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2023-10-14
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Navigating the Waters

Strategic Solutions for Water Resilience

September 2023

By Torsten Kurth, Dean Muruven, Jester Koldijk, John Staunton Sykes, and Adam Wlostowski

With major contributions from Stuart Orr and Richard Lee of the WWF Freshwater Practice

Coordination Team and from the WWF Water Risk Filter team

1 NAVIGATING THE WATERS: STRATEGIC SOLUTIONS FOR WATER RESILIENCE

Navigating the Waters

Strategic Solutions for Water Resilience

Readers might react skeptically. Hasn’t access to freshwater

steadily improved for decades? And didn’t the recent United

Nations Water Conference address this problem? Why

should we worry about water when other challenges seem

harder to solve? The reality, however, is both worse (because

we are facing a global water crisis) and better (because new

ideas and emerging technologies can help overcome the

challenges) than many people imagine.

Part I: The Water Crisis



Many responses to the crisis echo common myths, so let’s

begin by addressing these misconceptions.

Myth 1: The Water Crisis Is Like the Carbon Crisis

Unlike carbon emissions, water issues are hyperlocal. One

region might face severe drought, while another a few

hundred miles away has an abundant supply of water.

Quality varies widely, too: the groundwater in one area







action. It’s much easier to set national limits on fungible

-

prisingly, we have a global framework for measuring and

disclosing carbon emissions, but not for gauging and up-

holding water standards. Likewise, we can’t create emis-



These challenges help explain why the recent UN Water



groundbreaking in itself, yielded far fewer results than the

several gatherings on carbon emissions. Instead of produc-

ing a “Paris moment” of accelerated solutions, the gather-



forum for discussion, and it drew few (9% of the total) new

commitments from companies. (See Exhibit 1.) We need

regular gatherings to share success stories, discuss ongoing

challenges, and drive action. The water crisis demands

creative thinking and action to address local challenges.

The world is facing a pervasive—and mounting—water crisis. Many

people lack ready access to drinkable freshwater or are aicted by

severe ooding. Communities have too little water, or at times too

much, or the water isn’t clean. Already under pressure, the ecosys-

tems and infrastructure that sustain water resources are now vulner-

able to disruptions from climate change.

1. 

BOSTON CONSULTING GROUP + WORLD WIDE FUND FOR NATURE 2

Of course, the water crisis and the climate change crisis

-

festation of climate change resulting from high carbon

emissions. But each crisis calls for its own separate solutions.

Myth 2: Governments Alone Are Responsible for Providing

Resilient Water Supplies

Governments play a critical role in providing leadership

and regulations to ensure the adequate, equitable, and sus-



water management requires the involvement of diverse

stakeholders, including the private sector, local communi-

ties, and civil society. Two-thirds of companies say that

water problems could lead to substantive changes in their

 This is because the

private sector depends on water supplies to transport

goods over rivers, to serve as a key ingredient for beverag-

es, or to act as an input for agriculture.





draw on advances from elsewhere, but they must adjust

every new tool, technique, or process to the local context.

Hence the need for competent governance to provide

proper incentives to these nongovernmental actors.





the cost of action.

Myth 3: Water Comes from Infrastructure

-

cial or engineering challenge. As long as a community has

the capital and expertise, it can build a water supply sys-

tem to meet its needs. But water doesn’t just “come from

the tap.” It depends on natural ecosystems.

Planners must factor interconnected freshwater environ-

ments into development in order to ensure water system





has declined by two-thirds, and the populations of freshwater

-

neering projects have fallen short of expectations over time

because they undermined those ecosystems.

Hydropower development, for example, can hamper food

production, harm biodiversity, displace communities, and

endanger public safety as dams age. It can also block



-

age is so great—including to climate adaptation services—

that it outweighs the climate mitigation value of the renew-

able electricity generated.

We therefore argue that future water management systems

must work with nature, through nature-based solutions, to

sustainably manage ecosystems. We see many promising

innovations in the water sector, with numerous state-of-the-

art solutions now in scalable and pilot phases. Yet these

innovations can address the water crisis only in conjunc-

tion with freshwater ecosystems.

Exhibit 1 - The Recent UN Water Conference Led to Few New

Commitments from the Private Sector

Sources: 

Includes national, regional, and local governments, as well as intergovernmental and multilateral bodies.

Includes such entities as civil society, philanthropic organizations, and partnerships.

272

238

67 54

100

Number of new

commitments

Public sector1Other2

NGOs Private sector Academia

2. https://www.cdp.net/en/research/global-reports/high-and-dry-how-water-issues-are-stranding-assets.

3. https://www.cdp.net/en/research/global-reports/global-water-report-2020.

