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The Water Margin

How strategic management of water can grow business value. With two-thirds of the world to experience water shortages by 2025, a new report warns businesses: sink or swim

21st November 2008
London – A new report from global management consultancy Arthur D Little warns businesses that a reactive response regarding water management can damage business performance. The report provides several illustrations of how water affects many businesses' financial performance. These include Électricité de France (EDF), which was hit by losses of approximately €300m when it had to close a quarter of its 58 plants due to water shortages and Anheuser-Busch, who suffered increased production costs due to water shortages in the supply chain.

According to the new report, it is imperative for companies to assess their water footprint, broken down by product/service, by value chain position and by geographic region. A proactive approach to water management then assesses value drivers which include water security, regulation and expectations of stakeholders. These value drivers can be used to dictate the optimum water footprint of each asset by calculating potential immediate cost savings, future cost savings and additional, often intangible benefits that result from improving water efficiency.

This analysis can be incorporated into a comprehensive global water management strategy that is optimised at the local level while maintaining minimum standards – companies that apply a global “one size fits all” policy across all operations in all regions are exposed to significant risk. Companies can then develop a response that adds value to their business models whilst simultaneously protecting water as a local resource.

“Dealing with the challenges of water management will be a top priority for businesses and global policy makers over the next 10 to 20 years. However, it will only be possible to make meaningful changes through a whole-business approach starting at the board level” says Melissa Barrett, a manager in Arthur D. Little's Sustainability & Risk practice. “Those who assess their portfolio risks and potential opportunities now to choose and prioritize actions will get first mover advantage in what is rapidly emerging as a dominant global issue.”

With media already branding it “the next carbon”, water management is increasingly being acknowledged as a key focus area for business. However, the report highlights that water and carbon have quite different characteristics and impacts. Addressing a company's water and carbon issues requires a balancing act, recognizing the differences but also the synergies that can be derived from addressing both in a strategic, coordinated way.

The Water Margin is now available for download at www.adl.com/watermargin

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