Corporate Leadership For Depleting Aquifers

By Alejandro Litovsky, Margot Hill Clarvis 19 September, 2016

Earth Security Group's CEO brief shows aquifer depletion is a systemic business risk. Litovsky & Hill Clarvis expand

Review of world's 75 largest resource-intensive companies shows risk awareness but lack of understanding what to do
Countries over-pumping aquifers include China, India, US
Extractives industry hit hard; companies need to do more communication, collaboration and engagement

The exposure of multinational companies to depleting and degrading groundwater is increasing. The rapid depletion of aquifers is a systemic business risk in the world’s growing economies, including in some regions of China.

The rapid depletion of aquifers is a systemic business risk

A recent report by Earth Security Group shows companies that because the systemic risks of depleting groundwater are beyond their control, they must help improve groundwater decision-making by governments if they are to ensure the sustainable growth of their operations.

Our review of 75 of the world’s largest resource-intensive companies shows that their understanding of what to do is low

Companies face high exposure to the depletion of aquifers because groundwater resources are so poorly regulated. The absence of effective governance leads to a free-for-all, pitting in many cases large companies against small farmers and communities. Pollution due to the overuse of fertilisers and industry discharge is affecting drinking water for hundreds of millions of people. This confronts companies with existential threats.

Our review of 75 of the world’s largest resource-intensive companies shows that while many companies are increasingly aware of the major risks to their operations and license to operate, their understanding of what to do is low.

Global hotspots

Aquifers contain almost 96% of the planet’s freshwater. The majority is held in 37 of the largest aquifer systems globally. Out of these, recent studies using NASA’s satellites show that 21 are being depleted.They are located in some of the most water-stressed areas globally and are subject to growing industry and population pressures. These reserves are still largely unregulated and unmonitored. The map identifies eight regions that pose an urgent risk to global companies with a call to action for business leaders. (click to enlarge image)

ESG Aquifer Infographic

More than 2.5 billion people depend on groundwater for their basic water needs.2 Some countries are more reliant than others: aquifers account for between 75%-95% of water use in Saudi Arabia, Tunisia and Morocco.3  Countries over-pumping their aquifers include China, India, United States, Pakistan, Iran, and Mexico.4

Countries over-pumping their aquifers include China, India, US, Pakistan & others

  Groundwater is an essential buffer in periods of drought. However, as climate change impacts intensify, aquifers are projected to undergo increased erosion and reduced recharge rates.  Increased frequency of flooding of coastal areas will also augment the salinity of aquifers, reducing water quality and usability.

“…as climate change impacts intensify, aquifers are projected to undergo increased erosion & reduced recharge rates.”

In California’s Central Valley, intense drought has increased the state’s reliance on groundwater from 40% to 65%.5  The fastest depletion of aquifers is taking place in semi-arid and arid countries with a high dependency on irrigation for agriculture. The trends are most significant across Northern India, the United States, Saudi Arabia, North China and North Africa.6 India alone draws 230 km3 of groundwater per year, more than a quarter of the global total, driven by agriculture and industry.7

Global estimates of the depletion of groundwater storage are uncertain.
It is not just a question of their depletion: overuse can increase the rate of
pollution and salinization of remaining groundwater reserves, increasing the costs of water supply. For example,
in the Ganges basin in India, at least
 70 million people are at risk from arsenic poisoning of groundwater due in part to increased fertiliser application, coal-fired power generation, leaching from coal ash tailings, and mining activities.8

Spotlight: North China Aquifer System

The North China Aquifer sits below a region that comprises 11% of the Chinese population, including Beijing. The region supports 13% of China’s agricultural production and 70% of the country’s coal production.9 Northern China relies on groundwater for half of its total water use, which is mostly used for agriculture and municipal supply.

In non- renewable parts of the North China aquifer, water levels dropped >100m in 2005

In Beijing, groundwater use accounts for around 60%
of water supply.10 In non- renewable parts of the aquifer, water levels had dropped by over 100 metres in 2005.11

In response, the South-North Water Diversion project, the largest inter-basin transfer scheme in the world, is transferring 25 billion m3 of water from the Yangtze river along 1000 km to the northern area of China at a cost of USD 80 billion. Once complete, Beijing is set to phase out the city’s 40,000 private water wells.12 China’s Water Ten Plan has also been introduced to set strict groundwater targets to control extraction and pollution by 2020 by changing agricultural practices and targeting specific industries to reduce their water consumption.13

Industry focus: Extractives

The social license to operate for mining companies is increasingly vulnerable to depleting groundwater. The sector’s water risks are growing due to increasingly water-intense unconventional extraction methods, growing costs of treating water, growing water stress in extraction regions, and pressure to improve the sustainability of oil reservoirs.14

“The social license to operate for mining companies is increasingly vulnerable to depleting groundwater.”

