"How does a company respect local communities' right to water when operating production facilities that require high levels of water consumption and where the community suffers from an inadequate water supply by relevant government authorities, but where the business is welcome as a source of jobs and revenue?"

Access to water is one of the major challenges the world is facing today. The demand for water will continue to increase as the global population grows and exerts increasing pressure on supplies. This distorted relationship between demand for water and available resources is known as water scarcity. In addition to growing water demand, on-going water pollution is likely to exacerbate water stress – which is a symptomatic consequence of scarcity – by reducing the amount of potable water. As a result of these forecasted developments, access to water over time will become unreliable in many places, leading to water insecurity.1 Indeed, water security was identified by the World Economic Forum (WEF) in January 2011 as one of the key risks that the world may be facing over the next 10 years.2

Some countries may be more greatly affected by the problem of water scarcity than others. Drought prone countries with insufficient water resources, such as those in the Middle East and North Africa will present the greatest challenge. In turn, the balancing of competing demands for water may negatively impact on food and energy security, poverty reduction, and biodiversity, and may further fuel social conflicts. Other countries, such as Russia, may not face such large challenges, having sufficient water resources and expecting an 18% contraction in its population – from 142 million to 116 million – by 2050.3

However, even where countries may have sufficient internal water supplies, safe water for personal and domestic use may not be accessible to everyone. During a July 2010 meeting of the UN General Assembly, it was acknowledged that some 884 million people lacked access to safe drinking water and more than 2.6 billion to basic sanitation. Furthermore, it was observed that 1.5 million children under five years old die each year because of water- and sanitation-borne diseases. This alarming situation has led the UN General Assembly to recognise access to clean water and sanitation as a human right.4

Water scarcity will have implications for all business activities. However, heavily water-dependent businesses will face the greatest challenge. Examples of companies that may be affected the most include gold-mining companies that use high pressure jets of water to dislodge rock material or move sediment, the producers of biofuel crops and sugar-dependant soft drink companies, or other agribusinesses harvesting ‘thirsty crops', such as rice and wheat. Opting for alternatives to such business activities may sometimes be counterproductive, leading to other negative impacts on human rights.

Companies may come under pressure to reduce water use and waste and increase efficiency to win the ‘social licence' to operate where local communities already suffer from inadequate access to safe water for personal and domestic use, as well as for use in agriculture. This may be an issue despite clear benefits that business activities may offer to countries' economies in terms of new jobs created and revenue generated.

Environmental and Social Impact Assessments (ESIA) are a key tool for planning large-scale projects, and are intended to identify the impact a proposed project may have on the environment of a project hosting state and its population, especially the communities in the project's locality. As such, it is a widely recognised and utilised tool. Furthermore, it is a legal requirement in most countries. When the project hosting country does not legally impose such a requirement, companies incorporated in OECD countries are nevertheless required to conduct an ESIA.5 In addition, the ESIA is one of the conditions that must be met in order for companies to be eligible to receive financial support from the International Finance Corporation (IFC) and the Equator Principles Banks.

In most cases, an ESIA first involves gathering information on the environmental and social consequences of proposed activities and their alternatives. Based on anticipated project impacts, the ESIA provides measures to avoid, minimise or mitigate these impacts. It also provides a mechanism that ensures the participation of parties that may be affected by the proposed activities in the decision-making process, often through public meetings or consultation.

Despite in general being a very useful technique – including for addressing the impact of proposed business activities on water resources – the ESIA can sometimes become a ‘box-ticking' exercise, whereby the compliance of proposed project activities with certain rules and regulations is checked, but there is no meaningful involvement of relevant stakeholders.6 This is especially the case in countries that do not have strong enforcement of environmental laws. In addition, not all new project activities are subject to this requirement, but only those that are likely to have a significant impact owing to their nature, size or location. This can – and in fact does – create uncertainty as to when such analysis is required, an issue that is typically resolved through local government consultation.

Developing countries are not unique in facing water stress and restricted access to water. However, the lack of strong legal frameworks in developing countries translates into a higher risk in terms of human rights violations and abuses by state and non-state actors. As a result, the enforcement of equitable access to and sharing of available water resources, as well as provisions addressing water pollution, may be ineffective in developing countries. Weak critical infrastructures and state institutions for the delivery of water services are also major obstacles in these countries.

Considering this, where a state does not fulfil its duties to provide access to a sufficient, safe, physically accessible and affordable amount of water to its population, the positive role that business may play in this area will come to the fore. In such cases, the dilemma for a responsible company is how to ensure that it can successfully continue its business operations in water-scarce areas, whilst respecting the right of local communities to have access to water.

Although all businesses have responsibilities regarding responsible water use, the expectations of companies enabling access to water, such as manufacturers of drinking water or wastewater treatment equipment and utilities companies may be different. Therefore, the companies in these industries are not covered by this dilemma.

Real world examples

Coca-Cola's production of soft drinks negatively affecting the right to water in India

The production of beverages is generally highly dependent on water. The production of sweetened drinks has a greater water impact as a result of the amount of water required to grow sugar. In addition, water requirements for growing sugar in one country are not the same as in other countries due to geography and climate, as will be shown below. Therefore, the virtual water value of a product (i.e. amount of water used in different stages of the production chain) depends on the source of feedstock.

The production of Coca-Cola's soft drinks is not an exception. It has been reported that Coca-Cola uses about 3.75 litres of water to produce one litre of soft drink.7 However, the water intensity of growing sugar, an important ingredient in Coca-Cola's drinks, is significant. Thus, if growing sugar is taken into account, about 180 litres of water are required to produce the amount of sugar needed for one litre of a Coca-Cola soft drink.8

Insufficient water for business operations risks halting production, thereby threatening job security and revenue generation. Drawing on the already scarce water resources may furthermore leave impoverished local communities with no access to clean, safe and affordable water for their personal, domestic and agricultural use.9

Discontent with the operations of Coca-Cola first came to the fore in 2003, when local communities filed a charge against the company for causing severe drought conditions within a radius of 3km from their plant in Plachimada village, Kerala, India. The Coca-Cola plant in the area drew large amounts of groundwater on a daily basis, causing water scarcity that was exacerbated by poor rains in that same year. As a result, in 2004, the Kerala High Court issued an order prohibiting the Coca-Cola plant in Plachimada village from drawing underground water.10 The plant was subsequently shut down.

Campaigns against the operations of the Coca-Cola bottling plants elsewhere in India have persisted since then. A campaign led by the local community in Mehdiganj, Varanasi, is the latest in a series of community-led campaigns across India that accused the company of exacerbating the water crisis in the area. Water shortages for the local communities are most acute in the summer months. Given that demand for Coca-Cola soft drinks and, therefore, production reach their peaks in the same period, the already existing water scarcity is further exacerbated by the soft drink production, including the use of water for bottle processing.11

In response to the continuing campaigns, Coca-Cola has announced ambitious water conservation measures. In 2009, it also reported revising its Standard for Source Water Protection, which requires mapping water sources, assessing vulnerability of the source, and having management plans in place to protect water sources. The company expects all its plants to adopt a Source Water Protection plan by 2013.12 However, it is not clear whether the company has progressed in this direction. In addition, the company's commitment to respect the right of local communities to water has been questioned by critics, such as the Polaris Institute as lacking in substance and being a green-washing technique.13

This case demonstrates the challenge a highly water dependent business may face if it operates in arid zones where the government fails to impose limits on water use by businesses when granting an operational licence. Weak enforcement of provisions of local communities' right to water– once the business is up and running – will further add to the challenges faced by companies. In such cases, good business practice entails securing access to water for local people who depended on that water before the business started operating in the country.

Production of soft drinks and bottled water by PepsiCo exacerbating water scarcity in India

PepsiCo faced a similar challenge to Coca-Cola in India. In 2000, PepsiCo acquired an operational licence to run a plant in the arid Palakkad district of Kerala. The company depends solely on groundwater for its soft drink and bottled water production. It requires around two litres of groundwater to produce one litre of the soft drink. In response to complaints, the local village council cancelled the company's licence to operate in 2003. It cited as grounds for this decision the fact that over-exploitation of groundwater for the production of soft drinks by the company exacerbated water scarcity in the locality, leaving 45,000 people facing severe water shortage.14

Although the Kerala High Court reversed the decision of the local council, and later in 2008 the Supreme Court of India upheld the decision of the Kerala High Court, the government argued against PepsiCo in the Supreme Court.15 In March 2010, a committee of the Kerala Assembly recommended imposing limits on the amount of water that can be extracted by the PepsiCo plant at Pudussery in the Palakkad district. The committee suggested an almost three-fold decrease, from 7,000 litres a day to 2,340 litres. However, the committee did not recommend shutting the plant down in view of the number of jobs that would be lost as a result of such a decision.16

In June 2008, NorthStar Asset Management, Inc. and the Unitarian Universalist Service Committee (UUSC), an international human rights organisation based in the US, issued a resolution urging PepsiCo to recognise the human right to water, by adopting and following a policy respecting the right. The resolution received a strong (considering the difficulty of securing support for such resolutions among shareholders) 7% of the vote of shareholders.17 In response to the resolution, PepsiCo agreed to implement the relevant policy and asked for suggestions on the type of policy it should be implementing.18

In 2009, NorthStar Asset Management withdrew the resolution addressing PepsiCo further to the company adopting the suggested policy. PepsiCo also publicised its support of the human right to water.19

Thus, the challenge faced by PepsiCo – in addition to those faced by Coca-Cola – is how to ensure that local communities are provided with adequate access to water, where the company lacked the planning and foresight required to anticipate this challenge.

