A Drought For Business: How Water Shortages Will Impact Your Bottom Line

Business.com / Finances / Last Modified: February 22, 2017

The total economic cost of the 2014 drought in California was $2.2 billion. How is it affecting businesses across the nation in 2015?

The drought in California isn’t solely stifling resident’s lawns. It’s affecting businesses state—and nation—wide.

Since 2011, California has moved from a state of “abnormally dry” to two-thirds of the land labeled as “exceptionally dry”. The Governor has issued an array of laws to help replenish California, most recently a mandated 25 percent reduction in overall potable urban water use.

Direct costs to the agriculture industry totaled $1.5 billion in 2014. Farmers have been forced to let land lie fallow and let go of employees. Organic farms and diaries, that let animals graze on green pastures, have been sporadically closing shop because they can’t maintain their fields. 

But while most eyes are on farmers, this water shortage will distress businesses of all shapes and sizes. The total statewide economic cost of the 2014 drought was $2.2 billion.

Related Article: 5 Quick and Easy Ways to Cut Business Water Use

Where are these dollars being lost exactly? Here are five industries whose bottom lines are subject to the water shortage:

Breweries

Many brewers have been required to reduce their water consumption by 20 percent. Some have been able to accomplish this by more efficient bottling methods, but if the drought persists, Californians might be going dry as well.

Anything rice-related

California supplies the majority of nation’s rice supply. Experts say 25% of California’s $5 billion rice crop revenue will be lost due to the drought this year. Sushi restaurants, rice farmers, Asian importers, and even migrating birds could possibly be affected.

Clothing industries

The drought is disturbing the fashion industry as well, specifically denim-based businesses. The manufacturing of denim consumes 3 gallons of water per pair. With the Governor’s recent mandate, many companies are forced to cut production or devise new ways to lower water usage. 

Semicondutors

Maxin Integrated, TowerJazz and TSI Semiconductors still have manufacturing facilities in California, which require a ton of highly purified water in the production of electronic chips. One semiconductor fabrication plant can use as much water as a small city, so this shortage might force owners to turn to overseas manufacturing facilities. 

Golf courses

Traditionally lush golf courses have been forced to let areas go brown and implement strict water management strategies. In California, an average 18-hole course will use roughly 90 millions gallons per year. By removing turf in unused areas, golf courses have been able to save money for themselves and the state.

The future of the state and the nation

It’s too early to declare what will come of the drought, but economists estimate steep consequences. In addition to lost revenues, businesses (especially farmers) will also lose employees. An estimated 20,000 jobs will be lost this year due to lost crops.

Companies both near and far will feel the effects of the water shortage. Over half of the country’s nuts, fruits, and vegetables originate in California, which could effect restaurants, food processing businesses, and other out-of-state farmers.

California isn’t the only one going through water calamities. Montana, Texas, Kansas, North Carolina, and Delaware are all predisposed to dryer climates and insidious droughts.

Related Article: 5 Devices that Save Office Costs by Reducing Energy Usage

What other businesses are doing

Organizations both small and large are hankering down on water usage- an not in just California. According to the CDP Global Water Report 2014, which surveyed 174 of the world’s largest corporations, 82% of those surveyed are setting goals to reduce water usage, and 90% are establishing water resource management into business-wide strategies.

This is a time of emergency for California business owners, and despite (or perhaps because of) the short supply of H20, some entrepreneurs are rising to the challenge of innovation. 

Take Levi’s for example. In 2011, the denim giant launched its “Water<Less” campaign with the goal of using less water in the production of their jeans. Since the initiative’s inception, Levi’s has saved over 770 million liters of water. Other competitors are following the blue trousers leader, included Siwy Demin.  

Maybe you don’t have the demand comparable with Levi’s, but you probably are feeling the strain of the water supply. According to SmallBizTrends, here are a few ways to help you cut back on liquid (and energy bills): 

  • Outfit your break room and/or bathroom faucets with low-flow restrictors, which output less water than standard valves
  • Inform employees and encourage them to use less water and waste less paper
  • Consider swapping sumptuous greenery for native landscapes
  • Purchase water-efficient equipment
  • Get a water audit. The word “audit” might send chills up your spine, but taking an analytical look at your company’s water consumption will identify areas that need improvement.

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