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NavigatingtheWatersStrategicSolutionsforWaterResilienceSeptember2023ByTorstenKurth,DeanMuruven,JesterKoldijk,JohnStauntonSykes,andAdamWlostowskiWithmajorcontributionsfromStuartOrrandRichardLeeoftheWWFFreshwaterPracticeCoordinationTeamandfromtheWWFWaterRiskFilterteamNavigatingtheWatersStrategicSolutionsforWaterResilienceTheworldisfacingapervasive—andmounting—watercrisis.Manypeoplelackreadyaccesstodrinkablefreshwaterorareafflictedbysevereflooding.Communitieshavetoolittlewater,orattimestoomuch,orthewaterisn’tclean.Alreadyunderpressure,theecosys-temsandinfrastructurethatsustainwaterresourcesarenowvulner-abletodisruptionsfromclimatechange.Readersmightreactskeptically.Hasn’taccesstofreshwaterThathyperlocalitycomplicateseffortstocoordinateglobalsteadilyimprovedfordecades?Anddidn’ttherecentUnitedaction.It’smucheasiertosetnationallimitsonfungibleNationsWaterConferenceaddressthisproblem?Whyemissionsthatflowfreelyintotheatmosphere.Notsur-shouldweworryaboutwaterwhenotherchallengesseemprisingly,wehaveaglobalframeworkformeasuringandhardertosolve?Thereality,however,isbothworse(becausedisclosingcarbonemissions,butnotforgaugingandup-wearefacingaglobalwatercrisis)andbetter(becausenewholdingwaterstandards.Likewise,wecan’tcreateemis-ideasandemergingtechnologiescanhelpovercomethesionsmarketswithoffsetsforwater.challenges)thanmanypeopleimagine.ThesechallengeshelpexplainwhytherecentUNWaterPartI:TheWaterCrisisConference—thefirstinalmost50years—althoughgroundbreakinginitself,yieldedfarfewerresultsthantheTheWaterCrisis:MythstoClearAwayseveralgatheringsoncarbonemissions.Insteadofproduc-inga“Parismoment”ofacceleratedsolutions,thegather-Manyresponsestothecrisisechocommonmyths,solet’singinNewYorkCityinMarch2023servedmainlyasabeginbyaddressingthesemisconceptions.forumfordiscussion,anditdrewfew(9%ofthetotal)newcommitmentsfromcompanies.1(SeeExhibit1.)WeneedMyth1:TheWaterCrisisIsLiketheCarbonCrisisregulargatheringstosharesuccessstories,discussongoingchallenges,anddriveaction.ThewatercrisisdemandsUnlikecarbonemissions,waterissuesarehyperlocal.Onecreativethinkingandactiontoaddresslocalchallenges.regionmightfaceseveredrought,whileanotherafewhundredmilesawayhasanabundantsupplyofwater.Qualityvarieswidely,too:thegroundwaterinoneareamightbeundrinkable,whileneighborswhobenefitfromadifferentgeologycandrinkfreelyfromtheirwells.1.UNDepartmentofEconomicandSocialAffairs,“WaterActionAgenda”(April7,2023).1NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEExhibit1-TheRecentUNWaterConferenceLedtoFewNewCommitmentsfromthePrivateSector272238Numberofnew100commitmentsOther26754Publicsector1NGOsPrivatesectorAcademiaSources:UNDepartmentofEconomicandSocialaffairs(April7,2023);BCGandWWFanalysis.1Includesnational,regional,andlocalgovernments,aswellasintergovernmentalandmultilateralbodies.2Includessuchentitiesascivilsociety,philanthropicorganizations,andpartnerships.Ofcourse,thewatercrisisandtheclimatechangecrisisMyth3:WaterComesfromInfrastructurearerelated,andwaterproblemsareoftenavisiblemani-festationofclimatechangeresultingfromhighcarbonManypeopleassumethatpotablewaterissimplyafinan-emissions.Buteachcrisiscallsforitsownseparatesolutions.cialorengineeringchallenge.Aslongasacommunityhasthecapitalandexpertise,itcanbuildawatersupplysys-Myth2:GovernmentsAloneAreResponsibleforProvidingtemtomeetitsneeds.Butwaterdoesn’tjust“comefromResilientWaterSuppliesthetap.”Itdependsonnaturalecosystems.GovernmentsplayacriticalroleinprovidingleadershipPlannersmustfactorinterconnectedfreshwaterenviron-andregulationstoensuretheadequate,equitable,andsus-mentsintodevelopmentinordertoensurewatersystemtainablemanagementofwaterresources.Yeteffectiveresilience.Since1970,one-thirdoftheworld’swetlandswatermanagementrequirestheinvolvementofdiversehavedisappeared,thenumberoflong,free-flowingriversstakeholders,includingtheprivatesector,localcommuni-hasdeclinedbytwo-thirds,andthepopulationsoffreshwaterties,andcivilsociety.Two-thirdsofcompaniessaythatspecieshavedeclinedbyfour-fifths.Toomanygrandengi-waterproblemscouldleadtosubstantivechangesintheirneeringprojectshavefallenshortofexpectationsovertimebusiness,putting$225billionatrisk.2Thisisbecausethebecausetheyunderminedthoseecosystems.privatesectordependsonwatersuppliestotransportgoodsoverrivers,toserveasakeyingredientforbeverag-Hydropowerdevelopment,forexample,canhamperfoodes,ortoactasaninputforagriculture.production,harmbiodiversity,displacecommunities,andendangerpublicsafetyasdamsage.ItcanalsoblockCrucialinnovationsmustcomefrombothfor-profitandmigratoryfishandpreventsedimentsneededtosustainnonprofitorganizationsinthoseregions.Organizationscandeltasfromflowingdownstream.Insomecases,thedam-drawonadvancesfromelsewhere,buttheymustadjustageissogreat—includingtoclimateadaptationservices—everynewtool,technique,orprocesstothelocalcontext.thatitoutweighstheclimatemitigationvalueoftherenew-Hencetheneedforcompetentgovernancetoprovideableelectricitygenerated.properincentivestothesenongovernmentalactors.WethereforearguethatfuturewatermanagementsystemsFor-profitcompaniesneedtoseizethewateropportunity,mustworkwithnature,throughnature-basedsolutions,tosincethecostofinactionislikelyfivetimesashighasthansustainablymanageecosystems.Weseemanypromisingthecostofaction.3innovationsinthewatersector,withnumerousstate-of-the-artsolutionsnowinscalableandpilotphases.Yettheseinnovationscanaddressthewatercrisisonlyinconjunc-tionwithfreshwaterecosystems.2.https://www.cdp.net/en/research/global-reports/high-and-dry-how-water-issues-are-stranding-assets.3.https://www.cdp.net/en/research/global-reports/global-water-report-2020.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE2Myth4:We’veAlreadyLargelySolvedtheProblemofWaterMyth5:WaterShouldBeFreetoEveryoneAccessTheUNrecognizesaccesstoadequatewaterandsanita-Thepercentageofpeoplewholackcleanwaterfordrink-tionasafundamentalhumanright—onethatiscriticaltoing,cooking,andsanitationhasbeenfallingfordecades.health,dignity,andprosperity.5WateristhebasisofalllifeAndtoday,proportionatelyfewerpeoplearedyingfromonEarth,andfreshwateriscriticaltomanyecosystems.Itpreventablediseaseslinkedtounsafewaterandpoorisalsovitaltobusinessoperationsinmanyindustries.sanitation.4Thisdoesn’tmean,however,thatwatershouldbefreeandNevertheless,1.4millionpeopledieeachyearbecauseaccessshouldbelimitless.Waterpricingcallsforacom-theylackaccesstosafeandaffordabledrinkingwater,plexbalancebetweenequityandefficiency.Giventhatadequatesanitation,andsuitablehygienefacilities.Justwaterisahumanright,itshouldbeinexpensive,butpeo-underhalfoftheworld’s8billionpeoplestilllackreadypleshouldalsohaveanincentivetoconserveit.accesstosanitation.And2billionpeoplestillstruggletoobtaindrinkablewater.Aspopulationgrowth,risingeco-Withcarefulpricing,governmentscanworkwithprovidersnomicoutput,andchangingclimatepatternsincreasetopromotebothequityandefficiency.Market-basedmech-pressureonfreshwatersupplies,theprogressmadeinanisms,adaptivepricing,andotherpoliciescanpromoterecentdecadesisunderthreatandcouldbereversed.conservationandstimulatesufficientfinancingwhilealsomeetingtheneedsofvulnerablepopulations.TheUN’sSixthSustainableDevelopmentGoal(SDG6)callsforuniversalaccesstocleanwaterby2030.WithoutPricingwasakeyissueatthe2023UNWaterConference,suchaccess,regionswillstruggletoachieveotherdevelop-andmustbeacontinuingfocusofplanningasregionsmentgoals.aroundtheworldfacefreshwatershortages.WedelveintopricingconsiderationsinPartIIofthisreport,alongwithTomeetthisgoalforSDG6,weneedtoboostthecurrentothermarket-basedmechanisms.paceofprogressbysixtimes.In2030,atcurrentratesofprogress,one-fifthoftheworldwillstilllivewithoutsafelyMyth6:InvestorsHavetheInformationTheyNeedtoMakemanageddrinkingwater,one-fifthwithoutbasichygieneSustainableWaterInvestmentsfacilities,andone-thirdwithoutsafesanitation.Thismythissimplyfalse.Investorshavefartoolittleinfor-Meanwhile,climatechangeispoisedtodisruptongoingmationaboutwaterefforts,oftenfailtorecognizetheeffortstoimprovewateraccessinmanyplaces,makingmagnitudeofwater-relatedrisks,andlackunderstandingfutureadvancesmoredifficult.Bothdroughtsandfloodingoftheeffectsofclimatechangeonthewatersupplies.arelikelytobecomemorecommon,andthehigherrateofdisruptionwillincreaseriskstowaterquality.ThecurrentInvestorsneedreliableinformation,butmostcompaniesslowrateofimprovementunderthestatusquomightevenprovidefewdetailsabouttheirwaterusage.TheCarbongonegative.Andaswaterriskgrows,thechallengeofDisclosureProject(CDP),whichcollectsdataoncarbonreducingcarbonemissionsabsorbsmuchoftheworld’semissions,wateruse,andexposuretodeforestation,re-attentionandcreativity.centlysurveyedabout8,500companiesandfoundthatonly46%ofthemdisclosewater-relateddata.6Insteadofdoingmoreofthesame,weneedtoadoptanewapproach.Thisreportwilllayoutideasforaccelerat-Manyinvestorstodaypaynoattentiontowaterrisks,eitheringtheexpansionofaccesstocleanwaterwhilemakingbecausetheydon’tunderstandwater’simpactanddepen-watersuppliesresilientagainstclimatechange.denciesorbecausetheylackaccesstodecision-usefuldata.Wateristhekeyecosystemdependencyinmostfinancialportfolios,yetfewerthanhalfofthoseportfoliosdisclosetheirwater-relatedrisks.Jefferies,aUS-basedmultinationalinvestmentbank,foundthatthreeofthefivemostmaterialecosystemservicedependencieswerewaterrelated.74.https://www.sdg6data.org/en/node/1.5.https://www.unwater.org/water-facts/human-rights-water-and-sanitation.6.https://www.cdp.net/en/research/global-reports/global-water-report-2020.7.“Wateris‘mostcritical’naturalcapitalfactorforinvestors,”EnvironmentalScience(February9,2023).3NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEReality:TheWorldIsFacingSevereWaterDemandIsIncreasingUnsustainablyProblemsinManyRegionsEvenaswatersuppliescomeunderthreat,demandforOverall,theworldhasnotmanagedwatersustainablyandfreshwatercontinuestogrowrapidly.That’sespeciallytrueequitably—andtodayfourdriversareraisingthestakes.8inBRICScountries(Brazil,Russia,India,China,andSouth(SeeExhibit2.)Africa),wherebillionsofconsumersarejoiningthemiddleclassandconsumingmuchmorewaterthantheydidwhenChangingClimatesAreDisruptingFreshwaterSuppliespoor.Theyalsoeatmoremeatandconsumeawiderangeofprocessedgoods.Moreover,theUNexpectstheglobalClimatechangewillexacerbatelocalrisksofdroughtandpopulationtoexceed9billionpeopleby2050,with60%toflood,particularlyinregionsthatalreadyfacewaterstress.70%ofthemlivinginurbanareas.11ThesedemographicAccordingtotheGlobalCommissiononAdaptation,“Thechangeswillfurtherstresswaterinfrastructureandintensi-effectsofclimatechangewillmostimmediatelyandacute-fylocaldemand.lybeexpressedthroughwater.”9TheIntergovernmentalPanelonClimateChange(IPCC)expects50%morepeopleWaterisnotasimplecommodity.Itiscriticaltohouse-toliveunderwaterstressifaverageglobaltemperaturesholdsbutalsoessentialforbusinessesandagriculture,riseby2°C,ratherthanby1.5°C.Astheclimatechanges,itwhichneedtoexpandtheiroutputtomeetincreasingbecomeslessstable.Droughtsarelikelytoquadrupleanddemandfromconsumers.theirintensitytodouble,whilefloodswillmorethandou-bleandbecome30%moreintense.10InfrastructureIsNotKeepingUpInmanyregions,climatechangewillprobablyreduceWaterinfrastructureiscriticalforservingdrought-pronefreshwateravailabilityasaconsequenceofchangesinareas,protectingcommunitiesfromflooding,andprovidingprecipitationandincreasedevapotranspiration.Higherpublichealthservicessuchaswatertreatmentandsanita-temperaturesandrisingsealevelswilllikelyintensifytion.Yetwaterinfrastructureisagingandoftensuffersfromsalinization(increasedwater-solublesaltconcentrationindeferredmaintenance.Threekeypointsarerelevanthere.soil),worseningwaterquality.Exhibit2-FourDrivers,UnderpinnedbyFailuresinGovernance,AreCentraltoGlobalWaterChallengesIntensifyingUnsustainableInadequateDegradingclimatechangedemandincreaseinfrastructurewaterecosystemsClimatechangealterstheExpandingglobalpopulation,AgingwaterinfrastructureDeteriorationofglobalwatercycleandprecipitationurbanization,andeconomicandunderinvestmentorfreshwaterecosystemspatterns,whichexacerbatedevelopment—particularlymisappliedinvestmentinreducesfreshwateruptake,bothacutewaterchallengesinAsiaandAfrica—increaseinfrastructureexpansionincreasingtheriskofﬂooding(suchasseveredroughtsandwaterconsumptionincreasethestrainonandjeopardizingbusinessesﬂoods)andchroniconeswaterresourcesandsupplychains(suchaswaterscarcity)FailuresingovernanceSource:BCGandWWFanalysis.8.https://www.nature.com/articles/s41558-018-0257-z;https://blogs.worldbank.org/climatechange/147-billion-people-face-flood-risk-worldwide-over-third-it-could-be-devastating.9.“AdaptNow:AGlobalCallforLeadershiponClimateResilience,”https://gca.org/reports/adapt-now-a-global-call-for-leadership-on-climate-resilience/.10.IPCCAR6.11.https://www.un.org/en/desa/world-population-projected-reach-98-billion-2050-and-112-billion-2100;https://www.un.org/uk/desa/68-world-population-projected-live-urban-areas-2050-says-un.