BHP mining activities threaten the livelihoods of the indigenous population in Chile

Northern Chile is one of the world's most important mining regions. However, water scarcity results in competing demands for water by businesses, local communities and, generally, the needs of nature (e.g. wetlands). In 2005, the operations of Cerro Colorado, a subsidiary of the mining company BHP Billiton, were the subject of a complaint filed by the Aymara community of Cancosa against the excessive use of groundwater, which has led to the draining of wetlands and water wells, and has negatively affected agriculture and grazing that supported local communities.20

Since 1994, the company has been extracting between 90 and 12521 litres of water per second from a protected wetland in order to support its mining activities. This has resulted in the draining of almost the entirety of the Pampa Lagunilla section of the Andean wetland. In turn, the water crisis drove indigenous communities away to urban areas in search of unskilled work and education for their children.22

The problem of water scarcity generated by the Cerro Colorado mining project stemmed from the legal framework of Chile, which recognises water as a privately traded commodity. A relatively unfettered market approach, promoted by the 1981 Water Code, allows the government to grant generous rights to large amounts of water to private companies – often free of charge – even where such excessive extraction of water is not sustainable.23

In addition, the Chilean government has privatised its entire water and wastewater sector, which is now controlled by a handful of companies, such as Suez, and foreign investment consortia, such as the Ontario Teachers' Pension Plan. As a result, companies can also buy and sell water in the market with no impediments.24

Indigenous peoples, environmentalists, church leaders and leftist politicians have long tried to facilitate a change in the legal framework by forming a Frente Amplio para la Nacionalizacion del Agua (FANA) (Broad Front for the Nationalisation of Water) movement. The movement has been in favour of strengthening the state's powers to expropriate water rights when the public interest so demands. However, business actors, such as the National Society of Agriculture (SNA) and the Mining Council opposed these changes, emphasising that expropriation could proceed only subject to the payment of compensation for the property rights to water.25

Furthermore, although Law No.19.145 of 1992 prohibits the granting of water rights to individuals on aquifers that feed meadows and wetlands in the Arica, Parinacota, Tarapaca and Antofagasta regions of Chile – and therefore offers protection to the Pampa Lagunilla sector – the enforcement of this law is non-existent in practice.

In 2005, further to complaints by the indigenous population that the water level in the area had dropped due to the company pumping too much from the system that fed the wetland, Chile's Directorate General of Water found the project to be a problem and fined BHP Billiton approximately US$150,000 in damages.26

This case demonstrates the challenge a highly water dependent business may face when operating in countries where a loosely regulated water market system operates. On the one hand, the opportunity to buy or sell water freely in an open market offers security of water rights to companies. On the other, this results in a concentration of rights to water resources in the hands of those who can meet the associated costs. In the absence of social protection laws, this can lead to the marginalisation of indigenous and other local communities who cannot afford to pay for sufficient amounts of safe and clean water for their personal and agricultural use. In addition, in countries where the enforcement of environmental laws is poor, such laws will not serve as a restraint on unsustainable water use by companies.

Newmont's Conga gold mine in Peru suspended over water concerns

In August 2012, the President of Peru, Ollanta Humala, announced the suspension of Newmont Mining's Conga gold mine in the country's Cajamarca province. Construction of the mine began in July 2011 but was temporarily suspended in November of that year following violent protests from locals claiming the project would pollute the water used by local farmers. Further delay occurred after the government called for an independent review of the project's environmental impact assessment. Despite the assessment being approved, as well as his previous hard-line attitude towards protesters, Humala insisted on the mine's further suspension in August 2012.

In its 2011 annual report, Newmont stated that, having up until that point invested US$1bn in the project (and an additional US$440m in 2012), its top priority is now to develop local water reservoirs. The company has stated it will do this in a "safe, socially and environmentally responsible manner'. Pedro Martinez, Chairperson of Peru's National Mining Society, has claimed that, "[o]nce the reservoir construction has finished, the population will realise that there is more and better quality water [after which] the Conga project will finally be approved".

Officials have also stressed the importance of projects such as Conga to the country's economy and social infrastructure. The original cost estimation for the project was in the region of US$4.8bn, which equals 63% of Peru's total foreign direct investment in 2011, and, according to Martinez, the difficulties currently facing Newmont are likely to affect the appeal of the country to other investors. In addition, the executive director of the American Chamber of Commerce in Peru, Aldo Defilippi, has claimed that the provision by formal mining companies of well paid-jobs with insurance for local workers is in stark contrast to the exploitation and illegal activities carried out by illegal miners and loggers, drug traffickers and terrorists in the region.27

This case demonstrates the difficulties facing mining projects in rural areas of countries which still rely on a significant amount of GDP from agriculture (8% in the case on Peru, as of 201128). In such countries, where the livelihood of local farmers will be harmed by the exploitation of regional water sources by uneconomical mining firms, there exists the risk that the government will step in to protect the its citizens, in doing so demanding more in the way of corporate social responsibility from the companies involved.

• Companies such as SABMiller, Nestlé Waters, Bayer, Syngenta and Unilever have responsibly addressed the problem of securing local communities' access to water through methods such as assessing the water use in the supply chain, disseminating water education, developing less water intensive products, reducing water use and wastewater discharge in direct operations, and assisting suppliers in water management. For examples, see:
  Access to water case studies
• Please contribute your commentary or suggestions to our online discussion forum:
• Access to water online discussion forum

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All business activities depend on water to some degree. Some businesses require more water than others due to higher water requirements of a product or a process to produce an end-product (this concept is known as a ‘water footprint'). In addition, the production of the same product may have a different impact on water supplies depending on the country in which it is produced. The following examples illustrate the water footprint of a number of products and processes.

Coffee and tea: Water is used both for growing coffee beans and tea plants and for processing the crops into a final product. The Water Footprint Network (WFN) reported that it takes about 21,000 litres of water to produce 1kg of roasted coffee29 and 2,400 litres to produce 1kg of fresh tealeaves.30 The WFN has also estimated that approximately 120 billion m3 of water per year – or 2% of the global water use for crop production –is be required to sustain the existing worldwide coffee consumption.31

Thirty billion cubic metres of water per year is required to sustain the current worldwide tea consumption. Tea is commonly produced in rain-fed areas, which reduces the pressure of tea production on the world's water supplies. Only a small fraction of tea is produced in areas that require irrigation. The water footprint of growing coffee beans and tea leaves is significantly higher than that of post-harvest processing.32

While it may have a lower water requirement than growing beans and leaves, the use of water in processing is still significant. For instance, on average, the conventional processing of coffee involving the removal of the outer pulp and mucilage, and transportation of the waste products uses between 1,000-2,000 litres of water per 100 lbs of green coffee.33

Cotton: The impacts of cotton production on water are two-fold: production may lead to water depletion and adversely may also affect water quality. Both cotton cultivation and processing are water-intensive. It has been estimated that 1-6% of the world's total freshwater is withdrawn for cotton cultivation.34 The need for water is low during the early vegetative period of cotton cultivation (10% of total needs), and increases during the flowering period (50-60% of total needs). To produce 1kg of cotton lint, 10,000-17,000 litres of water are required.35

Irrigation supplements precipitation quantities, where the latter are not enough to water the crop. Fifty-three per cent of cotton fields worldwide are irrigated, which is partly explained by a higher yield capacity of irrigated cotton. The most commonly used irrigation system – known as ‘the flood-or-furrow' irrigation system –has the lowest (40% at most) water efficiency, despite being the easiest to install. More efficient irrigation systems, such as drip irrigation, are more expensive to install.36 The countries where irrigated cotton is grown (such as Uzbekistan, Egypt and Pakistan, as well as those in the Mediterranean and other regions with warm climates) lack sufficient quantities of freshwater, have dry climates or suffer from both conditions.37

The average volumes of water used at the processing stage (bleaching, dying and printing) and at the finishing stage are 360m3 and 136m3 per tonne of cotton textile, respectively.38

The impact of cotton production on water quality at the growing stage depends on the types and volumes of fertilizers used in the cultivation of cotton. Furthermore, many of the pesticides used in cotton production are washed away into either groundwater or surface water bodies.39

Biofuel production: Concerns about the negative contribution of fossil fuels to climate change, together with concerns related to energy security, have made biofuels an increasingly attractive alternative.40 Another advantage of biofuels relates to their potential to contribute to economic development in rural areas, especially in developing countries. However, the production of transport fuels from biomass (plant or animal matter) is water-intensive.

