'Water-related issues could threaten business models'.
| Author | Baird, Harold |
| Position | A word from the president |
During a recent visit to members in Ghana, I learned that one of the major challenges for businesses there is addressing the issue of water distribution. So many of us take water for granted, but the true implications of water scarcity - not just for Ghana but for the world as a whole - are driven home in "Thirsty planet: Business responses to water scarcity", a report recently published on our new CGMA website.
The facts are stark. The 2030 Water Resources Group, a research organisation supported by the World Bank and private corporations, estimates that under current conditions, global demand for water will be 40 per cent higher in 2030 than reliable supplies can provide.
In China, more than half the country's cities are already struggling to get clean water to their residents. India is also set to suffer severe water problems. As drinkable water becomes more scarce, prices will rise and access becomes threatened. The problems in developing economies, such as China and India, are particularly worrying because it is these countries that many corporations are relying on for future growth, either as low-cost manufacturing centres or in expanding consumer markets.
What has this got to do with management accounting? CIMA's report highlights how water-related issues can have a dramatic impact on the way we do business. Production methods, customer requirements, investor sensitivities and capacity levels that shift in the wake of constrained water availability could threaten many successful business models.
Clearly, water-intensive industries such as beverages and agriculture are most at risk and this is where we find many of the companies leading the discussion and implementing water sustainability programmes. But even sectors less obviously in danger must consider the potential threat. Ford, for example, uses about 400,000 litres of water for each car it makes.
The World Wide Fund for Nature has catalogued four areas of risk linked to water scarcity that could have a direct bearing on a company's success. These are physical risk, financial risk, regulatory risk and reputational risk. Issues related to water risk are also catching the attention of more and more corporate investors. The reality is that...
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