Importance of Water Conservation in Agriculture Now and Into The Future
Understanding the importance of water conservation in agriculture is pivotal to guiding wise investment.
“When the well is dry, we know the worth of water.”
– Benjamin Franklin, Poor Richard’s Almanack for 1733
Water is the foundation of both life and livelihoods. It is crucial to any sustainable development practices. Despite the looming threat that it poses, many often overlook water insecurity and the potential risk that comes with it. Water stress, and its impact on water security, occurs when demand exceeds the available supply. Understanding water risk and the importance of water conservation in agriculture is fundamental to ensuring a balance of sustainability and profitability.
Various environmental factors will impact the world’s water supply as we currently know it, from smaller climatological shifts to macro-scale weather events. This impact on global supplies may lead to disruptions in availability and directly impact production across a vast array of industries. Climate change is set to disrupt rainfall, raise sea-levels, increase fire probability, and affect runoff patterns, which will dramatically alter accessibility to freshwater globally. Additionally, factors such as pollution, wetland development, and other forms of ecological disruption will accelerate these changes, exacerbating water security risks rapidly.
Without proper attention and intervention, water insecurity will have unprecedented societal and economic impacts. New approaches to the way we manage water consumption and mitigate climate are vital to help reduce the impact of these changes and associated disruptions. Still, a lack of concerted attention by policy-makers and the general public alike are actively delaying necessary action.
Water Security and Risk
Water insecurity represents a potentially catastrophic risk to both land production and land value itself. Understanding these risks and their potential impact is essential for ensuring strong portfolio health, and may help guide better agricultural investment and production practices in the future. There are several key data points and figures that help to illustrate the scope of the potential risk caused by water insecurity.
- According to CDP Worldwide’s 2019 Global Water Report, the combined business value at risk is projected to be as much as $425 billion. These figures may even be underreported due to a lack of disclosure by a majority of respondents.
In their research, nearly 45% of respondent companies have reported exposure to substantive risks caused by water insecurity. These risks threaten core production, supply chains, financial stability, and their ability to grow. The key drivers of water risk include increased water stress and scarcity, as well as flooding, drought, and declining water quality, among others.
- The World Resources Institute’s Aqueduct Project aims to highlight the problems that come with water security, stress, scarcity, and risk. According to their research, nearly 56% of global food production currently occurs in areas experiencing high or extreme water stress.
The project also highlights several additional water risks currently impacting production globally. Factors such as increased competition for water are leading to extreme rationing and water-rate increases, such as price hikes as high as 300% for industrial users. Water shortages will disrupt production, impacting opportunity for growth across a vast array of industries. Water risks are set to change revenues and earnings in less-than-predictable ways, leading to declines in production and profitability that may not be projected in revenue growth forecasts.
- Even with heavy usage and imminent risk to freshwater supplies, demand has risen at a rate of 1% annually over the last several decades, according to data from the United Nations 2020 World Water Development Report.
Industrial and commercial activity remains the primary driving force of freshwater usage and consumption globally. According to data from CDP’s 2018 Global Water Report, a handful of key industries account for nearly 70% of global usage, with residential and office usage making up the remainder. This increase in demand, paired with disruptions to freshwater supplies, will likely disrupt global economic activity in unexpected ways. It is for this reason that we feel the importance of water conservation in agriculture is increasing dramatically.
While many agricultural business stakeholders are becoming increasingly aware of the water risks in their portfolios, there is still work to be done in improving risk analysis and mitigation strategies. Regulatory bodies and the industry as a whole is pushing for greater disclosure of water and other agricultural supply chain risks across the board. Proper analysis and mitigation strategies are vital to water security, ensuring productivity, profitability, and sustainability.
Solutions For The Future
Investor engagement is central to improving risk disclosure, which helps guide investor decision-making and their ability to assess the strength of their portfolios effectively. At AQUAOSO, we offer a suite of tools through our advanced water security platform to help identify and monitor your water risk, helping guide wise decisions. Unfortunately for investors, water insecurity is going to be an extensive, evolving global development over the coming years.
At AQUAOSO, we offer a suite of tools through our advanced water security platform that helps identify and monitor water risk, helping guide wise investment decisions. Our advanced offerings allow you to acquire land with a clear risk understanding, improve risk decisions, enhance relationships, and easily monitor your portfolio all from a single, easy-to-use dashboard.
Contact us today for a consultation to see how AQUAOSO can benefit you, your company, and your portfolio. You can also sign up for a free demo of our advanced water security platform, so you can test our robust suite of water and land research tools for yourself. See why 20% of California’s Agricultural Lenders proudly trust AQUAOSO to guide their lending decisions and let our advanced analytics inform your investing decisions.