From the July-August 2010 issue of Treasury & Risk magazine

When the Well Runs Dry


One of the potentially devastating impacts of climate change is a shrinking supply of water. A growing world population and urbanization are placing greater demands on a smaller supply of water, just as droughts caused by rising greenhouse gas levels are increasing. In fact, by 2030 water supplies will satisfy only 60% of demand globally and less than 50% in many developing regions, where the water supply is already under stress, according to a report from McKinsey & Co.

For many businesses--utilities and manufacturers that need water for cooling and cleaning, as well as food and beverage companies that depend on farmers for supplies--water scarcity is a particular threat. It poses risks for everything from lost revenues and a hit to their reputation to regulatory action and protests by local communities vying for access to the same dwindling resources.

Consider these cases:

-- In March, PepsiCo India was ordered to cut its groundwater use at a plant in Kerala by two-thirds, after protests
by farmers claiming the company's factory was using up most of the available water, leaving little for irrigating fields,
according to press reports.

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