State of Sustainability Podcast

Solo Episode: Water — A Corporate Sustainability Primer

SAIF: Welcome back to another episode of the State of Sustainability. I'm your host Saif Hamid, founder and CEO of Altruistiq.

Today we're talking about water. Water is messy, complex, and underappreciated — and there are people who know it far better than I could pretend to. What I want to do in this episode is talk in broad themes about the state of water in the context of corporate sustainability, where regulation is heading, and what companies should actually be doing about it. This is a primer; there is far too much in this topic for one episode to do it justice, and we will likely come back to it.

Water vs Carbon: The Key Differences

In food and beverage, the vast majority of water impact is upstream — in agriculture, in the crops being grown. That is the primary context for this episode.

Carbon, by comparison, is distributed differently depending on where a company sits in the value chain. A food and beverage company might see 60 to 70% or more of its carbon impact upstream. A fertiliser or pesticide company sits further upstream still, and much of its impact is downstream — in how farmers use its products, not in the production process itself. With water, this distribution is far more consistent: typically 70 to 90% of water impact is agricultural, driven by withdrawal, regardless of where you sit.

The second and more fundamental difference is fungibility. A tonne of CO2 emitted from a factory in Scotland and a tonne emitted from a factory in Pakistan have, for practical environmental accounting purposes, the same effect. Both go into the same atmosphere. Carbon is fungible. Water is not.

Where water is withdrawn and where it is polluted matter enormously. A water-stressed basin in one region is an entirely different problem from a water-abundant one in another. This means you cannot aggregate water impacts the same way you aggregate carbon impacts — and any analysis that tries to do so will mislead more than it clarifies.

The third difference is that water has several distinct dimensions that carbon does not. With carbon, you are primarily tracking emissions generation. With water, you need to think about at least three things: withdrawal, meaning how much water stress you are creating through abstraction; pollution, meaning how much you are degrading local water quality; and scarcity impact on your own business, which under double materiality is the flip side — not just your impact on the environment, but the environment's impact on you. Water scarcity can manifest catastrophically and suddenly. A drought next summer in a key sourcing region is not a 2040 planning scenario; it is an operational risk for the current fiscal year.

Despite all of this, sustainability teams in food and beverage companies I speak with consistently rank CO2 as their primary focus, with water somewhere around second or third, alongside single-use plastics. I think that is a dangerous ordering. A compelling case can be made that water scarcity will be at least as consequential for humanity as greenhouse gas emissions — and in many near-term scenarios, more so.

The Regulatory Picture

Water regulation comes in two families: disclosure and permitting.

On the disclosure side, the Omnibus simplification process has broadly been a step back. CSRD scope was narrowed — fewer companies required to report, fewer metrics, less granularity. Water-related metrics including water intensity per million euros of revenue and marine resource impacts were among the casualties. Disclosure requirements around water have been simplified or removed in the near term.

On permitting, however, the direction is the opposite. EU directives are beginning to reference microplastics and specific chemical substances as hazardous materials for permitting purposes. They are also shifting from input-based assessment toward outcome and impact-based assessment. Water permitting is becoming a more tightly controlled and more carefully scrutinised area.

A recent development worth watching: Wallonia, the French-speaking region of Belgium, has refused Google a water permit for an AI data centre. This is one of the first such refusals in recent memory. Food and beverage companies have historically received their water permits without significant challenge, but they also have substantially higher water impacts than data centres. As permitting authorities become more rigorous and politically exposed to water scarcity concerns, the question becomes whether food and beverage companies will face the same scrutiny.

The practical implication of this regulatory split: disclosure is a softer lever, while permitting is an existential one. A company that cannot renew or obtain a water permit for a manufacturing site cannot operate. That makes permitting risk a financially material issue in a way that disclosure requirements often are not.

Green, Blue, and Grey: Not All Water Is the Same

One of the most useful frameworks for thinking about water impact is the distinction between green, blue, and grey water.

Green water is rainwater stored in the soil and consumed by plants. It is not abstracted from rivers or aquifers — it is embedded in the land itself. The majority of agricultural water use falls into this category. The opportunity cost of green water is land, not water: the question is what you do with a given piece of land, not where you bring the water from.

Blue water is surface water and groundwater that is withdrawn and consumed. It is either incorporated into the product or lost through evaporation, cooling systems, or returned to a different basin at a different time. Blue water competes across uses — agriculture, industry, domestic consumption — and scarcity of blue water is the dimension most directly tied to the social and ecological water crises we read about.

Grey water is more abstract: it is the theoretical volume of water required to dilute a pollutant down to ambient ecological quality standards. It is essentially a pollution metric expressed in water terms.

The problem is that corporate reporting tends to combine green, blue, and grey into a single headline number. These three things are not comparable and are not managed through the same levers. Grey water is managed by reducing pollution at source. Blue water is managed through operational efficiency and abstraction reduction. Green water is managed through land-use decisions. Treating them as one number produces an aggregate that obscures more than it reveals.

There is also a related trap in how efficiency metrics are used. Improving irrigation efficiency on a farm — reducing water use per unit of crop — can lead to the same amount of water being withdrawn from the basin overall, because farmers use the efficiency gains to grow more output rather than to abstract less. If the problem you are trying to solve is basin-level scarcity, efficiency per unit of output is the wrong metric. You need to be looking at total abstraction from the basin, not efficiency ratios.

Where Companies Should Focus

The risk lens should come before the reporting lens. Here is how I would structure it.

License to operate — permitting risk. If your business has manufacturing sites with permit renewals coming up, or is planning new sites, understanding your permitting exposure is urgent. As regulatory scrutiny of water use tightens, permits that would once have been routine may become contested. This is a direct operational and financial risk, and it needs to be mapped and managed.

License to operate — reputational risk. As blue water scarcity increases and becomes more visible, there is a growing risk that corporations are positioned as the villains of water shortage in areas where they operate or source. Shell's legacy in Nigeria — still being managed decades later — is the paradigm case. In water-stressed sourcing regions, being seen as a driver of scarcity is a long-term reputational risk with real commercial consequences.

Supply chain water risk. Water scarcity and water excess both affect yields. A drought in a key sourcing basin can devastate the crop you depend on. Flooding can destroy logistics and harvests alike. Mapping your supply chain against water risk at a basin level — not just at an efficiency metric level — is the foundation for managing this. It also creates a tension: you want to consolidate and invest in key suppliers to build resilience, but you also need geographic diversification as a hedge against basin-level events. Both impulses are right and need to be held in balance.

Water pricing. The case for internal carbon pricing has been made in sustainability circles for years, with moderate uptake. The case for internal water pricing is at least as strong. In China, water-related fees are already overseen by the same authorities as taxation, with non-payment affecting a company's tax assessment. As water permitting tightens globally and water scarcity events become more frequent, having some form of water-cost modelling in financial planning will go from a nice-to-have to a necessity.

The somewhat counterintuitive conclusion is that if you focus on water risk — permitting, supply chain resilience, reputational exposure — you will very likely end up reducing your water utilisation and improving your reporting metrics as a by-product. Managing for risk leads to the same operational outcomes that managing for disclosure would, but with a stronger business rationale and a more direct connection to financial value.

This is a big, complex, and underexplored topic, and this episode is a primer rather than the full treatment it deserves. We will come back to it. If you have areas you think deserve more discussion, please drop me a message or an email — details are in the show notes. Thank you for listening, and please consider leaving a review or sharing this episode with a friend.

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