This page presents an introduction to and analysis of the dilemma. It does so through the integration of real-world scenarios and case studies, examination of emerging economy contexts and exploration of the specific business risks posed by the dilemma. It also suggests a range of actions that responsible companies can take in order to manage and mitigate those risks.
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, in certain areas on-going water pollution and climate change are likely to exacerbate water stress – which is a symptomatic consequence of scarcity – by reducing the amount of potable water available. As a result of these forecasted developments, access to water will, over time, become unreliable in many places, leading to water insecurity. Indeed, water crises due to failures to adapt to the effects of climate change was identified by the World Economic Forum's (WEF) 2017 Global Risks Report as one of the key risks that the world may face over the next 10 years.
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 8% contraction in its population – from 144 million to 133 million – by 2050.
However, even where countries may have sufficient internal water supplies, safe water for personal and domestic use may not be accessible to everyone. The UN estimated in 2016 that some 783 million people lacked access to safe drinking water and more than 2.4 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 helped lead the UN General Assembly to recognise access to clean water and sanitation as a human right.
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 advised to conduct an Environmental Impact Assessment (EIA). In addition, the application of such assessments 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 banks that apply the Equator Principles.
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. 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.
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) reports that it takes about 18,900 litres of water to produce 1kg of roasted coffee and 8,860 litres to produce 1kg of fresh tealeaves. The WFN has also estimated that approximately 85 billion m3 of water per year – or 3.7% of the global water use for crop production –is be required to sustain existing worldwide coffee consumption.
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.
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 wet processing of coffee involving the removal of the outer pulp and mucilage, and transportation of the waste products uses between 1,200 litres of water per 50kg of green coffee.
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 3% of the world's total freshwater is withdrawn for cotton cultivation. 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, 6,000-22,000 litres of water are required.
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. 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.
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.
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.
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. 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.
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 1,400 litres.
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. 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.
A transition to the greater use of biofuels is expected to increase its global water footprint tenfold, to an estimated 970 km2 per year in 2030. 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. As a result, the mining industry needs significant volumes of water for mining operations.
According to the United States Geological Survey (USGS), an estimated 5.3 billion gallons of water per day were withdrawn for mining purposes in the United States in 2010. This represented about 1% of total withdrawals of water by the country.
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. 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.
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.
For example, in Guatemala, it is alleged that water abstractions for irrigating sugar cane plantations has depleted the flow of major rivers, leaving local communities with insufficient water to support their households. Pollution of the remaining water resources threatens the health of indigenous populations who depended on them.
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, it is alleged that 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.
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. Coca-Cola reports that it uses about 2 litres of water to produce one litre of soft drink. 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, the amount of water required to produce soft drinks increases, with estimates ranging between 340 and 620 litres of water per litre of soft drink.
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.
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. The plant was subsequently shut down.
A community-led campaign in Mehdiganj, Varanasi, accused the company of exacerbating the water crisis in the area by over-abstracting groundwater for a bottling operation. The authorities ordered the plant to close in 2014 and remediate the damage it had caused. The company was also fined for violating land rights. Campaigns against the operations of the Coca-Cola bottling plants elsewhere in India continue. In 2017, more than a million traders in the state of Tamil Nadu boycotted soft drinks, including Coca-Cola and Pepsi, over concerns of excessive water consumption by large foreign companies.
In response to the continuing campaigns, Coca-Cola has undertaken water stewardship measures. In 2015, the company announced it has achieved its target of replenishing all the water it uses in its products by 2020. In that year, the company claimed to have returned 191.9 billion litres to the environment as treated wastewater in 248 projects across 71 counties; representing 115% of the water used in its global sales volume.
The company has also carried out Source Water Vulnerability Assessments and developed Source Water Protection Plans for every plant it operates. These require the mapping of water sources, assessing vulnerability of the source, and having management plans in place to protect water sources. To date over 3,700 mitigation actions have been identified globally.
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 –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.
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, allegedly leaving 45,000 people facing severe water shortage.
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.
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. 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.
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.
Nonetheless, the company continued to experience challenges to its operations in Kerala. 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 700,000 litres a day to 230,000 litres. In February 2017 the plant was finally closed by PepsiCo in the face of continuous protests by local people.
The challenge faced by PepsiCo – in addition to those faced by Coca-Cola – is how to ensure that soft drinks plants do not have an adverse impact on a local community's access to water. The case demonstrates that inadequate water planning can have a long-term and detrimental effect on a company's social licence to operate.
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 ecosystem services. The operations of Cerro Colorado, a subsidiary of the mining company BHP Billiton, have been subject to a number of complaints and legal actions by the Aymara community of Cancosa due to the alleged excessive use of groundwater. It is claimed that company abstractions have led to the draining of wetlands and water wells, and has negatively affected agriculture and grazing that supported local communities.
According to a 2010 study the Cerro Colorado project abstracts an average of 90 litres of water per second from protected wetlands in order to support its mining activities, despite only having a permit to extract 35 litres per second. Between 2013 and 2015, the company reported abstractions of around 3.5 billion litres per year. The Aymara allege that water use for the mine has resulted in the draining of almost the entirety of the Pampa Lagunilla section of the Andean wetland. The local communities claim that the water crisis drove indigenous peoples away to urban areas in search of unskilled work and education for their children.
