Water Scarcity Solutions
Water as a Circular Economy
by Kenneth von Rausch for RedPepper Mergers and GreenPepper Capital
Water scarcity is 1 of the 10 challenges the world faces to become sustainable. There is growing recognition that current patterns of economic development have led to a scale of demand for natural resources, like water, that is outstripping nature’s ability to replenish them.
Not only are these resources now scarcer but the impact of this resource extraction, degrading natural systems that are critical for human well-being, is becoming patently visible.
This scarcity is in part caused by the increased usage of water; through the abstraction and use of water for irrigation, with perhaps the most extreme example seen in the dramatic shrinkage of the Aral Sea, a once vast freshwater lake straddling the border of Kazakhstan and Uzbekistan. During the 1960s the Soviet Union undertook a massive water diversion project so as to harness the rivers that fed the lake for irrigated agriculture, especially for the growing of cotton. As the Aral Sea has contracted to a fraction of its previous extent, ecosystem services previously provided by the lake, including the harvesting of fish for human consumption, have collapsed. As an systemic economic impact, in the early 1960s 60,000 people were employed in fishing, but by the 1980s the industry had gone.
This specific example aside, global water extraction has tripled over the last 50 years to meet agricultural, industrial and domestic demands, leading to constraints on growth due to water scarcity, operational and supply chain disruptions, supply conflicts and increasing costs for water.
Several studies and reports reinforce that these trends will continue. In 2012, KPMG identified material resource scarcity, water scarcity, ecosystem decline, deforestation and food security as five of the 10 sustainability mega-forces that will have the greatest impact on business. These predictions have begun to play out accurately.
What is not always as apparent is that water scarcity is in fact also partly a function of our economic and product development choices. A recognition of the need for systemic innovation in water’s supply chain as resulted in business revisiting usage but has also resulted in the emergence of new markets for water-efficient products. It is in our response to this choice that we find the disruptive (and investment) opportunity to impact positively and address water scarcity.
Commercial synopsis
Fluid Innovation
The trends driving nature loss, and the social and economic questions with which they are closely linked, have diverse implications for businesses, presenting both significant risks and opportunities. GEO-5 for Business considers the operational, market, reputational and policy implications of environmental trends on ten business sectors, from extractives to finance to food and drink.
Across these sectors, businesses can expect to deal with challenges such as constrained availability, price volatility, limited development opportunities, business interruption, regulatory or market-driven reductions in demand, regulatory constraints, reputational risks and increased pressure from stakeholders.
Sustainability cannot be provided by technological innovation alone – the human way of life admittedly needs a ‘65%’ behavioural change. But early-stage creativity is a definite source of solutions and there is ethical commercial opportunity in supporting entrepreneurs to innovation.
Academic Support
All GreenPepper Capital articles are based on empirical evidence and factual sources. We welcome professional commentary.
Further Reading:
1. Gómez-Baggethun, E., de Groot, R., Lomas, P. L., & Montes, C. (2010). The history of ecosystem services in economic theory and practice: From early notions to markets and payment schemes. Ecological Economics, 69(6), 1209–1218. https://doi.org/10.1016/J.ECOLECON.2009.11.007
2. IPBES. (2018a). Summary for policymakers of the thematic assessment report on land degradation and restoration of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. Bonn, Germany.
3. IPBES. (2018b). The IPBES assessment report on land degradation and restoration. Montanarella, L., Scholes, R., and Brainich, A. (eds.). Retrieved from https://www.ipbes.net/assessment-reports/ldr
4. IPCC. (2018). Special Report: Global Warming of 1.5 oC. Retrieved October 10, 2021, from https://www.ipcc.ch/sr15/
5. IPCC. (2019). Special Report on the Ocean and Cryosphere in a Changing Climate. Retrieved October 10, 2021, from https://www.ipcc.ch/srocc/
6. IPCC. (2021). AR6 Climate Change 2021: The Physical Science Basis. Retrieved October 10, 2021, from https://www.ipcc.ch/report/sixth-assessment-report-working-group-i/
