Industry – from food production to mining, apparel manufacturing to high-tech – is collectively the single largest user and influencer of freshwater resources globally. Therefore, it has much to lose from critical water risks as population pressures and climate risks grow. How industry responds to intensifying water scarcity and water quality risks globally will be critical to its long-term future and society at large.

Against this backdrop, Ceres, in partnership with the Valuing Water Finance Initiative, commissioned the Global Institute of Water Security at the University of Saskatchewan for a first-of-its-kind comprehensive scientific review and analysis of industry impacts on freshwater resources around the world. This report analyzes the global role and impacts that industries are having on water systems, including their impact on water use, pollution, water flow alterations, and broader hydrologic system disruption. It also examines the longterm exposure that different industry sectors are facing from escalating water risks and the actions that companies can take to mitigate those risks.

Through this comprehensive analysis of the scientific literature, the report identifies five critical threats to global freshwater systems - groundwater depletion, contamination, plastic pollution, diversion and transfer of water, and eutrophication – threats driven primarily by industry practices. The analysis makes clear that key industries, including Food Products, Textiles, and High Tech and Electronics, are the biggest contributors to these problems, which are undermining the functioning of global freshwater systems that underpin economic and societal stability.

Figure ES1. Key sectors and industries within those sectors with the most severe and systemic impacts on freshwater resources.

This analysis demonstrates that these threats are not only locally severe, but are widespread, posing broader systemic risks to the global economy and to investment portfolios than have been commonly acknowledged. The degree to which corporate practices are triggering these severe and systemic impacts exposes companies and their investors to far-reaching financial risks, as several studies reviewed in the report show. A recent Barclays’ research note warned that the Consumer Staples sector alone, which includes food and beverage production, is facing a potential $200 billion impact from water scarcity risks – roughly three times higher than carbon-related risks.

This report outlines the important role investors can play in engaging with companies and the industries that they invest in to halt the systemic harm these sectors are causing.

Given that climate change is accelerating these risks, time is running out to protect the Earth’s most precious natural resource. The report concludes that it will be impossible to advance global water security without far stronger private sector leadership – both from companies and the investors owning them. Concerted and focused efforts of investors, companies, and governments to drive change in these unsustainable practices would make a significant positive impact to protect global water security, economic development, and the lives of millions.

Table ES1. Threats to freshwater from industrial practices deemed Very High (VH) or High (H) in terms of its severity, systemic nature, and overall impact. (see Appendix D).

These wide-ranging critical threats are not being caused by one industry alone. The biggest player is the Consumer Staples sector, including food, beverage, and livestock production. This sector is the largest driver of groundwater depletion and water pollution globally, much of it from nutrient-laden fertilizers and manure that overflow into streams, rivers, and coastal estuaries, causing low-oxygen, eutrophic ‘dead zones’ that are spreading worldwide. Agricultural supply chains within this sector account for 70% of global water withdrawals.

Other industries are also contributing to water scarcity threats. The Textile, Apparel, and Luxury Goods industry, mostly due to thirsty cotton production, is a significant driver of groundwater depletion in India, Brazil, Central Asia, and parts of the U.S. The Metals and Mining industry and Oil and Gas industry, especially from hydraulic fracturing and oil sands extraction, are also causing severe groundwater depletion and pollution.

On the pollution front, the Metals and Mining industry is the largest source of metal pollution, but the Information Technology sector also plays a significant role due to production of semiconductors, circuit boards, and batteries. The Textile, Apparel, and Luxury Goods industry also has a significant impact on water pollution, particularly in Asia, through the direct discharges of untreated or insufficiently treated wastewater from dyeing and finishing textiles directly into rivers and streams.

In addition, textile plants release an estimated half-billion tons of microfibers from textile washing each year.

The report’s analysis reveals broad shortcomings in how water is being managed and governed globally, notably:

Lax regulations
Weak or nonexistent policies and regulations governing water use and water quality impacts are an all-too-common problem globally. The dearth of policies is especially pervasive in Asia, Africa, and other developing countries where chemicals, heavy metals, and micro-plastics are discharged untreated into rivers, streams, and coastal estuaries. In particular, food production practices have tended to be less regulated globally.

Undervalued resource
Water is broadly undervalued globally. With rare exceptions, global economic systems continue to treat water as an infinite resource that has little monetary value, resulting in poorly managed and inefficient water use by industries in most parts of the world.

Water management gaps
Water management practices vary widely in scale and effectiveness across many industries – an indicator of the enormous challenge, but also the potential, for scaling up water management best practices worldwide, including the joint management of surface and groundwater resources.

