n today's ever-evolving landscape, businesses are increasingly aware of the significance of responsible resource management. Two resources hold critical importance: water and energy. These fundamentals are indispensable to the functioning of any organization, regardless of industry or sector.
The way companies use and consume water and energy has far-reaching implications—not only for their operations but also for the environment and society at large. They’re deeply intertwined within the regulatory landscape and are often caught in the crosshairs of multiple interests at play. The Colorado River is the perfect example, as seen in the recently announced seven-state agreement. There’s also a universal reason why no one can afford to neglect the importance of both water and energy. These resources are central to life on the planet, they’re critical to business, and they underpin a functioning economy. In this article, we’ll explore what it means for companies to prioritize sustainable practices in these areas.
Scarcity of resources isn’t just bad for the planet. It’s bad for people and profit too. Overconsumption of water and energy poses an increasingly material risk to businesses and their supply chains, hindering economic growth and sustainable development.
It’s time to take a closer look at how companies can evaluate the role they play from an ESG (Environmental, Social, and Governance) lens. Only then can leadership take meaningful action to mitigate those impacts.
Excessive water extraction has far-reaching environmental consequences. Depletion of natural water sources can disrupt ecosystems, endanger biodiversity, and compromise the overall balance of the water cycle. Leaving water use and pollution unchecked only exacerbates these issues. This has resulted in the water scarcity and reduced water quality we’re seeing in many regions of the world today.
Improper water management negatively impacts companies as well. Already, the global water crisis is causing significant financial losses for multinational companies across key industries. According to the CDP Global Water Report 2020, companies disclosing through its water security questionnaire that year risked losing nearly $301 billion USD combined in business value if they failed to address water risks. On the flip side, the estimated total cost of addressing those risks totaled $55 billion USD—less than one fifth of the amount they would’ve suffered in damages.
From an investor standpoint, unhealthy water use practices increase operational costs due to excessive water usage, pose supply chain risks from water scarcity or disruptions, and damage reputation and stakeholder trust due to environmental impacts such as pollution and ecosystem degradation. The benefits of taking action now to address such risks far outweigh the costs of investing in those changes.
Energy consumption—particularly from non-renewable sources—significantly contributes to environmental degradation. The burning of fossil fuels releases greenhouse gasses that lead to climate change and its associated impacts, including rising global temperatures, extreme weather events, and sea-level rise. Reducing energy consumption and transitioning to cleaner, renewable energy sources are crucial steps towards mitigating these adverse effects. Much like unsustainable water use, improper energy consumption negatively impacts companies by increasing operational costs, contributing to environmental degradation and creating reputational and regulatory compliance risks.
A study conducted by Lawrence Livermore National Laboratory in 2018 revealed a staggering statistic: up to 68% of the energy generated in the United States is wasted. The U.S. Environmental Protection Agency (EPA) further reported that companies waste approximately 30% of the energy they consume. For businesses, this translates to overspending on energy by a significant margin just to maintain their current production levels. Such high levels of energy waste significantly impacts businesses, leading to increased operational costs, reduced profitability, and a higher carbon footprint, undermining both financial and environmental sustainability.
The good news is that there are significant upsides to being smart with resource management:
These real-life examples further emphasize the significance of efficient resource use for businesses. Neglecting sustainable practices not only poses financial risks—it also undermines long-term growth and profitability. On the contrary, responsible resource management makes good business sense. Embracing actionable strategies and adopting a forward-thinking approach benefits the bottom line. It also ensures a positive impact on the environment and society as a whole. It's time for companies to harness the power of sustainable water and energy use practices for a brighter and more prosperous future.