Water is essential for life, whether to irrigate crops, to manufacture goods, or for drinking, washing and cleaning. But the intensification of climate change, a growing population and increasing demands from cities, agriculture and industry – coupled with poor water governance – is driving acute water shortages around the world.

The World Bank predicts that by 2050 this scarcity will deliver a significant hit to the economies of Africa, central Asia and the Middle East, taking double digits off their GDP.

To address these challenges and ensure that every person, country and business has enough, it is essential to determine the true value of water throughout the supply chain. But how?

This was the question debated during a panel discussion, hosted by the Guardian and supported by SABMiller, at the World Water Week conference in Stockholm, Sweden, which was organised in association with the Stockholm International Water Institute (SIWI).

Lack of awareness

The panel was unanimous that water is not valued in the way it should be. Lack of awareness was suggested as a likely cause.

“In places where farmers have been hit by drought to the point that it’s impacted their livelihoods, water has become a valued resource,” said Paul Reig, senior associate of the Water Programme and Business Centre at the World Resources Institute. “It is places that haven’t suffered this kind of impact that lack awareness.”

Reig has been working with Valuing Nature, a sustainability consultancy, to understand the value of water in terms of the cost of delivering it in socially, environmentally and economically beneficial ways. “We think that by understanding the total cost, it could inform the level of investment needed to reach those conditions, as well as the largest impacts that are impeding their achievement,” he said.

Thirsty agriculture

The panel agreed that the agriculture sector has a long way to go before it adequately values water. “Agriculture is the largest consumer and the largest polluter of water,” said Reig. “Despite this, it’s difficult to ask farmers to pay for water when they struggle to make a living.”

John Vidal, the Guardian’s Environment editor who chaired the debate, asked whether farmers need to think differently about how they grow and irrigate crops, if they are unwilling or unable to pay for water.

“I think it’s already happening,” said Anton Earle, director of SIWI’s African Regional Centre. The government of Botswana is looking at ways to introduce a water charge for farmers and the farmers SIWI speaks to there say they are already using efficient techniques for irrigation to reduce the cost of powering pumps, he said.

Speaking companies’ language

It is not only in agriculture, however, where operations and processes need to be more water efficient.

SIWI has been working with Swedish textile companies to encourage their production plants in countries such as Bangladesh, China and Ethiopia to place greater value on water. “We talk to these factories and say: ‘You’re using and polluting many of the water resources in the local area – you should change your practices’, but factory owners would rather sell to a business that is less pushy,” said Earle.

Instead, the key was to find the right language businesses could respond to. “We asked them about their major costs and they consistently pointed to energy and the chemicals used to dye textiles. We told them we could introduce processes that would reduce those costs,” said Earle. “So instead of dyeing fabric three or four times and releasing the water, they do it once, capture the chemicals and reuse them. Improving water use is a side effect but the entry point had to be something that the corporates could really relate to.”

But individual corporate action does not necessarily mean water is being better valued overall. André Fourie, head of water security and environmental value at SABMiller, described the company’s work with barley farmers in India, where he says agriculture accounts for 80% of water consumption. “By having better irrigation – drip irrigation [where water is directed at the plant’s root], for example – they save water. But we’ve also seen that the water they save is used by someone else, so we haven’t actually solved the problem.”

One of the most effective ways for companies to determine the value of water, says Fourie, is to develop a better understanding of what it costs throughout different parts of the business. “By having one price [for water] in our thinking it makes our decisions quite blunt. Take a brewery: the water that comes into it has one price, but if the brewery treats it the water is worth more.”

Should we pay more for water?

One of the key challenges in securing a long-term supply of water is finding sustainable streams of finance and working out who should bear the cost.

“In many cases, there is a cultural issue around making profit from water, even in countries where the private sector has played a strong role in different parts of the economy,” said Earle.

When it was suggested to the National Treasury of South Africa that the country’s wastewater treatment could be handled by the private sector on the condition that the business could sell off the treated water, the idea, said Earle, was not met with open arms.

In some areas, however, many of the poorest people have to buy water from vendors, tankers and other informal providers, and spend as much as 10 times more than someone who has a reliable connection in the home. While this situation reveals deep inequalities, it also shows that there is a willingness to pay.

Monika Freyman, director of Investor Water Initiatives at non-profit Ceres, agreed that asking domestic users to pay for water could be a way of increasing the value placed on it, as well as leveraging the money needed to secure supply.

“Many investors, when they look at private solutions or public-private partnerships, are beginning to ask: ‘How can we ensure that those at the bottom of the pyramid can afford and have access to water?’ I think privatisation can work but you have to have pretty strong policies and stewardship from the regulators to go with it.”

Freyman believes that the corporate and investment community can value water better by understanding the risks of inefficient water management. “Many companies are beginning to assess the money they’re leaving on the table by not getting water management right,” she said. “In the past, the investment community was obsessed with the volumes of water they were using, but I think the bigger question now is: what are the lost opportunities around not understanding and managing water well?”

At the table

Chair – John Vidal, environment editor, The Guardian

Anton Earle, director, Africa Regional Centre, Stockholm International Water Institute

André Fourie, head of water security and environmental value, SABMiller

Monika Freyman, director, Investor Water Initiatives, Ceres

Paul Reig, senior associate, Water Program and Business Center, World Resources Institute