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The Economist: Business and water: Running dry

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  • Pamela Rice
    [No mention of the animal-based foods being the main water guzzlers in the following story in the current edition of The Economist.] Letters to the editor:
    Message 1 of 1 , Sep 1, 2008
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      [No mention of the animal-based foods being the
      main water guzzlers in the following story in the
      current edition of The Economist.]

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      Business and water: Running dry

      Aug 21st 2008 | NEW YORK

      The Economist print edition

      Everyone knows industry needs oil. Now people are worrying about water, too

      "WATER is the oil of the 21st century," declares
      Andrew Liveris, the chief executive of Dow, a
      chemical company. Like oil, water is a critical
      lubricant of the global economy. And as with oil,
      supplies of water-at least, the clean, easily
      accessible sort-are coming under enormous strain
      because of the growing global population and an
      emerging middle-class in Asia that hankers for
      the water-intensive life enjoyed by people in the

      Oil prices have fallen from their recent peaks,
      but concerns about the availability of freshwater
      show no sign of abating. Goldman Sachs, an
      investment bank, estimates that global water
      consumption is doubling every 20 years, which it
      calls an "unsustainable" rate of growth. Water,
      unlike oil, has no substitute. Climate change is
      altering the patterns of freshwater availability
      in complex ways that can lead to more frequent
      and severe droughts.

      Untrammelled industrialisation, particularly in
      poor countries, is contaminating rivers and
      aquifers. America's generous subsidies for
      biofuel have increased the harvest of
      water-intensive crops that are now used for
      energy as well as food. And heavy subsidies for
      water in most parts of the world mean it is often
      grossly underpriced-and hence squandered.

      All of this poses a problem, first and foremost,
      for human welfare. At the annual World Water Week
      conference in Stockholm this week, delegates
      focused on measures to extend access to clean
      water and sanitation to the world's poor. But it
      also poses a problem for industry. "For
      businesses, water is not discretionary," says
      Dominic Waughray of the World Economic Forum, a
      think-tank. "Without it, industry and the global
      economy falter."

      Water is an essential ingredient in many of the
      products that line supermarket shelves. JPMorgan,
      a bank, reckons that five big food and beverage
      giants-Nestlé, Unilever, Coca-Cola,
      Anheuser-Busch and Danone-consume almost 575
      billion litres of water a year, enough to satisfy
      the daily water needs of every person on the

      Although agriculture uses most water (see chart),
      many other products and services also depend on
      it. It takes around 13 cubic metres of freshwater
      to produce a single 200mm semiconductor wafer,
      for example. Chipmaking is thought to account for
      25% of water consumption in Silicon Valley.
      Energy production is also water-intensive: each
      year around 40% of the freshwater withdrawn from
      lakes and aquifers in America is used to cool
      power plants. And separating just one litre of
      oil from tar sands-a costly alternative fuel made
      viable by high oil prices-requires up to five
      litres of water.

      Quality matters as much as quantity. According to
      the World Bank, around 90% of the rivers in China
      near urban areas are seriously polluted. The
      overall cost of water scarcity-from pollution and
      the depletion of groundwater-is estimated to be
      147 billion yuan ($21.4 billion) a year, or
      almost 1% of China's annual output. In 2007 poor
      water-quality cost China some $12 billion in lost
      industrial output alone.

      Elsewhere, Taipei City in Taiwan no longer allows
      companies to tap its groundwater, because of
      shortages. Firms in drought-ridden Australia have
      lived under stringent water restrictions for
      years. Southern Company, an electricity utility
      based in Atlanta, temporarily shut down some of
      its power plants last summer because of a
      drought. Indeed, according to a survey by the
      Marsh Centre for Risk Insights, 40% of Fortune
      1000 companies said the impact of a water
      shortage on their business would be "severe" or
      "catastrophic"-but only 17% said they were
      prepared for such a crisis.

      Not all companies are sitting still. Since 1995
      Dow has reduced the amount of water it uses per
      tonne of output by over a third. Nestlé cut its
      water consumption by 29% between 1997 and 2006,
      even as it almost doubled the volume of food it
      produced. And at Coca-Cola bottling plants from
      Bogotá to Beijing, schools of fish swim in water
      tanks filled with treated wastewater, testament
      to the firm's commitment to clean all its
      wastewater by 2010 (it is 84% of the way there).

      Cynics say such programmes are mere public
      relations. There is some truth to this. Companies
      that use freshwater in areas where it is scarce
      are understandably unpopular. Activists have
      attacked both Coca-Cola and Pepsi, for instance,
      for allegedly depleting groundwater in India to
      make bottled drinks. Coca-Cola took the matter to
      court and was exonerated by an independent
      commission, which blamed a regional drought for
      water shortages, but activists were not
      mollified. Coca-Cola has responded by redoubling
      its attention to water-for instance, by backing a
      scheme in Kaladera to teach villagers how to
      harvest rainwater and irrigate crops more
      efficiently. "Regulatory licences to water are
      not enough," says Jeff Seabright of Coca-Cola.
      "We need a social licence-the OK from the
      community-to operate."

      Cutting water consumption can also make business
      sense. Using less water reduces spending on water
      acquisition and treatment, and on the clean-up of
      wastewater. Some firms have no choice. Elion
      Chemical in China is working with General
      Electric to recycle 90% of its wastewater to
      comply with Beijing's strict new "zero-liquid
      discharge" rules, which bar companies from
      dumping wastewater into the environment. Of
      Nestlé's 481 factories worldwide, 49 are in
      extremely water-stressed regions where water
      conservation and re-use is the only option.

      Such farsightedness is, alas, only a drop in the
      bucket. In a drought, even water-efficient
      factories can run into trouble. Moreover, the
      water used within a factory's walls is often only
      a tiny fraction of a firm's true dependence on
      water. José Lopez, the chief operating officer of
      Nestlé, notes that it takes four litres of water
      to make one litre of product in Nestle's
      factories, but 3,000 litres of water to grow the
      agricultural produce that goes into it. These
      3,000 litres may be outside his control, but they
      are very much a part of his business.

      [Non-text portions of this message have been removed]
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