Water scarcity

Water scarcity is the situation in which the demand for water persistently exceeds the availability of renewable water resources in a given region. This shortfall can be physical (not enough water exists), economic (the resource exists but access is lacking) or institutional (there is insufficient capacity to manage it fairly and efficiently). It is a structural phenomenon that compromises the water, energy, food and health security of hundreds of millions of people worldwide.

According to the World Resources Institute (WRI), through its Aqueduct Water Risk Atlas, around a quarter of the world's population lives in countries facing extremely high water stress, where more than 80% of the available renewable supply is withdrawn each year. This pressure is intensified by population growth, rapid urbanisation, climate change and the overexploitation of aquifers.

Types of water scarcity

Scarcity is not a single phenomenon; it can take several forms:

Physical scarcity

Occurs when there is not enough fresh water to meet the needs of ecosystems and users. It is typical of arid and semi-arid regions such as North Africa, the Middle East or south-eastern Spain. It can also appear in basins under high pressure from agriculture, industry or tourism.

Economic scarcity

Even where water is physically available, communities may lack access because of missing infrastructure, technology or financial resources. It is common in parts of the global South where structural poverty prevents the development of abstraction, treatment and distribution systems. Economic scarcity is, in essence, a governance problem.

Institutional scarcity

Stems from poor planning, corruption, lack of coordination between levels of government or the absence of reliable data. It can be observed even in countries with sufficient resources but ineffective management, overlapping competencies or incoherent public policies.

Structural causes of water scarcity

Water scarcity results from multiple interrelated factors:

• Agricultural overuse: agriculture accounts for roughly 70% of global freshwater withdrawals. In many cases irrigation systems are inefficient and water-intensive crops are grown in unsuitable areas.
• Unplanned urban growth: the expansion of cities without adequate water planning drives excessive demand, loss of water quality and overloaded infrastructure.
• Climate change: increases the frequency and intensity of droughts, alters rainfall patterns and accelerates evapotranspiration, reducing aquifer recharge.
• Pollution: industrial, agricultural and urban discharges reduce the quality of available water, forcing more resources to be spent on treatment or rendering entire sources unusable.
• Unregulated abstraction: in many regions, illegal wells and weak control over water concessions worsen aquifer depletion and soil salinisation.

Consequences of water scarcity

The implications of water scarcity are profound and cross-cutting. The most relevant include:

• Reduced agricultural output and rising food prices.
• Loss of aquatic biodiversity and degradation of wetlands and river ecosystems.
• Forced migration and conflict over the control of water sources.
• Strain on sanitation systems, especially in low-income contexts.
• Reputational and operational risk for companies that depend on water.

Water scarcity is not a future risk: it is a present reality with documented impacts in Latin America, sub-Saharan Africa, Central Asia and the Mediterranean.

Measuring water scarcity

The most widely used indicators to quantify water scarcity are:

• Water stress: the ratio of total water withdrawals to renewable availability. Values above 40% indicate high risk; this metric also underpins SDG indicator 6.4.2.
• Water Risk Atlas (WRI): an interactive platform that maps stress, demand, seasonal variability and future projections by country or basin.
• Water governance indicators (OECD): assess the institutional capacity to deal with scarcity.

These instruments help prioritise investment, design public policy and plan infrastructure based on realistic scenarios.

Mitigation strategies

Water scarcity is not irreversible. Technical, institutional and social solutions exist to reverse it, especially when action is preventive:

• Water-use efficiency: modernising irrigation systems, smart metering and reducing urban leakage.
• Circular water economy: reuse of greywater, tertiary treatment, aquifer recharge and the production of reclaimed water.
• Progressive tariff policies: systems that penalise waste while protecting basic consumption.
• Integrated basin planning: coordination across sectors and territories, based on data and the participation of local stakeholders.
• Water culture and education: campaigns that promote behavioural change at individual and collective level.

Water scarcity in ESG and business terms

From a corporate perspective, operating in water-scarce regions involves operational, financial and reputational risks. Companies should therefore integrate this factor into their materiality analysis, business continuity plans and investment strategies.

A growing number of reporting frameworks, such as CDP Water Security, the SASB Standards and the European ESRS E3, require indicators on water management, exposure to water-stressed areas and measures to guarantee equitable access.

Water scarcity is a physical limit to growth. Managing it proactively and fairly is a necessary condition for a resilient, regenerative economy. At Manglai we help companies measure their environmental footprint and identify exposure to water risk as part of their sustainability strategy. Discover how Manglai can help you.