Water scarcity key driver for innovation

Water is crucial for people and businesses alike. ‘There is no alternative,’ stresses Judith Sanders, investment strategist at ABN AMRO MeesPierson. ‘By making smarter use of the available water, we can do something about its increasing scarcity.’ Sanders sees companies and governments investing heavily in saving and recovering water, among other things. Consumers can also do their bit by using water economically.

For instance, we know from research by the Stockholm Resilience Center at Stockholm University approximately how many billion cubic metres of freshwater we can sustainably consume per year without harming the environment. That level is almost reached anno 2023. Due to the growing population, demand for water will only increase in the coming years. This puts great pressure on the environment and on society. So there is work to be done.

Fortunately, consumers and companies are becoming increasingly aware of the importance of sufficient clean water for the environment and society. There is a reason why water is described as “the core of sustainable development” in the UN Sustainable Development Goals (SDGs, ed.), Sanders says. SDG 6 states that by 2030, everyone worldwide should have access to clean drinking water. Great strides have already been made there: since 1990, almost 2.3 billion people gained access to clean water. This has a big effect, Sanders stresses: ‘Clean water is important for poverty reduction, economic growth and environmental protection. Billions of people also depend on water for their livelihoods.’

She finds it remarkable that there is still relatively little focus on water scarcity and the role of water in our livelihoods. ‘At the end of March, the United Nations Water Conference took place in New York. The Netherlands co-organised this event, but you don’t read much about it. Pretty crazy for a conference about a basic necessity of life.’

The corporate world has an important role to play in solving water scarcity. For instance, one fifth of all available fresh water is consumed annually by industrial companies. Sanders sees growing enthusiasm for water conservation and recycling in the business world. Rising water prices are helpful in this regard. US food group General Mills, for example, wants to reduce its water consumption even further by pricing it into its internal processes. This should encourage business units to use water even more sparingly.

The availability of sufficient water is very important for businesses. And the days when water was easily and widely available are long gone. One example is beer brewer Heineken, which has 170 breweries worldwide, 26 of which are located in areas with water shortages. ‘That’s a risk,’ says Sanders, ‘when your product consists of 93% water and brewing and bottling require a lot of water as well.’ For Heineken, this was one of the reasons for reducing the amount of water needed to brew a hectolitre of beer by a third in recent years – to 3  hectolitres.

Worldwide, many companies are taking a critical look at water use within their own company, within the production chain and within society. For instance, food group Mars – owner of rice brand Uncle Ben’s – stimulates sustainable innovation among the rice producers it works with. For example, by investing in drip irrigation. This innovative watering method allows rice to grow more easily in areas where less water is available.

Sanders stresses that water is not only crucial in food production. The production of semiconductors – computer chips – for example, also requires large amounts of very clean water. Taiwanese chip producer TMSC had to bring in immense amounts of water from another part of the island during a period of severe drought in Taiwan in 2021. The company has since been investing more than ever in water recycling.

Companies are increasingly aware of their role in society. Siemens, for example, collects rainwater at its production site in India during the monsoon season. This water is used for its own facilities, but also to recharge groundwater in the surrounding area during the dry period after the monsoons.

The way a company deals with water can create opportunities or pose risks. Investors can mitigate risks and contribute to solving water issues through targeted portfolio choices. By choosing companies that use water sparingly and produce in a circular way as much as possible. Or by investing in companies that develop the technology to do so.

Demand from companies and governments for innovative water technology has been rising for years. Think of technology to quickly filter wastewater or for targeted detection of leaking underground pipes. In France and the United States, for example, the water supply network is severely outdated. Many billions of litres of drinking water leak away every year. Providers of advanced spray systems in agriculture also benefit from the focus on water conservation. Investing in companies that contribute to sustainability can therefore be promising as well.