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE4First,waterinfrastructureispronetoleakage,eveninEffectivelymanagingwateruserequiresstrong,impartial,regionsvulnerabletowaterstressorssuchasprolongedandcollaborativelocalgovernance.Governancestructuresdroughts.Forexample,demandinSouthAfricawilllikelyoftenlackbroad-basedlegitimacy,sincemanyhistoricaloutpacesupplyby17%by2030evenasone-thirdoftheagreementshaveexcludedstakeholders.Moreover,munici-waterthatrunsthroughexistinginfrastructureislosttopalities,wateragencies,andotherlocalgovernmentalleaks.12Thisisaproblemintheglobalnorthaswell.Forbodiesstruggletoenforcepoliciesbecausetheyhaveinstance,Italyhasaleakagerateof42%.13IntheUS,ainadequatetechnicalcapabilitiesandexpertiseinprojectwatermainbreakseverytwominutes,resultinginthelossmanagement.of6billiongallonsoftreatedwaterdaily.Globally,leakagecostswaterutilities$14billioneveryyear.LeaksandotherAdeepunderstandingofthewatercrisisinallitscomplexi-waterdisruptionswereresponsiblefor$50billioninlossesty,andofhowtomeetthechallenges,iscriticaltobetterbythe11mostwater-reliantindustriesin2019.governance.Thisreportaimstoprovidethatunderstand-ing.ItoffersguidanceonstrategicactionsdirectedtowardSecond,aginginfrastructureisasecurityrisk.MostUSresilientecosystems,economies,andsocieties.leveesanddamsreceivedgradesof‘D’or‘F’forsafetyfromtheAmericanSocietyofCivilEngineers.14StructuralAFrameworkforUnderstandingWaterImpactsfailureofanyofthesewatercontainmentbarrierscoulddevastateentirecommunities.Toreducethecomplexity,wecancharteachregion’sde-greeofcrisisaccordingtoathree-by-threematrix.(SeeThird,intheabsenceofproperwatertreatmentanddistri-Exhibit3.)In2020,BCGintroducedtheWaterImpactbution,consumersriskbacterialcontaminationandchemi-Matrix,whichenablespolicymakers,environmentalists,calpollution.Insuchsituations,theymustrelyonques-executives,financiers,andotherstakeholderstoconsis-tionablesurfaceorgroundwater,leavingthemmuchmoretentlyassessalocalsituationandproposeappropriatevulnerabletowaterborneillnesses.solutions.Itstartswiththreebasicissues:FreshwaterEcosystemsAreDegrading•TooLittleWater.Demandforwaterexceedsavailablesupply,waterinfrastructureisinadequate,orinstitutionsSuppliesdependonbroadecosystems.Forexample,peat-failtobalanceeveryone’sneeds.Climatechangeismak-landsandwetlandsperformcrucialfilteringandstorageingdryareasdrierandincreasingthelengthandseverityfunctionsfordownstreamfreshwateraccess.Yetathirdofofdroughts.Waterscarcityhurtsbusinessesaswellasallwetlandshavedisappearedsince1970.Similarly,manyresidents.ThisisthemainprobleminnorthernAfricariversandlakesarebeingdegraded,bothqualitativelyandandtheMiddleEast,whererisingdemandisoverwhelm-quantitatively.inglocalresources.Evenseeminglydryforestsimprovewaterqualityandflow•TooMuchWater.Someregionsareatriskforfloodsthroughfiltrationandretention,whilealsocreatingatmo-duetodevelopmentssuchaspavingfloodplains,ortosphericconditionsthatledtorainelsewhere.Coastalclimate-drivenshiftsinprecipitationpatterns.Moremangrovesprovidenaturalfloodprotection.Yetmanyfrequentepisodesofexcessiveraincanoverwhelmcitiesbuildoverthesenature-basedresources.Evenwhenriversorcausestormsurgesthatbattercoasts.Floodingmanytreesremain,disruptedflowscandiminishvegeta-candisruptbusinessesatvariouspointsintheirvaluetionandpreventforestsfromretainingwaterandrecharg-chains—closingtheirmainoperations,shuttingdowningsupplies.Ascitiesandeconomiesexpandattheex-suppliers,orraisingtransportationandcapitalcosts.penseofthesecriticalecosystems,theyweakentheirownCoastalandriverineareasinplacessuchasEastAsiaresiliencetoclimateimpacts.Weneedtoexploremodelsfacethegreatestimpactfromthisthreat.ofdevelopmentthatworkcooperativelywithecosystemstobuildresilience.•TooDirtyWater.Thisissuecoversnotjustpollutedwater,butalsowaterthatistoorichinnutrients,tooTheWaterCrisisUltimatelyStemsfromFailedGovernancesalty,ortoowarm.Inmuchoftheworld,poorwaterqualityduetoindustrialactivityposesthemainchallengeManyregionslackthegovernmentalcapacitytomanagetowateraccess.freshwaterresourceseffectively.Theysendoutweakpricingsignals,relyonoutdatedallocations,andinmanycasesdonotconsidertheecosystem’swiderecologyandhydrology.12.http://awsassets.wwf.org.za/downloads/wwf009_waterfactsandfutures_report_web__lowres_.pdf.13.https://www.reuters.com/business/environment/italys-water-crisis-exacerbated-by-leaky-pipes-data-shows-2023-03-21/.14.https://yaleclimateconnections.org/2021/03/new-report-u-s-dams-levees-get-d-grades-need-115-billion-in-upgrades/.5NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEExhibit3-TheBCGWaterImpactMatrixHelpsRevealtheLikelyImpactofVariousWaterChallengesEnvironmentalImpactSocialEconomicQualityToolittleChallengewaterToomuchwaterQuantityToodirtywaterRisk:VeryhighriskHighriskMediumriskLowriskVerylowriskSource:BCGandWWFanalysis.Note:Thematrixshownhereisatemplateversion,withriskvaluesnotfilledin.Waterchallengescanbeacute(suchasflashdroughts)orchronic(suchaslong-termwaterscarcity).Bothtypesareconsideredhere.TheWaterImpactMatrixthenmapstheseissuesagainstThematrixfocusesontheprimaryimpacts,whilealsothreedimensions:permittingdeepdivesintospecifictopicssuchasreputation-alandregulatoryrisks.Takethetextileindustry,forexample.•Environmental.FreshwateriscrucialforvirtuallyAsconsumersbecomeawareofenvironmentalissues,theyeveryecosystem.Whenwaterisunderthreat—whetherwillpushreputablecompaniestodevelopsustainablewaterthroughscarcity,excess,orpollution—theseecosystemspractices.Governmentmayadoptnewregulationstoad-are,too.dresswaterpollutionandwaterscarcity,whichinturnmayaffectcompanies’operationsandprofitability.•Economic.Cleanwaterisacrucialbusinessinputinmanyindustries,fromagriculturetopharmaceuticals.Toassesstheextentofthewaterchallenge,wecombinedItalsoplaysaglobalroleinmaintainingreliablesupplytheWaterImpactMatrixwithWWF’sWaterRiskFilter,achains.rigorousfreetoolthatquantifiesrisksathighresolutionwithindicatorsfrom32externalandpeer-reviewedglobaldata•Social.Waterisahumanright.Allpeopledeserveac-sets.Wefoundthat4%oftheworld’senvironmentallyrichcesstosafedrinkingwateranddignifiedsanitation.Thisareas,30%ofglobalGDP,and34%oftheworld’spopulationrequirementisfundamentaltotheUN’sSustainableareinlocationsathighwaterrisk.(SeeExhibit4.)By2050,ifDevelopmentGoalsandanimatesmanywaterrightswecontinuebusinessasusual,7%ofenvironmentallyrichdisputesaroundtheworld.areas,43%oftheglobalGDP,and51%oftheglobalpopula-tionwillbeathighrisk.TheWaterImpactMatrixgatherstheseareasintoasingleview.Stakeholderscanunderstandthelikelihoodandim-pactofeachtypeofwaterchallenge,andthenidentifyasuitablepathtoaction.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE6Exhibit4-ClimateChangeWillPutMuchoftheWorldatHighWaterRiskby2050Levelofwaterriskforglobalenvironmentallyrichareas,GDP,andpopulation(%)x2.0(2millionkm2)x1.6($70trillion)x1.7(3billionpeople)46782123232330383443495151567572706953424720202050205020504036optimisticBAUpessimistic383834172017161911111020202020205020502050205020502050optimisticBAUpessimisticoptimisticBAUpessimisticEnvironmentallyrichareasGlobalGDPPopulationRisk:HighorveryhighriskMediumriskLoworverylowriskSources:WWFWaterRiskFilter;WangandSu,“GlobalgriddedGDPdatasetconsistentwiththesharedsocioeconomicpathways,”Sci.Data(2022);Wang,Meng,andLong,“Projecting1km-gridpopulationdistributionsfrom2020to2100globallyundersharedsocioeconomicpathways,”Sci.Data(2022);BCGandWWFanalysis.Note:GDPandpopulationestimatesincludechange—includingclimatescenarios—basedonlatestprojections.GDPismeasuredaspurchasingpowerparity,in2005internationaldollars.BAU=businessasusual.Becauseofroundingnotallbarsegmentsaddupto100%.Thematrixrevealsthatpoorwaterqualityisakeyissue.RegionsandSectorsatRiskMorethanhalfofthecurrentglobalpopulationandGDPtodayareinAsianregions,includingIndia,withhighrisksFocusingonglobalstatisticsgivesshortshrifttothechal-relatedtowaterquality—andthatfigureislikelytorisetolengesfacedbyregionsandsectorswherewaterrisksare68%by2050.acute.Wecanusethematrixandtheriskfiltertooltoobtainmorespecificinsights.(SeeExhibit5.)Flooding,too,hasseveresocialandeconomiceffects.Worldwide,1.8billionpeoplefacefloodrisks,andone-thirdRegionsofthemhaveincomesoflessthan$2perday.Theyhavelimitedaccesstofinancingforfloodprotectionorrecovery,Theresultsshownotableconcentrationsofwaterstressinmuchlessinsurance,whichleavesthemvulnerabletonorthernIndia,northeasternChina,thesouthwesternUS,propertyloss,dislocation,andeconomicdisruption.InandtheMediterranean,amongothers.Theseregionsmusteconomicterms,riverfloodingistheworld’smostdamag-developsustainablewatermanagementsolutionstomeetingformofdisaster,atacostof$115billionperyear.15theneedsofsocialandeconomicgrowthaspartoftheirClimatechangewillprobablyincreaseanomalousflooding,long-termsustainabledevelopmentplans.with$15trillionineconomicactivityatriskoffloodingby2040.16NorthernIndia.17Indiaisnowtheworld’smostpopulouscountry,andsignificantpartsofitsGDPandbiodiversityareexposedtohighwaterrisks.15.https://www.nature.com/articles/s41558-018-0257-z.16.https://blogs.worldbank.org/climatechange/147-billion-people-face-flood-risk-worldwide-over-third-it-could-be-devastating.17.https://www.wri.org/insights/3-maps-explain-indias-growing-water-risks.7NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEEffectsofclimatechangewillmostimmediatelyandacutelybeexpressedthroughwaterExhibit5-BCG’sWaterImpactMatrixIdentifiesHotspotsMediterraneanMiddleEastEconomicSocialEnvironmentalEconomicSocialEnvironmentalToolittleToolittlewaterwaterToomuchwaterToomuchToodirtywaterwaterToodirtywaterSouthwesternUSEconomicSocialEnvironmentalNortheasternChinaToolittleEnvironmentalEconomicwaterToolittleToomuchNorthernIndiaEconomicSocialwaterSocialwaterEnvironmentalToomuchToodirtywaterwaterToolittlewaterToodirtywaterToomuchwaterToodirtywaterRisk:VeryhighriskHighriskMediumriskLowriskVerylowriskSources:WWFWaterRiskFilter;WWFandBCGanalysis.India’srapidlyworseningwatersituationisduemostlytoNortheasternChina.18AlargeportionoftheChina’sissuesofwaterscarcityandpoorwaterquality,buttheGDPisgeneratedinareasofhighorextremewaterrisk.countryalsofacessubstantialrisksofflooding.ItranksLikeIndia,Chinafacesthetwinchallengesofpoorwateramongtheworld’smostwater-challengednations,inpartqualityandmountingwaterscarcity,drivenbyrapidpopu-becauseofitshighpopulationdensityandinadequatelationshifts,economicgrowth,heavyindustry(steelmak-waterinfrastructure.Groundwaterlevelsaresinkingasing,smelting,andpaperandchemicalproduction),andfarmers,cityresidents,andindustriesoverdrawfromwellselectricitygeneration,alongwithclimatechange.andaquifers;overallavailabilityhasfallenbyhalfoverthepastsevenyears.For16%oftheland,thegroundwaterThenortheasternpartofChinaisanimportantagriculturallevelisdecliningbyanalarming1meterperyear.Muchofproducer,butthatareaholdsjust4%ofthecountry’sthewaterthatisavailableispolluted.freshwater.Theregionreliesonever-depletingandincreas-inglypollutedgroundwaterforhouseholduseaswellasforIndiadependsonitsnorthernregionsforsuppliesofriceindustryandagriculture.andwheat,bothofwhicharewater-intensivecrops.TheavailabilityofcleanwaterisshrinkingasaresultofbothChina’selectricitygenerationiswater-intensive,comprisingclimatechangeandunsustainablewaterusebylocal12%ofnationalwaterconsumption.Muchofitcomesproducers.Thefederalgovernmentsubsidizeselectricfromcoal-firedplantsthatrequirelargevolumesofwaterpumpsandplacesnolimitsongroundwaterextraction,forcooling.Two-thirdsofthecountry’scoalplantsareinworseninganalreadyprecarioussituation.Fewerthan10%northernprovincesandotherareasofhighwaterstress.ofIndia’sgroundwaterdistrictsprovidewaterthatiscon-sideredsafetodrink.18.https://www.lowyinstitute.org/the-interpreter/water-scarcity-challenges-china-s-development-model.9NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEChina’sheavyindustryisanothermajorconsumeroftheAnextremecaseofpoliticsoutsidetheMediterraneancountry’sfreshwater,withause-to-value-addedratiothatinvolvestheHornofAfrica,whereyearsofconflict,local-farexceedsthatofpeercountries.izedviolence,andrefugeecampshavecombinedwithclimate-relatedshockstorender82millionpeoplefood-SouthwesternUS.TheColoradoRiverBasinhasbeeninsecure.AidagenciessuchastheWorldFoodProgramunderstressfortwodecades,especiallyasaresultofhaveworkedwithpartnerstoamelioratetheseconditions,consumptioninCalifornia,whichishometo39millionbuttheregion’sworseningclimateislikelytointensifypeopleand15%oftheUS’sGDP.Themainchallengeherefuturefloodsanddroughts.Thelong-termsolutionisnotinvolveswaterscarcityduetogrowingdemandwithoutaexpandedfoodaid,butinvestmentinresilientfoodsys-commensurateincreaseinsupply,amplifiedbyrisingtems,whichinturndependonlong-neglectedwatersup-temperaturesandworseningdroughtdrivenbyclimateplies.Engineeringalonewon’tsuffice—theregionneedstochange.19Theriver’sflowhasfallenbyone-fifthsince2000,adoptnature-basedsolutionsandsocialinnovationsandanda2°Cincreaseinaveragetemperature(overpre-buildgraywaterinfrastructuretocreateresilientwaterindustriallevels)by2050couldreduceitby40%.systems.Inresponsetothelongstandingdrought,theregion’sstateSectorsgovernmentsrecentlyagreedtosubstantiallyreducetheirallocations.