Water use is associated with two stages of biofuel production, which include feedstock production and biofuel refining. The main types of biofuel in use today are ethanol and biodiesel. Common ethanol feedstock include sugarcane and sugar beet, wheat, barley and corn (maize). Biodiesel can be manufactured from virgin or waste vegetable oils – commonly palm, rapeseed, soy(a) and sunflower oils.

On average, 1,200 litres of irrigation water is used to produce one litre of biofuel. The amount of water required for growing feedstock varies subject to the feedstock and where crops are grown. For instance, Europe accounts for the lowest use of irrigation water due to the use of rain-fed rapeseed as a biofuel feedstock. In contrast, in India, where yields and conversion efficiencies are lower and sugarcane is fully irrigated, the amount of irrigated water required to produce one litre of ethanol is 3,500 litres.41

Aside from water needed to grow feedstock, the refining process also involves the use of water, the amounts varying subject to the process for fuel production. Generally, water consumption for refining is similar to that for oil refining. For example, ethanol distillation requires 10 litres of water for every litre of ethanol produced.42 Studies also indicate that the cultivation of biofuel feedstock and the refining of the final product may strain water resources in other ways – by polluting water sources due to use of pesticides and fertilizers.43

According to Dr Jan Lundqvist, the director of the Scientific Committee of the International Water Institute of Stockholm, projections indicate that the volumes of water required to produce biofuels will double by 2050, similarly to water demand for food production. As a result, 20-30 million m3 of water will be required by 2050 to accommodate the needs of food and biofuel production. This constitutes more freshwater than is available worldwide.44 This situation is likely to exacerbate water stress and make competition for water resources fiercer.

Mining operations: Minerals and precious metals from the mining industry are important for many countries, including many developing nations. Gold, hydrocarbons and iron, for example, are used in a vast range of industries, from energy production to construction and from pharmaceuticals to the production of hi-tech goods.

However, mining operations are also highly dependent on water. High pressure jets of water are used to dislodge rock material or move sediment in order to extract valuable minerals. Water is also important for cooling and lubricating cutting and drilling equipment, processing ore, managing waste tailings and suppressing dust.45 As a result, the mining industry needs significant volumes of water for mining operations.

According to the United States Geological Survey (USGS), an estimated 4 billion gallons of water per day were withdrawn for mining purposes in the United States in 2005. This represented about 1% of total withdrawals of water by the country. Sixty-three per cent of this volume was sourced from groundwater.. Eighty-seven per cent of surface water withdrawals were freshwater.46

The mining industry is also a significant source of water pollution. Discharges of mine effluent and seepage from tailings and waste rock impoundments affect the quality of fresh water.47 Sometimes effluents may contain cyanide and heavy metals, which, if discharged unnoticed into surface water and groundwater, may make water unusable and potentially poisonous. For example, research commissioned by Wacam, a Ghana-based NGO, shows that 250 rivers in the Obuasi and Tarkwa mining areas of Ghana have been polluted by cyanide and heavy metals as a result of gold mining operations, by companies including Golden Star Resources and AngloGold Ashanti.48

Beverages: Although water makes up to 94% of the contents of beverages, their water footprint is determined by the water intensity of their ingredients and different processes used to produce a final product. For instance, the water footprint of a sugar-containing soft drink is in the range of 170 to 310 litres per 0.5 litre bottle, subject to whether the sugar for the drink comes from beet sugar from the Netherlands or cane sugar from Cuba, the latter being very water-intensive to grow.49

For example, in Guatemala, sugar cane production resulted in the drain of at least eight different rivers in the region, which left local communities with insufficient water to support their households.50 Indigenous populations who depended on them for their livelihoods had to move to give way to large sugarcane companies.51

The growing of ingredients for soft drinks can also result in water pollution because of the use of fertilizers and pesticides. Production of sugarcane is a source of hazardous by-products that, if not carefully disposed of, can negatively impact on the quality of water. In the Guatemalan municipality of San Andres Villa Seca, for instance, waste from a sugar mill was accidentally discharged from a containment pond, contaminating the water sources of a local community. Consequently, many people were forced to move in search of sufficient clean and safe water.52

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Maplecroft's Water Security Risk Index 2013 measures the risk to economic and societal functions posed by the availability of water across 162 countries of the world. In an assessment of a country's water security, it considers water stress that arises from an imbalance between domestic, industrial and agricultural consumption and renewable supplies of water from precipitation, surface water bodies and groundwater. Other factors, such as the strain that can be put on available water resources by the projected population, reliance on access to water from other nations, sustainability of water use practices and ability of governments to manage water resources effectively are also considered. Based on the results of the index, the following includes a description of eight emerging markets in which companies may face challenges pertaining to water security:

Bangladesh: Bangladesh is highly dependent on external water resources due to the mountainous and fragmented nature of the region. The Ganges-Brahmaputra basin in Bangladesh and the approximately 54 major and minor rivers flowing through Bangladesh originate in Nepal, Bhutan and India. These countries also have concerns about their own water security. In a region where cross-border tensions are already high, a responsible approach to water resource management would help to avoid exacerbating such tensions.

Bangladesh is experiencing a degree of surface water stress, thus groundwater is commonly used to sustain agriculture. This is already leading to symptoms of significant environmental degradation such as a fall in the water table, saline intrusion and other aquifer contamination. Mismanagement in preserving rain water is also a problem. As the population is expected to rise by 40% in 2025 and 60% by 2050,53 this puts additional strain on the country's water resources. Accordingly, Bangladesh is scored as a high risk country in Maplecroft's Water Security Risk Index.

Brazil: Brazil is a medium risk country in terms of water security. Fourteen per cent of the world's fresh water originates in Brazil. The vast majority of it flows down the Amazon River. Brazil is also home to the Pantanal, the planet's largest continental wetland, and the Amazon flooded forests. However, Brazil's abundant freshwater resources are not evenly distributed across the country or throughout the year. Access to water is also undermined by overuse and pollution, particularly in the heavily populated coastal regions. As a result, 40 million people lack access to clean drinking water. Waterborne diseases account for 70% of all Brazilian hospital admissions.

One of the key factors contributing to water security risk in Brazil is the high production of biofuels. In 2011, Brazil was the world's second largest producer54 and exporter55 of bioethanol, behind the USA. Biofuel production in Brazil is based on sugarcane as a feedstock,56 which is, as discussed above, a ‘thirsty' crop.

China: Several of Asia's most important rivers originate in China. This relatively high degree of water self-sufficiency has contributed to the scoring of China as a medium risk country in terms of water security. However, rapid economic and population growth in China has contributed to increased water demand. Agriculture accounts for most of the water use, as more than 70% of grain in China comes from irrigated land.57

North China is most affected by water scarcity, as more than 40% of the annual renewable water resources are utilised. To address the shortage of water supplies in the north, the South-to-North Water Diversion Project has been initiated. It has taken more than 50 years to develop and is expected to be completed in 2050. It will eventually change the direction of the flow of water to bring around 44.8 billion m3 of water from southern rivers to the drier north.58 This project has been criticised by Chinese scientists for its actual and potential environmental impacts, as well as for its impact on local communities that must give up their land to give way to the project.59

According to a 2009 report by the 2030 Water Resources Group entitled "Charting Our Water Future", China's water demand is expected to reach 818 billion m3 in 2030. Over 50% of this will be required for agriculture (of which almost half will be for rice), 32% for industrial demand driven by thermal power generation, and the remaining 18% will be for domestic use. Although agriculture is the biggest source of water consumption, industrial and domestic demands for water are the fastest growing. The problem of pollution exacerbates the problem of water scarcity; 21% of available surface water in the country cannot be used even to support agricultural activities as a result of contamination. Current supplies are just over 618 billion m3, far below anticipated demand in 2030.60

To address the problem of water scarcity threatening its food security, China has acquired several million hectares of land in Africa. This phenomenon of outsourcing water intensive crop production to water-abundant countries is known as ‘land grab' and has attracted global attention due to its potential to adversely impact the rights and livelihoods of local communities.61 The government still needs to implement further measures, including aggressive water-saving regulatory reforms, to be able to close the water supply-demand gap that is expected to increase in the future.

Egypt: Egypt is one of the ten most water insecure countries in Maplecroft's Water Security Risk Index. Egypt currently has extreme levels of water stress, despite its reliance on imports of products with high water footprints (virtual water imports). Exacerbating this problem is Egypt's extremely unsustainable levels of groundwater extraction. The River Nile is the main source of water for Egypt. While it is recognised as a significant resource on a global scale, it is a transboundary resource and as such is at a higher risk than internal sources; 15% of the Nile's river flows from the Equatorial Lakes Plateau, whereas 85% comes from the Ethiopian Highlands.62 It is regulated by a number of treaties between the countries through which it passes, such as the Nile Water Agreements of 1929 (between Egypt and the UK) and 1959 (between Egypt and Sudan).