Unconventional fuel sources, such as shale oil and tar sands are expected 
to increase the sector’s underground water exposure. For example, 38% of the world’s shale resources face high to extremely high water stress or arid conditions, including the Lower Indus shale play in the Pakistani part of the Indus basin.15

In 2014, state-owned China Shenhua Group, the world’s largest coal producer, stopped abstracting groundwater resources at the Shenhua Ordos project
in Inner Mongolia due to new government requirements and disputes with local farmers. Groundwater levels had dropped by 62% in comparison to 2004 due to its operations.16

Shenhua & Rio Tinto experiencing operating issues due to groundwater regulations & disputes with locals

Rio Tinto’s USD 6.6 billion Oyu Tolgoi mine in Mongolia is set to use approximately 20% of the Gunii Hooloi aquifer. The company has estimated that aquifers in the region could supply up to 500,000 m3 of water daily. However, by 2020, it is estimated that population growth will compete for these water sources.17  In 2013, the Umnugobi province, also in Mongolia, passed a resolution to prohibit groundwater extraction for mining 
purposes from 2016 onwards. However, following a court dispute between the national government and mining companies, the resolution was suspended.18

Our review of how companies are communicating on groundwater risks across strategic business functions concluded that companies in resource-intensive sectors should:

  1. Communicate more about the work they are already doing on groundwater risks, improving how corporate teams across functions like risks management, sustainability and government affairs collaborate to improve corporate intelligence and focus on the right messages;
  2. Collaborate with policy-makers and universities to improve their understanding of their systemic risks from depleting aquifers including sharing corporate data to improve decision-making; and
  3. Prepare to increase their public engagement as public concern with aquifers grows, including advocating the pre-competitive cooperation with other companies within existing global corporate sustainability networks.

As a next step in this area of work, Earth Security Group is bringing companies, corporate networks, and policy-makers together in a workshop at Stockholm World Water Week on September 1st 2016 to advance opportunities for such collaboration.

ceo briefingThe Earth Security Group published the report “CEO Briefing: Global Depletion of Aquifers” in June 2016, on which the above article is based.
Click here to access the brief.


1 ‘Quantifying renewable groundwater stress with GRACE’, Richey et al, Water Resources Research (51), 14 July 2015.
2 ‘The United Nations World Water Development Report 2015: Water for a Sustainable World’, United Nations World Water Assessment Programme, 2015.
‘UN General Assembly adopts resolution on the Law of Transboundary Aquifers’, UNESCO, 2009.
4 Ibid – UN World Water Development Report 2015; & ‘The real threat to our future is peak water’, Brown, L., The Guardian, 6 July 2013
5 ‘In dry California, water goes to those who drill the deepest’, El Nasser, H., Al Jazeera, 9 August 2014.
6 ‘Management of aquifer recharge and discharge processes and aquifer storage equilibrium’, Dillon et al, GEF – FAO, 2011.
7 ‘Deep Wells and Prudence: Towards Pragmatic Action for Addressing Groundwater Overexploitation in India’, The World Bank, 2010.
8 ‘How arsenic contamination is affecting
the Ganga basin in states like West Bengal, Bihar’, The Economic Times, 23 May 2015.
9 ‘Towards a water and energy secure
china’, Tan, D. et al., China Water Risk. June 2015.
10 ‘Water Supply and Water Use’, China Statistical Yearbook, 2012. https://www. (accessed 12 April 2016).
11 ‘Sustainability of groundwater usage
in northern China: dependence on
palaeowaters and effects on water
quality, quantity and ecosystem health’, Currell, M. J. et al., Journal of
Hydrological Processes 26 (26), January
12 ‘Beijing to expand water quota system to all enterprises in the city’, People’s Daily,
4 May 2011.
13 ‘Groundwater Under Pressure’, Hu, F., China Water Risk, 14 May 2015.
14 ‘Produced Water: Stronger Integration and Collaboration Key to Finding Viable Solutions’, Al-Sulaiti, M., Energy Outlook, The Gulf Intelligence, 2015.
15 Global Shale Gas Development: Water  Availability and Business Risks’, Reig et
al, World resources Institute, 2014.
16 ‘Why the world’s biggest coal company has stopped extracting Chinese groundwater’, Kahya, D., Greenpeace, 8 April 2014.
17 ‘Mongolia Copper Mine at Oyu Tolgoi
Tests Water Supply and Young Democracy ‘, Schneider, K., Circle of
Blue, 5 November 2013.
18 ‘Mongolia: Targeted analysis on water resources management issues’, 2030 Water Resources Group, March 2014.