Social responsibility gaps
Private sector water activities are triggering damaging social impacts across the globe, with vulnerable communities, including Indigenous and fenceline communities, being disproportionately impacted. Activities such as water diversions are displacing communities, the disproportionate use of water resources and overdraft of groundwater are leading to conflicts between frontline communities and industries, and the discharge of polluted water and inadequate wastewater management is impairing drinking water quality and jeopardizing human health.

The report cites several studies showing that stronger water management measures from industries will be far less costly than ‘business as usual’ approaches that have been broadly insufficient so far. A Barclays’ report, for example, estimates that proactive water management will cost the Consumer Staples industry 18 times less than the cost of inaction. A 2019 CDP report reached a similar conclusion for other industry sectors.

Table ES2. Table ES2 provides a relative assessment of water impacts caused by industries within areas of the value chain, whether from direct operations, global supply chains, or end-product use. Industries with the most severe (very high) impacts throughout the value chain include Food Products, Beverage, Textiles, Apparel, and Luxury Goods, Oil and Gas, Pharmaceuticals, Chemicals, Metals and Mining, Paper and Forest Products, and Renewable Electricity.

The report identifies the five most critical threats – largely attributable to industry – that are causing systemic impacts on water quantity, water quality, and broader environmental changes.

Eutrophication

Eutrophication, a complex process that results from excessive nutrient loading caused mostly by livestock- and fertilizer-related runoff and detergent discharges into wastewater, is increasing exponentially worldwide, causing billions of dollars in damages. Eutrophic “dead zones” in water cause fish die-offs, human health impacts, and declining water quality. Eutrophication affects an estimated 54% of the lakes and reservoirs in Asia, 53% in Europe, 48% in North America, 41% in South America, and 28% in Africa. In the U.S. alone, the United States Environmental Protection Agency has identified more than 166 dead zones across the country, including in the Great Lakes, Chesapeake Bay, and the Gulf of Mexico, much of it from agriculture-related nitrogen runoff. While some voluntary industry-led initiatives are underway in the U.S. to reduce nutrient pollution, these efforts are mostly small-scale in nature. And even as progress is being made in some parts of the world to reduce run-off of certain kinds of nutrients, the impacts from industry continue to grow in other regions. For example, nutrient levels in municipal wastewater are expected to increase 4- to 8-fold in sub-Saharan Africa and 3- to 5-fold in South Asia by 2050.

Groundwater Depletion

Groundwater depletion is an escalating global threat that has resulted in underground aquifers and groundwater wells drying up faster than their natural recharge capacity. Groundwater aquifer depletion, mostly due to crop-related irrigation, increased 22% from 2000 to 2010 globally. A 2019 study estimated that by 2050, 42% to 79% of watersheds that pump groundwater globally could surpass ecological tipping points without better management. Declining water tables are already causing financial impacts, including higher pumping costs and reduced crop yields and crop acreage. In India, cropping intensity, or the number of crops that farmers can grow in a given year, decreased by 68% in northern regions due to groundwater depletion. Devastating droughts and groundwater depletion in California have forced farmers to leave millions of acres unplanted in recent years. While water policy instruments have been strengthened in recent years by the 38 countries that are members of the Organization for Economic Co-operation and Development (OECD), these instruments are less commonly used to protect groundwater than surface water. Still, in places like California, nearly half of the state’s crops are being produced with extremely inefficient flood irrigation practices.

Water Diversions/Water Transfers

Water diversion and transfer projects are critical for many industries, particularly to support food crop irrigation and power generation. However, dams and other large-scale water diversions cause major disruptions to global water systems and critical habitats. Dams damage rivers in many ways, including through ecosystem impacts, high evaporation losses, leakage due to poor maintenance, increased salinization, and reduced sediment loading. They also cause societal upheaval and dislocation. More than 48% of global river basins are severely affected by existing water diversion projects, many of them in North America. Global river fragmentation will likely double if nearly 4,000 planned hydroelectric dams are built, most of them in China, India, South America, and Africa.

Metals Contamination

Metals, which can be toxic in even relatively low concentrations, are a threat to human health and wildlife worldwide. The human health threat is especially large in developing countries lacking environmental regulations and adequate wastewater treatment to address metals. Heavy metals have been found in rivers and lakes globally, with the highest concentrations in Africa, Asia, and South America, and lower levels in Europe and North America. Most metal pollution comes from the Metals and Mining industry, which releases contaminants during raw material extraction and processing. Another source is IT companies, which produce semiconductors, circuit boards, and batteries, leading to contaminated wastewater, including with mercury, copper, chromium, lead, and lithium. As water is increasingly polluted with metals, this also creates water scarcity risk for companies, especially IT firms that need ultrapure water. According to a 2019 CDP report, 91% of metals and mining companies reported water risk exposure, with an estimated combined financial impact of $24.9 billion.

