Thirsty work

Features

"Water security is fast rising up the agenda as a critical business issue, with companies becoming aware that water availability, linked to changing climate and increasing consumption, could have a significant impact on their direct operations, supply chains, and the communities where they operate. How companies plan and respond today could have significant implications for future business success."
Geoff Lane, Sustainability and Climate Change Partner, PricewaterhouseCoopers

According to the International Monetary Fund, more than half of the worlds available freshwater is already in use and, by some estimates, it could increase to as much as 90% by 2025.

Water is essential to mining and metals production. Production involves activities that can require significant volumes of water for processing and cooling and without access to high volumes of fresh water, neither of these critical processes can take place.

In addition, the by-product of many mining processes is water, which raises water quality issues for the surrounding environment. The water in the energy supply chain, required for cooling water or hydro-electric power, should not be underestimated as a potential threat to production.

Accordingly, the industry faces three significant types of risk with regard to water: physical, regulatory and reputational.

• Physical risks: reduced water supply could interrupt production due to insufficient process water. Equally, a failure to meet discharge requirements for wastewater or any major incident (e.g. dam failure or leaching into groundwater) could also close a plant;
• Regulatory risks: potential for higher prices for water or fewer abstraction licenses; and
• Reputational risks: conflict with local communities over access to water and concerns raised by shareholders. For example, gold mining operations have been subject to campaigns over extraction of glacial waters in Chile and from aquifers in water-stressed Nevada, demonstrating it is not just an issue in the developing world.

Despite the risks, this trend also presents significant opportunities. Companies that develop efficient solutions and commodities or products with a low water footprint will be increasingly in demand. But to do so, water needs to be treated in its own unique way.

Is water another carbon?

Despite water beginning to be seen as significant an issue as carbon by some companies, it cannot be treated in the same way. Whereas carbon can be traded in certain markets, water cannot readily be transferred between basins and therefore solutions must be sought within the region.

Some companies are considering concepts such as ‘water neutrality’ and ‘water trading’, but these remain at the concept stage. Apart from water being a more localised issue than carbon, it is also potentially a more serious issue. Loss of water supply is a ‘show-stopper’ for mining operations, which is difficult to overcome at short notice.

Where’s the catch?

Local factors make it difficult to manage water at a global level. An operation may be able to happily co-exist in a catchment area with plentiful resources and limited other water consumers; yet the same operation would have significant environmental and social impacts in another more sensitive location.
Traditionally, water shortages have been tackled with an engineering solution to increase supply or improve efficiency, however a technological approach may not always be the most cost effective or sustainable solution.
The private sector is now looking at improving catchment management, through working with local farmers or landowners to maintain water levels and introduce more efficient agricultural practices. This can work out more economical than a major capital investment in upgrading facilities.

A corporate or a local issue?

While solutions for water access problems may not be delivered at a corporate level, a global approach to risk assessments should be adopted across operations, with key questions being raised before investments are approved. Companies should consider the following at site-level:

• Is there adequate information on the key sources of water demand and supply in the region?
• Have water risk assessments been conducted at a site level?
• How will climate change affect the watershed and is there an adaptation strategy?
• Does someone have clear responsibility for water issues?
• Has the right balance between managing water and energy costs been achieved?
• Has there been appropriate engagement with the right stakeholders on water issues?
• How would future water shortages affect production or the value of asset?

Reporting gaps

Mining companies are already developing strategies to manage water risks and reporting on their performance in some areas, including:
• Corporate water footprints
• Levels of water recycling
• Water intensity of products
• Water balance at site level
• Site-specific water management plans and efficiency targets
• Stakeholder engagement programmes and research
• Case studies on water partnerships

While information on water use is essential for managing operations, there is a trend emerging for a greater focus on strategy and risks, rather than simply disclosing overall levels of consumption and recycling without any local context. In February 2009, the US CERES coalition of responsible investors published a report with the Pacific Institute outlining the growing risks from water scarcity facing various sectors, including mining. Greater disclosure is likely to be requested from mining companies regarding assessment of water risks and the strategy for managing them, given the potential impacts water could have on the industry. Importantly, as the race to secure water supplies heats up, there will be benefits for those who have developed their understanding about the water catchments they are operating in, and identifying the most efficient solutions.