However, abstraction limits and usage rights create an ongoing potential for conflict. For instance, there has been a long dispute between Ethiopia and Egypt over the construction by the Ethiopian government of a US$4.7 billion hydropower dam on the Ethiopian basin of the River Nile near the border with Sudan. Citing the risk of conflict, the Egyptian government has allegedly tried to persuade international donors to refrain from funding Ethiopian hydropower projects.63

Industrial pollution of the River Nile is a problem, with about 230 industries releasing effluents into the river. The domestic water supply network also suffers from heavy leakage losses.64 For these reasons, among others, not all people in Egypt have access to water. For instance, in urban areas, 99% have access to drinking water, compared with only 82% of those living in rural areas. That being said, about 40% of Cairo's inhabitants do not get drinking water for more than three hours a day due to the failure of the municipal authorities to provide a vital utility. Furthermore, only 36% of the population is connected to a sewage system.65 The system was built about 50 years ago to meet the needs of 2 million people, whereas there are currently about 10 million people living in the capital.66

India: India is one of the two BRICS countries, along with South Africa, that have the highest water security risk. India's water security risk occurs principally due to its current levels of water stress, and its high water use per GDP earned in the economy. This is due to its sizeable agrarian economy which in 2011 contributed 17.2% of the GDP to the economy.67 The agricultural systems are very inefficient, leading to excessive water waste. Groundwater resources are mined by farmers twice as fast as they are being replenished, while most of the irrigation supply is lost as a result of groundwater seepage and as run-off from fields.68 Furthermore, the excessive use of pesticides and chemical fertilisers has resulted in the pollution of water courses.

According to a report by the 2030 Water Resources Group, by 2030, demand for water in India will reach almost 1.5 trillion m3, compared with India's current water supply of approximately 740 billion m3. Domestic demand for rice, wheat and sugar for a growing population will be the main driving factors. As a result, most of India's river basins could face a severe deficit by 2030. The Ganges, the Krishna and the Indian portion of the Indus are likely to face the biggest absolute gap.69

India is also partially dependent on water flowing into the country from the north. China, Pakistan, Bhutan, Nepal, Bangladesh and Myanmar each share trans-boundary water resources with India. With an engrained legacy of land border disputes, this creates a significant localised risk for agriculture, industry and communities in the north and northeast regions of India.

Indonesia: Indonesia scores low for water security risk. This is partly due to Indonesia's self-sufficiency in terms of water supply. Indonesia holds approximately 6% of the world's freshwater reserves and 21% those of the Asia-Pacific region.70 However, there are still some key allocation and institutional problems that can impede equitable access to water in the country.71

Indonesia struggles to supply enough water for its industry and agriculture. The growth in demand for non-irrigation water, especially in urban areas, strains water allocation. Pollution and untreated municipal wastewater discharges reduce the volume of available clean water. Degrading watersheds is another problem, leading to increasing flood peaks and decreasing dry season flows. Furthermore, the maintenance of the irrigation system is inadequate, causing leakage.72

In addition, Indonesia is one of the world's two largest palm oil producing countries, along with Malaysia. Indonesia's palm oil plantations have given rise to significant environmental concerns (including those relating to water resources) due to their rapid expansion. They are set to expand from an estimated 5.59 million hectares in 2005 to a projected 13.8 million by 2020, according to local NGO Forest Watch Indonesia.73 The United Nations Environment Programme (UNEP) estimates that palm oil production could eradicate 98% of the country's remaining forests by 2022.74 A 2009 study commissioned by the UNESCO-IHE Institute for Water Education indicates that the average annual amount of water used for palm oil production in Indonesia for the period 2000-2004 was 44.1 billion m3.75

In light of these issues, a moratorium on deforestation was initiated by the government. It was scheduled for January 2011; however, it was not until May 2011 that a presidential order was signed to stop issuing permits for deforestation of native forest and peatland for a two year period. Secondary forest can still be converted to plantation.

When it comes to institutional problems, two deserve a special mention. The first relates to the fact that the country lacks suitable mechanisms for stakeholder consultation or representation in decision-making. For instance, there is a clear lack of rules with respect to how, when and where information should be made available, which hinders the process of effective water policy formulation and implementation. The second challenge arises out of inadequacy of institutions for water policy formulation and strategic allocation of water resources. Coordination between responsible agencies is inefficient and accountability mechanisms are lacking. The latter, in particular, enables authorities to refrain from discharging their responsibilities to mitigate the negative impacts of projects.76

Russia: Of the BRICS countries, Russia is by far the most water secure. It has low levels of water stress, low reliance on transboundary water resources and virtual water imports, and negative forecasted population growth. However, it does not use its water resources efficiently. In addition, due to high levels of pollution, clean drinking water is not equally accessible. In 2009, only 38% of Russia's towns were supplied with drinking water that met sanitary and hygiene requirements.77

The water and wastewater infrastructures in Russia are in urgent need of upgrading. Regulatory agencies have little or no control over indiscriminate discharge of untreated industrial wastewaters into water basins. This has had a negative impact on the quality of water in Russia and affected the health of Russian citizens.78

South Africa: South Africa is one of the two BRICS countries, along with India, to have the highest water security risk. South Africa has high levels of current water stress, and a significant reliance on virtual water imports, principally due to high imports of petroleum products, other chemicals, and food and beverage products, which typically have high virtual water content. A significant proportion of these imports (approximately 6%) are from Saudi Arabia, itself rated as extreme water security risk, therefore posing a significant supply chain risk to companies operating in South Africa that rely on these products.

A 2009 report by the 2030 Water Resources Group entitled "Charting Our Water Future" forecasts that the water demand in South Africa will reach 17.7 billion m3 in 2030, whereas the available volume of water currently stands at 15 billion m3. The current supply in South Africa is severely constrained by low rainfall, limited underground aquifers, and high dependence on water transfers from neighboring countries. Household consumption will account for 34% of the total water demand in 2030. The gap between demand and supply will require balancing the needs of agriculture, key industrial activities such as mining and power generation, and large and growing urban centres.79

Considering the above description of water problems in different states, it is imperative that business has a good understanding of challenges it may face with regards to access to water in countries of its existing and potential operations. Increasingly competing demands for water, be that for the reason of the population growth or new water-intensive activities, may strain available resources and thus reduce the amount available to companies. As a result, a company will face the need to source water from elsewhere, which can add on the costs of production. In the worst case scenario, companies may be forced to shut their water-intensive business down. Additional operational expenditures may be incurred by business also due to the lack of a sufficient amount of clean water and the need to purchase safe drinking water or install water-filtering systems. In the case where two or more countries share a watercourse, the need to find additional water sources may be caused by deteriorating diplomatic relations between the two.

The weak regulation of water resources by governments presents different challenges. First, where the use of water by business creates shortages for the local community, the reputation of the company as ethical business may be ruined leading to the loss in share value. In addition, consumer boycotts of the company's production will have a detrimental effect on its profits. Secondly, if there is no effective administration of water rights, each party may try to maximise the amount of water for its use, ignoring the needs of others, leading to dramatic water shortages in area and consequently creating impediments to business operation in the longer run.

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Legal

International law

The right to water has been explicitly recognised by a number of international treaties, such as the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW)80 and the Convention on the Rights of the Child (CRC).81 States signatories of the CRC include, among others, Brazil, India, China, Russia and South Africa. Brazil, Russia and South Africa are also among the states that have ratified the CEDAW.

Although the right to water is not explicitly mentioned in the International Covenant on Economic, Social and Cultural Rights (ICESCR), General Comment No.15 of the Committee on Economic, Social and Cultural Rights (CESCR) recognises it as a necessary component of the right to an adequate standard of living and the right to health protected under Articles 11 and 12 of the ICESCR.82 As clarified by the CESCR in the said General Comment, the human right to water entitles everyone to "sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses".83 As of this date, 160 countries are parties to the ICESRC,84 and are required to "prevent [third parties] from compromising equal, affordable, and physical access to sufficient, safe and acceptable water".85

Water related commitments of states parties, including their positive duties to address actions and inactions by third parties, can also arise from the International Covenant on Civil and Political Rights (ICCPR), which has been ratified by 167 countries as of May 2011.86 Article 27 of the ICCPR protects the rights of ethnic minorities "in community with the other members of their group, to enjoy their own culture". In a Communication in the Lubicon Lake Band v. Canada case, the Human Rights Committee clarified that "the rights protected by article 27, include the right of persons, in community with others, to engage in economic and social activities which are part of the culture of the community to which they belong".87 These activities include fishing, hunting and agriculture, which in turn depend on sufficient water resources in the area.

