Climate change capsizes your water supply

by Jon Davis

You know water’s importance for agricultural applications but increasing seasons of drought and flood are squeezing many more sectors in today’s interconnected supply chains. Water issues limit industrial and urban expansion, population growth, worker safety, manufacturing processes, mining, and more.

Only 0.5 percent of our global water on Earth is usable and available as freshwater, and accessible fresh water has dropped by one centimeter each year in the past 20 years, according to the United Nations.

Waves of problems in 2021

Fact: All industrial processes require water. Without water, production and global supply chains will dry up. And the more global water stress increases, the more your operations will feel the impact.

For example, low rainfall last year in Brazil lead to one of the worst water shortages in its history. As the world’s largest producer of coffee beans, disruptions hurt coffee production and global cargo transport for manufacturers while price increases and shortages hit consumers.

Low rainfall combined with rising temperatures leads to drought, and 2021 ranked among the seven warmest years on record. Severe drought reached Taiwan in April 2021 and triggered water rationing measures, causing revenue loss for farmers and forcing semiconductor makers to bring water in by truck to maintain production.

Waterproofing for 2022

Record low water levels of the past few years will continue to threaten key waterways such as the Parana River in South America and the Rhine River in Europe, affecting the inbound and outbound transportation of raw materials and finished goods. These critically low levels in waterways typically force shipping lines to impose low-water surcharges on shipments, which increases costs for river-dependent industries such as chemical, metallurgy, and energy.

With water-related impacts multiplying for many manufacturers across several industries, we also foresee more stringent government regulations related to water consumption and conservation. Measures like installing water-saving technology or mandated water resource management will become commonplace for companies aiming to stay resilient.

While your operations might not feel the weight of flooding or the pinch of drought yet, it may be headed for your second and third tier suppliers. Companies must maintain ongoing and deep visibility down the supply chain to spot water issues before they become full-scale problems.

As global water instability heightens, water risk management strategies will be critical for maintaining a resilient supply chain.

Download our Annual Risk Report to discover more about water risks and other critical disruptors in the coming year

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