(Reuters) - From cotton farms to factories that make high-tech computer chips, companies face huge risks from droughts like those searing California and Australia and that recently parched the U.S. Southeast.
Climate scientists say droughts will become more common as higher temperatures evaporate water supplies and overuse drain aquifers faster than they can be replenished by natural cycles.
Large cities in China and India are also at risk from droughts as mountain glaciers shrink on the Tibetan plateau.
The risks to big business range from actual physical shortages of water, to rising costs for meeting water quality regulations, to conflicts with local communities.
Below are some sectors that face risk from water scarcity.
— AGRICULTURE. About 70 percent of global water used is for agriculture, in some developing countries where populations are growing fastest that figure is as much as 90 percent. Australia’s drought helped sharply boost global rice prices last year. Companies that make products that require large amount of water, such as meat and biofuels, face drought risks.
— BEVERAGES. Coca-Cola and PepsiCo bottlers lost licenses to operate in Kerala, India while major beverage firms face opposition to new plants. Bottled water companies also face opposition in places where water is scarce. Some consumers are drinking more tap water for environmental reasons.
— HIGH TECH. More than half of the world’s largest semiconductor factories are in the Asia-Pacific, where water risks are severe. Silicon chips take large amounts of clean water to make and factories face competition with local populations.
— ELECTRICITY GENERATION. Droughts can severely cut power generation from hydropower, an electricity source that is low in greenhouse gas emissions. In 2001, a drought in Brazil dramatically cut energy output.
— APPAREL. Cotton and other raw materials of clothes face risks as droughts slash agricultural yields.
— BIOTECH PHARMACEUTICALS. Companies face new cleanup costs from new regulations to cut the concentration of chemicals and microbes in their waste water streams
— FOREST PRODUCTS. Water-intensive pulp and paper manufacturing faces risks from droughts, increased costs for water and regulatory costs.
— METALS/MINING. Companies face regulatory risks from their waste water streams. Mines use lots of water and face competition with local populations.
(Sources: Ceres, Pacific Institute)
Reporting by Timothy Gardner, editing by Mary Milliken