(See“CaseStudy:TheColoradoRiverBasin.”)Throughouttheworld,wateriscriticaltotheoperation,profitability,andsustainabilityofagriculture,textiles,min-Mediterranean.TheMediterraneanattractstouristsfroming,andenergyproduction.(SeeExhibit6.)aroundtheglobe,drawnbyitsfineweatherandbeautifulnature.Theregionalsoproducesgrapes,olives,andnuts—Agriculture.Becauseagriculturedependsonwatermoreallwater-intensivecrops.thananysectordoes,itisespeciallyvulnerabletowaterrisks.Atthesametime,itheightenssuchrisksthroughYettheregionhasseenfiveconsecutiveyearsofdrought,depletionandpollution.AccordingtotheWorldResourcesalongwithrecord-breakinghightemperatures.ThistrendisInstitute,agricultureaccountsfortwo-thirdsofgloballikelytocontinueandworsenincomingyears.In2022andfreshwaterwithdrawals,and40%oftheworld’sfoodcomes2023,temperaturessometimesroseto4°Caboveaverage,fromareaswithhighwaterstress.22duetolong-lastingheatwaves.20Thecombinationofdrought,highwaterdemandfromagricultureandtourism,Agriculturalproductionrequireslargequantitiesofwater,andrecordheathasreducedriverflows.Spainisexperienc-eveninregionswhereresourcesarelimited.Asidefromingpervasivewatershortages,particularlyinAndalusia,issuesrelatedtowaterscarcity,floodsandwaterpollutionwherewaterreservoirslanguishatone-quarterofcapacity.candamagesoilfertilityandirrigationsystems,leadingtoFarmyieldsarefalling,andforecastersexpectevenlowerhigherinputcostsorgreaterproductionlossesandatten-yieldsinthefuture.dantfoodinsecurity.Theseproblemshaveknock-oneffectsinsectorssuchasfoodandbeverageproductionandtex-Severedroughtsandwaterscarcityarealreadyhavingtiles.Anothercontributortoscarcityisthevirtualwaterpoliticalrepercussions.Drought-struckAndalusia,specifi-trade.(See“TheVirtualWaterTrade.”)callytheprovinceHuelva,istheworld’slargestexporterofstrawberries.TheregionalgovernmentwantstolegalizeWaterpollutionarisesmainlyfromexcessiveagrochemicalfarmsandirrigationinthewatershedthatsurroundsDoña-useandinadequatewastewatermanagement.Agriculturalnanationalpark.Illegaloperationsalreadyinplacecon-runoffofpesticides,fertilizers,andanimalwastecancon-tributedtothepark’slosingmorethanhalfofitspondtaminatelocalwatersources,makingthewaterunfittonetworkfrom1985to2018,andlegalizationwouldworsendrinkandhurtingaquaticlife.thesituation.21ThepotentialdamageissogreatthatGermanactivistshavecalledforboycottingAndalusianstrawberries.19.https://www.nature.org/en-us/about-us/where-we-work/priority-landscapes/colorado-river/colorado-river-in-crisis/#:~:text=Temperatures%20in%20the%20Basin%20are,by%20another%2010%20to%2040%25.&text=In%20addition%20to%20causing%20soaring,threatens%20rivers%20and%20water%20supplies.20.https://joint-research-centre.ec.europa.eu/jrc-news-and-updates/severe-drought-western-mediterranean-faces-low-river-flows-and-crop-yields-earlier-ever-2023-06-13_en.21.https://www.wwf.eu/?10136966/Donana-emergency-European-Commission-must-stop-destructive-law.22.https://www.wri.org/news/release-one-third-all-irrigated-crops-face-extremely-high-water-stress.BOSTONCONSULTINGGROUPSUB-BRAND10CaseStudy:TheColoradoRiverBasinTheColoradoRiversuppliesdrinkingwaterto40millionOverthepasttwodecades,theriver’sstreamflowshavepeopleinthesouthwesternUSandMexico.Itsupportsfallenbyone-fifth,andexpertspredictanadditionaldrop$1.4trillionincommerce,16millionjobs,15%ofUSfarm-of9%perCelsiusdegreeofhighertemperature.2Waterland,and30tribalnations.Withouttheriver,Arizonaalonelevelsinthebasin’sreservoirsaredroppingatanalarmingwouldlose2millionjobsandseeitsgrossstateproductrate,threateningnotjustwatersuppliesbutalsohydro-fallbyone-third,or$185billion.1Thehighstakesinvolvedelectricpowergeneration—acornerstoneoftheregion’sinmaintainingtheColoradoRiverBasin’shealthhaveledenergy.Thecurrentwaterallocationof20.4billioncubicstakeholderstoadoptfourofthesixstrategicmovesde-metersperyearexceedsthelong-termaverageannualscribedinPartII.streamflowof18billioncubicmetersbymorethan10%.3From2000to2022,theannualnaturalflowdecreasedtoSevenstategovernmentsrepresentedinthebasinare15billioncubicmeters,whichsuggestsa30%deficit.balancingthewaterdemandsofmunicipal,commercial,cultural,andecologicalendusers,allcompetingforlow-ThreeCriticalMovescostwater.Thelargestuserisagriculture,whichtakesupthree-quartersofthesupply,sostakeholdershavebeenAgenciesandotherstakeholdersareworkingonvariouslookingtofarmerstoreducetheirusagewithoutcompro-solutionstoputthebasinonapathtowaterresilience:misingthesector’seconomicviability.Metropolitanareasintheregionhavegrownrapidlyandarestrugglingto•Acceleratingagriculturalinnovation,especiallyinthear-ensuretheavailabilityofsuppliessufficientforcontinuedeasofprecisionirrigation,water-efficientcropselection,growth.Often,theyaccomplishthisbybuyingwaterrightsandregenerativeagriculturefromfarms(“buyanddry”),atacticthatremoveslandfromproductionanddamagesruralcommunities.•Deployingmarket-basedmechanismstoencouragebasinuserstosharewatertemporarilybyreducingAllocationsofColoradoRiverBasinwaterweresetacentu-transactioncostsforwaterleasingandothermeasuresryago,withanincompleteunderstandingofclimatevari-abilityandwithouttheparticipationofstakeholderssuch•Newwater-efficienttechnologiestointensifyresidentialasindigenouspeoplesandfisheries.The1922Coloradoconservation,forbothindoorandoutdoorusageRiverCompactapportionedthewaterbetweenUpperBasinandLowerBasinstates,withtheremainingflowsThesethreemovescouldsaveabout2.3billioncubicgoingtoMexico.Thecompactcreatedtwogroups:seniormetersofwaterperyear(Seetheexhibit.)StakeholdersuserssuchasCalifornia,andjunioruserssuchasArizona.couldalsoseekequitablegovernancepracticesbasedonIntimesofscarcity,juniorholdersgetcutfirst.Becausenewlegislation,newformsofblockpricing,newpartner-1922wasatimeofanomalouslyhighflows,compactpar-ships,andnewdroughtplanninganddisclosuremandates.ticipantshadafalsesenseofthearrangement’ssustain-ability.Sincethen,severaldroughtshavestrainedrelation-Let’sdelveintoeachofthethreeimmediatemovesavail-shipsamongbasinusersandforcedsometoquestiontheabletostakeholders.compact.Theypointtosuchflawsasa“useitorloseit”provisionthatdiscouragesconservation.AcceleratingAgriculturalInnovationToday,juniorrightsholdersaretryingtorenegotiatetheCropsdestinedforcattlefeedconsumemoreriverwatercompact’sterms,butseniorrightsholdershavelittlein-thancropsharvestedfordirecthumanconsumption.Beefcentivetogoalong.ThesevenbasinstatesrecentlyagreedanddairyproductsarethereforetheleadingdriverofwatertoaseriesofcutsinColoradoRiverwaterusage,andnowshortages(andfishimperilment)intheregion.4Butsalesthefederalgovernmentisassessingwhetherthosecutsareoftheseproductsareunlikelytofallinthenearfuture.Soadequateinlightofclimatechange.stakeholdershavefocusedontwoinnovations:precisionirrigationandbettersoilmanagement.1.https://abcnews.go.com/US/happen-colorado-river-system-recover-historic-drought/story?id=98475953;https://feedingourselvesthirsty.ceres.org/regional-analysis/colorado-river.2.https://pubmed.ncbi.nlm.nih.gov/32079679/.3.https://sgp.fas.org/crs/misc/R45546.pdf.4.https://www.nature.com/articles/s41893-020-0483-z.11NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEInterventionstoOvercomeDeficitsintheColoradoRiverBasin,EnabledbyEquitableGovernanceWateravailability,allocation,andupside(billionsofcubicmeters)Directionalandnon-exhaustive2520.43–51.1200.30.30.518.215–1815InMay2023threestates10proposedsaving3.7billioncubicmetersofwater,bringingthebasincloserto5asustainableﬂow0NaturalDeﬁcitPrecisionCropselectionRotationalDomesticwaterCurrentallocationExistingwaterannualﬂowirrigationandregenerativefallowingsavingsminusselectedinterventionsallocationagricultureSources:CongressionalResearchServices,“ManagementoftheColoradoRiver:Waterallocations,drought,andthefederalrole”(February2023);Richteretal.,“Waterscarcityandfishimperilmentdrivenbybeefproduction,”NatureSustainability(2020);BCGanalysis.Farmsaremovingawayfromfloodirrigation—althoughRelyingonMarketsfour-fifthsofbasincroplandstillreliesonit—andtowardsprinkleranddropsystems.EvenbetteraredripirrigationSeveralagencieswithstakesintheColoradoRiverBasinandAI-drivensprinklersthatoptimizethetimingandloca-haveestablishedmarket-basedmechanismsforwatertionofdelivery,therebyminimizingevaporationfromthesharing.Californiahostsoneoftheworld’slargestwatersoilsurface.markets,withapproximately1.7billioncubicmeterstradedannually.6Coloradoispioneering“alternativetransferToaugmentthisprecisionapplication,farmsareexploringmechanisms”thatworkinmuchthesameway.regulateddeficitirrigation(RDI),whichlimitsdeliveriesofwaterwhencropscantoleratewaterstress.ThegoalistoThesemechanismsencouragevoluntarywater-sharingconservewaterwhileminimizingadverseimpactsonyield.agreementsamongusersandcanhandlepermanentasAccordingtothePacificInstitute,employingRDIcanreducewellastemporarytransferstotheoptimalallocation.Inannualirrigationintheregionby1.1billioncubicmeters.5exchange,usersreceivecompensationandgreaterlegalThePacificInstitutealsoestimatedthatswitching10%ofprotectionoftheirremainingwaterrights.alfalfaplantingsintheColoradoRiverBasintocottonorwheatcouldsaveabout300millioncubicmetersofwaterForexample,farmersreceivefinancialincentivesfortheannually.voluntary,temporary,rotationalfallowingoffarmland.Esti-matessuggestthatrotationalfallowingof20%ofcattle-feedRelatedtoRDIisconservation-orientedtillageandmulch-irrigatedlandfromJulythroughSeptemberwouldyielding,amethodthatlimitsevaporationtokeepmorewaterinwatersavingsof300millioncubicmetersperyear.7Farmersthesoil.Besidessavingwater,thisapproachcanincreasecanalsoenterintoaninterruptiblewatersupplyagreementoverallsoilhealth.withamunicipalorindustrialuser.Undersuchanagree-ment,theuserleaseswaterfromthefarmersforthreeoutofeverytenyearsofdrought-tightenedsupplies.Inthoseyears,thefarmerscurtailtheirwaterusebyfallowingorengagingindeficitirrigation,inexchangeforafee.85.https://pacinst.org/wp-content/uploads/2013/05/pacinst-crb-ag.pdf.6.https://www.scienceforconservation.org/assets/downloads/Market-Based_Mechanisms_for_Env_Water_TNC_2017.pdf.7.https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1064&context=wffdocs.8.https://www.auroragov.org/residents/water/innovation;https://dnrweblink.state.co.us/CWCB/0/edoc/212963/ATM%20Status%20Report.pdf.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE12ScalingHouseholdSavingsTotalhouseholdwaterusageinColoradoRiverBasinstatesamountsto3billionto4billioncubicmeters,with55%outdoorand45%indoorusage.9With“smart”applicationssuchasWaterSense,engineersestimatethathouseholdscansaveupto45%ofindoorand70%ofoutdoorusage.Ifweassumea20%to30%incrementaladoptionrateoftheseapplications,theBasincouldsaveupto500millioncubicmetersannually.Thatfigureexcludesurbangrowthtrajectories,however,andthesouthwesternUS’spopula-tionislikelytoincreaseincomingdecades.MuchDependsonGovernanceTheregionhasmadegoodprogressinrecentdecades.Today,southernCaliforniauseslesswaterthanitdidinthe1980s,despitehaving50%morepeople.Buttosustaintheseefficienciesoverthelongterm,governancemustimprove.Thegoalfollowingtheunexpectedfloodingfromheavyrainslastyearistostorecurrentlyabundantwaterforlateruse.Infrastructurechanges—especiallytheabilitytobankandtransferwater—areessential.Thisshouldhappenwithacombinationofgreenwaterandgraywatersolutions.Foritspart,thefederalgovernmentisencourag-ingsubstantialinvestmentinwaterinfrastructurethroughtheInflationReductionAct.Governancemustalsopromotedeepershiftsinwaterallocations.Farmers(includingagriculturalcompanies)needincentivesnotjustfortemporarytransfers,butalsoforpermanenttransfersthatfacilitateinvestmentsinwater-efficientequipmentandconservation.Andofcourse,theregionneedsanupdatedcompactgoverningwatermanagementonthebasisoftermsnegotiatedacrossallstakeholders,includingrecreationalusers,ecosystem-basedsectors,andtribes.Thosevoicesareatriskofbeingsuppressedbylargeconsumers—agriculture,municipali-ties,andindustry.Beyondbig-picturechanges,eachmunicipalityorlocalitymustsetupitsowndroughtplanninganddemandman-agement.Eachmustalsodevelopalong-termsupplyportfoliostrategythatplansforawarmer,drier,andulti-matelyuncertainwaterfuture.9.https://www.flumedatalabs.com/water-index.NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCE13Exhibit6-TheAgriculture,Fishing,FoodandBeverage,Paper,Textiles,Mining,andConstructionSectorsAreatHighestRiskofWaterChallengesRiskIndustryGlobalGDP(%)1ScarcityQualityAgriculture4LowriskVerylowriskFishingandaquaculture<1Foodandbeverageproduction2Paperandforestproduction<1Textilesandluxurygoods<1Metalsandmining5Constructionmaterials6Energyproduction6Chemicals,pharma,andbiotech5Hospitality3Manufacturing215Oilandgas5Other348Risk:VeryhighriskHighriskMediumriskSource:WWFBiodiversityRiskFilter,2023.1WorldBankDevelopmentIndicators,2020.2Includesautomotive,electronicequipment,machinery,electronicsandsemiconductors,andgeneralmanufacturing.3Includesretail,professionalservices,transportservices,telecommunications(includingwireless).Agricultureisparticularlysensitivetoclimateimpacts.FoodinsecuritymayreverseitscurrentdownwardtrendShiftingclimatetrendscanalterrainfallpatterns,increaseandbecomeagrowingglobalproblem,intensifiedbycli-evaporation,andraisethefrequencyandintensityofex-matechangeandpopulationgrowth.Foragriculturegener-tremeweathereventssuchasdroughts,heatwavesandally,muchoftheworld’sfivemostpopularcrops—wheat,flashfloods.TheIPCCexpectscropyieldstofallsubstan-corn,rice,soybeans,andcotton—isgrowninareasoftiallyasaresultoftheseweatherchanges,evenaspopula-high-waterscarcity,andthisislikelytoincreasesubstan-tioncontinuestogrow.tiallyby2050.