into Egypt and the Mediterranean sea has been the cause of much political tension in the region – tension which could boil over into conflict as scarcity worsens. This kind of conflict is already happening – among the factors behind the Syrian civil war was an urban population swell caused by the emigration of farmers driven from their land by water scarcity. And the threat of violence will mean that limited water resources become even more tightly controlled, and scarcer still.

Where Water Shortages Will Hit

When considering the social and political impacts of water sustainability, it is important to understand where and how the sustainability issues will manifest. And when considering the sustainability of the world’s water resources it is important to separate fresh water from sea water. 97% of the water on Earth is sea water, not suitable for human consumption and many of the other uses discussed in this article.  That leaves only 3% to support the existence of the human race.  Of the fresh water supplies, only 11 percent of the 9 trillion cubic meters (or 9 quadrillion litres or more than 2.3 trillion gallons) of water consumed every year is consumed as municipal water – that is, used by households and hooked up to a city’s water grid. The remaining 89 percent is used by industry (19 percent) and agriculture (70 percent). Water is required to irrigate the fields where the cotton, corn and rice are grown, it is required to produce the dyes involved in manufacture of clothing, and it is required to manage the industrial wastes that manufacturing processes create.

This burden is not borne evenly across the globe – for example, the United Kingdom may face wet summers and winters, but only 1 percent of its annual water consumption is spent on artificial irrigation.  At the other end of the spectrum is Amu Danya, the longest river in Central Asia, where nearly all of the water is used for inefficient irrigation of cotton and food crops in Uzbekistan and Turkmenistan. Meanwhile, India spends a massive 90 percent of its water supplies on keeping its crops watered and its people fed. “Water issues’ vary depending on where you’re located,” says Rodney Taylor, Managing Director, Environmental Practice, Aon Risk Solutions. “In the U.S. alone, ‘water issues’ in Miami can mean ocean-level rises that threaten the developed infrastructure and fresh water aquifers, whereas across the country in California, there’s currently a drought.”

Industry too is a massive consumer of water resources. Fuel burning power stations need access to huge quantities of water for cooling turbines. An EW3 study from 2008 found that power plants in the US alone consumed 7.3 trillion litres (about 2 billion gallons) of water, of which 96 percent was fresh water. Even industries not immediately associated with significant consumption can be hugely dependent on water supply. For instance, growing a single almond consumes nearly four litres of water. If that 4 litres of water per almond seems steep, then remember that producing a single pair of denim jeans requires more than 13,000 litres of water. An automobile requires 148,000 litres.

Pollution of freshwater supplies has also been a significant factor in determining the water available for human consumption, agriculture and manufacturing.  In the United States, approximately 40 percent of rivers and lakes are considered too polluted to support normal activities. In China, 80 percent of rivers are so polluted fish cannot live in them.  The Ganges River, which supports more than 500 million people, is one of the most polluted rivers in the world.  Pollution from industrial, agricultural and residential activities has exacerbated the shortage of freshwater in areas where the need is most critical.

Beyond direct applications of water for manufacturing and agricultural purposes, maintaining water supply also has a whole range of knock-on costs. Sitting at the nexus of power generation, manufacturing, food production, and the domestic sphere of consumption – from hygiene to heat –  and a host of other services, few areas of daily life are unaffected by a lack of water. Simply put, water makes the existence of human life on this planet possible.

Little wonder, then, that when water supply is jeopardised, whole societies can grind to a halt. If current conditions of supply, storage and capture remain unchanged, the costs of water to the global economy could hit $63 trillion by 2030.

What Is Being Done?

Meeting the water challenge can first be achieved on the micro scale, through individual and societal drives towards water conservation. For example, California, in the midst of a five-year drought, has adopted state-wide water conservation policies that apply to individual residences, businesses, institutions, small towns and major cities. At a corporate level, businesses can engage company-wide water conservation schemes, and more high-level moves, like shifting manufacturing facilities away from water stressed regions to alleviate pressure on local communities. “Water availability is now going into the decision-making process of where to locate new facilities.  Additionally, this is also a factor in curtailing manufacturing operations, closing or relocating current facilities.  For example, if a plant in Asia no longer has access to clean water or a means to process it, the plant will sit idle and can cost thousands in terms of lost revenue,” says Taylor. While high level moves like facility relocation may seem like an extreme reaction, efficiency savings can make this a financially sensible as well as an ethically sound decision.

