Academic Master

Environmental Science

Effects of Global Water Crisis to Businesses and the World Economy

The global water scarcity due to the rising demand for water and the change in climate is increasingly affecting the world businesses and the economy. Virtually, all businesses have to consider the use of natural resources. The world is facing a possible 40% of water that is available for use by humans by the year 2030 according to a study conducted by the United Nations (Gosling, and Arnell, 2016). This has raised concerns in the global business and the economic world as companies and businesses cannot get a sustainable supply of clean water. This will reduce the expansion of operations by companies in the world as water is a basic element in virtually all operations of any company. This paper will discuss the impacts climate change and global water crisis is having on businesses and the world economy.

The world GDP is predicted to fall by 6% by the middle of this century by the World Bank as a result of the increased competition for water. This is because companies and businesses are spending an average of $1.2 billion to at least have a constant water supply to help run its operations. Every year, the flooding, droughts and tightened environmental regulations cost companies and businesses close to $14 billion every year a factor that is not favorable to the business and the economy (Gosling, and Arnell, 2016). All these challenges are attributed to climate change that has been brought about by the industrial revolution.

There is strong evidence of how the use of fossil fuel has impacted earth’s atmosphere. The concentration of carbon dioxide in the atmosphere is continually increasing. This increase in the concentration of carbon dioxide and other greenhouse gases in the atmosphere are changing the planet’s climate. The Global temperatures have increased and these changes are expected to accelerate in the coming years. In the most recent study, the intergovernmental panel on climate change concluded that water and its availability will be the main pressures on the societies and the world economy. More evidence is being documented all over the world as there is increased severe weather events like flooding, drought and diminished ice covers all of which are attributed to the climatic changes. Scientific studies have also shown that there are an increased duration, intensity and spatial extent of droughts, increased atmospheric temperatures, changes in the rain patterns and the diminishing snowpack. This is affecting the quality and supply of fresh water in the world. The figure below shows how the levels of carbon dioxide have increased in the atmosphere since the industrial revolution

This climatic changes will affect water and sustainability by increasing the water shortages due to the changes in precipitation patterns and intensity. The subtropics and the mid-latitudes are expected to experience dry conditions thus affecting the businesses and companies based those areas. The natural water storage mechanism, a will also be affected. The glacier and snow parks are melting due to the increased temperatures thus affecting the long-term availability of water for the world population. The populations living in the snow-fed areas will face an extreme shortage of clean water.

In addition to that, there will be an increased vulnerability to ecosystems due to temperature changes that have brought changes in precipitation patterns and extreme weather events and prolonged droughts. This changes will, in turn, reduce the natural water filtering process thus reducing the amount of water available for use by human beings. The water supply infrastructure set by companies will be affected by the floods, rise in sea levels and droughts. Most companies are not built to withstand such extreme conditions. This ranges from the water treatment companies that do not have the infrastructure to capture large amounts of water that will help meet the high demand for water during the dry periods.

Other than the scarcity of water, climate change will impact the water quality. The increased erosion rates will wash the chemicals used as fertilizers to the water bodies. This affects the quality of water and makes it not healthy for consumption. The coastal waters and surfaces are also affected due to the sea level rises that result in the saltwater intrusion into rivers and aquifers that are responsible for holding fresh water used for consumption.

The increased temperatures lead to increase the growth of algae and other bacteria that father contaminates the water to a level that the current infrastructure is not equipped to treat. This will lead to increased health issues that will require governments and businesses to pay more for treatment of employees. Governments will also be required to spend more on health as its population will be exposed to a whole lot of infections related to water. On top of that, there will be an increased demand for clean water because of the prolonged droughts that will require that most farming industries and businesses will require water for irrigation. The human beings and agricultural animals will require more water for hydration because of the increased temperatures. The industrial factories will also require more water for cooling because of the increased atmospheric and water temperatures. This means that businesses in basically all sector of the economy are affected as they depend on clean water to run their operations.

Other than that, the world economy will be forced to shift into either nuclear power or the fossil fuel to produce electricity as the hydroelectric power plants will not be able to meet the demand. This is because there will be no enough water throughout the year thus. The use of fossil fuel will speed up the rate at which carbon dioxide concentration in the atmosphere increases and the nuclear power will require water to cool (Wada, and Bierkens, 2014). The impact of water shortages will vary depending on the region. Some areas will have more water while others will have an extreme crisis on water. But overall, the effects of the water crisis affects more than those areas that will benefit. This phenomenon is shown in the figure below.

The figure shows the different effects the change in climate and specifically the water crisis will have in the different parts of the world.

Additionally, the people and businesses located in the low altitude levels will experience severe flooding that will destroy their properties and even lead to displacement of people from the areas. This can lead to a world refugee crisis as the circumstances are able to create environmental refugees on a massive scale. This, in turn, will affect the economic sector as governments will be spending so much to protect the people and resettling them in areas that are saved. Presently, there are more than 900 million people who do not have access to clean water. Another 2.5 billion people lack access to proper sanitation (Alcamo, Henrichs, and Rösch, 2017). Therefore the situation will be worse in the future since the government will be concentrating on feeding its population and not building the economy. Businesses also will close down either because they have been displaced by the rising sea levels or by the lack of fresh water to run its operations.

Another important aspect of water is the direct relationship that exists between water and energy. Most people think of hydropower when they hear water and energy. But other than generation of electric power, water is used in the extraction and refining of other sources of energy like coal. Other forms of energy production also use water, for instance, the solar energy uses water to transform solar energy into heat energy. The vast amounts of energy used to treat and distribute water also show a close relationship between energy and water. Therefore, the energy production will be affected drastically as the business and company decision makers will concentrate on how to safeguard the water than how to increase the energy productions. A reduction in energy production means that many businesses will shut down since they will not be able to have enough energy to run its operations (Tas, 2013). Decision making for many firms is affected slowly as most firms are concentrating more on how to ensure a sustainable source of clean water than how to achieve its goals. Governments are also spending a lot of money trying to restore the natural ecosystem thus most of the world economies are stagnant and this will affect businesses adversely (Alcamo, Henrichs, and Rösch, 2017).

Conclusively, from the discussion above, it is evident that water is directly linked to business and the economy. For instance, water is used in almost all operations run by businesses. This ranges from production, consumption by the employees and even the raw materials needed by business need water. On top of that, the energy needed in production mostly need water in production, transformation and in the cooling of the machines. This means that without water there will be no energy and no business. The decision-making process also is dependent on water as most companies are turning to concentrate on how to get clean water for its processes. Therefore businesses should learn to measure water and carbon footprints through the value chain thus being able to develop a management strategy to safeguard water and limit pollution. Secondly, they should integrate water and climatic issue into the business strategies and operational activities. This will help safeguard the water quality and also plan on the changes in water supply. And finally, businesses should come up with the environmental risk assessment to help in long-term planning and implementation activities. This will ensure that the business is not caught off-guard by the water shortages that it had not planned for.


Alcamo, J., Henrichs, T., & Rösch, T. (2017). World water in 2025: Global modeling and scenario analysis for the world commission on water for the 21st century.

Gosling, S. N., & Arnell, N. W. (2016). A global assessment of the impact of climate change on water scarcity. Climatic Change134(3), 371-385.

Tas, E. (2013). Integrated water resources management. Aerul si Apa. Componente ale Mediului, 217.

Wada, Y., & Bierkens, M. F. (2014). Sustainability of global water use: past reconstruction and future projections. Environmental Research Letters9(10), 104003.



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