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What the future of water means to business
by David Unger, Medill News Service
Washington (UPI) Apr 5, 2012

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Over the past decade, Ford Motor Co. has set out to reduce the amount of an important natural resource it uses in the production of its vehicles. What precious liquid has the automotive company set its sights on? The humble three-atom compound H2O.

"World Water Day is March 22," reads a company news release, "but every day is Water Day for Ford Motor Company."

The rising price of nature's other most valuable resource -- oil -- may dominate the headlines but Ford and other companies are quietly examining how water, regarded for decades as virtually free, may one day have a bigger affect on their bottom line.

PepsiCo Inc., a company that relies heavily on water for its products, draws a direct line between water efficiency and business growth.

"A broader range of stakeholders -- large investors, financial analysts, insurance companies and others -- now recognizes that water scarcity poses business risks for all companies in a host of sectors," the recent PepsiCo water stewardship report states.

It's no secret that water is an important factor in the production of goods. Apart from being necessary for human life, water has long been a catalyst for economic growth, serving as a crucial ingredient in agriculture and manufacturing. It is little coincidence that the majority of the world's population is centered on a river, lake or other body of water.

In the early 20th century, as water filtration and distribution technology evolved rapidly, access to clean, relatively cheap water became commonplace in much of the United States. No longer was economic growth inextricably linked to naturally occurring bodies of water. People, along with the industries that employ them, were free to move to drier, more arid regions in large numbers.

That trend could change in the coming decades, said Steven Maxwell, the author of "The Future of Water" and the managing director of TechKNOWLEDGEy Strategic Group.

"Water is so plagued with all sorts of subsidies that the broad public assumption is that it's free," Maxwell says.

As the world population increases so too will demand for what is ultimately a finite resource, he and other experts say.

"As it becomes more expensive, it will drive economic and individual decisions," Maxwell says.

It's a vision of the future that resonates with Sharlene Leurig, a senior manager at Ceres, a sustainability leadership advocacy organization.

Leurig advises insurers and insurance regulators on climate risk and says that companies should pay more attention to the liquid that covers roughly 70 percent of the planet's surface.

"Water is the next big thing," she said during a panel in Washington on water risk hosted by The Environmental Law Institute and ZAG/S&W LLC. "Water is the next real asset."

A more serious corporate focus on water While experts say it's a while before water plays a predominant role in the global marketplace, some companies have started taking the resource more seriously. In the past 10 years, companies like Ford, Coca-Cola Co., IBM and Intel Corp. have made water conservation or stewardship a part of their company profile.

IBM developed technology that cut water usage in its Burlington, Vt., semiconductor factory 29 percent. Coca-Cola employs a director of global water stewardship and has issued an annual "Global Water Stewardship and Replenish Report" for the past five years. A November 2011 report by Morgan Stanley examines the notion of peak water and concludes that "water may turn out to be the biggest commodity story of the 21st century, as declining supply and rising demand combine to create the proverbial "perfect storm."

Part of the corporate focus on water is an extension of the rise of environmental sustainability as a cultural and corporate zeitgeist. But the interest in water also stems from a growing awareness of water risk management, says Charles Fishman, author of "The Big Thirst."

"It's not just good business," Fishman says. "It gives you an incredible competitive edge."

Companies attentive to water needs and usage, Fishman says, are in a position to continue operations even during severe water shortages.

There's a social and political component to water risk as well, he says. If a company is seen as depleting a community's water assets for non-vital purposes, it becomes a public perception issue. In times of water scarcity, Fishman says, people wonder, "Do we let the car factory have the water or the farm?"

A growing corporate interest in water will translate to cities and other local governments leveraging their water resources to attract new businesses and economic growth, Maxwell said. Companies determine where to locate based on a variety of different factors including tax rates, education levels and infrastructure.

Access to water is only one factor but those who study water say that its relevance to economic vitality will grow in the coming decades.

Milwaukee: How one city markets water resources At least one city is building on its proximity to fresh water to spur economic growth. In 2009, the Milwaukee Water Council, a non-profit, was formed to promote collaboration among the city's growing water industry. The group also works to attract water industry businesses to Milwaukee, likening the city to a water hub in the way other cities brand themselves as a hub for the arts or technology.

The council's Web site opens with a dominant image of Lake Michigan waters flowing smoothly past downtown Milwaukee.

"Milwaukee numbers among the world's most significant hubs for water research and industry," the message on the Web site reads. "Whether you are in industry, academia or government, you will find a confluence of expertise and resources in the Milwaukee region, needed to succeed in the world water marketplace."

Alexis Morgan, Global Water Roundtable coordinator for The Alliance for Water Stewardship, says Milwaukee is ahead of the game in terms of branding itself as water rich.

"Milwaukee is actually beginning to think about [water] as a municipal or city-level pitch or competitive advantage to recruiting companies," Morgan says.

Other water-rich cities may follow suit. Maxwell said he envisions a future where water-rich cities like Milwaukee -- Buffalo, N.Y., and Cleveland for example -- may use cheap, direct and sustainable access to water as an incentive to attract companies.

Water, after experiencing a period of relative financial irrelevance, may one day return to being an important consideration in job creation efforts and sound investing. At a time when the average price of a gallon of another important factor of production creeps toward $4, the pennies paid for water seem like drops in the bucket.

Water experts, however, say those days are numbered and companies, like individuals, are beginning to catch on.

"Water was a critical economic tool and then the water people were so good at their jobs that their work ended up completely hidden from ordinary people," Fishman says. "I think now we're headed into an era where the pressure on our supplies will force people to think about water and its connection to economic development in a way that we haven't thought about it in a long time."

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