Groundwater: The Risk Less Seen

Groundwater: The Risk Less Seen

Over the past month, several articles from various news sources have centred on the depletion of groundwater aquifers within the United States, stating that “45% of the wells examined showed a statistically significant decline in water levels since 1980”, with “last year being the worst yet” for record low water levels. This issue is a global phenomenon, with aquifer depletion leading to a whole host of problems around the globe and presenting new risks to operations.

Aquifers are bodies of rock or sediment that retain groundwater beneath the surface. Located around the world from deserts to lush jungles, groundwater is a resource that has been leveraged by populations for farming, industry and conventional drinking water via wells. This usage, while nothing new, has been compounded by lax regulations and difficult enforcement, changes in precipitation necessitating increased withdrawals, and higher levels of demand for water as a resource.

As water scarcity goes, it is generally an unseen risk unless you are directly exposed to it, yet with both the trend of depletion and compounding factors accelerating, it is now front and centre for communities and businesses alike. Some of the most at-risk industries include:

• Data centres and internet hubs.
  Data centres, the backbone of our modern internet and mission-critical to almost every business operation, are large consumers of water. Some estimates for larger centres place consumption at between 1 million and 5 million gallons of water per day. This water is used primarily for cooling the racks of servers that comprise the ‘cloud’ that the vast majority of organizations use to store and process data. From Arizona to Spain, local communities are pushing back against those centres that are already in operation, and those that are proposed, due to their large – and often discrete – water consumption. Fuelling this debate is the integration of AI and other advanced technologies, which some experts have linked to Microsoft’s water consumption growth – amounting to a disclosed increase of 34% – over the 2021 to 2022 period. As businesses increasingly leverage these tools, data centre providers and local communities will be required to revisit the permitting table.
• Traditional agricultural and livestock operations.
  According to some estimates, around 70% of groundwater extraction across the globe is utilized for agricultural and livestock operations. This number is projected to increase due to the growth in populations and the subsequent need to feed them. Unlike some industrial processes, these operations have limited ability to recycle the used water – given its high levels of contamination – and thus continue to rely on groundwater sources. This problem is compounded by droughts and spells of inconsistent precipitation, throughout which groundwater has been used as a backup supply. As climate change exacerbates this problem globally, farmers and ranchers will have to search for other sources of water as they over-extract water tables.
• Real estate.
  Just like agricultural operations, many real estate developments rely on groundwater as a source for locations far away from surface water sources. Communities across the American Southwest, India and Bangladesh leverage groundwater extensively as a source of drinking water. However, these very same areas have undergone massive population increases in previous years, which has put unsustainable pressure on these water tables. Neighbourhoods in Scottsdale, Arizona have had their water cut off to ensure supplies for residents when faced with extreme drought. However, for these communities, the challenge extends deeper than the availability of water – it also involves ground subsidence. As aquifers are depleted, the immense weight of the strata and community above collapse the permeable space, and thus ground levels sink, in some cases so much that the people above have had to take steps to reinforce foundations and structures, consider shifting locations, and more.

As this trend continues, firms need to re-evaluate their risk exposure to groundwater depletion and what this means for both their internal operations, larger supply chain resilience, and consumer behaviours. Further risks arise on the financial side, as valuations can drop, as well as losing potential future investment. For more information on the risks associated with water, see Verdantix Strategic Focus: Industrial Water Risk Criticality.