Of all the headwinds that businesses have had to contend with in the recent past, uncertainties of climatic conditions currently seems to be topping the list. From Europe and Asia which are experiencing drought like conditions that will affect crop production, to the continued energy crisis, corporates are in for a world of challenges as they try to keep businesses on course. A common underlying factor in all these issues, is water, or to be precise, the lack of it. Water and heat stress has reduced forecasts for this year’s summer harvest in Europe. Hydroelectric dams have dried up in Portugal and Norway, prompting the curb of energy exports as a consequence.
Generation of energy from nuclear power plants has faltered due to the lack of water to cool reactors.
This might be a good time to re-emphasize the importance of water and its judicious use as we look at economic development and growth, especially given the fact that water scarcity affects iover 40% of the global population. The path to sustainable growth is a tricky one, as countries navigate a labyrinth of environmental and policy regulations to bolster economic development alongside protecting the environment. Take India for instance; how the country manages sustainable growth will come to define eco-sustainability, especially as it moves towards becoming a USD 5 trillion economy, and the manner in which it generates 50% of its power requirements from non-fossil fuels.
Water scarcity, exacerbated by climate change, could cost some regions up to 6% of their GDP, spur migration, and spark conflict, as per data by the World Bank. Countries would do well to try and assess the true economic value of water and see how to best deploy this natural capital across sectors, especially since the lack of water will affect not only industries, but also health and eventually add additional strain on the already overwhelmed social systems. Studies show that universal access to basic water and sanitation would result iiin USD 18.5 billion in economic benefits. Each dollar spent on water and sanitation, provides an economic return of four dollars, from lower health costs and increased productivity.
The United Nations World Water Development Report 2022 states iiithat in the ‘context of growing water scarcity in many parts of the world, the potential of groundwater and the need to manage it carefully can no longer be overlooked’. To reduce groundwater usage in water stressed areas, crop diversification, drought resistant varieties, early maturity varieties, agri practices that avoid flood irrigation are essential. This becomes an important point for agrarian economies such as India, which are heavily dependent on groundwater for agriculture.
Groundwater accounts for over 60% of the total irrigated area in the country and 85% of the rural drinking water supply is also met from ground water resources. This is compounded by the fact that unlike other factors of production, water and land are difficult to evenly distribute given shared geographies, given the eco-political and geo-political factors that play a significant role in ensuring water security for any country.
To address these pertinent issues, corporates along with governments could look at reassessing economic models of water pricing and incentives to save water. They could also focus in a big way on encouraging and investing in innovative technologies focused on hyper local innovations that solve problems at the grassroots level. Design level changes and policy changes will need to match commitment of corporates and societies as a whole to ensure water security for all.
(Sanjiv Lal, MD & CEO, Rallis India)
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