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Water Scarcity Becomes Strategic Risk for Businesses

Global water crisis impacts on corporations and management strategies

Sloan Management Review2 min

1Global Water Crisis Deepens

While 70% of Earth's surface is covered by water, only 0.5% is readily usable. In 2025, 35.8% of the U.S. experienced drought conditions, with 30% of global land area affected by arid conditions. Climate change, population growth and industrial usage are threatening water resources. Regulations like France's 2026 PFAS ban are tightening water quality standards.

2Industry Water Dependencies

Food and beverage industry accounts for 20% of global water withdrawals. Textile production is responsible for 20% of industrial water pollution. AI data centers consume massive amounts for cooling, while green hydrogen production uses water as primary feedstock. Mining operations also pressure water resources. Even small businesses like car washes and restaurants face water risks.

3Corporate Water Management Gaps

Many companies view water as operational cost rather than strategic factor. Procurement focuses on cost reduction while PR handles regulations. However, supply chain water dependencies are often overlooked. Agricultural sector accounts for 70% of freshwater withdrawals, making dependent companies particularly vulnerable.

4New KPIs for Water Management

Companies are developing new performance indicators for water efficiency. Metrics like total withdrawal, recycling rates, wastewater treatment improvements and watershed impact are being monitored. Both inflow and outflow must be accounted for. Since watersheds are local, regional strategies are becoming crucial over standardized solutions.

5Supply Chain Water Risks

An agri-food executive asks, 'If you're not monitoring water in your supply chain, what are you doing?' Drought and contamination often emerge in supply chains. For companies with extensive networks, water scarcity creates localized risks. A company with three sites in U.S. Northeast may need different water strategies for each region.

6Regulatory Pressure Mounts

Regulations like France's PFAS ban target chemicals affecting water supplies for 12.5 million Europeans. Companies face penalties for environmental discharge. Issues like farm runoff, pharmaceutical residues and nanoparticles create operational challenges. As water quality standards tighten, compliance costs are rising.

7Water-Saving Technologies

Companies are investing in new technologies to improve efficiency. Closed-loop systems, greywater recycling and advanced treatment are gaining traction. Some redesign production processes to reduce water footprint. For instance, textile industry is developing dyeing technologies that cut water use by up to 50%. These investments yield long-term cost savings.

8Needs to Become Strategic Priority

Water is no longer just operational cost but strategic risk factor. Executives must integrate water management into top-level decisions due to impacts on health, economic development and social stability. Water scarcity will determine competitive advantage. Companies should map supply chain risks, engage in local watershed management and plan for circular water economy transition.

Original article: Sloan Management Review — Su Kıtlığı Şirketler İçin Stratejik Risk Haline Geliyor