Supply Chain Water Footprint - The Risk You Likely Aren't Mitigating

by Source Intelligence

on October 25, 2021

The concept of carbon footprints has received a lot of attention in the news. Many organizations have programs in place to reduce Greenhouse Gas (GHG) emissions; governments are putting the fight against climate change high on their legislative agenda.


What has not yet reached the same level of awareness is the concept of a water footprint, although businesses are increasingly incorporating the issue in their sustainability initiatives.


Water may be a renewable resource, but it is not unlimited and climate change affects freshwater lifecycle to a degree that can or already does induce supply chain disruptions.



Understanding How To Measure Water Footprint



A business’s water footprint is the total water it uses to produce its goods and services throughout the supply chain: extracting materials, growing crops, fabricating, processing, washing, diluting, cooling, transporting, and more. It also includes water consumed in buildings for human use, maintenance, and sanitation.

blue waterWe distinguish three measurement categories per the Water Footprint Network:

  • Blue water footprint: the freshwater from freshwater lakes, rivers, and aquifers that is consumed by a company because of the production of the goods or services it provides.
  • Green water footprint: the volume of rainwater consumed during the production process. 
  • Grey (or gray) water footprint: the pollution of freshwater during product production.



Supply Chain Risks Associated With Water Footprint



One of the 17 UN Sustainable Development Goals (SDGs) is to ensure availability and sustainable management of water and sanitation for all, knowing that 2.3 billion people live in water-stressed countries.


Some industries are heavier consumers of water than others. Large amounts are needed to produce food, paper, chemicals, refined petroleum, or primary metals. Of the commodities that require the most water usage, clothing accounts for two-thirds of freshwater use. It is therefore worrying to learn that some of the main cotton-producing countries are under water stress: China, India, Pakistan, Turkey, and the US. According to The Conscious Challenge, In China, 80% to 90% of fabric, yarn and plastic-based fibers are made in water-scarce or water-stressed regions.


Operational Risks


As water availability or quality decreases, water costs increase. Scarcity can also lead to conflict in communities or with companies that are big users. The operational impact works its way up the supply chain mainly in price increases for raw materials.


Scarcity and more frequent/longer droughts can halt production and disrupt the value chain at any point. One single cog stops and the entire machine is impacted to the point of costly delays and shortages.


Reputational Damage


Companies operating or working with suppliers in regions where the population has limited access to water can significantly harm a brand. Consumers are unlikely to support competition between a business’s needs and those of humans or even animals, especially livestock which may be the livelihood of entire communities.


Stakeholders can also blame an organization for buying from sources that disregard proper water management and have little concern over polluting freshwater bodies.


Regulatory Impacts


Caps and restrictions are also risk factors. Countries under water stress are implementing these measures, putting pressure on their main utilities and hereby threatening production facilities. For instance, China may be the largest virtual water exporter, yet it is water scarce. Some pilot programs are underway to help attain self-sufficiency, as outlined in its Made In China 2025 plan.



Water Governance: Measuring Water Footprint And Mapping Risks



The impact of a product on global water resources can only be relevantly measured if the whole supply chain falls under the assessment scope. While the environmental impact of consumption and pollution is material, a water footprint assessment is more a measuring process: how water is appropriated for human purposes.


Water Footprint Assessment Process


Measuring a product’s water footprint follows a four-step process.

Water Footprint Assessment Process copy  

1. Setting Goals And Scope


When determining goals and scope, it’s important to answer the following questions:

  • Which footprint is it most relevant to assess? It can be a process step, a product, within a region or a country, or of a business/supplier.
  • What is the target? Raise awareness, improve processes, optimize production times?
  • Are we measuring direct or indirect water footprint?
  • Which water category will be in scope, blue, green, gray, all three?
  • What product to consider? A single SKU, a family of products, a particular brand in the portfolio?


2. Water Footprint Accounting


Next is determining what metrics make the most sense and what types of data are available.


For green water footprint, include production-related evapotranspiration and water contained in the product, from soil and vegetation and ground/surface reserves.


For blue water footprint, measure production-related evapotranspiration and water contained in the product, and water transfer. It is important to note that we either count the water footprint of a product, a producer, or a process step so as to not double count.


3. Water Footprint Sustainability Assessment


The assessment is an analysis of the water resources’ availability and how it is allocated. This comparison can be approached on several levels - environmental, social, economic – and the footprint impacts can be primary or secondary. Sustainability will depend on geography, season, operational practices of the suppliers, process needs (for growing, mining or extracting, and for production), etc.


Some of the data to collect can include:


  • Crop parameters, maps, yields
  • Soil and irrigation maps
  • Fertilizer and pesticides application rates
  • Precipitations
  • Quality standards
  • Concentration of water bodies
  • Design and product formulation
  • Consumption measured at the meter


4. Water Footprint Response Formulation


Based on collected data, you can map the risk across your supply chain and rate sustainability results. From there, it will be easier to make decisions. If a component is scored unsustainable for instance, can you remove it or rethink its production process?


There are numerous response options that will be dictated by the goals you set and how they fit in your sustainability strategy.


For example, you can respond by:

  • Increasing land productivity
  • Encouraging producers to mulch
  • Design better ways to reuse water
  • Share best practices
  • Recycle chemicals
  • Improve cooling systems
  • And many more


But most of all, working with your suppliers is paramount. Agree on reduction targets and encourage transparency and commitment. Other solutions may be to invest in communities or compensate users who are affected by water use.



What Now? Collecting Data With Source Intelligence



Protecting our water resources is a goal that naturally fits with your sustainability goals as it has such an impact on the environment and people’s welfare.


To help you collect data at the (freshwater) source – pun intended – we have designed a program that gets you the information you need downstream the supply chain. It marks the spots where water usage is coming from. We aggregate the data into levels of risk and provide individual and overall water footprint summaries. The reports deliver great insights into where to act and lower risks and obtain greater security and transparency in production inputs.


Water scarcity, pollution, restrictions, local conflicts over water can disrupt supply, lead to increased or more volatile prices, and/or negatively impact access to raw materials. Managing water risks will lead to savings and a strengthened relationship with your suppliers, ultimately resulting in a competitive advantage.


Request a demo of our Water Footprint Solution to see how you can prevent supply chain disruptions. 


Request a Demo

Read More of What You Like.

Verified Supplier Data is a Huge Compliance Issue for Retailers

Understanding the Regional Supply Chain Risks in the Middle East

How To Utilize Virtual Audits To Dramatically Reduce Your Supplier Risk