The private sector is the main water consumer worldwide. Because of globalised supply chains, local water user problems become risks for multinational global supply chains and investments.
1 Executive Summary In comparison with other countries, water resources in Germany are sufficiently available and well governed. However, being the world’s third biggest import nation Germany is depending on goods and resources from abroad. Most of these goods inherit so-called water risks, since they originate in locations with water scarcity, deteriorating water quality, weak governance and regulatory challenges, poor infrastructure, vulnerable communities, and fragile ecosystems. Water risks can be defined in three categories – physical, regulatory, and reputational – and are embedded in a company’s direct operations (company-related) and the location of production (river basin-related). Water is therefore not an issue of the future; rather, it is hitting the bottom line of companies today – and water risk situations around the globe are increasing. Rising populations, changing consumption patterns, and climate change will directly affect water availability and quality, which puts additional pressures onto politics, companies and the society. Water is not an issue of the future; rather, it is hitting the bottom line of companies today. Key findings Based on a combination of their high water dependence and exposure to water risk, four sectors with direct water risks (agriculture, chemical, textiles & apparel, and extractives) and two sectors with indirect water risks (financial services and retail) were selected and analysed. The water risks for the retail and financial services sectors are mostly indirect since they are mostly connected to suppliers and investments. Some examples of countries related to German imports and with high water risk in at least one economic sector are: »» Textiles & apparel – China, Bangladesh and India »» Extractives – Russia, Libya, South Africa »» Agriculture – Ethiopia, Indonesia, Argentina »» Chemicals – China, India, Morocco Though each sector is exposed to water risks, the stage and intensity at which they arise in the value chain differs. For example, cotton production is the most water-intense segment in the textiles and apparel sector’s value chain and is also the segment most vulnerable to climate-induced physical water risks. On the other hand, the chemical industry faces the greatest risk (in countries with lax regulation) during the processing stage due to pollution or connected to the sourcing of raw materials. Call to action To reduce water related risks, WWF developed the Water Stewardship concept. This step-by-step approach enables companies to create internal water awareness, analyse their water risks and reduce these through internal and external measures. A company can rarely reduce all of the water risks it shares with water users in the same basin or other companies along its supply chain on their own. Water stewardship activities aim to drive companies towards collective action with other water users, public authorities or civil societies in a given river basin. The root cause of water risk is often not the availability or use of water, but governance. Water stewardship is an opportunity for companies to contribute to the responsible and sustainable management of freshwater resources in a river basin. THE IMPORTED RISK Germany’s Water Risks in Times of Globalisation | 5
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