Is Your Supply Chain Planning in Step with Your Water Footprint?
Manufacture and delivery of a company’s products usually consume a wide array of materials, either directly or indirectly, ranging from rare commodities like titanium or zinc, to the most basic, such as water. Given the explosive growth of world population in recent history, and the resulting increases in consumption of food and other products, and the finite nature of raw materials, the sustainability of the supply chain over time is a growing planning concern for many companies. Water is often a key focus in their planning, whether it is the main ingredient in their product, as it is in the beverage industry, or a major component, as it is for power generation, paper production, mining and many other industries.
One way to measure the water impact of companies (or countries, or production of industrial or agricultural products, such as textiles, rice or beef) is through the calculation of a “water footprint”, which can help identify what water is used (both directly and indirectly), where it comes from, and the relative efficiency of its use. This concept is discussed in detail on the website www.waterfootprint.org which has a wide array of statistics, as well as an interactive water footprint calculator and the option to download extensive research materials. According to the website 92% of total water consumption in the world is associated with agricultural use. However, since agricultural products are raw materials in many corporate supply chains, and are shipped from one location to another around the world, nations and companies effectively consume water from around the world. The figure below shows major international water consumption flows, taking into account such factors as goods consuming water in production in one part of the world are shipped to a consumer in another area.
Source:Mekonnen and Hoekstra (2011)
Why should a company be concerned about their water consumption? There are several risks that all companies face, to varying degrees, as global water consumption increases, including
- Physical supply risk: will fresh water always be available in the required quantities for your operations?
- Corporate image risk: your corporate image will likely take a hit if you are called out as a “polluter” or “water waster”
- Governmental interference risk: governmental bodies are becoming increasingly interested in water consumption, and can impose regulations that can be difficult to deal with
- Profit risk: all of the above risks can translate to a deterioration of your bottom line.
But with risk comes opportunity – planning for your water consumption, and footprint, as part of your supply chain analysis, and acting in response, can keep you ahead of the curve!