Innovations in Infrastructure

But businesses can only do so much. Action needs to come from top down to ensure the effectiveness of existing infrastructure. This is no small task. In the US many extant water pipelines were laid in the 1920s, with a predicted hundred-year lifespan. Replacing these pipelines as they deteriorate will be a monumental and expensive task. The American Water Works Association estimates that replacing these pipelines will cost around $1 trillion over the next 25 years. Similarly, updating existing pipelines to ensure compliance with the Safe Water Drinking Act, something thrown in the spotlight after incidents like the Flint, Michigan case (where domestic water supplies were contaminated by lead), could cost up to $384bn over the next 20 years. And this is just the US.

Boosting water infrastructure also needs to be done responsibly and sustainably, or the problem can be exacerbated. Years of excessive and poorly planned irrigation in the former Soviet Union led to the almost complete desertification of the Aral Sea, formerly one of the largest sources of fresh water in the world.  The economic loss and human suffering from this environmental disaster have been beyond calculation.

Another solution to curtailing the worst effects of water stress could be looking to new sources of water generation apart from rivers, reservoirs and groundwater. One method being pursued is the desalination of seawater. Since seawater constitutes 97 percent of available water in the world, its conversion to freshwater offers a promising alternative. Countries in hot, dry climates are leading the way forward here.

“Water reuse technologies in the Middle East are emerging as a vital solution,” says Kessler. “These include the treatment of wastewater and seawater for drinking as well as irrigation and industrial processes. Desalination and tertiary filtration are good examples, along with biological treatment.” Israel currently gets 40 percent of its water supply this way, while Saudi Arabia currently operates the largest desalination plant in the world in Ras al-Khair. However, making seawater drinkable by removing the salt is an expensive and time consuming process, requiring enormous amounts of energy (creating another environmental problem).

Rainwater harvesting is another option being pursued in areas with high rainfall but poor water processing infrastructure, such as Mexico City. Isla Urbana, a system of rainwater collection technologies has provided 170 million litres of captured water to users in the city as of 2016.

Staying in Latin America, the Inter-American Development Bank is issuing an open call to support other innovative start-ups working on water, sanitation, hygiene and health projects. Across the region, “improving potable water and sanitation, management and watershed protection, agricultural development and irrigation, drainage and flood control is vital,” says Mariano Viale, Managing Director, Aon Construction and Infrastructure LatAm. “This is being done through studies, financing and investment programs in order to improve the quality of life population according to the particular needs of each country.”

Solving The World’s Biggest Challenge

“Water supplies are no longer a given – you don’t realize how fragile things are until they are no longer there,” says Taylor. Water risk could be one of the biggest challenges facing the world over the next couple of decades. The threats are real and the stakes are terrifyingly high, for people and for the economy. But solutions do exist and every single person and organization that consumes water in any way can be a part of these solutions.

Individuals can follow conservation policies and turn to alternate collection services. Corporations can cut waste, relocate core services and leverage smart data to optimise resource usage.  Governments can renovate and improve the hydraulic systems on which their sovereignty ultimately rests all while encouraging our transition to a more sustainable approach to water worldwide. All of these entities and individuals can work to prevent additional pollution of water resources and to clean up the world’s lakes and rivers. The future of global wellbeing and development depends on it.

Talking Points

“Global water crises… are the biggest threat facing the planet over the next decade.” – World Economic Forum

“Freshwater scarcity is a major risk to the global economy, affecting four billion people directly. But since the remaining people in the world receive part of their food from the affected areas, it involves us all.” – Arjen Y. Hoekstra, Professor of Water Management, University of Twente

“It is unlikely we are going to get out of this problem by building more infrastructure alone – we need to find a better way of sharing what we have. We need to be doing more with less, and water markets are essentially a way of doing that – they are a mechanism for reallocate water sellers to willing buyers so that you get a more efficient and productive use out of the same amount of water.” – Giulio Boccaletti, Head of Water, The Nature Conservancy

“Innovation is responding with solutions to the water crisis which are specific to a region, whether that is dealing with a scarcity (Middle East) to waterborne disease, which still a major issue in undeveloped regions.” – Greg Kessler, Director of Surety and Performance Security, Aon Risk Solutions

Further Reading

Related stories