From Droughts to Floods, Water Risk Is an Urgent Business Issue

  • 12.11.2022
  • HBR

When companies think about risk, most of them don’t think about water. Historically, water has been available even in areas prone to drought, and flooding followed a fairly predictable pattern. But as the climate warms, the world is beginning to see more extremes — and that often means too little or too much water. Water scarcity contributes to wildfires, but other problems, too: As the water table drops, the quality of the water degrades, often leading to increasing concentrations of minerals and salts that are expensive to treat or can even make the water unusable. On the other extreme, more violent storms are already making flooding a new risk in areas that didn’t worry about it before. Floods and droughts are now sudden, unforeseen events — and increasingly hit areas in quick succession.

This growing variability has caught major corporations unprepared.

Risks are appearing on multiple fronts. Companies in water-stressed areas face increasing risk of regulatory restrictions on water use, or fully losing access. Last year Taiwan Semiconductor Manufacturing Corporation, the largest computer chip maker on the planet, had to truck water for miles to keep its chip fabrication plants running when the local water supply dried up. Barrick Gold, a Canadian mining company, is being forced to close the Chilean portion of its $8.5 billion Pascua Lama gold and copper mine because of concerns that the mine draws too much water from the local watershed. And a water shortage on the Colorado River threatens water supplies for more than 40 million Americans and food production for the rest of the country