Clean water access offers flood of business opportunities

Water security is on central government agenda as it opens floodgates to business opportunities by setting targets for usage and recycling

PUBLISHED : Monday, 28 July, 2014, 4:26am
UPDATED : Monday, 28 July, 2014, 6:56am

Access to clean water to quench the thirst of a growing global population is threatening to be one of the defining struggles for future generations.

Last year, the Organisation for Economic Cooperation and Development called "water security" a "major policy challenge" and in 2012, a US government report identified water as a potential "weapon" that powerful upstream countries might wield against downstream rivals.

At its heart, the debate revolves around consumption demands, and whether or not it is possible to adjust them sufficiently to avert future water shocks. Companies can play a major role by discovering new technologies and business solutions that cut water usage, said analysts, while a carrot-and-stick approach to check current trends could include water tariff increases and stiffer penalties for polluting.

"The water issue has the potential to be cataclysmic," said Michele Ledgerwood, senior associate at the Washington-based policy Centre for Strategic and International Studies.

A specialist in identifying disruptive trends, Ledgerwood said there are solutions. "We have to be optimistic and look at what can make a difference."

Water-related businesses, like waste water recycling, are part of a US$600 billion sector that is growing 7 per cent each year, according to Sarbjit Nahal, equity strategist at Bank of America Merrill Lynch.

China alone is looking at US$750 billion worth of power-related projects, many linked to water recycling, said Debra Tan, director of Hong Kong-based research group China Water Risk.

This May, the central government approved 170 water-saving-related projects, including irrigation schemes, to be launched before 2020, offering a flood of business opportunities for related firms.

Beijing is also rolling out a tiered payment structure so heavier users pay more. It has threatened fines and censorship on companies breaching pollution guidelines, though detractors often argue such penalities do not go far enough.

The challenges facing China are formidable. Nahal said 45 per cent of the nation's gross domestic product comes from "water-stressed provinces" and that 90 per cent of water used for agriculture is wasted.

Around 60 per cent of groundwater is either bad or very bad quality, according to China Water Risk, thanks in part to decades of heavy pollutants leeching through the soil, while a lack of water in parched rural areas is now forcing people to leave long-established communities.

While cities are unlikely to run out of water, shortages would force Beijing to prioritise who gets to keep the taps running. To help stave off such a scenario, the government is spending upwards of 500 billion yuan (HK$629 billion) to divert water from the Yangtze River to the drier northern provinces.

Government targets to reduce usage and waste water means building treatment plants for factories and power plants is a growing business, said James Peng, China solution director at Veolia Water Technologies.

Despite the diligence of some household members to have quick showers and recycle rainwater, the thirstiest users by far are farms and industry. Chinese factories waste four to 10 times more water than Western counterparts, but Tan said this gap can be quickly closed by installing existing technologies.

Chemicals giant BASF is developing new technologies to better break down industrial waste, and said it aims to halve its use of drinking water in manufacturing by 2020. Its China operation used 6.1 million cubic metres of water last year.

Companies are developing "incredibly off-the-wall innovative ideas that are working," said Ledgerwood.

Breakthroughs will be needed to help change how water is used.

In one example, US-based clothing designer Patagonia is working on a waterless dyeing technique that could save a lot of water in China and other textile heavy economies, said Tan.

Some countries have shown water efficiency can be achieved. In Israel, recycled water usage is around 80 per cent, versus a global norm of 2.4 per cent.

Without similar efforts made elsewhere, Nadal estimates 45 per cent of projected 2050 global GDP - roughly US$63 trillion - could be at risk.

New ideas cannot come soon enough. In China, environmental degradation is already taking a toll on peoples' health, and for those that can afford to emigrate, their choice of residence.

"Two-thirds of wealthy people who have left the country or expressed plans to leave country cited environmental issues as one of their reasons," said Nahal.