Today, more than ever, water is not only an environmental issue, but also an economic, social and geopolitical one. According to a joint study by the World Economic Forum and McKinsey, 60 per cent of global GDP depends directly or indirectly on water and freshwater ecosystems. A figure that alone would be enough to explain why the global water crisis is one of the greatest challenges of our time.
A system under pressure
The world’s water system is increasingly unbalanced, with some 4 billion people facing a severe emergency related to water scarcity each year. As global temperatures rise, between 3 and 4 billion people would face an even more acute water emergency. At the same time, rainfall has become more extreme and erratic: 709 million people live in areas where rainfall has increased in intensity, whilst 86 million face the opposite phenomenon. The result? Heavy rains, floods, landslides, droughts, and a steady degradation of water quality.
Water-related disasters—such as floods and drought waves—are responsible for more than half of the deaths caused by natural disasters. But it’s not just about human lives: water vulnerability also carries a gigantic economic risk, with $77 billion at risk in the supply chain of key sectors such as agribusiness, manufacturing and materials alone.
Water as the (invisible) engine of the economy
Water is everywhere, even where we don’t imagine it. It is used to irrigate fields, cool data centres, refine materials, produce drugs, build cars, even to support the growth of artificial intelligence. Every industrial activity, in one way or another, is linked to water. According to the report, the annual economic value of water is around $58 trillion, which is equivalent to nearly two-thirds of the world’s GDP.
By 2023, 25 countries that are home to about a quarter of the world’s population have already reached extreme levels of water stress, or withdrawals exceeding 80 per cent of renewable resources. These include India, with 1.4 billion people, but economic giants such as China and the United States are also facing unsustainable use of water resources.
The other side of growth: rising demand, falling resources
As per capita water availability declines—in China, for example, it has fallen by 50 per cent in half a century—global demand continues to grow. Per capita withdrawal has increased by more than 650 per cent in the last 30 years. And not only for agriculture, which still consumes 70 per cent of global freshwater, but also for new industrial needs, such as data centres, which are critical to the digital world. A single one-megawatt data centre can use over 25 million litres of water per year for cooling alone: enough to meet the daily needs of 300,000 people.
The risk of a point of no return
Competition for water is already a reality. Agriculture, industry, urban centres and the natural environment are competing for the same resource. If this imbalance continues, the risk is to pass a point of no return. Without intervention, high-income countries could lose up to 8 per cent of their GDP by 2050, whilst low-income countries risk a 10 to 15 per cent collapse.
But there is also positive news: action can be taken, and the investments needed are known. The World Resources Institute estimates that sustainable water management will require about $1,040 billion a year through 2030. That’s a huge amount, certainly, but manageable when compared to the economic value of water itself. More importantly, it is an expense that can become an opportunity: it is estimated that the private sector can contribute more than 55 per cent of the capital needed, leveraging technological innovations and water resilience strategies.
