Water shortages impact global economy

Global water shortages will have a negative impact on economies around the world, including in wealthy countries such as Germany and eslewhere in Europe, according to a WWF study released in the lead up to World Water Week. André Anwar reports from Stockholm where World Water Week will take place from August 31 to September 5.

World Environment Day

Freshwater is becoming an increasingly scare resource, and the problem is not limited to developing countries and desert regions alone. Even in strong economies such as Germany, there are various economic activities that are both responsible for and are also negatively affected by the water crisis such as the food, clothing and automobile industries. These are some of the findings from a study published by the international conservation organisation World Wild Fund for Nature (WWF) in advance of World Water Week which begins in Stockholm this coming Sunday.

Water risks are imported

In comparison to other countries, water resources in Germany, Austria and Switzerland are available in sufficient quantities and well government. But it is easy to forget that as the world’s third largest import nation, Germany is dependent on water-intensive goods from abroad. According to WWF, many of these goods inherit so-called “water risks” because they originate in locations with water scarcity, poor water quality, week governance and regulatory challenges, and fragile ecosystems.

Service industry also causes water shortages

The WWF study identified and analysed four important import sectors for Germany with direct water risks (agriculture, chemical, textiles and apparel, and extractives) and two sectors with indirect water risks (financial services and retail). “It is often the case that the management level in these sectors is not even aware that certain difficulties related to water scarcity lie somewhere along the supply chain. This has to become much more ingrained in the mind-set of managers,” said the author of the WWF study Philip Wagnizt.

For example, cotton production is the most water-intensive segment of the value chain for the textiles and apparel industry, and the German economy consumes 5.46 cubic kilometres of water each year by importing cotton and textiles from Pakistan. Textiles and apparel imported from China, Bangladesh and India also contain high water risks and are also highly vulnerable to future water shortages caused by climate change.

Western demands drying up Africa

Industrialised countries consume huge quantities of water when they import raw materials and metals from countries such as Russia, Libya and South Africa. In 2012 Germany imported around 5.5 million tonnes of coal, metal and ore from South Africa’s water-intensive mining sector in the value of close to 2 billion euro. “In 2011 South Africa had to shut down some mines temporarily because of water shortages. In India a beverage company had to close down because the local municipality protested its high use of groundwater resources,” said Wagnitz when pointing out examples of water risks.

Countries such as Ethiopia, Indonesia and Argentina consume a lot of water because of their export-oriented agricultural industry which relies heavily on irrigation, writes WWF. The chemical industry, notably in China, India and Morocco, is a major industrial user – and polluter – of water, and exports the associated risks to Germany and other developed countries.

Responsible water stewardship called for

Simply shifting supply chains to locations with lower water risks is not, however, the solution. “For now, companies just move to a different location when not enough water is available. But this cannot continue forever and we need importers to understand that this approach will ultimately have a negative impact on their prices,” explains Wagnitz.

WWF instead calls for water stewardship: For companies to reduce their risks in the long term, they should manage shared freshwater resources with local stakeholders in a sustainable manner and find solutions for “shared risks”. In doing so, water becomes a shared resource that we all feel responsible for — and a strategic business issue that is crucial to profits and long-term growth.


Photo credit: UNAMID, flickr/Creative Commons

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