(SeeExhibit7.)Deltas,whichareamongthemostproductiveagriculturalInthecaseofwheat,whichoccupiesthemosthectaresregions,areshrinkinginresponsetoseveralfactors:sealevelglobally,farmsinareaswithahighriskofwaterscarcityrise,groundwaterpumping,andreducedsedimentflowinwilllikelyrisefrom25%to42%,a68%increase.Otherriversduetosandminingandtrappingbyupstreamdams.23cropsseesimilartrends.Forexample,cornwillseeanincreaseinhigh-water-riskplantingsfrom12%to27%.Thetextileindustrymaybeparticularlyhardhit:44%ofcottonproductionalreadyoccursinheat-stressedareas,apropor-tionthatislikelytoincreaseto70%.23.https://weblog.wur.eu/fnh-ri/combined-insights-stimulate-sustainable-food-production-in-deltas-under-pressure/.BOSTONCONSULTINGGROUPSUB-BRAND14TheVirtualWaterTradeAgricultureaccountsformuchoftheworld’svirtualwater83%ofthetotal.Paradoxically,muchofthetradewenttrade—thebuyingandsellingofwater-intensiveproducts.fromthewater-scarcenorthwestandnortheasttowater-Thistradecanoccurinternationallyorwithinacountry.ItrichprovincesinsouthernChina.becomesproblematicwhenawater-scarceregionexploitsitswatersuppliesunsustainablytosupportsuchproducts.MuchofthevirtualwatertradeisduetolargevariationsinAstudyconductedin2019foundthat15%ofglobalwatercropwaterintensityandtotheinefficientdistributionofconsumptionwenttotheinternationalcroptrade.1thesecropsaroundtheworld.Nuts,spices,andstimulantsusemuchmorewaterthanvegetablesandfruits.(SeetheIn2015,theUS,India,Pakistan,Mexico,andSpainaccountedexhibit.)Waterintensityvarieswithincategories,too:avo-fortwo-thirdsoftheinternationalwater-stressedcroptrade.cados,forexample,useninetimesasmuchwaterascar-TheUSisthelargestexporter,with22%ofunsustainablerots.Locationisanothervariable.Iftheregioniswater(businessasusual)virtualwatertransfers,followedbyscarce,thenRaisingwater-intensivecropsinawater-scarceIndia(19%),Pakistan(14%),Mexico(7%),andSpain(5%).regionhasfarmoreimpactonthelocalwatersituationChinaisthelargestimporterofthesecrops,followedbythanraisingtheminawater-abundantregion.theUS,Turkey,Mexico,andJapan.About60%ofthistradeinvolvescotton,sugarcane,fruits,andvegetables.Animalproductsarethemostwater-intensiveoutputsofall.Beefuses15,415cubicmetersofwaterperton,whileVirtualwatertradingalsotakesplaceinsidemanylargechickenuses4,325cubicmeters.3Thedisproportionatecountries,withelectricalgenerationandchemicalproduc-waterdemandsofanimalproductsremaintrueevenwhentioncontributingtothetransfertotals.InChina,from2002gaugedbycaloricdensity:beefuses10litersofwaterperto2012,theshareofinterregionaltradetototalwaterkilocalorie,comparedto0.5literperkilocalorieforcerealswithdrawaldoubled,from20%to40%.2Virtualwaterflowsand1.3litersperkilocalorieforvegetables.fromagriculture,electricity,andchemicalsaccountedforWaterIntensityVariesEnormouslybyCropGlobalaveragewaterfootprintofcrops(cubicmetersperton)20,000Spices,nuts,andstimulantsusesigniﬁcantlymorewater15,89715,526pertonthancereals,fruits,Withinthefruits,vegetables,andvegetablesdoandcerealscategory,15,00014,218Waterusagepercropavocadoesuseabout9xmoredependsheavilyonlocationwaterthancarrotsdoandﬁnalproduct,reﬁned10,000sugarforinstanceuses1,782cubicmetersperton5,0004,0283,3662,9262,2702,1441,9811,826+916%1,6741,6041,2227903472872091950CinnamonCottonTobaccoSoybeansWheatCherriesBananasPotatoesCarrotsCoﬀeeCashewSunﬂowerRapeseedAvocadosRiceMaizeStraw-SugarnutsseedsberriescaneOils,nuts,stimulants,andspicesFruits,vegetables,andcerealsGreenwaterBluewaterGraywaterSource:MekonnenandHoekstra,TheGreen,BlueandGreyWaterFootprintofFarmAnimalsandAnimalProducts,UNESCO-IHE(2010).Note:AsdefinedbytheWaterFootprintNetwork,“greenwaterfootprint”iswaterfromprecipitation,“bluewaterfootprint”iswaterthathasbeensourcedfromsurfaceorgroundwaterresources,and“graywaterfootprint”istheamountoffreshwaterrequiredtoassimilatepollutantstomeetspecificwaterqualitystandards.1.https://iopscience.iop.org/article/10.1088/1748-9326/ab4bfc/pdf.2.https://pure.rug.nl/ws/portalfiles/portal/79507015/1_s2.0_S0959652618330919_main.pdf.3.https://www.waterfootprint.org/resources/multimediahub/Mekonnen-Hoekstra-2012-WaterFootprintFarmAnimalProducts_4.pdf.15NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEExhibit7-MoreAgriculturalLandWillBeatRiskofWaterChallengesby2050,withWheat,Corn,Rice,andCottonParticularlyVulnerableLevelofwaterscarcityinareaswherekeyglobalcropsaregrown(%)12711142227251723231187374227281917442930317076206159562055474682817936474238116191918202020502050202020502050202020502050202020502050202020502050BAUpessimisticBAUpessimisticBAUpessimisticBAUpessimisticBAUpessimisticWheatCornRiceSoybeansCotton199million151million113million98million31millionhectareshectareshectareshectareshectaresWaterscarcitylevel:HighorveryhighscarcityMediumscarcityLoworverylowscarcitySources:WWFBiodiversityRiskFilter,2023;InternationalFoodPolicyResearchInstitute,2019;BCGandWWFanalysis.Note:BAU=businessasusual.1WorldBankDevelopmentIndicators,2020.2Includesautomotive,electronicequipment,machinery,electronicsandsemiconductors,andgeneralmanufacturing.3Includesretail,professionalservices,transportservices,telecommunications(includingwireless).Textiles.Ofallindustries,textileshasthehighestwater-Energy.Theenergysectorfacesrisksrelatedtobothwaterrelatedfinancialimpact,ascostsvaryfrom2%to4%ofquantityandwaterquality.Globally,powergeneration—revenues.24Manufacturingconsumeslargequantitiesofparticularlythermoelectricpower—isamongthelargestwaterfordyeingandfinishing.WWFhasfoundthatittakesconsumersoffreshwater.AccordingtoboththeCDPGlobal2,700litersofwatertoproduceasinglecottont-shirt.25WaterReport2020andtheInternationalEnergyAdminis-tration,thesectorissecondonlytoagricultureinwaterHeighteningthestrain,muchoftheworld’stextilemanu-usageglobally,accountingfor10%ofwithdrawals.27facturingtakesplaceinwater-stressedregions,suchassouthernEurope,India,andChina.TheindustryisalsoaWateruseinenergyproduction,suchastocoolthermalmajorcontributortowaterpollutionbecausewastewaterplantsortoextractandprocessfossilfuels,involveslargefromtextilemanufacturingcontainshazardouschemicals,quantitiesofwaterandcontributestowaterpollution.dyes,andheavymetals.TheresultingpollutionharmsWastewaterfromgenerationandprocessingmaycontainaquaticecosystems,damageshumanhealth,andreduceshazardouschemicalsandheavymetals,andextractionandthesupplyofcleanwater.TheUNestimatesthatone-fifthtransportationcanentailspillsandleaks.TheUNfindstheofglobalindustrialwaterpollutioncomesfromtextiles.26sectorresponsiblefor30%ofglobalindustrialwaterpollution.24.https://www.cdp.net/en/research/global-reports/global-water-report-2020.25.https://wwf.panda.org/?358216/Thirsty-for-fashion.26.https://www.europarl.europa.eu/news/en/headlines/society/20201208STO93327/the-impact-of-textile-production-and-waste-on-the-environment-infographic.27.https://www.iea.org/reports/water-for-energy-is-it-enough.BOSTONCONSULTINGGROUPSUB-BRAND16RegionscandevelopgreaterresiliencetothewatercrisisbycombininggreenandgrayformsofinfrastructureThedamagecausedbythissectorisn’tlimitedtofossil-PartII:ResilientSolutionsforaSustainablefueledpowergeneration.Renewableenergytechnologies,Futuresuchashydropowerandbioenergy,canstresswatersup-pliesasaresultofpoorsitingofdamsandbroadchangesNext-GenerationWaterManagementinlanduse.Somedamsreducetheriskoffloodsandimprovewatersupplies,butincorrectlysiteddamsandthosePeoplehavetraditionallyused,valued,andgovernedfresh-thatfailtoworkwithnaturalecosystemcanincreasewaterwaterasaninexhaustiblecommodity.Toboostaccesstorisks.Theproportionofhydropowerdamslocatedinbasinswaterthroughadoptionofclimate-resilientsystems,wewithahighfloodriskislikelytoincreasefrom2%to36%needalong-termsystems-levelapproachthatincludesby2050.28Meanwhile,manyhydropowerfacilitiesarenaturalprocessesforgroundwaterandaquiferrecharge.sufferingfromdiminishingreservoirsindrought-stricken(SeeExhibit8.)Thisapproachwillnotonlysustainprimaryareas.accesstofreshwater,butalsoprovidesecondaryservicestoeconomiesandpeople.Forexample,riversarecrucialtoMining.Anotherindustrysectorthatranksasaheavymanyecosystems,deliveringsedimentthatmakesdeltaswateruserandcontributortowaterpollutionismining.highlyproductiveforagricultureandfishing.Often,howev-Drawingonvastamountsofwaterformineralprocessing,er,stakeholdersdonotunderstand,recognize,andvaluedustsuppression,andotheractivities,itisthemostwater-thesebenefitsappropriately.intensiveofallindustries.The2020CDPfoundminingtobethethirdlargestuserofwaterglobally,accountingforWeproposesixstrategicshiftsinwatermanagementfor8%ofwaterwithdrawals.29thepublicandprivatesectors.(SeeExhibit9.)Insomewater-stressedcountriesthatrelyonmining,the•Fosterandacceleratetechnologicalandsocialinnovations.industryaccountsforasignificantproportionofthecoun-try’swaterconsumption.InSouthAfrica,forinstance,•Anchorcorporatestrategyanddecisionstothewaterone-tenthofconsumptiongoestomining.Andbecausecrisis.miningdischargescontainheavymetals,acids,andotherpollutants,theycandegradewatersupplies.TheUNties•Expandnature-basedsolutionstomanageandrestoreminingto10%ofglobalindustrialwaterpollution.ecosystems.Theminingsectorhasampleroomforimprovementsim-•Enhancevaluation,pricing,andwaterallocation.plybyadoptingexistingsolutionsandtechnology.SouthAfrica,forexample,couldaddressacidminedrainage(the•Improvewaterfinancingframeworks.outflowofacidicwaterfrommetalandcoalmines)tomakewaterflowsdrinkable.Byacceleratinginvestmentin•DevelopalocalfoundationofgovernanceandregulatorywatertreatmentintheWitwatersrandgoldregion,theenforcement.countrycouldmake220millioncubicmetersofadditionalwaterperyearpotable,accordingtothecurrentmaster-plan.30(See“WaterRiskinaHydrogenDrivenFuture.”)28.J.Oppermanetal.:“UsingtheWWFWaterRiskFiltertoScreenExistingandProjectedHydropowerProjectsforClimateandBiodiversityRisks”(2022).29.https://www.cdp.net/en/research/global-reports/global-water-report-2020.30.https://www.gov.za/sites/default/files/gcis_document/201911/national-water-and-sanitation-master-plandf.pdf.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE18WaterRiskinaHydrogen-DrivenFuturePartlyinanefforttolessentheircontributiontoclimatechange,manycountriesareworkingtoreducetheirreli-anceonfossilfuelsforenergyproduction.Onepromisingpathisgreenhydrogen,whichinvolveshavingfactoriesuserenewableenergytoconvertpurifiedwaterintohydrogenfuel.Thedownsideofthisapproachisthatitcouldstresslocalwatersupplies.Iftheworldweretotransfertoafullyhydrogen-basedeconomy,theadditionalfreshwaterconsumedwouldamountto2%to3%ofcurrentwithdrawals,or10%oftotalindustrialwaterusage.1Ofcourse,theactualusagewouldvarybylocation.IfSingaporereliedentirelyonlocallymadehydrogenforenergy,itwouldusealmosthalfofitsavailablefreshwaterforthatpurpose,whereasthecorre-spondingfigureforTajikistanwouldbeonly1%.Typically,desertandislandnationswouldhavetodrawthelargestproportionoftheirlocalwatersupplytogeneratetheirownhydrogenfuel,sotheywouldbemorelikelytoimporthydrogeninstead.Theywouldgainthebonusofaflowofcleanfreshwater,effectivelyimportedfrombetter-endowedregions—abeneficialwatertrade.Greenhydrogen’swaterfootprintalsodependsonthesourceofenergyusedinitsproduction.Solarandwindpowerhaveaminimalwaterfootprint,whilenuclearpowerrequireseighttimesasmuchwaterasthosesources.2Abundantandinexpensivehydrogencouldpromptthespreadofdesalinizationplants,whichareenergyintensiveandthereforetooexpensiveformostcountries.Hydrogen-powereddesalinizationcouldyieldlargequantitiesoffreshwater.Althoughitisappealingforwater-scarcere-gions,desalinizationrequiressafeguardstoavoidundesir-ableconsequencessuchasthosethatcanresultfromdumpinghigh-salinewaterbackintooceans.1.https://www.weforum.org/agenda/2022/09/how-a-transition-to-a-hydrogen-economy-will-affect-water-security/.2.https://itm-power-assets.s3.eu-west-2.amazonaws.com/Green_Hydrogen_Water_Use_56b96f577d.pdf.19NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEExhibit8-ForaWater-SecureWorld,WeMustMitigatetheImpactsofWater-DependentValueChainsandBuildResiliencetoWaterHazardsAdaptandbuildresiliencetonaturalSafeguardandoptimizeengineeredwater-relatedclimateimpactswatervaluechainsDroughts5SupplyFloodsDistributionIncreasedwaterscarcity1TreatmentPoorwaterquality2EﬃcientuseDegradingfreshwaterecosystems34Forallofitsmajoruses:3Energy4Industry5Environment21Agriculture2Municipal1Source:BCGanalysis.Note:Thefollowingdomainswerenotconsideredinthisdescription:transboundaryagreementsonwater,marineecosystems,andthehumanrighttowater.1Includesdrinkingwatersupplyandprovisionofsanitation.2Referstoenvironmentalflows.Exhibit9-SixStrategicMovestoAddresstheWaterCrisisandBuildResilienceFosterandAnchorcorporateExpandnature-basedEnhanceImprovewateracceleratestrategyandsolutionstomanagevaluation,pricing,ﬁnancingtechnologicalandsocialinnovationsdecisionstotheandrestoreandwaterframeworkswatercrisisecosystemsallocation20DevelopalocalfoundationofgovernanceandregulatoryenforcementSource:BCGandWWFanalysis.