Water is a critical asset for all types of businesses and a significant driver of global economies. Even though it remains highly important and sought-after, many businesses take the availability and abundance of water for granted. The cost and potential scarcity of water can affect some industries in obvious ways. In contrast, others that might not feel this impact as much are blind to the potential consequences of the scarcity of this critical resource. Water can impact businesses at different levels and in ways that you might not expect.
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Impact on Business Cost and the Cost of Goods
Water is vital for businesses that use a lot of it, such as agriculture and manufacturing. These businesses have to factor in the cost of this resource when pricing their products, which is then passed on to the consumer. Where water is scarce or expensive, this can be a significant percentage of the product’s final cost to customers.
Water is also a business expense that businesses have to handle. Again, how much businesses spend on water will depend on its scarcity and other factors like their supplier and the supply chain that ensures these businesses have it.
If it has become an expensive resource for your business, consider switching suppliers. The first step is to compare business water rates from different suppliers. Doing so allows businesses to benefit from competitive water and wastewater rates, which can help keep expenses low. You can learn more via Business Water Shop, where you will find more information on securing the best business water contracts.
Lastly, consider the higher utility charges businesses face when there is a scarcity. In the past, water scarcity in Brazil and Australia cost businesses millions in extra charges, with governments taking measures to ensure everyone, including businesses, had enough water at affordable rates.
Disruption of Supply Chains
If a single company supplies a significant percentage of businesses with water, a supply disruption could have ramifications cascading down the whole supply chain. Consider an industry like microchip manufacturing. Microchips are in all tech devices today, and their manufacturing process requires vast amounts of water to purify the various raw materials used.
If the water supply to this industry is affected, smartphone, laptop, TV, monitor, and other electronics manufacturers would be impacted, with the impact also felt by retailers due to the low supply of these products. Such catastrophic events also apply to other industries which require a lot of water in their manufacturing processes.
Some businesses are already turning to on-site water sourcing and treatment to ensure disruption to the water supply chain has minimal impact on them.
Impact on Logistics
Water shortages can also impact the transportation of goods because a significant portion of goods shipped globally is shipped through various waterways. If there is insufficient water in these waterways, transportation through these channels would be impacted, affecting logistics significantly.
This has already happened in the past. A heatwave in 2018 caused water levels to be so low in the River Rhine that ships could not navigate it. Given that this is one of the most important waterways in the world, the production of pharmaceuticals, chemicals and other vital goods fell in Europe by 10%. Considering how big the combined economies of all European countries are, the value lost was in the trillions.
Government Intervention Impacts Business Practices
Domestic usage, agriculture and industries compete for water in any given country. When there is scarcity, governments are forced to intervene, which can significantly change how businesses function.
In 2021, the United States government told farmers to stop drawing water from local streams and rivers. This intervention was meant to protect drinking water that would become scarce if farmers used it on their farms. It essentially took away a farmer’s right to use natural resources. It also led to lower agricultural output, impacting farmers, their families, lenders, and the local government due to lower taxation.
Water stress can also cause the government to force companies not to discharge wastewater. Since this is a by-product of production, halting wastewater discharge can cause businesses to cease operations altogether, which can have a cascading effect on numerous levels.
Other Water Risks on Businesses
Another way in which water impacts businesses and that many people do not think about is making it harder for businesses to borrow money. Water scarcity can cause businesses to have lower output or to cease operations altogether, creating idle manufacturing plants. Lenders and creditors notice these changes, and businesses cannot borrow money because of their poor records. Businesses in agriculture and manufacturing are at the highest risk of this happening to them.
Water is critical for life, and business too. Its availability or scarcity can impact a business in numerous ways, many of which they do not think about until they have already happened. Some of the obvious ways it does this is increasing running costs and the cost of goods, with some impacts like disruption of logistics and goods transportation being less obvious.