Convention No.169 of the International Labour Organization (ILO) on Indigenous and Tribal Peoples extends similar protections to indigenous communities. It has been ratified by 22 countries, including Brazil, Mexico, Ecuador, Honduras and Nicaragua.88

A human rights-based approach to water use and management is protected under the United Nations Economic Commission for Europe's (UNECE) Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (Aarhus Convention). Under the Aarhus Convention, states parties must ensure that the public affected or likely to be affected by, or holding an interest in environmental decision-making, shall have the following rights:

• The right of access to environmental information. This includes information on the state of elements of the environment, including water89
• The right to participate in decision-making on environmental matters
• The right to seek and obtain justice in environmental matters

Although the primary duty to ensure the realisation of these rights is vested in public authorities, state parties shall "encourage operators whose activities have a significant impact on the environment to inform the public regularly of the environmental impact of their activities and products".90 In addition, states must ensure that "members of the public have access to administrative or judicial procedures to challenge acts and omissions by private persons ... which contravene provisions of [the state's] national law relating to the environment".91

Where a state authority may allow the development of an economic activity that has an adverse environmental impact – in terms of leading to water stress in the area and further endangering the state of other components of the environment – the licence may be challenged by the public concerned and revoked as a result of litigation. Parties to the Aarhus Convention include Kazakhstan, Tajikistan, Kyrgyzstan, Turkmenistan and Ukraine, among others.92

Similar obligations arise under the Espoo Convention on Environmental Impact Assessment in a Transboundary Context of 1991 that was concluded with the aim of preventing, reducing and controlling significant adverse transboundary environmental impacts of planned activities, especially on the shared watercourses. To ensure this, the Espoo Convention imposes an obligation on contracting states to take the necessary legal, administrative and other measures, including the imposition of the requirement of an EIA for certain activities by project developers. The 45 states parties to the Espoo Convention include Belarus, Kazakhstan, Kyrgyzstan and Ukraine.93

Considering this, where a company plans operations in a country that has ratified one of the abovementioned international instruments, it is reasonable to expect that there will be rules and procedures in place within domestic legal and policy frameworks to ensure that the water-related actions or inactions of business actors do not put the state in violation of its international obligations. In addition, a developing country may have constitutional provisions recognising the international obligations to be a part of its domestic system without the need to transpose them by means of additional national laws. The constitution may equally recognise a prevailing legal force of international obligations of the country when in conflict with domestic norms in the same area, making it all the more important for business actors to be aware of a higher international benchmark.

National law

Explicit references to the right to water can also be found under the national laws in a number of countries. These include the Democratic Republic of the Congo, Ecuador, Kenya, Nicaragua, South Africa, Uganda and Uruguay. Examples of how the right to water is being enforced under national legal systems include the following:

• In Brazil, a 2007 Law on Sanitation (Law No.11445) regulates the supply of adequate drinking water and urban rainwater drainage, among other things. This law is complementary to a 1997 Law on Water Resources (Law No.9433), which prioritises human consumption in cases where water supplies are not sufficient to fully meet all needs. The 1997 Law mandates a participatory approach to water resources management and seeks to protect the interests of future generations by licensing and charging industrial and agricultural water uses.94
• In South Africa, the right to have access to sufficient water is guaranteed by the 1996 Constitution.95 This constitutional protection of the right has been fleshed out in subsequent national laws. A 1998 National Water Act (NWA)96 aims at promoting equitable access to water and sustainable use of water resources in the interests of both present and future generations. A 1997 Water Services Act (WSA)97 gives effect to the constitutional guarantee, securing the rights of access to basic water supply and basic sanitation, among other aspects. The Free Basic Water policy of the South African government lays down a framework for the provision of the World Health Organization's (WHO) recommended minimum of 6,000 litres of safe water per household per month free of charge.

Some countries may have laws in place allowing compensation from corporations for affecting the rights of individuals to have access to water. For instance, in February 2011, the state legislature of Kerala in India passed legislation allowing individuals negatively affected by Coca-Cola's bottling operations in Plachimada to seek compensation from the company. The law sets up a tribunal to look into the claim and under this law, Coca-Cola must follow the directives of the tribunal. The law is a direct result of the March 2010 report and recommendations of a High Power Committee holding Coca-Cola responsible for causing water depletion in Plachimada, Kerala.98

The threat of litigation may be more clearly pronounced where there are known judicial cases enforcing the right to water. The litigation in India against Coca-Cola and PepsiCo (discussed above in Real world examples) are good examples. Another is presented by the Chusmiza and Usmagama Communities case in Chile. The details of the case are as follows:

• In 1991, as a result of a change in the control of the Mineral Water Bottling Chusmiza company, the public road to the water basins feeding a bottling plant were closed to the Chusmiza and Usmagama communities. This was done in violation of a 1915 agreement reached by the communities with the then owner of the company, Natalio Papic, which guaranteed that the communities would have access to water on this land in exchange for the locals' consent to the operation of the bottling plant. In fact, the communities had benefited from this agreement since 1915. An eight-year judicial conflict over water rights resulted in a final 2009 decision of the Supreme Court recognising the ancestral rights of the indigenous communities to all water in the basin.99

Companies may also face significant litigation risks arising due to the impact their products and operations may have on water quality. Considering this, when a heavily water-dependent business plans its operations in a country whose national legislation explicitly guarantees the right to water, it should expect that the country will have measures in place to regulate the use of water by third parties. Violation of such legislation will likely result in legal liability for companies.

Reputational risks

Even where companies do not face legal action, allegations of complicity in human rights violations can still expose them to a range of negative impacts. Businesses whose operations are heavily dependent on water may face the greatest reputational challenges. Reputational risks may also be faced by companies that prefer sourcing raw materials with high water footprints due to the geography of the location of production, even though the same feedstock – but with lower water requirements – may be sourced from elsewhere. Reputational risks can include:

• NGO, local community or consumer initiated boycotts resulting in reduced sales of company products
• Divestment by ethical and mainstream investors resulting in reduced access to capital
• Negative press and activist campaigns resulting in brand erosion

Lately, shareholder advocacy is increasingly being used to advance greater corporate disclosure on water practices and performance. The number of shareholder resolutions focusing on water issues has grown significantly.100

Reputational risks may also arise as a result of a company failing to remediate the breach of its UNGC commitments, despite the UNGC initiative being voluntary. Thus, in addition to the misuse of certain logos and brands, the UNGC Integrity Measures also aim to address allegations of systematic or egregious abuses with respect to the UNGC's principles and related commitments. Where such abuses are claimed, the UNGC Office may engage in a dialogue with the company to assist it with the resolution of the matter. In the event that the company fails to cooperate within a certain time frame, the name of the company can be removed from the list of UNGC participants, which the UNGC Office may publicly disclose on its website.101

Operational risks

Where there is not enough water in a given locality to supply the local communities as well as support the water needs of a new business, business operations that are highly dependent on water may be threatened by water scarcity. The minimum water requirement to ensure a basic standard of living for local communities may have been provided by law or clarified in the case-law of national courts, thus making it mandatory for local authorities to secure that amount for local communities before any new demand for water could be considered.

For example, in South Africa, in the Phiri Water case (Mazibuko and Others v City of Johannesburg and Others), the Johannesburg High Court ordered the City of Johannesburg to increase a free basic water supply from 25 litres per person per day to 50 litres, recognising, inter alia, that the initially provided 25 litres were insufficient to meet the basic needs of households in Phiri.102

The operational risk is exacerbated where the costs of sourcing water into the locality from elsewhere make the existing business operations no longer feasible or constrain their expansion. This is especially the case where water must be piped and pumped from localities, as the energy required for pushing the water through pipelines creates additional costs.

A similar effect on company activities may be rendered by drought, resulting in shortages or higher prices of raw materials. In 2009, for instance, beverage producers were affected by the sharp increase in sugar prices, which resulted primarily from a decline in production in India due to drought.103

The lack of clean and safe water can also present a challenge, as contaminated water will require additional treatment before it can be used, thus leading to higher costs of production.

Water scarcity created or exacerbated by company operations may lead to loss of social licence to operate due to community animosity and higher costs of doing business in the locality. Furthermore, it can also result in the loss of political licence to operate, where governments are not willing to co-operate and support future business opportunities of the companies concerned.

Nestlé Waters, for instance, conceded in September 2009 to withdraw its plans to build the country's largest water bottling plant in McCloud, California, partially as a result of years of protests by local residents and pressure applied by NGOs. The company initially signed a contract with the town that gave it access to local water for 50 years, and which provided for a right to extend the term of the contract for another 50 years. The local communities were concerned that the contract did not contain provisions for inflation and the changes in water flow or value. Furthermore, the contract specifications allowed the company to pay less for water than the area residents, and it was alleged that its operations would put rivers and streams in the region at risk of drying up.104

In areas where water resources are insufficient to fully meet industrial needs and the needs of local communities, companies may need to dig new wells or construct pipelines to source water from other areas within the country. Where local communities are allowed to make use of these additional sources (usually they are), the price of water (where charged) should be affordable for local communities. Failure by the company to work with the community on this issue may result in the loss of their social licence to operate.

With the volumes of available water sources in a country decreasing, the risk of regulatory caps on water use could increase, thus impeding company operations. The risk of changes in regulatory requirements pertaining to water quality, or limiting types or the extent of discharges into water, may have similar impact on companies. These risks are highlighted in the following examples:

• In November 2005 in China, an explosion at a petrochemical plant resulted in the release of 100 tonnes of benzene into the Songhua River, leaving almost four million people without water for four days. As a result, the Chinese government revised the Water Pollution Control Law. The 2008 Act increased penalties, among other specifications.105
• In August 2009, 12 international and local beverage and dairy producers were added to the List of Major Water-Polluting Enterprises by the Beijing city economic planning agency. This resulted in increased supervision of these companies and the requirement to submit management plans aimed at the reduction of wastewater discharge and energy use.106

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Business has a responsibility, according to the UN's ‘Protect, Respect and Remedy'107 policy framework, to respect all human rights. This responsibility requires businesses to refrain from violating the rights of others and to address any adverse human rights impacts of their operations.