Further Reading

  • Water Risk Valuation – What Investors Say – See what 70+ investors have to say on different valuation approaches we applied to 10 energy stocks listed across 4 exchanges. Is there consensus? What are they most worried about?
  • Banking in the Age of Water Risk – Are water risks and their potential impacts factored in by banks? Or is ‘water exposure’ just the water used in their office buildings & branches? Tan says prudence dictates we must start to waterproof portfolios
  • 2016 World Water Week: Key Takeaways – Business, risk assessment & linkages with SDG 6 were key issues at World Water Week 2016, fitting given the theme “Water for Sustainable Growth”. China Water Risk’s Dawn McGregor on our three key takeaways from Stockholm
  • Yangtze Headwaters Under Threat – By the end of the century, 67% of China’s ice may be gone. Can the Yangtze survive? As temperatures rise, the glaciers which sustain Asia’s longest river are reaching the tipping point. Sam Inglis explores the headwaters, as we march towards an ice-free Yangtze
  • 2015 State of Environment Report Review – China says overall environment quality has worsened in 2015 with groundwater deteriorating for the fifth year straight. It’s mixed news for rivers but lakes & reservoirs see marked improvement. Get the latest pollution status updates from the newly released 2015 State Of Environment Report
  • Groundwater Under Pressure – New official survey says that China’s groundwater quality has yet again deteriorated. Can the ‘Water Ten Plan’ turn this around? Who will be affected? Hear from China Water Risk’s Hu on what’s at stake & why the next 5 years are crucial
  • China’s Water Resource Tax Reform – The recently launched water resource tax reform will ultimately supersede the existing resource fee system. China Water Risk’s Yuanchao Xu on how the two systems compare and why Hebei is taking lead as the pilot city
  • Water Ten: Comply or Else – China’s new Water Ten Plan sets tough action on pollution prevention & control. While this is good for the water sector, less obvious is who or which sectors will be impacted. China Water Risk’s Tan on why China is serious about its fast & furious pollution reforms to propel China to a new norm
  • BWS-China: WRI’s New Water Stress Map – With more granular data from the Chinese government, WRI China upgraded its Aqueduct  Baseline Water Stress (BWS) maps for China. BWS China developers Wang, Zhong & Long explain key differences
  • Water In Coal: Still Murky – Multiple policies were issued recently over the proper management of coal mine water, in particular mine water reuse to alleviate groundwater woes. But the road ahead is still murky. China Water Risk’s Thieriot walks us through inconsistencies in data & targets
Alejandro Litovsky
Author: Alejandro Litovsky
Alejandro Litovsky is the Founder and CEO of the Earth Security Group in London. He is a trusted strategic advisor to companies, investors and governments on ESG challenges. Alejandro has developed a new method based on country data, to help companies understand the critical resource boundaries to which they are exposed and improve their collaboration with governments and stakeholders. He is Argentinean and has lived in London for over a decade, working at the interface of corporate leadership, political risk in emerging markets and proactive government affairs. Between 2004 and 2010, he held senior positions at the London-based consultancies AccountAbility and Volans/Business of Social Innovation, and worked for Shell International’s Future Scenarios team. He has worked globally in all major emerging markets to help companies and governments move towards new forms of cooperation for sustainable development. Prior to coming to London, between 1998 and 2003, he supported large resource-infrastructure companies in Argentina to engage policy-makers on sustainable development, and worked as an impact investment manager with the Swiss-based Avina Foundation in Buenos Aires, the leading player advancing corporate sustainability innovation on social and environmental challenges in Latin America. He holds an MSc in Political Sociology from the London School of Economics, where he was awarded LSE’s 2004 Hobhouse Memorial Prize for highest academic achievement. He is also the recipient of the 2012 BMW Foundation Young Leader Award.
Read more from Alejandro Litovsky →
Margot Hill Clarvis
Author: Margot Hill Clarvis
Margot Hill Clarvis is a Senior Manager at Earth Security Group. Prior to joining ESG, Margot worked at UNEP-Finance Initiative on the intersecting challenges between finance and water, climate and natural capital risks. She was project manager for E-RISC (Environmental Risk Integration in Sovereign Credit Analysis), a project coordinating research to explore the integration of environmental risk in sovereign bond ratings with a group of banks and financial institutions. Margot has led research projects on environmental and sustainable finance, water governance and climate change adaptation for a number of international organisations such as WWF, IUCN, ODI and UNEP. She also co-developed and jointly led the development of a university-wide sustainable finance teaching and outreach programme at the University of Geneva, while also being responsible for the Sustainable Finance module of their executive programme. She has previously held positions at ESG information provider Asset4-Thompson Reuters, and BPO provider Xchanging, in the banking and finance sector in London and Frankfurt. She holds a PhD in Environmental Sciences from the University of Geneva, an MSc in Environmental Technology from Imperial College London, and a B.A. Hons in Classics from the University of Cambridge. A Swiss-British national, her native language is English, but she also speaks Swiss-German, German, French and Spanish.
Read more from Margot Hill Clarvis →