How the water crisis connects to a world of risks

Close up of a person wearing wellies trying to walk through a flood.

Our global economy depends on a healthy natural world. The World Economic Forum quantified this when it found that US$44 trillion of economic value generation — more than half of the world's total GDP — is moderately or highly dependent on nature and its services.

This issue again came to the fore at Davos with a powerful session titled Our Freshwater Future, exploring the nexus of risks across water, climate, nature, food, and energy.

In this session, we heard not only from political leaders and CEOs, but also from the climate youth activist Elizabeth Wathuti. She described scenes of extreme water stress in her home country Kenya, pointing out that droughts and blockades in Ukraine played a large role in three million people in Kenya and 20 million in the Horn of Africa facing extreme hunger.

The problem of water scarcity is both local and global, with vulnerable countries suffering the most. Discussions explored what this meant for business leaders and the lessons that could be drawn for the future of governance.

James Quincey, Chairman and CEO of The Coca-Cola Company, stressed that companies do not need to wait for regulation to take action. He described how Coca-Cola had hit its goal of returning all water used to the environment early in 2015, and was now focused on a 2030 strategy addressing local impacts in water-stressed countries.

One thing that rang true both in this session and throughout the week is how intricately connected environmental challenges are. A few facts underpinned this:

It takes 600 liters of water to produce one liter of milk.
70% of water extracted is used for agriculture, which is also a major driver of climate change.
It takes two million liters of water to produce one kilo of lithium, a key raw material for electric vehicle batteries, though less intensive approaches are being developed.

Risk managers need to take a holistic view of ESG and map out the connections between different areas. Just as the problems connect, so do solutions: Smart approaches to agriculture, for example, use less water and keep more carbon in the soil.

As business leaders increasingly focus on nature, we will think about risk in two ways: companies who depend on nature will need to understand the enterprise value at risk from a loss of nature, while companies who impact nature in a negative way — or have the potential to do so — will need to understand their reputational risk.

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