According to the framework, to meet the responsibility to respect human rights, a responsible company should engage in human rights due diligence.108 The scope of due diligence is subject to a potential risk of infringements posed by the country context in which a company operates, its own business activities and the relationships associated with those activities.109 The UN has further adopted the Guiding Principles on Business and Human Rights for the Implementation of the UN ‘Protect, Respect and Remedy' Framework,110 which were endorsed by the UN Human Rights Council in 16 June 2011.111 These aim "not only to provide guidance that is practical, but also guidance informed by actual practice".112

The framework, as clarified by the Guiding Principles, specifies the main components of human rights due diligence:

• A statement of policy articulating the company's commitment to respect human rights and providing guidance as to the specific actions to be taken to give this commitment meaning: This policy should be informed by appropriate internal and external expertise and identify what the company expects of its personnel and business partners. The policy should be approved at the most senior level and communicated internally and externally to all personnel, business partners and relevant stakeholders. In addition, it should be reflected in appropriate operational policies and procedures.
• Periodic assessment of actual and potential human rights impacts of company activities and relationships: Human rights due diligence will vary in scope and complexity according to the size of a company, the severity of its human rights risks and the context of its operations. Impact assessment must be continuous, recognising that human rights risks may change over time as companies' operations and operating contexts evolve. The process should draw on internal and external human rights experts and resources. Furthermore, it should involve meaningful engagement with potentially affected individuals and groups, as well as other relevant stakeholders.
• Integration of these commitments into internal control and oversight systems: Effective integration requires responsibility for addressing such impacts to be assigned to the appropriate level and function. It also requires appropriate internal decision-making mechanisms, budget allocation and oversight processes.
• Tracking of performance: Tracking of performance should be based on appropriate qualitative and quantitative metrics and should draw on feedback from both internal and external stakeholders. In addition, it should inform and support continuous improvement.
• Public and regular reporting on performance: When reporting, companies should take into account the risks the communication of certain information may pose to stakeholders themselves, or to company personnel. In addition, the content of the reports should be subject to the legitimate requirements of commercial confidentiality.
• Remediation: Where business enterprises identify responsibility for adverse impacts, they should provide for or cooperate in their remediation through legitimate processes.

In designing a Human Rights Impact Assessment (HRIA), a company may wish to consult existing guidance documents, such as the International Finance Corporation (IFC), UN Global Compact and International Business Leaders Forum's (IBLF) Guide to Human Rights Impact Assessment and Management.113 This Guide provides companies with a "process to assess their business risks, enhance their due diligence procedures and effectively manage their human rights challenges." The online guide takes users through different stages of the impact assessment process, including Preparation, Identification, Engagement, Assessment, Mitigation, Management and Evaluation.

In 2005, the Sub-Commission on the Promotion and Protection of Human Rights of the UN Commission on Human Rights adopted Draft Guidelines for the Realisation of the Right to Drinking Water Supply and Sanitation.114 The Draft Guidelines "highlight the main and most urgent components of the right to water and sanitation", whilst not attempting to "provide an exhaustive legal definition of the right to water and sanitation".115

Business can influence positive changes in the area through their own behaviour and by requiring that similar measures are taken by their suppliers. Specific actions that responsible business might take include:116

1. Policy on water

To prevent or mitigate the risk of business activities impacting on the right of local communities to have access to water, a company could consider adopting a policy on water use, committing the company to, for example:

• Carrying out a survey to map all water stress-prone areas where the company has business
• Carrying out a survey to ensure a company is aware of all competing uses of water in a locality
• Assessing the impact of business activities on local communities' access to water
• Engaging with local communities in finding solutions to mitigate the company's impact on water use in the area
• Identifying areas where water use and waste could be reduced and reducing the water use and waste to the extent feasible
• Opting for a location of business activities where production can have less impact on water, compared with other locations
• Reducing the virtual water impact of business activities by opting for raw materials that have lower water footprints
• Regularly monitoring water use and reporting on the targets, results and water-related activities
• Sharing good practices on water use with suppliers
• Encouraging suppliers to report regularly on water use
• Partnering with other organisations and businesses to raise awareness of water sustainability practices
• Engaging with governments in developing a water policy, where possible

• In March 2009, PepsiCo adopted a policy on the human right to water that guides its domestic and overseas operations. The policy commits PepsiCo "not to take any action that would undermine a state's obligation to its citizens to protect and fulfil the human right to water". See:
• PepsiCo's policy on the human right to water (Global)
• Please contribute your commentary or suggestions to our online discussion forum:
• Access to water online discussion forum

2. Assess the context of business operations for water impact

To prevent and/or mitigate the risk of business activities negatively impacting on the right to water of local communities, companies might consider the following set of factors within the framework of their ESIA:

Impact of the external environment

Before embarking on a business project, a responsible company is advised to check a project hosting country for water security factors, such as:

• Water stress: this assessment should show whether a country's water resources are sufficient to sustain a sum of domestic, industrial and agricultural demand for water. This assessment should try to capture the vulnerability of water sources. Where demand exceeds total renewable water resources by 40%, this can result in a physical water stress. In turn, this can impact adversely on local, national and international security and increase the potential for violence and armed conflict. It is important to research that a country has ‘sufficient' quantities of clean drinking water, in addition to ‘sufficient' quantities of safe water for all other uses.
• Reliance on transboundary water resources: where a country already relies on water resources originating in another country to meet its existing demands, new water intensive business endeavours will increase this dependence. In turn, the worsening of bilateral relations may have serious water implications both for businesses and other domestic users.
• Projected population growth: where the population of a country is likely to increase, this, together with improving standards of living, will potentially result in increased demand for water. In turn, where the water resources of the country are not sufficient to meet existing demand, the increase in population will strain renewable water resources making it more difficult to meet competing demands.
• Groundwater use: the assessment of the use of groundwater should compare the volumes of water withdrawn with the extent to which they are naturally renewed. As groundwater supplies take many years to re-fill, every effort should be made to ensure that those supplies are not significantly depleted. Otherwise, such water use practices will often lead to exacerbated water stress within a country.
• Water intensity of the economy: having a clear understanding of the water intensity of a country's economy is very important to ensure that projected business activities are feasible. The more reliant an economy is on water supplies, the greater the risk of a water shortage if new competing interests for water are considered.
• Equitable distribution of water resources across the country: the assessment of how water is allocated within a country should show whether the required amount of water could be provided in a certain location within a country without jeopardising the rights of local communities to adequate housing, health or food. The right to water does not depend on a person's housing or land status. The rights of people living in informal human settlements should also be respected. Where discrimination against and marginalisation of different groups restricts their access to water, water intensive business activities may exacerbate controversial practices. Considering this, access to water should be prioritised for marginalised groups, as well as those least able to cope with scarcity, such as institutions serving vulnerable groups, such as schools, hospitals and refugee camps. The right of access to traditional water sources should be secured for local communities in rural areas, especially where water is relied on for agricultural activities.
• Efficacy of the regulatory system: the assessment of national laws and policies on water management, as well as the quality of law enforcement within a country, should determine whether a government has the ability to manage water resource issues efficiently and allocate them equitably. The lack of effective management of water resources by governments may result in a stronger role for businesses in providing and/or respecting access for local communities.

Impact of the company's final products and direct operations

Companies should consider conducting an assessment of the water use and wastewater discharge volumes of each of its final products and direct business processes. This should enable them to understand the extent to which the company uses water in the direct production of goods and services. Water accounting should be done at both the corporate and site-level. The assessment of impacts could consider at minimum the following factors:

• Identification of water uses in direct operations: this should enable a better understanding of key water uses within company operations from the production stage, including process heating/cooling, cleaning of parts during production, and as an ingredient in the final product, through to employee usage.
• Identification of direct water impacts: this should identify whether water is released to a wastewater treatment plant before discharge or whether water is returned directly back to the water basin from which it has been withdrawn, then assessing the effects to the receiving water bodies.
• Identification of indirect water impacts: this should enable a better understanding of the water impact that results from production processes that might adversely impact total availability as well as water quality.

