Water 'more important than oil' businesses told

Juliette Jowit

Water shortage will cause greater ruin than peak oil. Photograph: Pedro Armestre/AFP/Getty Images

Dwindling water supplies are a greater risk to businesses than oil running out, a report for investors has warned.

Among the industries most at risk are high-tech companies, especially those using huge quantities of water to manufacture silicon chips; electricity suppliers who use vast amounts of water for cooling; and agriculture, which uses 70% of global freshwater, , says the study, commissioned by the powerful CERES group, whose members have $7tn under management. Other high-risk sectors are beverages, clothing, biotechnology and pharmaceuticals, forest products, and metals and mining, it says.

"Water is one of our most critical resources – even more important than oil," says the report, published today . "The impact of water scarcity and declining water on businesses will be far-reaching. We've already seen decreases in companies' water allotments, more stringent regulations [and] higher costs for water."

Droughts "attributable in significant part to climate change" are already causing "acute water shortages" around the world, and pressure on supplies will increase with further global warming and a growing world population, says the report written by the US-based Pacific Institute.

"It is increasingly clear that the era of cheap and easy access to water is ending, posing a potentially greater threat to businesses than the loss of any other natural resource, including fossil fuel resources," it adds. "This is because there are various alternatives for oil, but for many industrial processes, and for human survival itself, there is no substitute for water."

In a joint statement, CERES' president Mindy Lubber and Peter Gleick, president of the Pacific Institute, urged more companies and investors to work out their dependence on water and future supplies, and make plans to cope with increased shortages and prices.

"Few companies and investors are thinking strategically about the profound business risks that will exist in a world where climate change is likely to exacerbate already diminishing water supplies," they say.

"Companies that treat pressing water risks as a strategic challenge will be far better positioned in future," they add.

The CERES report adds to growing concern about a looming water crisis. In the Economist's report, The World in 2009 , Peter Brabeck-Letmathe, chairman of food giant Nestlé, wrote: "under present conditions… we will run out of water long before we run out of fuel". And at its annual meeting this year the World Economic Forum issued what it itself called a "stark warning" that "the world simply cannot manage water in the future in the same way as in the past or the economic web will collapse".

CERES, which has members in the US and Europe, made recommendations, including that companies should measure their water footprints from suppliers through to product use, and integrate water into strategic planning, and that investors should independently assess companies' water risk and "demand" better disclosure from boards.

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