In 2006, 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 (DGA) found the project to be a problem and imposed a monthly fine of approximately USD150,000 on BHP Billiton for causing environmental damage. Further lawsuits were filed by the Cancosa community between 2006 and 2008, including a compensation claim for USD40 million.
The mine is now reaching the end of its productive life. In 2015, BHP obtained an approval to extend operations until 2023. However, in the face of increasing costs, the company started the process for selling the mine in May 2017.
The problem of water scarcity alleged to be 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.
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.
However, the Water Code in Chile is currently undergoing reform and a draft Code was approved by the lower house in 2016. Currently awaiting approval by congress, the revised code will give priority to "human subsistence and environmental sustainability".
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.
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.
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.
In 2016, the Newmont Mining announced that they would abandon the Conga gold mine in the country's Cajamarca province and did not anticipate being able to develop the mine in the foreseeable future. While local opposition was cited as the primary reason behind the decision, other factors contributed, including regulatory uncertainty and market conditions.
The mine had previously been suspended on two occasions. Construction began in July 2011 but it 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 delays occurred after the government called for an independent review of the project's environmental impact assessment. Despite the assessment being approved and his previous hard-line attitude towards protesters, the president of Peru, Ollanta Humala, insisted on the mine's further suspension in August 2012.
In its 2011 annual report, Newmont stated that, having invested USD1 billion in the project (and an additional US$440m in 2012), it was prioritising the development of local water reservoirs in a "safe, socially and environmentally responsible manner'. Pedro Martinez, Chairperson of Peru's National Mining Society, 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 USD4.8 billon, 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.
This case demonstrates the difficulties facing mining projects in rural areas of countries which still rely on a significant amount of GDP from agriculture (7.88% in the case on Peru, as of 2015). 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.
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) and the Convention on the Rights of the Child (CRC). 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. 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". As of this date, 165 countries are parties to the ICESRC, and are required to "prevent [third parties] from compromising equal, affordable, and physical access to sufficient, safe and acceptable water".
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 169 countries as of September 2013. 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".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.
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:
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". 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".
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.
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.
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.
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:
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.
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:
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. Violations of such legislation will likely result in legal liability for companies.
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:
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.
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.
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 2010 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.
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 2016, 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.
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, were prevented from opening a water bottling plant in Cascade Locks, Oregon in May 2018. The company planned to withdraw 118 million gallons of spring water by 2020, bringing significant investment to a region of high unemployment. However, a successful campaign by concerned residents saw the plans voted down in a county-wide ballot, despite reassurances that the abstractions would not affect river flow.
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:
The UN ‘Protect, Respect and Remedy' Framework for Business and Human Rights provides guidance on how to protect individuals and communities from corporate related human rights harm.
The framework is comprised of three key principles:
Protect: The state duty to protect against human rights abuses by third parties, including business;
Respect: The corporate responsibility to respect human rights; and
Remedy: Greater access by victims to effective remedy, both judicial and non-judicial.
The framework states that in addition to complying with national laws businesses have a responsibility, in the context of the countries where they operate, to respect human rights through their own business activities and through their relationships with third parties – such as business partners and entities in their supply chains. To meet this responsibility, the framework notes that businesses should engage in human rights due diligence and specifies the main components of the process:
Policies: Including a human rights policy containing broad commitments, supported by more detailed guidance in specific functional areas
Impact assessment: Including assessments that explicitly reference internationally recognised human rights and are used by companies to avoid potential negative human rights impacts on an ongoing basis
Integration: Including the embedding of respect for human rights throughout a company
Tracking performance: Including regular updates of human rights impact and performance
The Guiding Principles for the Implementation of the UN "Protect, Respect and Remedy" Framework aim to provide "concrete and practical recommendations" about how businesses can operationalise their responsibility to respect human rights. According to the Guiding Principles, the responsibility to respect human rights requires responsible companies to:
The UNGPs apply to all States and to all business enterprises, both transnational and others, regardless of their size, sector, location, ownership and structure.
The UNGPs have experienced widespread uptake and support from both the public and private sectors, and numerous companies have publicly stated their commitment to the Guiding Principles. The UN Guiding Principles Reporting Framework is also used by companies to report on how they respect human rights.
Companies can seek specific guidance on this and other issues relating to international labour standards from the ILO Helpdesk. This aims to help company managers and workers understand the ILO approach to socially responsible labour practices and to assist in the development of good industrial relations.
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. 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. 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".
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:
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:
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:
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:
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:
Following are different water accounting methods/tools, including:
As each of these has its benefits and shortcomings, 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.
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:
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.
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:
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 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.
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 efficiency – 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. Companies might consider actively engaging, including via multi-company actions, in the formulation of a better water policy for all users by governments.
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:
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:
In addition, a telephone ‘hotline' or a complaints box can be supported by companies as mechanisms for receiving and addressing grievances.
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".
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".
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 living and the highest attainable standard of health, being integral to the realisation of these two rights.
The right to water has also been implied under the right to adequate housing and adequate food, 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:
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:
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.
See Access to Water case studies
@TalkHumanRights / @globalcompact
Website: By Verisk Maplecroft in partnership with the United Nations Global Compact