Relationships (business partners and entities in a supply chain)

As a significant portion of water-related impact is created by companies' supply chains, rather than by their direct operations. Therefore, the sustainability of water use in companies' supply chains should also be assessed to the extent feasible. Such impact assessments could address the following factors:

• The water intensity of production of raw materials and the extent of wastewater generation
• Sources of water: The identification of the sources of water relied upon by suppliers can be useful for determining their water footprint, as using water from a depleted water basin has different reputational, operational and legal implications compared with those using rain water.117
• Methods and timing of wastewater disposal: Disposal of waste to a waste treatment plant has different polluting impacts compared with waste is discharged untreated into a nearby water basin. Furthermore, subject to the time of year, disposals of effluents into a water basin may have different implications, such as for spawning fish species.118
• Water-related management systems, policies and standards
• Compliance with water-related regulations

Following are different water accounting methods/tools, including:

• The Water Footprint Network's ‘water footprint': the WFN's water footprint concept allows assessing the total use of freshwater for the production of a final product by a company by looking at both direct freshwater use by producers themselves, as well as indirect water use along supply chains to produce raw materials for the final product.119
• Life Cycle Assessment (LCA): the LCA tool measures the environmental impact of each product, process or service, including water use, wastewater discharge and emissions, through all components of the value chain. It is also called a ‘cradle to grave' approach. The stages of the lifetime of a product that are covered by the LCA tool include the following: raw material extraction and processing; materials production; manufacture of finished products; transportation; lifetime operation/use and disposal and/or recycling.120
• The World Business Council for Sustainable Development's (WBCSD) Global Water Tool: this tool integrates data on corporate water use, discharge and facility information with watershed and country-level data to enable the measurement of water use in the context of local water availability.121
• Global Environmental Management Initiative's (GEMI) Water Sustainability Planner and Tool: this tool guides companies through five stages of assessment and planning, which are a) water use, impact and source assessment; b) business risk assessment; c) business opportunity assessment; d) strategic direction and goal setting; and e) strategy development and implementation.122

As each of these has its benefits and shortcomings,123 companies could consider using a combination of these for water accounting to ensure that all aspects of water impact are captured in the due diligence process. Information on the water scarcity and security in a host country, together with the assessment of the water impact of a company's projected direct operations in that country, as well as the sustainability of sourcing raw materials from a certain locality, should enable companies to understand the feasibility of their projects.

• SABMiller, a South African brewing company, reports an estimate of water use in its supply chain. In 2008, and again in 2009, it measured the water footprints of its South African and Czech operations. See:
• SABMiller reports on water use in its supply chain (South Africa and Czech Republic)
• In its March 2007 Water Management Report, Nestlé reported developing an internal water stress index that builds on the joint national Water Poverty Index (WPI) of the World Water Council and the UK Centre for Ecology and Hydrology (CEH) and a site-level evaluation of Nestlé factories that are located in water stressed regions. See:
• Nestlé developed an internal water stress index (Global)

3. Engage local stakeholders in dialogue about the potential water impact of the company

Although the ESIA should ideally provide for a mechanism that ensures the participation of parties that may be affected by the proposed activities in the decision-making process, this is not always the case in practice. Alternatively, where third parties may be allowed to participate, their participation may not be meaningful due to misunderstandings of the process or the results to be achieved by the process of consultations.

In order to ensure that the proposed project activities address all concerns of communities whose water rights might be negatively affected, a responsible company should consider providing relevant stakeholders with the following:

• Information describing the water intensity of the proposed project and the adverse impacts it is likely to have on the water rights of local communities and the available water resources in general
• Comparative analysis of the water impact of the project's alternatives and a clear explanation of the reasons the final option was chosen and its positive aspects, including in terms of water use and wastewater discharge. Other benefits of the project, such as planned employment and income generating potential, should also be highlighted
• Information on how the company plans to prevent or mitigate the potential adverse impact its activities may have on the sufficiency and/or quality of water resources, especially at the site-level
• Evidence of prioritising the uses of water by local communities

• Please contribute your commentary or suggestions to our online discussion forum:
• Access to water online discussion forum

4. Reduce water intensity of production or dependence on freshwater

Companies should consider reducing the water intensity of their production, to the extent feasible. This includes employing water conservation equipment and techniques, or developing varieties of products less dependent on water. In addition, through increasing the water efficiency of production, companies may see reductions in their operating costs.

The strain on the available freshwater can also be eased through reusing process water. Using seawater instead of freshwater in different company processes could also be one way of improving the water efficiency of production. The use of desalination equipment, though adding to the project costs, could free up additional sources of water for business operations and mitigate other reputational or operational risks.

As part of the process to reduce the water intensity of production, companies may consider encouraging their personnel to consider and reduce the water impact of business operations by providing different benefits for successful results. For instance, Danone, a food company, has an incentive system for senior managers. Their compensation is determined with consideration of pre-defined environmental and social objectives, including those related to water.124

• In 2009, PepsiCo reportedly saved more than 12 billion litres of water through efficiency improvements within its operations, compared with the amount of water used in 2006. See:
• PepsiCo's water efficiency (Global)
• From 2005-2010, Nestlé Waters reduced their indirect water use (water outside of the bottle) by 34%. See:
• Nestlé's water efficiency (Global)
• One of the lighthouse projects of Bayer CropScience, a subsidiary of the Bayer Group focusing on crop protection and non-agricultural pest control, is focussed on improving rice yields, while reducing the volumes of water required for cultivation. See:
• Bayer CropScience cultivating less water intensive crops (Indonesia)
• Syngenta, an agri-business company, reports developing genetically modified varieties of corn, sunflower and rice that are high temperature and drought-resistant, and thus has lower water needs. See:
• Syngenta develops varieties of corn with lower water needs (Global)
• Bayer MaterialScience, a subsidiary of the Bayer Group focusing on supplying high-tech polymers, has improved the wastewater treatment process in its polymer production facilities in South Charleston in the US. See:
• Bayer MaterialScience improved wastewater treatment process (US)
• In the US, PepsiCo has initiated a number of improvements to reduce water use. In Casa Grande, Arizona, the company uses a water filtration and purification system to recycle and re-use about 80% of the process water. See:
• PepsiCo's improvements to reduce water use (US)
• Intel, a semiconductor manufacturing company, disclosed the reduction of its daily water demand in the city of Chandler, Arizona. See:
• Intel's water efficiency (US)

5. Monitor water quality

Overuse of water by companies heavily dependent on this natural resource to sustain their operations is only one way in which companies may strain available water resources within a country. Water pollution from business activities is another and may leave local communities with an insufficient amount of clean and safe water. To effectively address water quality problems, a responsible business should consider the following:

• Preventing pollution at the source by committing to cleaner production: for instance, this would require the company to reduce or restrict use of solvents in industrial processes or decrease the use of chemical fertilizers in agricultural activities by replacing them with composting plant matter or animal manure, where possible. To prevent agricultural water runoff, the business may consider contour farming and terracing in hilly areas or keeping retention ponds.
• Controlling pollution: measures to control pollution include recycling, wastewater treatment, and safe storage, transportation and disposal of hazardous waste and wastewater.125

Companies may consider empowering ethnic minorities and other vulnerable groups to monitor the quality of water in water basins that may be affected by business operations. Such a participatory approach can increase transparency and mitigate the risk of the loss of social licence to operate.

• In 2007, Barrick Gold, a Canadian mining company, reported inviting local communities to participate in the company's water monitoring activities at its Lagunas Norte mine in Peru. See:
• Barrick Gold invited local communities to monitor its water use (Peru)

6. Become involved in initiatives aimed at improving access to water by local communities

In localities where demands for water exceed available water resources, companies may be required to invest in water infrastructure to source water from water-abundant areas within the country. In such cases, companies might consider giving access to additional water resources to local communities. Where a business needs to charge for water sourced to the locality through the pipeline system funded by a company, it can agree with the state that the latter will be subsidising some of the costs. This will allow the cost of water to remain ‘affordable' to the local population, whilst ensuring the feasibility of business activities.

• PepsiCo, through PepsiCo Foundation, collaborates with different institutions, such as the Columbia University Earth Institute's Global Water Center, Water.org, the Safe Water Network, the Energy Resources Institute (TERI) and the China Women's Development Foundation (CWDF), in developing projects aiming to improve access to water by local communities. See:
• PepsiCo collaborates with NGOs to improve access to water (China/India)
• Coca-Cola provides rain barrels to collect rainwater runoff and replenishes local communities' watersheds. See:
• Coca-Cola's initiatives to improve access to water (Global)

7. Engage with other stakeholders to reduce water risks

Collective actions with other stakeholders can help companies to prevent some and mitigate other water-related risks and their implications. Such stakeholders include local communities, suppliers, governments of host countries, other businesses and other organisations (both international and local, governmental and non-governmental) responsible for developing water-related policies and standards.

In water-scarce areas, besides taking company-level actions, business might consider raising awareness of other water users (farmers, domestic users) on how to reduce water use, waste and pollution.