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATUREFosterandAccelerateTechnologicalandSocialInnovationsWe’vemappedtheseinnovationsalongthewatervaluechaininthreebuckets:digitalinnovation,infrastructureAlthoughtechnologicalgainsgarneredlittleattentionatinnovation,andother.(SeeExhibit10.)Ouranalysisidenti-therecentUNWaterConference,theywillprovidethefiesmanypromisingdevelopments.Someoftheseideastoolsforawater-resilientfuture.Theyincludeimprove-willfail,butweexpectthatenoughwillsucceedtoacceler-mentsincollectingwater,monitoringandforecastingflows,ategainsinaccessandqualitywhilereducingwater-relateddistributingwatereffectively,usingwaterefficiently,lower-hazards.Thepressuresofclimatechangemaketheseingthecostofreusingwater,andprotectingagainstimprovementsurgent,andtheymustcomelargelyfromwater-relatedhazards.theprivatesector—whichmakesthesector’smeagerrepresentationattheUNWaterConferenceespeciallydisappointing.Exhibit10-InnovationsWillEnabletheNextGenerationofWaterManagementNon-exhaustiveWatersourcingWatertreatmentWateruseWastewatercollectionDisposal/reuseanddistributionandtreatmentOptimizationofeﬃciencyWastewaterreuseWaterresourcemanagementAdvancedwaterWaterstorageandstreamﬂowforecastingPrecisionirrigationandtreatmentWastewaterReal-timewaterqualitymonitoringfarmingtechniquesreclamationandCost-eﬃcientre-usetechnologyDiversiﬁcationofsupplyInfrastructureSmartwaterusage(biological)wastewaterWastewatertoenergymaintenanceprocessingsolutionsCost-eﬀectiveConnectedmetersdesalinationDigitalleakdetectionenablinginsightsonMicropollutantandoperationsandmonitoringusagebiopollutantﬁltrationResidentialandGreenandgrayInfrastructureindustrialwatersavingstoragecapacitiesmodelingandappliancesandtransmissionsimulationsoftwareResilientwatersystemsRainwaterandgraywatercollectionReal-timemonitoringoptimizationandforecastingofﬂoodingHarvestingwaterMobilestormwaterfromhumidairremediationsystemsDroughtresistantseedstoreducewaterneedsDecentralizedwateraccessModularoﬀ-gridwaterpuriﬁcationPoint-of-useﬁltrationtechnologyLowconsumptionusageLowwater-demandagricultureWaterlesshygieneproductsMarket-basedmechanismstoenabletradeofwaterMarket-basedinnovationBluebondsBankablewatersolutionsSources:Expertinterviews;companywebsites;StartUs,“Top8WaterManagementTrends&Innovationsin2023”(2023);Tracxn,“WaterandWaste-waterManagementTech”(2023);WEFUplink,“UpLinkattheUNWaterConference”(2023);RecyclingStartups,“Top10WaterSavingStartups”(2023);BCGanalysis.21NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEIntermsofsocialinnovation,theseinitiativesmakenewWithwater-efficientcropselection,farmerscanmovetechnologiesorcollectiveactionacceptableintherelevanttowardcropsthatbettermatchfutureconstraints.Cropcultural,economic,andpoliticalcontexts.(See“InnovatingshiftingisespeciallyappropriatefortheLowerColoradoTechnologicallyandSocially.”)Ingeneral,theyprioritizeRiverBasin,whichhasamuchgreaterdiversityofcropsimprovingsocietyovergeneratingreturnoncapital.Theygrown,andwherehalfofallagriculturalwatergoestofeedcomefromstartupenterprises,fromteamswithinlargecattle.Byshiftingfromalfalfatowheatandcotton,theorganizations,andfromcollaborationsacrossmultipleregionwouldsave300millioncubicmetersoffreshwater.31bodies.(SeeExhibit11.)RegenerativeagricultureisanadaptivefarmingapproachPrecisionirrigation,forexample,useshardware(driplines,thatappliesproven,science-basedpracticestoimprovesprinklers,timers,sensors,andsatellites)andsoftwareandmaintainsoilandcrophealth.Itsgoalsinclude(equippedwithAIdecisionmaking)toapplywateronlystrengtheningyieldresilience,reducingcarbonemissions,whereandwhencropsneedit.Farmersandagriculturalpreservingwatersupplies,andenhancingbiodiversity.AcompaniesalreadyhaveaccesstovariousdigitaltoolstostudyinGermanysuggestedthatscalingthesepracticesfacilitatethisapproach.BCG’sCenterforEarthIntelligencewouldreducewaterdemandsandnitratepollution,with(CEI)hasextensiveknowledgeabouthowtomaintaincropannualbenefitstotaling€500million.32yieldswhileminimizingthequantitiesofwaterandotherinputsused.AnchorCorporateStrategyandDecisionstotheWaterCrisisForinstance,tosetsuitableirrigationparameters,farmersMostcorporationsdependeitherdirectlyorindirectlyonmustdetermineacrop’shealthwithhighgranularityandwaterintheirsupplychain,leavingthemvulnerabletoaccuracy.TheCEIdevelopedatooltodeterminevegetationriskstodayandincreasinglysointhefuture.Thewaterhealthdowntoareasof3squaremeters.Fromthere,crisiscandamagetheirbottomlineandintroducereputa-farmerscanoptimizetheiruseofwaterandotherinputs.tionalrisk.Tobuildresilientstrategiesforlong-termgrowth,theymustfactorthewatercrisisintotheirdeci-sionsandinvestments.Weofferafour-stepapproach.(SeeExhibit12.)Exhibit11-SocialInnovationsAreClusteredAlongLinesofEntrepreneurship,Intrapreneurship,andExtrapreneurshipApproachtosocialchangeExamples:SouthAfricaSocialentrepreneurshipCreateschangebyfoundingnewClearWater,aSouthAfricanorganizations(tocatalyzeaction)startup,isfocusingondevelopingaTheprocessofcreatingandgrowingafor-proﬁtorclosed-circuitsystemtoilettononproﬁtventure,wheretheentrepreneur’sorganicallyrecycletoiletblackwatermotivationistoaddresssocialchallengestorenderitsuitableforuseinﬂushingSocialintrapreneurshipCreateschangebyleveragingSouthAfricanBreweries(SAB),atheresourcesandcapabilitieskeywateruserinSouthAfrica,is,Theprocessofaddressingsocialchallengesfromofestablishedorganizationstacklingwaterscarcitychallengesinsideestablishedorganizationsfromwithin,workingwithcommuni-tiesonsuchprojectsasreducingalienplantspeciesSocialextrapreneurshipCreateschangethroughplatformsStrategicWaterPartnersNetwork,thatsupportcollectiveeﬀortwithinaleaderinSouthAfricainTheprocessofinterorganizationalactionthatandbetweennewandestablishedmulti-stakeholderapproachestofacilitatesalternativecombinationsofideas,people,organizationswaterresourcemanagement,oﬀersplaces,andresourcestoaddresssocialchallengesthepublicandprivatesectorsanengagementplatformforsharedlearningandengagementSources:PaulTraceyandNeilStott(2017)“Socialinnovation:Awindowonalternativewaysoforganizingandinnovating,”Innovation19(1);companywebsites.31.https://pacinst.org/wp-content/uploads/2013/05/pacinst-crb-ag.pdf.32.https://www.bcg.com/publications/2023/regenerative-agriculture-benefits-germany-beyond.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE22InnovatingTechnologicallyandSociallyParametricfloodinsuranceandwater-efficientsanitationhasworkedwithlendersonaloanforgivenessprogramaretwoexamplesofinnovationthatcombinetechnologicaltiedtofloodrisks.andsocialentrepreneurship.Water-EfficientSanitation.PopularhouseholdproductsParametricFloodInsurance.Thisnovelapproachtothatuselotsofwater,suchastoilets,showers,anddish-insuranceaimstoreducerisksforhomeandbusinessown-washers,arenotfitforpurposeinwater-stressedregions.ers.InsteadofreimbursingownersafterdocumentedForcontext,one-fourthofthedomesticwaterconsumptionlosses,thesepoliciesgiveownersafixedamountofcashintheUSgoestotoiletflushing.Rapiddevelopmentandthattheinsurercalculatesonthebasisoftheoverallsever-deploymentofwatertechnologyandsocialinnovationisityoffloodinginthearea,usingsatellitedataaswellascrucialintheseregionstoensurethatvulnerablepopula-localinformation.Becauseinsurershavemoreinformationtionshaveaccesstocleanwaterandsanitation.onweatherpatternsandbettermodeling,theycanofferpolicieswithpayoutsthatavoidcostlyandcontentiousTakeSouthAfrica,oneofthethirtydriestnationsintheinspections.Ownersgetcashquicklysotheycanimmedi-world,where11millionpeople(one-sixthofthepopula-atelyrebuildorgetonwiththeirlives.tion)lackaccesstogoodsanitation.Water-efficientorevenwaterlesstoiletsexist,butinadequatefinancingmakesBecauseparametricfloodinsurancepromisestolowerthemchallengingtodeployatscale.Asolutioncamefrompremiumsandboostaccess,itcanchangetheindustry.thenationalgovernment’sWaterResearchCommission.Mostflooddamageworldwideoccursonuninsuredproper-TheagencydevelopedtheSouthAfricanSanitationTech-ty.Boththeeconomicactivityonsiteandtheassetsthem-nologyEnterpriseProgramme,bringingprivatecompanies,selvesarerarelycovered—therateofcoverageisonly20%publicagencies,andNGOstogethertofast-tracktheadop-worldwide,andlessindevelopingcountries.Insurershavetion,commercialization,andindustrializationofnext-beenreluctanttoofferaffordablepoliciesinmuchofthegenerationsanitationtechnologies.Itisessentialtopursueworld,butwithparametricfloodinsurance’sabilitytothesestepslocallybecausepeopleoftenresistnewsanita-predictlikelihoodsinspecificareas,theycandomore.tionequipmentforculturalreasons.Insurershavelongreliedonfloodpredictionmodels,butHerearethreeexamplesoftechnologicalandsocialinno-thesemodelstendedtobethinondataanddidn’taccountvationforhouseholdwaterconsumption:foragingwaterinfrastructureorclimatechange.Newtechnologiesenableinsurerstogreatlyimprovetheir•“Racingheart”isalow-maintenance,water-efficienttoi-models.letdesignedfortightspaces.Thesystemcanbiodegradethewastewater.Floodbase,forexample,offersinsurersacomprehensivedatamonitoringandmodelingservice.1Itsreal-timemoni-•“Clearwater”usesaclosed-circuitsystemtoorganicallytoringfeatureenablesinsurerstopaypolicyholdersquicklyrecyclemostoftheblackwater(waterwithsewage)andincaseofdisaster.Besidessupportinginsurersandreinsur-makeitsuitableforflushing.Becauseitreliesonsolarers,itworkswithgovernmentsandnongovernmentalpanelsforenergy,themodelscangoanywhereofftheorganizations,helpingthemmovequicklywithdata-drivenelectricalgrid.decisions.•“NEWgenerator”recycles95%ofblackwater.BecauseIn2018,Floodbaseprovidedinsightsforsafelysettlingthetoiletsoperateofftheelectricalandsewagegrid,11,000refugeeswhohadimmigratedtotheRepublicoftheycanbefittedinsideshippingcontainers,areeasilytheCongo.Itfoundthat7,000oftherefugeeshadsettledinstalled,andgeneratenutrientfertilizeraswellasgray-inahigh-riskarea,soitrecommendedmovingthemtoawater(nonpotablewaterclearedofsewage).saferspot.Tenmonthslater,theoldsitewascompletelyinundatedinaflood.Theseandotherimprovementsareenoughtodeliverdignifiedsanitationtoeveryoneby2030.ThenextstepistoParametricfloodinsurancecanalsoreduceupfrontriskforfindtheinvestmentneededtoproducethematscale,businessowners.InLatinAmerica,farmersoftentakeoutbecausemostuserscan’taffordtheupfrontcostatcurrentloanstoacquireseedsforseasonalproducts.Bydestroyingprices.theircollateral,floodingcansendfarmersintobankruptcybecausetheycannolongerobtainnewloans.Floodbase1.Parametric(orindex-based)solutionsareatypeofinsurancethatcoverstheprobabilityofapredefinedeventhappeninginsteadofindemnifyingactuallossincurred.Itisanagreementtomakeapaymentupontheoccurrenceofatriggeringevent,andassuchisdetachedfromanunderlyingphysicalassetorpieceofinfrastructure.Forinstance,aninsurerwouldpayacertainamountforeverymillimeterofcumulativerainfallaboveacertainthresholdinaspecificarea.