Adaptation measures of energy and utility companies to cope with water scarcity induced by climate change

While business plays a fundamental role in causing climate change through the emission of a large amount of GHGs, climate-induced physical changes can in turn affect companies. The IPCC (2012) reports an increasing frequency and severity of extreme weather and climate events. Among these, droughts represent a major challenge for business, both in terms of exacerbation of dry climates and of the increase in number of territories that experience water shortage. Energy industry and utilities are particularly challenged by droughts. Since a shift in the electricity sector away from traditional coal power plants may result in either more or less water consumption, energy trends shape water demand (Macknick et al., 2012). Based on an empirical analysis of the energy and utility sectors, the objective of this research is twofold: on the one hand to examine how companies perceive the changes in water availability induced by climate change and the potential impacts on business; on the other hand to analyse the corresponding measures that these companies adopt for coping with changes in hydrology and water resources driven by climate change. Data from the Carbon Disclosure Project (CDP) provide the research with valuable information about business climate-related responses of the world’s largest firms. Among 198 scanned firms, 74 energy and utility companies had the perception of water shortage related to climate change as a salient issue according to CDP 2011 questionnaire. The paper derives three main levels of impacts related to changes in hydrology and water resources: company infrastructure (e.g. personnel, production plants, operations, and supply channels); supply, demand and competitive conditions of market; regulations and other frameworks, including relationships with communities and local industries. Grounding on this, the study sheds some light on the design of adaptation measures to address risks and opportunities related to water scarcity in terms of technical solutions (e.g. water storage), diversification (e.g. investing in renewables), relocation, and cooperation with governments and local stakeholders. The paper concludes with implications for management practice, and policymakers.