Companies urgently need to step up their efforts in one supply chain risk area -- the threats posed by water scarcity, according to Alexis Bateman in the MIT Sloan Management Review.
Bateman, citing The Carbon Disclosure Project’s (CDP) 2016 Annual Report of Corporate Water Disclosure, says that disclosing companies reported $14 billion in water-related impacts in 2016, a fivefold increase from 2015.
Impacts include financial obligations to address groundwater pollution, capital costs to build power plants to replace declining sources of hydropower, and water conservation efforts in the face of drought.
More than one-fourth of the companies have experienced detrimental impacts from water this year, and they expect more than half of the 4,416 water risks identified to materialize over the next six years.
The problem is that companies are not reacting quick enough to this threat according to the CDP. Performance has not improved since last year on key metrics such as tracking water usage and assessing related risks.
Stressed water resources represent a major threat to the integrity of global supply chains and Mitigating or eliminating these risks will require action on multiple fronts says Bateman.