(SwissRE:“Whatisparametricinsurance?”August1,2018.)23NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEExhibit12-AFour-StepApproachtoIncludingWaterResilienceinStrategyDiagnosetheSetambitionsCreateaplanImplementpilotsbaselineandscaleup•Quantifywaterfootprint:Usethreelensestosetambitions•Alignwithoverallstrategy:Link•Deﬁneenablers:Determineincludingdirectusage,usageandcontextualscience-basedwaterambitiontocorporateandcriticalenablers(tech,throughoutsupplychain,andtargets:sustainabilityvisionsgovernance,monitoring)pollution•Reducewaterfootprint,•Useﬁt-gapanalysisand•Identifyﬁnancing•Identifyriskhotspots:focusingontheorganization’sprioritization:Deﬁnenewandopportunities:ConsideroptionsDeterminespeciﬁcregions/ownoperationsexistingactions,comparethemsuchasblendedﬁnancelocationswithinsupplychain•Increasewaterresilience,towaterambition,andprioritizewithhighwaterrisksreducingregulatory,physical,•Explorepartnershipsandandreputationalrisks•Explorenewwatercollectiveaction:Find•Deﬁnechallengesandimpacts:•Deﬁnewateropportunitiesandopportunities:Alignthemwithpublic/privatepartnerships,andUsetheWaterImpactMatrixtocontributions,suchaswaterstrategy,whilemanagingjoinrelevantactiongroupsforidentifylocation-speciﬁctechnologicalinnovationswaterriskscoordinatedinitiativesimpactsofwaterrisk•Determinearoadmap:Deﬁne•Exploretheregulatorytimelinesanddependencieslandscape:TakeintoaccountrelevantsubsidiesandincentivesSources:BCGandQuantisanalysis.Step1:Diagnosethebaseline.First,companiesneedtoStep3:Createaplan.Next,companiesneedtoaligndefineandquantifytheircurrentwaterusage,dividingittheirgoalsandtargetswiththeiroverallstrategy,especiallyintothreecomponents:direct(fromsourcesownedoronsustainability.Theycanintegratenewtargetsintoexist-controlled);mainindirect(allotherusageinfacilities);andingKPIframeworks.Thentheyshouldformulateinitiativesotherindirect(usagebysuppliersorcustomers,whichintoattaintheirwaterambitions,assessgapsinthem,andmanycasesaccountsforthebulkoftotalwaterusage).prioritizehigh-impactoptionsandlocations,bothtoreduceSecond,sincewaterishyperlocal,executivesmustidentifyrisksandtocapturenewopportunities.Afterthat,theycanriskhotspotsonthebasisofwherethefacilitiesarelocat-aligntimelinesanddependencieswithrunninginitiatives.ed.Outsidetoolsanddatasources—suchasWWF’sWaterRiskFilterandBCG’sWaterRiskMatrix—canbeveryStep4:Implementpilotsandscaleup.Fromthere,helpfulinthisregard.Third,theymustfactorinthetypescompaniesshouldconsiderenlistingenablerstohelpofwaterchallenges(flooding,scarcity,orpoorquality)thatachievetheirgoals—suchasestablishingagovernancearemostlikelytotakeplace,andthewaysinwhichthesestructure,monitoringforprogress(alignedwithframe-mayaffectthelocaleconomy,society,andenvironment.workssuchastheTaskforceonNature-relatedFinancialDisclosures),andbuildingneededdigitalcapabilities.Step2:Setambitions.FromthebaselineestablishedinCompaniescanleveragevariousfundingopportunitiesstep1,companiescanidentifycontextual,science-basedwithinthepublicandprivatefinancingspacestoattaintargetsforwateruse.Theycanreducetheirwaterusagetheirambitions.Partnershipsandcoordinatedeffortareandwaterpollutionfootprint,especiallyfromdirectsourc-essentialhere,socompaniesshouldexplorecollectivees,andincreasetheirwaterresilience,usuallythroughactionandexistingpublic/privatesectoreffortsbeforecollaborationwithsuppliers(includingshippers,asundertakinginitiativesontheirown.Finally,givenhowdroughtsandfloodscanimpedetransportation)andcon-rapidlytheregulatorylandscapeischanging,companiessumers.Besidestakingintoaccounttheobviousphysicalwillbenefitfromscanningtherelevantsubsidiesandandoperationalrisks,theymustconsiderreputationalandregulations.regulatoryrisks,bothofwhicharebecomingincreasinglyimportant.Butthewatercrisisalsobringsopportunities,sothegoalsneedtofactorintechnologicalinnovationandpotentialgrowthmarkets.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE24ExpandNature-BasedSolutionstoManageandRestore•FinancialInstitutions.IndiscussionswithclientsEcosystemsandinvestees,investorscanintegrateconsiderationofwater-relatedrisksandopportunitiesintheirsteward-Asustainablewaterplanwilllikelyincludegreeninfra-shipstrategies.Theycanencouragedisclosureofkeystructure,includingnature-basedsolutions(NbS),whichwater-relatedmetrics,screenportfoliosforwater-relatedusenaturalcomponents(suchastrees,wetlands,coastalrisksandopportunities,andestablishinvestmentfundsmangroves,bioswales,andurbanrooftopgardens)topro-thatfocusonpromotingNbS.Bankscandevelopfinan-tect,sustainablymanage,andrestorenaturalormodifiedcialproductsthatrewardinvestmentinNbS.ecosystemsinordertoaddresslocalchallenges.Thegoalistopromotebothhumanwell-beingandbiodiversity.NbS•NongovernmentalOrganizations.NGOscanadvisecomplementthe“grayinfrastructure”thatdominatesmostgroupsonthemanifoldvaluesofwater,identifyanden-watersystems,inwhichcommunitiesrelyonconcreteandcouragelocaltechnologyandsocialinnovation,identifyotherartificialengineeringtocollectanddistributewater,potentialpublic-privatepartnershipstoincreaserevenueoftenwithoutconsideringsystemicandlong-termimpacts.streamsforNbS,andhelpde-riskprojectsinconsulta-WeneedbothtypesofinvestmentsifwearetomeetSDG6tionwithstakeholders.andimproveclimateresilience.•PublicSector.GovernmentscanaccordgreatervalueNbScanhelpbuildresilientriverbasinstoaddressmulti-towater,enableinvestmentswithpublic-privatepartner-plewaterchallenges:inlandflooding(overallriskaswellasships,encourageadaptive(notjustconventionalgray)stormwaterandurbanfloods),coastalprotection,droughts,infrastructure,andofferblendedfinancing.Theyshouldanddegradedwaterquality.NbScanmoderateeconomicalsoconsiderNbSinpublicprocurementprocesses.andsocialexposuretochangingrainfallpatternsandfloodingbybufferingriverflowsandboostinggroundwaterWiththeseactions,andcombininggreenandgrayformsofstorage.InSouthAfrica,forexample,communitiesandinfrastructure,regionscandevelopgreaterresilienceinbusinesseshaveusedNbStomanageforestsandlimitrespondingtothewatercrisis.developmentinordertoprotectplainsandwetlandsthatholdfloodwaters.33EnhanceValuation,Pricing,andWaterAllocationAstemperaturesriseandmicroclimatesshift,manyforestsWaterissimultaneouslythemostpreciousresourceonarecapturinglesscarbonthantheyoncedid,duetore-Earthandthemostundervaluedone.Pricingwaterisducedgroundwater.Thesevere2022droughtinEuropedifficultbecauseitentailsaprecariousbalancingact:pricescausedanadditional200megatonsofCO2toentertheneedtobelowenoughtoensureaccessforlow-income,atmosphere,accountingfor5%oftotalEUemissions.vulnerablecommunities,buthighenoughtominimizeUsingNbStoincreasethestoreofgroundwatercanthere-profligateuseandinadvertentfreshwatercontamination.35foreenlargemuch-neededcarbonsinks.34Real-worldpricingofwateriscomplex,butitrarelycoversExhibit13categorizesseventypesofNbS:catchmentandthefullspectrumofvaluesandcostsinvolved.Tobalanceriverbasinmanagement,wetlandrestorationandprotec-social,economic,andenvironmentalneeds,governmentstion,reconnectionoffloodplains,sustainablerestorationoftensubsidizewater,pricingitbelowitsmarginalcost.andmanagementofforests,expansionofriparianbufferLargecommercialwaterusersinagricultureandindustryzones,developmentof“spongecities,”andcultivationofoftenpayalmostnothingforwaterwhileconsumerspaycoastalmangroves.muchmore—andyetconsumersstillpaylessthantheactualcost.InpromotingNbS,everyorganizationhasaroletoplay:•For-ProfitCompanies.Besidesworkingtodevelopwater-resilientplansanddisclosewater-relatedimpacts,companiescaninvestinrelevanttechnologies,asout-linedinExhibit10.33.https://www.dffe.gov.za/projectsprogrammes/wfw.34.https://www.nrc.nl/nieuws/2023/04/27/veel-bossen-trekken-het-s-zomers-niet-meer-dan-nemen-ze-geen-co2-meer-op-a4163062.35.https://www.wearewater.org/en/what-is-the-value-of-water-and-its-price_349991;http://d2ouvy59p0dg6k.cloudfront.net/downloads/the_value_of_water_discussion_draft_final_august_2015.pdf.25NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEExhibit13-Nature-BasedSolutionsforWaterResilienceSocietalproblemaddressedTypeofnature-basedsolutionExamples•Vietnam:MekongRiverCoastalInlandWaterPoorwaterprotectionﬂoodingscarcityqualityCatchmentandriverbasinmanagementImprovingthefree-ﬂowingcapacityofariver,includingmanagingsedimentsandsandﬂows,whilepreservingcriticalaquaticwildlifehabitatWetlandandpeatlandrestorationandprotection•Peru:DatemdelMarañón•UK:IngoldisthorpeProtectingwetlands,whichrestorewaterqualitybyreducing•Turkey:BüyükMenderesrunoﬀofpollutants(e.g.,nitrates)—forinstance,nearagriculturalareasReconnectionofﬂoodplains•Netherlands:RoomfortheRiverEnlargingﬂoodplainsbymovingdikesback,givingriversmoreroomtoﬂow,reducingpressureondikes,andprovidingwildlifehabitatSustainablerestorationandmanagementofforests•Kenya:MauForestComplexRemovinginvasivealienplantspeciesandenablingforeststo•Indonesia:Centralnaturallyregulateﬂowsofwater,ﬁlterwater,andsupplydownstreamwaterKalimantan•SouthAfrica:WorkingforExpansionofriparianbuﬀerzonesEstablishingavegetatedbuﬀerareanearstreamsandriverstoWaterhelpprotectthestreamfromlanduse,enhancewaterquality,andreduceﬂoodingDevelopmentof"spongecities"•China:YanweizhouPark•Rwanda:KigaliAbsorbingwaternaturally,bychannelingawayrainwaterthroughterraces,wetlands,greenroofs,andpermeablepavementsCultivationofcoastalmangroves•Jamaica:Coastaldefense•Kenya:CoastalprotectionRestoring,sustaining,andexpandingcoastalmangroveforesttoimprovecoastalprotectionagainstﬂoodingrelatedtosea-levelriseSources:WWF,“WaterwaystoResilience”(2021);WWF,“BankableNatureSolutions”(2020);BCGandWWFanalysis.Thereisnoone-size-fits-allmodelforwaterpricing.Deci-Governmentsmustalsoencourageconservation.Waterissionmakersmustconsiderefficiencyandequityinthenotasimplecommodity,andaquaticecosystemsarenotlocalcontext.36Wateriscriticalforagricultureandothermereconduitsforstoringandmovingwater;bothhaveeconomicsectors,andlowpricescanstimulateeconomicmultipleeconomic,societal,andecologicalvalues.37Pric-investment.Yetkeepingpriceslowerforcompaniesthaningmusttakeintoaccountsuchnonmarketvaluesasforconsumersmaynotbesociallyresponsible.Toaddressclimateregulation,ecosystemfunctionality,andculturalquestionsofequityandefficiency,policymakersmightservices.Forexample,riversreducefloodrisks,sustaindevelopvariablepricingaccordingtotypeofuserandfreshwaterfisheries,anddeliversediment.volumeofuse.Thisformofvariablepricingwithmeteringcanincreaserevenueandexpandthepublicwaternetworkforconsumers.36.https://academic.oup.com/oxrep/article/36/1/86/5696684.37.http://awsassets.panda.org/downloads/wwf_valuing_rivers__final_.pdf.BOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE26Effectivelymanagingwateruserequiresstrong,impartial,andcollaborativelocalgovernanceThesetypesofservicedeservemaximumprotection.Policy-•TieredPricingBasedonVolumeUsed.Aflatpricemakersshouldconsiderfuturewateruseandachangingchargesthesamerateregardlessofthevolumeofwaterclimate.Sincewaterusetodaycandepleteaquifersandused.Incontrast,tieredpricingencouragesconservationlimitwateravailabilityforfutureuse,policymakersneedtobychargingahigherrateforlarger-volumeusage.Theplanresponsiblyforlong-termprovisioningofwater.Inlatterapproachrequiresadditionalcapitalexpensestodoingso,theymustusemodelsthatincorporateforecast-installmeters.eddroughtsandchangingprecipitationduetoclimatechange,ratherthanrelyonoutdatedhistoricalpatterns.By•Combination.Manycommunitiesusebothtieredcombiningcontinualmonitoringofflowsanddemandwithpricingandavariabletariff,inoneoftwoways.Eitherev-agilepolicies,theycandevelopeffectiveincentivestoeryonepaysastandardyearlyfixedusagefee,combinedpreserveandincreasesuppliesforuseintimesofscarcity.withavolumecharge,oreveryonepaysatieredvolumechargethatischeapatlowusagebutclimbssubstantial-Somehow,waterpricesmustcoverthecostsofwatertolyasconsumptionrises.Thegoalinthiscaseistogivekeepthesystemfromdegradingovertime,withoutdenyingcompaniesandhouseholdsalowbasicrate,toensurevulnerablecommunitiesaccesstotheresource.Anumberaccess,whilediscouragingheavyuse.ofapproachestovariablepricingarepossible.