Figure 12. General value chain of the chemical sector and associated water intensity and pollution. Raw materials Processing Final products Distribution Components in other value chains Sales Animal and vegetative Materials Minerals Mining and extraction Basic chemical processes Petrochemicals Industrial gases Synthetic dyes, pigments and adhesives Other organic and inorganic chemicals Soaps, detergents, oils, perfumes Chemical product wholesale Semiconductors Automotive Construction Pharmaceuticals Other chemical manufacturing in textile or metal industry (electroplating) Final product sales to consumers Plastics Pesticdes and fertilisers Water Intensity Consumption Withdrawls 90% 85% 6% 3% 0% 0% 2% 9% 2% 2% 1% 0% Water Pollution Ecotoxicity Acidification Eutrophication 93% 31% 96% 1% 35% 1% 0% 0% 0% 3% 32% 3% 2% 1% 0% 0% 0% 0% 46
Risks that can be influenced by a company Risks that can be influenced by basin stakeholders Physical risk Regulatory risk Reputational risk »» Disruptions or declines »» Stricter regulation and »» Reputational risk is in water supply limit increased enforcement particularly high as a industrial use for production, by governments may result of accidents, spills, material processing, increase cost for fresh- or product impacts cleaning, and especially water and wastewater on water resources cooling, which demands treatment and discharge and environment (e.g. the most water - Lawmakers may force Union Carbide factory - As the industry’s companies to use explosion in 1984 in manufacturing footprint innovative production Bhopal, India J ) expands to more water-stressed technologies to reduce »» Governments, com- regions of impact on water munities, NGOs and the world including the - Impact of potential companies looking at Middle East, India, and price increases is their own supply chain China, water scarcity significant, considering footprint are increasingly will become a greater the required volumes concerned with the high issue »» Companies must amount of chemical - Highly polluted water discharge and potential may require on-site negative impacts on water purification for water resources and operations surrounding ecosystems »» Freshwater availability (quantity) under pressure due to increasing demand from other basin users - As the chemicals industry shifts to areas facing severe physical and economic water scarcity, companies competing with local communities could lose their license to operate »» Other basin users may pollute freshwater sources (quality) »» Increasing air and water temperatures imply more water needed for cooling and operation, while evaporation of water sources is increasing comply with numerous international, regional, and national standards - The EU’s Water Framework Directive is driving the phase out of 33 priority chemicals with the goal of improving water quality in key river basins. The EU legislation, REACH, places greater responsibility on industry to manage the risks to the environment and health »» Large multinationals often easy targets for (local) governments - Local companies often favoured over large multinationals for e.g. taxes and regulation »» No or limited regulation or no or limited enforcement by local governments can impact water quantity and quality »» If operating in a multi-national basin, differences in regulations and enforcement per country can have greater impact on water quantity and quality downstream »» A company can lose its license to operate or incur higher costs because of changes in water rights, pricing, and wastewater treatment requirements »» Conflicts with local communities over access to water threaten license to operate and damage to brand image »» Waste discharge on water quality, with consequences for downstream users and aquatic ecosystems »» In case of local water scarcity or wastewater pollution in the basin of operation, reputation of especially large multinationals is vulnerable in local communities »» End user (consumer) pressure not to buy products in troubled basins 147, 148 Table 11. A general overview of water-related risks for the chemical sector J Dow Chemicals, which acquired UC, was ordered by the state of Maharashstra in 2009 to relocate a proposed research THE IMPORTED RISK Germany’s Water Risks in Times of Globalisation | 47
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