Plastic Pollution

The world produces more than 368 million tons of plastic each year for packaging and other industrial uses, and, if managed or disposed of improperly, plastic waste can easily end up in water bodies, polluting water, entangling and poisoning aquatic species, and entering the food chain. Up to 80% of plastics in the world’s oceans are carried there by rivers. The growing presence of plastics in water has major implications on the efficacy of water and wastewater treatment processes, impacting all water users. Microplastics (plastics less than 5 millimeters in size) are of particular concern because of their persistence in the environment and bioaccumulation in food chains. Poor waste management practices in many Asian countries have contributed to the continent being identified as generating the greatest volumes of plastic pollution globally. Asian rivers account for an estimated 86% of total plastic releases to ocean waters globally.

Climate Change -A Threat Multiplier

Climate change is directly impacting the global water cycle and the distribution and availability of freshwater around the world. Increasing temperatures, melting ice sheets and glaciers, changes in the distribution of water, and uncertainty associated with climate change all intensify the impact and development of critical threats to freshwater. These impacts on freshwater will also increase risks to industries that rely on freshwater resources. The private sector’s response to these critical threats will require more focused consideration of climate change’s role as a threat multiplier.

Evolving Threats

Recent research highlights additional evolving threats to global freshwater resources that will require heightened attention from industry and policymakers. These threats are intrinsically linked with industry activities that are proliferating and have only recently been identified as threats. For example, even as thousands of pharmaceutical drugs are polluting water resources across the U.S., most of them are not subject to federal safety limits and are currently not being measured in drinking water supplies or being removed during wastewater treatment. Per- and polyfluoroalkyl substances (PFAS), a widely used group of artificial toxic chemicals known as “forever chemicals,” are also largely unregulated.

Pharmaceuticals

Escalating releases of pharmaceuticals, such as prescriptions and over-the-counter drugs, in water resources will have long-term damaging impacts on human and environmental health. Many wastewater treatment plants are not equipped to remove these complex chemical compounds, which, as a result, are being continuously released into water bodies. Between 1995 and 2015, research has found that pharmaceutical-related risks to global aquatic ecosystems rose 10- to 20-fold. Studies show that pharmaceuticals in water can impact antimicrobial and antibiotic resistance, create toxicity and endocrine disruptors in organisms, and impact human reproductive health.

PFAS

PFAS, commonly referred to as “forever chemicals,” are a group of artificial chemicals widely used by industry to create non-stick coatings on cookware, carpets, and food packaging. PFAS are highly persistent and bioaccumulate, becoming a critical toxin in surface and drinking water. Discharged mostly in domestic wastewater, PFAS have been found in drinking and coastal marine waters, primarily in Europe, China, Korea, Japan, and North America. A recent study found nearly 120,00 facilities in the U.S. that may be handling PFAS and could be a source of contamination. PFAS have many human health implications, including cancer, thyroid disease, low birth weight, and immune suppression. The Stockholm Convention on Persistent Organic Pollutants added PFAS in 2015 as a compound that needs to be phased out eventually through use of safe alternatives.

The report makes clear that current industry practices are leading to systemic water risks that jeopardize their business future and society at large. But it doesn’t have to be this way. The private sector and investors are positioned to lead the world in adaptation and innovation in response to pressing global water threats. They can go beyond their direct operations and value chains to help solve these profound challenges. By acting quickly, companies can substantially reduce financial risks and bottom-line losses down the road.

Drawing on the available body of scientific literature and our own vision of sustainable business leadership, we offer seven core actions that companies should be focusing on:

1. Water Quantity

Companies should ensure their practices are not negatively impacting water availability, with particular attention to water scarce basins across their value chains.

2. Water Quality

Companies should ensure that their activities are not polluting local and regional water bodies.

3. Ecosystem Protection

Companies should ensure that natural ecosystems are not degraded from their business activities and help restore ecosystems that their businesses depend on.

4. Access to Water and Sanitation

Companies should collaborate on efforts to support access to clean water and sanitation in the communities they interact with and impact.

5. Business Integration

Companies should ensure that water related risks and opportunities are systematically integrated into corporate governance and decision-making from the board room to senior management to employees at all levels of the workforce. Companies should transparently disclose comprehensive water use across their supply chains.

6. Public Policy Engagement and Water Governance

Companies should proactively support public policies and water governance structures that further sustainable water resource management.

7. Multi-Stakeholder Collaboration

Since water is a shared resource, companies should be boosting multi-stakeholder collaborations to ensure sustainable water resources. They should be building, engaging and investing in industry and cross-industry efforts that challenge traditional business practices, that encourage research, and enable system-level changes that are needed.