Why Water Risk Can’t Be an Afterthought in Climate Resilience

July 29, 2025

Climate change and water stress are deeply intertwined. Rising global temperatures are intensifying droughts, accelerating extreme weather events, and disrupting the availability and quality of freshwater across the world. These disruptions are no longer “distant threats.” They already impact operations, value chains, and local communities.

Despite this, many companies continue to treat water risk as a peripheral issue in their climate strategies. Water is often overlooked while carbon reduction and energy transitions take center stage. That approach is no longer sustainable.

To ensure operational continuity, meet rising regulatory expectations, and build long-term business value, companies must treat water stewardship as a core pillar of their climate resilience planning.

Why Water Must Be Central to Your Climate Strategy

Water-related disruptions are escalating. In 2024 alone, the U.S. experienced 27 separate billion-dollar weather and climate disasters, including droughts, floods, and storms—nearly triple the long-term annual average. These events are no longer rare. Industries across the board are facing growing threats: factories halted due to flooding, supply chains broken by water shortages, and community tensions fueled by the overuse or contamination of shared water resources.

While climate change is a global crisis, water is often how we feel its impacts first—and most acutely. Drought, flooding, and water stress are amplifying in places already under strain. These disruptions can destabilize business operations faster than many other climate risks.

Importantly, water risk is not just a site-level issue. It’s shaped by broader watershed dynamics—like upstream over-extraction, aging infrastructure, or shared pollution burdens—that extend far beyond a facility’s fence line. On-site resilience alone isn’t enough. Managing water as a shared resource means looking outside your operations and engaging with communities, governments, and local partners.

Understanding Physical and Transition Risks Through a Water Lens

Water risk isn’t a single challenge, but a convergence of physical and transition risks that threaten business value in different ways.

Physical risks include:

Droughts that reduce freshwater availability
Flooding and sea-level rise that damage infrastructure
Water pollution that affects both input water and discharge compliance
Infrastructure strain in areas with outdated or failing water systems

Transition risks, meanwhile, stem from evolving expectations and pressures, including:

Stricter water regulations at the local, national, or regional level
Climate-related litigation that raises operating costs and exposes reputational vulnerabilities
Volatility in input costs, such as energy and raw materials, that can lead to major swings in operating expenses and financial performance
Increased pressure from consumers and civil society for responsible water use

Industries from tech to textiles to agribusiness are increasingly exposed to these threats. And while the specific risks vary by geography, the trend is clear: water is becoming a defining business constraint.

Regulatory and Market Expectations Are Rising

If water risk isn’t already on your compliance radar, it will be soon.

The EU’s Corporate Sustainability Reporting Directive (CSRD) is one of the few mandatory frameworks that specifically requires companies to disclose water-related impacts as a standalone topic.

Elsewhere, an increasing number of national and subnational regulations are requiring disclosure of climate-related risks—including water—as part of broader environmental reporting. These often align with voluntary frameworks such as the ISSB’s sustainability standards, which many jurisdictions are starting to adopt or reference.

Environmental management systems like ISO 14001 already require businesses to assess and mitigate water-related impacts. Meanwhile, investors and consumers increasingly demand transparency around water usage, pollution prevention, and watershed engagement.

Companies that don’t proactively address water risk will find themselves playing catch-up and risking regulatory penalties, reduced access to capital, and reputational damage.

The Business Case for Water Stewardship

Addressing water risk is smart business beyond merely addressing compliance. Companies that invest in water stewardship often see measurable improvements in operational efficiency, cost savings, and brand equity.

Water-efficient processes reduce utility bills and safeguard production continuity.
Proactive engagement in watershed management reduces the likelihood of shared crises like depleted aquifers or toxic runoff.
A strong water strategy improves ESG ratings and builds trust with stakeholders and communities.

Collective action also matters. Companies that collaborate with peers, governments, and civil society on local water issues help create more stable, predictable operating environments for entire regions.

Embedding Water into Your Climate Strategy

To meaningfully reduce exposure to water risk, companies must move from reactive compliance to a proactive, integrated strategy. This means:

Assessing water risks across all priority supplier sites, using both physical data and stakeholder insight
Setting meaningful water use reduction targets, aligned with local watershed conditions and science-based thresholds
Embedding water into ESG and value chain integration, especially where value chains rely on water-intensive processes
Establishing governance, accountability, and reporting structures to track progress and drive continuous improvement

Water risk is a material business risk, and must be treated with the same rigor and urgency as carbon or energy.

Global Execution Requires Local Expertise

One of the greatest challenges in addressing water risk is that conditions vary widely by region. What works in one geography may fail in another due to regulatory, hydrological, or cultural differences.

Global companies need partners who can operationalize corporate water strategies at the local level—ensuring site-specific compliance, stakeholder engagement, and watershed alignment. Doing this effectively requires both broad geographic coverage and deep, region-specific expertise.

Inogen Alliance provides on-the-ground technical expertise and regulatory insight in over 150 countries, enabling companies to implement water strategies that meet local requirements, reduce risk, and build trust with regional stakeholders.

Water Risk Is Climate Risk

The bottom line is clear: companies that treat water as central to their climate strategy will be more resilient, more compliant, and better positioned to compete in a resource-constrained world.

Now is the time to take stock. Where does water sit in your climate risk assessments? Are you adequately prepared to manage disruptions across your operations and value chain? Do your policies address both site-level and watershed-level challenges?

Don’t wait until the next drought, flood, or regulatory shift to act. Start integrating water risk now and build resilience where it matters most.

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