(SeeExhibit14.)Threearepopular:Insettingprices,policymakersmusttakeintoaccountallstakeholders—notjustpayingcustomers,butalsoindige-•VariableTariffs.Uniformtariffsrequirealluserstonouspeoplesandcommunitiesthatrelyonecosystempaythesamerateacrosssectorsandlocations,whileservices,fromfishingcommunitiestoresidentsofflood-variabletariffsdifferentiate.Thelatteraddsaburdentoproneareas.Differentinstitutionsinevitablyhaveconflict-administration,butitalsoenablescommunitiestosetinggoals.Waterutilitiesseekareturnoninvestment,forincentivesforwater-scarceregionsorspecificusers.instance,whilepolicymakersseekreelection.Butthefundamentalbalancingactisbetweenprovidingwaterasahumanrightandencouragingefficiencyandconservation.Exhibit14-WaterPricingOptionsTiered•MediumtransactionalcostsMostlydevelopedeconomies•Incentivizesreducedwaterusage•Nodiﬀerentiationbetweenuser•Highesttransactionalcosts•Incentivizesreducedwaterusagetypes•DiﬀerentiatesbetweenusertypesMostlyemergingeconomies•Lowesttransactionalcosts•Lowtransactionalcosts•Doesnotincentivizereducedwater•DoesnotincentivizereducedwaterusageFlatusage•Diﬀerentiatesbetweenusertypes•NodiﬀerentiationbetweenusertypesUniformVariableSources:Grafton,Chu,andWyrwoll,“Theparadoxofwaterpricing:dichotomies,dilemmas,anddecisions,”OxfordReviewofEconomicPolicy(2020);BCGanalysis.BOSTONCONSULTINGGROUPSUB-BRAND28Besidesadoptingvariablepricing,policymakerscanpro-Inestablishingthesemarkets,policymakersmustconsidermotetheuseofmarket-basedmechanismstosharewater.thespecificwater-relatedproblemorproblemswithinthe(SeeExhibit15.)Well-regulatedmarketscanhelpsolvetheregion.Decidingwhethertoencouragelong-orshort-termwaterallocationpuzzleefficiently,whilesafeguardingtradesdependsonwhetherwaterscarcityischronicorsocialandecologicalusesofwater.Byincreasingsuppliesepisodic.Shouldthemarketsbeopentoeveryonefromtohigher-payingusers,utilitiescanusetheenlargedreve-farmerstomunicipalities,orshoulditbelimitedto,say,nuestreamtoinvestinsuppliesandinfrastructurethatlowerfarmersonly?Isthemaingoaltoreallocatewaterefficient-pricesforeveryoneelse.Thegoalistoestablishwaysforly,orisittodecreasedemandforwaterandencourageuserstotradeallocatedwaterpermanentlyortemporarily.38newsupplies?Dozensofcountriesinwater-scarceregionshavebeguntoToday,threemainbarrierslimitmarket-basedmecha-establishthesemarkets.First,governmentsissuewaternisms:hightransactioncostsduetolimiteddataonassetsrights,andthentheypermitreallocationoftheserightsandpricing;equityconcernsinsituationswheremaximiz-throughtrade.39Sensiblegovernmentpoliciescanensureingrevenuesqueezesenvironmentalorsocialgoals;andthaturbanandhigh-valueagriculturalusersthatpayinadequatemonitoringofavailabilityandconsumptiontop-dollardon’tsqueezeenvironmentalandequityinter-(especiallyindevelopingcountries).Policymakersmustestsandunderminewaterresilience.Leftunchecked,waterovercomethesebarriersbeforeencouragingwidespreadmarketscoulddescendintotime/spacewaterarbitrage,adoptionofmarket-basedmechanisms.Betterdatacollec-andthusintospeculatingonwater—apracticethatmanytionandinformationsharingplatformscanhelp,butgover-Westerncountriesviewasunethical.nanceandpoliticalconcernsmustbeaddressedaswell.40Exhibit15-Market-BasedMechanismstoAddressWaterScarcityTemporarysolutionstosolveepisodicscarcityPermanentsolutionstosolvechronicscarcityGroundwaterbankingtostorewaterforlateruseForestthinningtorestorehealthandincreasewatersupplyIncreaseOﬀ-streamstoragepondsandtankstoalignsupplyanddemandsupplyRotationalfallowingofagriculturallandforcompensationGroundwatercapandtradetoallocaterightsandallowDecreaseIncliningblockratepricingtoincentivizewaterconservationpurchasesdemandPumptaxtoincreasecostofpumpingandencouragereductionIrrigationeﬃciencytofundirrigationupgradestosecurewaterAll-inauctiontopermitbiddingforwaterrightsandcompensationforrightsGroundwatermitigationtooﬀsetimpactsofnewpumpingLeasingofexistinglandorwaterrightsPermanentacquisitionofexistinglandorwaterrightsWaterneutrality,oﬀsetting(corporate)wateruseRedistributesupplySources:TheNatureConservancy,“Market-basedmechanismsforsecuringenvironmentalwaterinCalifornia”(2017);Richteretal.,“Waterscarcityandfishimperilmentdrivenbybeefproduction,”NatureSustainability(2020);TheNatureConservancy,“Watershare:Usingwatermarketsandim-pactinvestmenttodrivesustainability”(2016).38.https://www.scienceforconservation.org/assets/downloads/Market-Based_Mechanisms_for_Env_Water_TNC_2017.pdf.39.https://www.nature.org/content/dam/tnc/nature/en/documents/WaterShareReport.pdf.40.https://iopscience.iop.org/article/10.1088/1748-9326/acb227/pdf.29NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEImproveWaterFinancingFrameworksHowcanwefillthegap?Toincreasewater-relatedinvest-ments,banks,companies,andinvestorsmustincorporateIntheprivatesector,businessasusualcreatesanunderes-waterintoinvestmentdecisions.Weproposethatcompa-timatedportfolioriskforinvestorsandanunderestimatedniesandgovernmentstakethefollowingactions:operationalriskforeconomies—allthemoresowiththeadventofclimatechange.AstheinvestmentbankJefferies•Improvethetransparencyandqualityofreportingfornoted,“Thegreatestnumberofcorporateproduct-makingwater-relatedrisksandopportunities.Financialinstitu-activitiesdependonsurfacewater,inadditiontoothertionscanlearnfromcarbonemissionsreporting,whichwater-relatedecosystemservices.”Freshwateraccessistookyearstodevelop.“irreplaceable.”41•SetupastrongdisclosureframeworkonthebasisofInarecentopenletter,majorinvestorsurgedgovernmentscommontaxonomiesandreportingmandates.Mod-to“committoambitious,domesticshort-termwatertar-elsincludetheEUCorporateSustainabilityReportinggets”andtoimplement“mandatorywaterdisclosureDirective(CSRD)/EUTaxonomy,ScienceBasedTargetsrequirements.”42VeryfewcompaniescurrentlydiscloseforNature(SBTN),andtheTaskforceonNature-relatedtheirwater-relatedrisks.Onlyabouthalfofferanywater-FinancialDisclosures(TNFD).relateddatathroughCDP,thoughthatrepresentsa16%increasefrom2021,suggestingincreasedcorporateinter-•Tracewater-relatedfinancingneeds,flows,andout-estinwater-relatedrisks.43TheCDPsaysthattheEUandcomes,andintervenestructurallyasneededwithtaxtheUKaretheonlytwoG20membersthathaveproposedincentives,subsidies,andothertools.Investorsshouldcomprehensivewaterdisclosureregimes.44disclosetheresultsoftheireffortssothatotherscanassessremaininggapsandengagewithcompaniesonSeveralinvestmentfundstargetwaterprojects,butmanypressingwater-relatedtopics.Tomaprisksgranularlyatfundslackthedatanecessarytotrackimprovementsinthecompanylevel,theycandrawontoolsandcapabil-availability,quality,andefficiency.AsonejournalistpointeditiessuchastheWWFWaterRiskFilter,theWRIAque-out,“Fromasustainablepointofview,itremainsdubiousduct,andClimateCentral.whethermanywaterfundsreallyaddresstheUNgoalofcleanwaterandsanitationforall.Atbest,theyaretamelyAsbanks,companies,andinvestmentfundssetobjectivesaddressingitforthedevelopedworld,bybuyingutilitiesandrefinetheirselectioncriteria,theycanhelpconservewithstablereturns.”45freshwater,reducedirtywaterdischarge,increaseaccesstopotablewater,maximizewaterefficiency,andminimizetheAfterrespondingtotheimmediaterisksthatbusinessasimpactsoffloods.Theycangobeyondtraditionalboundar-usualposestowatersupplies,communitiesmustadapttoiesbycollaboratingwithsocialinvestorsanddevelopmentfutureclimatechange.Morethanhalfofthe$330billioninbankstode-riskinvestments.Suchactionisespeciallyprojected2030adaptationfinancingiswater-related.46Thatimportantindevelopingcountries,wheremacroeconomic,addsupto$200billion,drivenbytheagricultureanddisas-political,andproject-specificpressuresincreaseinvest-termanagementsectors.Yetwecurrentlyseeonly$46mentrisk,butwhereinvestmentisevenmorecriticalthanbillioninclimateadaptationfinanceflows.47inthedevelopedworld.Blendedorsocialfinancingcanreducetheinitialriskontheseinvestments.41.Environmentalscience:Wateris‘mostcritical’naturalcapitalfactorforinvestors(February9,2023).42.https://cdn.cdp.net/cdp-production/comfy/cms/files/files/000/007/160/original/Water_Investor_Letter_March_23.pdf.43.https://cdn.cdp.net/cdp-production/cms/reports/documents/000/006/925/original/CDP_Water_Global_Report_2022_Web.pdf?1679328280.44.https://cdn.cdp.net/cdp-production/comfy/cms/files/files/000/007/716/original/Water_Infographic_2023.pdf.45.FT:“Waterfundsdilutetheenvironmentalmessage”(February17,2023).46.https://www.rockefellerfoundation.org/wp-content/uploads/2022/11/Climate-Finance-Funding-Flows-and-Opportunities-What-Gets-Measured-Gets-Financed-Report-Final.pdf.47.https://unfccc.int/sites/default/files/resource/cp2022_08_add1_cma2022_07_add.1.pdf.BOSTONCONSULTINGGROUPSUB-BRAND30DevelopaLocalFoundationofGovernanceandRegulatoryTogetstarted,municipalitiesandotherlocalgovernmentalEnforcementorganizationsneedtoidentifyexistingresources,risks,opportunities,andstakeholdersthatarespecifictotheirStrong,impartial,andcollaborativelocalgovernanceisbasin,determinetherequiredcapabilities,andstartdevel-essentialtomanagingthepotentiallyconflictinginterestsopingthem.Localgovernmentstypicallyneedtechnicalofthemanywaterusersinabasin,oftenacrossjurisdic-expertisetomanageandsupporton-the-groundprojectstions.Upstreamactivitiescangreatlyaffectdownstreamandtoensureregularmaintenanceafteraprojectbeginssuppliesandquality,socollectiveaction,agreements,andoperating.Governmentsshouldalsoinvestincapabilitiespartnershipsarecrucial.Thegoalistoachievebothequityfornext-generationwatermanagement,includingtheandefficiency.following:Sofar,governancehasfallenshortinseveralways.Itis•Granularfloodanddroughtriskmodelingoftenlackingintransparencyandenablinglegislation,anditisvulnerabletocorruption.Manyexistingarrangements•PotentialsubsidiesforNbSmappingandintegrationintohaveexcludednumerousstakeholders—notablywomenpublicprocurementprocessesandindigenousgroups—fromthedecision-makingpro-cess.Manymunicipalitiesandwateragencieslackthe•Digitalplatformsformonitoringleaksinexistingexpertiseandbudgettooverseewatersystemseffectively.infrastructureWithoutfullparticipationandinformation,governancewon’tpossessthelegitimacyandcapacitytoenforceitsWithbettermonitoringanddata,decisionmakerscandecisions.movetowardevidence-basedwatermanagement,ratherthansimplyfavoringtheloudestorbest-connectedinterestTostrengthenlocalandregionalgovernanceinregionsgroups.Thatincludesevaluatingcurrentresourcesinwithhighwaterrisk,collectiveactioniscritical.Onlyfromaaccordancewithcriteriasuchas“bluedrop”(quantityperstartingpointofbroad-basedlegitimacycangovernmentsnaturalstreamflowofwater)and“greendrop”(qualitysuccessfullyoverseelocalresourcesatthecatchmentorfromwastewaterprocessing).basinlevel.Collaborative,inclusivegovernancebodiesshouldincludepreviouslyexcludedstakeholders,especiallyTheglobalwatercrisishascreptupgradually,aspeoplemembersofsmallcommunitiesandthosewhodependonaroundtheworldbuilteconomiesandsocietiesthattheecosystemasawhole.Industry-wideandcross-industrytookaccesstofreshwaterforgranted.Withthoughtful,waterinitiativessuchastheSustainableApparelCoalition,informedinvestmentsandpolicyshiftsthatencouragetheBeverageIndustryEnvironmentalRoundtable,thebuildingin—ratherthanbuildingover—naturalecosystemInternationalCouncilonMining&Metals,andtheStrate-services,wecanbetterprepareourselvesforexpectedgicWaterPartnershipNetworkprovidereadyplatformstowaterconstraintsinmuchoftheworld.amplifyefforts.Aboveall,weneedtoworkcollaborativelytoaddressthecomplexityofthewatercrisis.Governments,financialinstitutions,nonprofitorganizations,andcorporationsmustworktogetherinsupportive,inclusiveconditionstobuildresilientwatersystemsthatdeliveronwaterasahumanright,facilitateeconomicgrowth,andovercomethechallengesofclimatechange.31NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEWaterissimultaneouslythemostpreciousresourceonEarthandthemostundervaluedoneAbouttheAuthorsTorstenKurthisamanagingdirectorandseniorpartnerDeanMuruvenisanassociatedirectorinthefirm’sintheBerlinofficeofBostonConsultingGroup.YoumayAmsterdamoffice.Youmaycontacthimbyemailatcontacthimbyemailatkurth.torsten@bcg.com.muruven.dean@bcg.com.JesterKoldijkisaconsultantinBCG’sAmsterdamoffice.JohnStauntonSykesisaconsultantinthefirm’sLondonYoumaycontacthimbyemailatkoldijk.jester@bcg.com.office.Youmaycontacthimbyemailatstauntonsykes.john@bcg.com.WithmajorcontributionsfromStuartOrrandRichardLeeoftheWWFFreshwaterPracticeCoordinationTeamandfromtheWWFWaterRiskFilterteam.AdamWlostowskiisaseniordatascientistinthefirm’sBostonoffice.Youmaycontacthimbyemailatwlostowski.adam@bcg.com.ForFurtherContactAcknowledgmentsIfyouwouldliketodiscussthisreport,pleasecontacttheTheauthorsthankDavidPotere,SophieDejonckheere,authors.FleurdeWit,LouiseBerrebi,DustinGarrick,JayBhagwan,andtheWorldFoodProgramRegionalBureauNairobifortheirassistanceindevelopingthisreport.33NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEBostonConsultingGroupWorldWideFundforNatureBostonConsultingGrouppartnerswithleadersinbusinessWWFisanindependentconservationorganization,withoverandsocietytotackletheirmostimportantchallengesand30millionsupportersandaglobalnetworkactiveinovercapturetheirgreatestopportunities.BCGwasthepioneer100countries.WWF’smissionistostopthedegradationinbusinessstrategywhenitwasfoundedin1963.Today,oftheEarth’snaturalenvironmentandtobuildafutureinweworkcloselywithclientstoembraceatransformationalwhichhumansliveinharmonywithnature,byconservingapproachaimedatbenefitingallstakeholders—theworld’sbiologicaldiversity,ensuringthattheuseofempoweringorganizationstogrow,buildsustainablerenewablenaturalresourcesissustainable,andpromotingcompetitiveadvantage,anddrivepositivesocietalimpact.thereductionofpollutionandwastefulconsumption.Visitwww.panda.org/news.Ourdiverse,globalteamsbringdeepindustryandfunctionalexpertiseandarangeofperspectivesthatquestionthestatusquoandsparkchange.BCGdeliverssolutionsthroughleading-edgemanagementconsulting,technologyanddesign,andcorporateanddigitalventures.Weworkinauniquelycollaborativemodelacrossthefirmandthroughoutalllevelsoftheclientorganization,fueledbythegoalofhelpingourclientsthriveandenablingthemtomaketheworldabetterplace.AboutWWFandBCGSinceWWFandBCGstartedtheirglobalpartnershipin2012,wehaveembarkedtogetheronnumerousprojects—globally,regionally,andlocally—insupportofWWF’smissiontostopthedegradationofourplanet’snaturalenvironmentandbuildafutureinwhichhumansliveinharmonywithnature.Forinformationorpermissiontoreprint,pleasecontactBCGatpermissions@bcg.com.TofindthelatestBCGcontentandregistertoreceivee-alertsonthistopicorothers,pleasevisitbcg.com.FollowBostonConsultingGrouponFacebookandX(formerlyknownasTwitter).©BostonConsultingGroup2023.Allrightsreserved.9/23NAVIGATINGTHEWATERS:STRATEGICSOLUTIONSFORWATERRESILIENCEBOSTONCONSULTINGGROUP+WORLDWIDEFUNDFORNATURE

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