Assisting farmers to move away from the commonly used flood-or-furrow irrigation system – which has the lowest water efficiency126 – could be one way of achieving that aim. Companies might also consider supporting existing initiatives of different NGOs and local governments, in addition to their own activities. For instance, in Pakistan, the World Wide Fund for Nature (WWF) works with sugar and cotton farmers in finding more water efficient ways of growing their crops, offering technical advice, training and innovative techniques.127 Companies might consider actively engaging, including via multi-company actions, in the formulation of a better water policy for all users by governments.128

• Coca-Cola reportedly works with its bottlers to improve water efficiency in bottling operations. See:
• Coca-Cola's initiative to improve water efficiency (Global)
• Nestlé Waters is the largest private sponsor of the Water Education for Teachers Project (Project WET). See:
• Nestlé Waters disseminating water education (Global)
• In 2008, the PepsiCo Foundation teamed up with Columbia University's Earth Institute to assist local water users to increase water efficiency in their activities. See:
• PepsiCo collaborates in disseminating knowledge on better water use (Global)
• Unilever reported that it evaluated suppliers on water management and assisted them to improve water efficiency and reduce water usage. See:
• Unilever assists suppliers to improve water efficiency (Brazil)
• General Mill's Green Giant division reportedly collaborates with growers to reduce water consumption and the use of chemical fertilisers for key crops. See:
• General Mill assists crop growers to increase water efficiency (Global)

8. Report efficiency data and water impacts

Companies should consider reporting on water use and wastewater discharge, as well as measures taken to improve water efficiency in business operations and to mitigate other water-related adverse impacts. Transparency in this area is increasingly becoming an expectation of global companies. Companies might consider using the CEO Water Mandate's criteria for water-related reporting content, the key aspects of water reporting of which include the following:

• Direct operations: companies should consider disclosing relevant data on water use and water quality impact in light of their local-level impacts and performance, rather than in aggregated form as corporate-wide numbers. Disclosure of impact in direct operations would also include information on programmes, policies or targets for water performance.
• Supply chain and watershed management: companies should try to improve reporting of water use and discharge in their supply chain, to the extent feasible. This requirement becomes more important for companies dependent on raw materials with high water intensity. Key aspects of water reporting with regard to a company's supply chain could include the same factors as for the company's own reporting.

• Collective action: information in this area will indicate whether a company has been collaborating with inter-governmental organisations, civil society, and businesses facing the same challenges and engaging in multi-stakeholder actions.
• Public policy: a company's disclosure of engagement in a public policy space can include information on its participation in water governance and decision-making, water sustainability advocacy and the commitment to respect internationally recognised human rights.
• Community engagement: companies could specify whether they have taken any corporate actions on water at the community level or contributed to the development of the local water infrastructure.
• Transparency: increasingly, it is becoming a good practice to verify the accuracy of companies' statements by third parties. Where a company has made arrangements for a third party verification/assurance assessment, its reporting on water-related issues could emphasise that point.129

• A number of companies have to a certain extent improved transparency of information on water impacts of their operations, as well as water use/wastewater discharge targets they are planning to achieve in future. For instance, in 2009, Alcoa, a mining company, disclosed a wastewater reduction goal of zero process water discharges by 2020. For more examples see:
• Companies report on water efficiency and water impacts (Global)

9. Provide remedies for the breach of water rights of local communities

Companies might consider the establishment of a grievance mechanism to address complaints of a negative impact of companies' operations on their water rights. Subject to a company's resources, an officer or department could be appointed to specifically deal with such complaints. Subject to the nature of a grievance (and depending on the degree to which a company has control over its suppliers), remedies could take the form of:

• Conducting an investigation of claims
• Reducing water intensity of production, where possible
• Development and/or the use of water conservation equipment or processes, where possible
• The tightening of terms of contracts with suppliers requiring them to improve water efficiency and reduce wastewater discharges
• Changing suppliers of raw materials to reduce the water footprint of a company's products or services

In addition, a telephone ‘hotline' or a complaints box can be supported by companies as mechanisms for receiving and addressing grievances.

• Please contribute your commentary or suggestions to our online discussion forum:
  Access to water online discussion forum

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General Comment No.15 of the Committee on Economic, Social and Cultural Rights clarifies that the human right to water entitles everyone to "sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses".130

In 2010, the UN bodies – the UN General Assembly (UNGA) and the UN Human Rights Council – affirmed that the right to water is part of existing international law, imposing certain obligations on states. The right to water was defined as the right to or the right of access to "safe drinking water and sanitation".131

Prior to the issuance of General Comment No.15, the right to water was long perceived to be implied under the rights to an adequate standard of living132 and the highest attainable standard of health,133 being integral to the realisation of these two rights.134

The right to water has also been implied under the right to adequate housing135 and adequate food,136 protected under Article 11.1 of the ICESCR, which, alongside other factors, determine the ‘adequacy' of the standard of living. Another human right – the right to gain a living by work, protected under Article 6 of the ICCPR – was also seen as protecting water necessary to secure one's livelihood.

General Comment No.15 clarified that the components of water must be "adequate for human dignity, life and health". The assessment of ‘adequacy' goes beyond the consideration of volumetric quantities and may change according to circumstances. However, the core content of the right to water remains unchanged and includes the following factors:

• Availability: The water supply should be sufficient to meet personal and domestic needs on a continuous basis. Such needs include drinking, cooking, personal and household hygiene, laundry and sanitation. The WHO's 2003 Guidelines on Domestic Water Quantity, Service Level and Health note that "optimal access to water", requires on average 100 litres of water per person per day.137 The needs of different groups of people, such as young children, pregnant or lactating women, the elderly, the terminally ill and athletes may be different.138 Different weather conditions and activity levels also impact on the quantity of water needed to support an adequate standard of living.
• Quality: The quality of water is assessed, first of all, with reference to its adequacy for health. Although it is not possible to achieve ‘zero risk' in terms of safety of the quality of water, it is an established fact that poor quality of water beyond acceptable levels is a vehicle for infectious diseases. Excessive concentration of chemicals, especially arsenic and fluoride, in water can also have adverse health implications.139
• Accessibility: The UN Human Rights Committee (HRC) differentiates between physical and economic accessibility of water resources. Physical accessibility is determined by distance travelled and time spent to access water, as well as the source of water located in places presenting no risks to physical security. Economic accessibility refers to the reliability and potential cost of water supplies. The HRC emphasises that water should be accessible to all without discrimination. The lack of obstacles to seek, receive and impart information related to water also feeds into the assessment of the accessibility of water.

The right of access to water is integral for the realisation of all human rights. As a result, the following rights may also be affected as a result of the violation of the human right to access clean water and sanitation:

• The right to life: The link between access to clean water and life can be demonstrated by the simple fact that the lack of drinking water may result in deaths from dehydration. A report published by the WHO shows that in order to maintain hydration, on average, men need 2.9 litres of fluid per day, women need 2.2 litres and children need 1 litre (requirements change depending on climate). One-third of this intake can be derived from food.140 Water- and sanitation-related diseases may have similarly grave consequences. For instance, the UNGA noted in its Resolution on the right to water that about 1.5 million children under the age of five die each year because of water- and sanitation-related diseases, such as diarrhoea.141
• The right to health: Mild dehydration, while not life threatening, may have a number of adverse health effects, such as urinary stone formation, increased risks of urinary tract cancer and poor oral health. Water of poor quality, as well as the lack of safe water for sanitation and hygiene, may result in other diseases, such as trachoma, schistosomiasis, ascariasis, trichuriasis, hookworm disease, malaria and Japanese encephalitis.142 Studies indicate that about 443 million school days are lost because of water- and sanitation-borne diseases.143
• The right to adequate housing: The CESCR General Comment No.4 defines ‘adequacy' of housing with reference to, inter alia, the availability of services, facilities and infrastructure essential for health, security, comfort and nutrition. Thus, the CESCR emphasises that all beneficiaries of the right to adequate housing should have "sustainable access to ... safe drinking water ... sanitation and washing facilities", among other things.144 The CESCR General Comment No.15 clarifies that a household includes "a permanent or semi-permanent dwelling, or a temporary halting site."145
• The right to food: Apart from water constituting an important part of food intake, sustainable access to water to support agriculture is very important for the realisation of the right to food.146 Lack of water can adversely impact on the core content of the right to adequate food, particularly availability and accessibility of opportunities for local communities to feed themselves.147 Some products require more water for production than others,148 and the water scarcity caused by additional business activities in the area may affect the nutritional content of food, and thus dietary needs.149 For instance, the water footprint of 1kg of rice stands at 3,400 litres of water, compared with 1,300 litres per kg of barley.150
• The right to be free from discrimination: Lack of access to water affects poor and marginalised groups the most. Where water resources are not sufficient to fully meet all needs, scarce water is usually channelled to sustain the water supply to those who can pay for it. In such cases, the poor will for the most part find themselves forced to pay excessive prices for drinking water or will use polluted water from rivers or wells. Indigenous and rural communities (whose traditional way of living by engaging in fishing and agriculture is highly dependent on water) may also find it difficult to sustain their livelihoods where business activities draw on or pollute the scarce water resources in the area. Women and children are among marginalised groups who disproportionately suffer from a lack of access to water. Where water resources are not evenly distributed within the country, it is usually women and children who have to walk long distances to collect and carry water to their households. In the latter case, the right of women to family life and the right of children to education may be additionally affected.151
• Freedom of religion: Water holds a central place in the practices of different religions. In Islam, water is important for cleansing and purifying. Muslims must clean their faces, hands to the elbows and feet to the ankles before they approach God in prayer. The bodies of the dead must also be washed in pure water before they are buried. In Christianity, water is used to baptise a person by ‘immersing' their whole body in water or by pouring water over their head three times. The religious importance of water resources can also be illustrated with the example of Hinduism. Hindus worship the river Ganges, which they believe is sacred. Hindus believe that bathing in the river leads to the forgiveness of sins. The ashes of the dead are also submerged into the river in the belief that the dead will attain salvation.

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